TMI Blog2015 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ents? - Held that:- In the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act. - Decided in favour of assessee. - ITA 164/2015, ITA 175/2015, ITA 176/2015, ITA 177/2015 - - - Dated:- 30-10-2015 - Dr. S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr N.P. Sahni, Senior Standing Counsel with Mr Nitin Gulati, Junior Standing Counsel For the Respondent : Mr Kapil Goyal and Mr V.M. Chaurasia JUDGMENT Vibhu Bakhru, J 1. The Revenue has preferred these appeals under Section 260A of the Income Tax Act, 1961 (hereafter the Act ) impugning a common order dated 26th August, 2014 passed by the Income Tax Appellate Tribunal (hereafter the Tribunal ) in a batch of six appeals and six cross objections relating to six assessment years (AYs), being AYs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which satisfaction under Section 153C of the Act was recorded and, thus, outside the scope of Section 153C of the Act. He submitted that the present case also involved the question as to jurisdiction of the AO to make assessments under Section 153C of the Act; but, as the questions of law were framed prior to issuance of notice in these appeals, the Assessee had no opportunity to suggest the same. 4. Mr N.P. Sahni, learned Senior Standing Counsel for the Revenue, did not dispute that the substantial question of law as suggested by Mr. Goyal also arose in these matters. Accordingly, the parties were also heard on the following question of law which arises from the impugned order passed by the Tribunal:- (a) Whether the AO had jurisdiction to assess and reassess the income of the Assessee under Section 153C in respect of AYs 2003-04 to 2008-09? 5. Briefly stated, the relevant facts necessary to address the issues involved in the above captioned matters are as under:- 5.1 Search and seizure operations were undertaken under Section 132 of the Act in the case of Sh. B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. (hereafter also referred to as se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 69C of the Act. The AO also disallowed 100% of the expenses claimed by the Assessee in its P L Account concluding that they were unverifiable. 5.6 In response to a request under the Right to Information Act, 2005, vide a letter dated 14th May, 2015, the Assessee was provided a photocopy of a single sheet of Record Slip of a cheque book pertaining to a Bank Account No.124002000001410 with Centurion Bank of Punjab Limited, Tilak Nagar Branch, New Delhi. The said record slip - which formed a part of the cheque book contained three entries pertaining to cheques issued on 11th August, 2008, 27th August, 2008 and 10th December, 2008 respectively. 5.7 Also, in a reply to a request under the Right to Information Act, 2005 filed by the searched persons, the Deputy Commissioner of Income Tax, Central Circle-17, vide a letter dated 10th June, 2013 noticed that there was no satisfaction note available/recorded in respect of the other entities whose documents were allegedly seized during the search. 5.8 The Assessee, being aggrieved by the AO s order, filed appeals before the CIT(A). The Assessee raised several grounds in each of its six appeals. The grounds pertaining to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preparation of the balance sheet and the computation of income which were disclosed to the Income Tax Department. It was also contended that the soft copies and the papers seized were the property of M/s Bhupesh K. Dhingra and Co. and did not belong to the Assessee. The Assessee submitted that Section 153C of the Act can only be invoked where the AO is satisfied that any money/documents etc. seized belonged to a person other than the one searched and such material is of incriminating nature indicating undisclosed income of such person. The Assessee further emphasized that proceedings under Section 153C could be initiated only in respect of such years in respect of which some incriminating material was seized and since there was no material pertaining to the assessment years in question, there was no justification for the invocation of proceedings under Section 153C of the Act. The Assessee also contended that the Satisfaction recorded under Section 153C was not communicated in the notices itself and, thus, the assessment was bad and illegal. 5.11 In reply to the Asseessee's submissions, the AO vide letter dated 25th October, 2011 submitted a remand report, inter alia, claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that while search has taken place in the group case in October 2008 but the documents are deemed to be handed over to the AO of the appellant on 08th September 2010, the date on which the notice u/s 153C has been issued in the appellant's case. That six years which can be assessed u/s 153C shall have to be construed from the date on which the books of accounts or documents are handed over by the AO of the main party subjected to the search to the AO of the other person (the applicant in this case). That accordingly the six years which can be assessed u/s 153C in applicant's case are AY. 2005-06 to 2010-11. The above view is clear on reading the proviso to sec 153C(1) r. w. s 153A(1) of the IT Act. In this connection reliance is also placed in the ratio of decision in the case of VJM Vimawal vs ACIT 124 TTJ 508 (UR). Accordingly the initiation of the proceedings for A.Y. 03-04 (and the other respective AY's as the case may be)which has been made on 08.09.2010 is barred by limitation, and therefore the assessment order passed u/s 153C is held as a nullity. This plea however is fundamentally flawed in view of the basis of the fact that in case of this appellant the AO wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had failed and neglected to provide the documents/materials on the basis of which proceedings under Section 153C of the Act were initiated and in the circumstances, the Assessee was constrained to apply for the same under the Right to Information Act, 2005. In response thereto, the Assessee received a letter dated 14/15th May, 2015 enclosing therewith a photocopy of the record slip of a cheque book, which reflected three entries for issue of three cheques on 11th August, 2008, 27th August, 2008 and 10th December, 2008 respectively. The Assessee was further informed that all other pages were blank. He submitted that this record slip of a cheque book could not be considered as the material on the basis of which proceedings under Section 153C of the Act could be initiated in respect of the AY s 2003-04 to 2008-09. He further submitted that the hard disk, which was referred to by the AO did not belong to the Assessee but M/s Bhupesh K. Dhingra Co - sole proprietorship concern of Mr Bhupesh Kumar Dhingra. 7. Mr Goyal further submitted that the hard disk, inter alia, contained soft copies of working papers for preparation of the Assessee s balance sheet, income tax computation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessee were seized. The AO was satisfied that the said assets/documents belonged to the Assessee - as required under Section 153C of the Act - and the satisfaction note was recorded on 8th September, 2010. The notice under Section 153C of the Act was issued to the Assessee immediately thereafter. 12. At this stage it is expedient to refer to Section 153C(1) of the Act, which reads as under:- 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provisions of Section 153A of the Act. 14. The proviso to Section 153C(1) of the Act expressly indicates that reference to the date of initiation of search for the purposes of second proviso to Section 153A shall be construed as a reference to the date on which valuable assets or documents are received by the AO of an Assessee (other than a searched person). Thus, by virtue of the second proviso to section 153A of the Act, the assessments/reassessments that were pending on the date of receiving such assets, books of accounts or documents would abate. 15. The controversy in this regard is no longer res integra. A Coordinate Bench of this Court in SSP Aviation Ltd. v. Deputy Commissioner of Income Tax: (2012) 346 ITR 177 has held that: in case of the searched person, the date with reference to which proceedings for assessment or reassessment of any assessment year within a period of six assessment years shall abate, is the date of initiation of search under Section 132 or requisition under Section 132A. However, in case of other person.. such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other person. The second step is-after such satisfaction is arrived at-that the document is handed over to the Assessing Officer of the person to whom the said document 'belongs'. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Thus, there are two stages: The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. The second st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er person has to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 22. The aforesaid principles would be equally applicable to proceedings initiated under Section 153C of the Act as Section 153C(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book were entered in the regular books of accounts maintained in the normal course of business. Insofar as the hard disc seized from the office at 801, Padma Tower-II, Rajinder Nagar, New Delhi, is concerned, he affirmed that the hard disc contained the soft copies of working papers for preparing Balance Sheet and the Income Tax Computation and details of Income Tax Filing . He further affirmed that the Balance Sheet which had been prepared on the basis of the working papers etc. had already been filed with the Income Tax Department and, therefore, the same was fully disclosed and the transactions as contained in the soft copies were fully recorded. In addition, he confirmed that the soft copies of papers were the property of M/s Bhupesh K. Dhingra Co. a sole proprietorship concern of B.K. Dhingra and did not belong to RRJ Securities Ltd. as the said documents were part of working papers of Bhupesh K. Dhingra Co. and were obtained and kept in discharge of his professional duties. 28. According to the AO, the documents/papers pages 126 to 179 of Annexure A-34 seized during the search and data contained in the hard disc mentioned in Annexure A-102 belonged to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had observed as under:- At the time when the Assessing Officer having jurisdiction over the searched person reaches the satisfaction that the document belongs to a person other than the searched person, it is not necessary for him to also reach a firm conclusion/opinion that the document shows undisclosed income belonging to such other person. That is a matter for enquiry, which is to be conducted in the manner prescribed by section 153C. 33. The record slip belongs to the Assessee and, therefore, the action of the AO of the searched persons recording that the same belongs to the Assessee cannot be faulted. However, the question then arises is whether the AO of the Assessee was justified in taking further steps for reassessing the income of the Assessee in respect of the assessment years for which the assessments were concluded and in respect of which the seized document had no bearing. In our view, the same would be clearly impermissible as the seized material now available with the AO, admittedly, had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the Assessee for the years in question. Merely because a valuable ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee. 36. The decision in SSP Aviation (supra) cannot be understood to mean that the AO has the jurisdiction to make a reassement in every case, where seized assets or documents are handed over to the AO. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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