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2015 (12) TMI 1280 - ITAT VISAKHAPATNAM

2015 (12) TMI 1280 - ITAT VISAKHAPATNAM - TMI - Reopening of assessment - Held that:- Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Asse .....

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-12-2010 passed u/s 143(3) r.w.s. 147 is quashed.

Since, we have allowed the assessee ground on legality of reopening of assessment u/s 147 and quashed the assessment order, therefore, we do not consider it appropriate to discuss the other grounds raised by the assessee on merits of the case. - Decided in favour of assessee. - I.T.A. No. 400/Vizag/2014, I.T.A. No. 401/Vizag/2014, I.T.A.No. 402/Vizag/2014, I.T.A. No. 403/Vizag/2014, I.T.A. No. 404/Vizag/2014, I.T.A. No. 405/Vizag/2014, .....

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are clubbed, heard together and disposed of by this common order for the sake of convenience. 1. Brief facts extracted from ITA.No. 406/Viz/2014 is that there was a search operations u/s.132 in the premises of Sri. N.Suryanarayana Reddy and in the office premises of M/s Sai Lakshmi Township Pvt. Ltd., Visakhapatnam and survey operations in its branch offices on 22/08/2008. During the course of search, certain incriminating documents were seized and as per the seized documents, it was noticed tha .....

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ing the course of investigation proceedings, before the DDIT(Inv) to a specific question the assessee had agreed that he along with other associates have invested an amount of ₹ 230 lacs for purchase of 14.81 acres lands and furnished the source for investments to the extent of ₹ 206 lacs and the balance was admitted as unexplained investments. The DDIT(Inv) -Unit -III(2), completed the investigation and forward a report to the Assessing Officer. 2. The AO, based on the report of the .....

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o notice u/s 148, the assessee has filed return of income. Subsequently, the case was selected for scrutiny and statutory notice u/s 143(2) was issued on 4-11-2010 which was duly served on the assessee. In response to notice, the assessee has filed necessary details. The AO however, did not accept the explanation offered by the assessee and completed the assessment. 3. Aggrieved by the assessment order, the assessee preferred an appeal before CIT(A) and challenged the validity of assessment made .....

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adjudicated the issue of reopening of assessment, but upheld the assessment order on merits and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the assessee is in appeal before us and raised the following grounds of appeal. 1. On the facts and in the circumstances of the case, the order of the learned Commissioner of Income-Tax (Appeals) to the extent confirming the order of the Assessing Officer under Section 143(3) read with Section 147 of the Income-tax Act, 1961 is erroneous i .....

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ppellant crave leave to add to/alter/substitute/delete/modify all or any of the above grounds. 4. The ld. AR, at the time of hearing submitted that in this case, the assessment was framed consequent to a search operation u/s 132 of the Act, therefore assessment order passed u/s 143(3), r.w.s.147is bad in law and liable to be quashed. The AR further submitted that the AO has no jurisdiction to issue notice u/s148 to re-open the assessment in the case of a person, where search is conducted u/s 132 .....

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n the case of third person, where certain documents belongs to assessee were seized which shows investments by the assessee in lands. He further argued that based on the said seized documents, the DDIT(Inv) summoned the assessee and recorded his statement and forwarded a report to the assessing Officer. Therefore, in the light of the above, he submits that according to section 153C, any books of account or other documents seized or requisitioned pertains to a person other than the person referre .....

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efore, the AO has erred in issue of notice u/s 148 and complete the assessment u/s 143(3), r.w.s. 147. Therefore, the assessment order passed u/s 147 has no legs to stand in the eyes of law and the same should be quashed. 5. Regarding merits of the case, the ld. AR argued that the Assessing Officer has made additions towards investments in purchase of lands as unexplained investments despite furnishing relevant details and verifiable & creditable sources for the investments. The AR submitted .....

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along with their PAN numbers. The AR further submitted that the assessee had explained sources to the extent of ₹ 206 lacs with cogent materials before the DDIT(Inv) and accepted the balance amount of ₹ 24 lacs as unexplained investments, which is evident from the statement recorded during the post search proceedings. Despite proving the source for investments, the AO considered the entire investment as unexplained which is contrary to the evidences filed before the investigation off .....

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dia as evidence of receipt of agricultural income. The Assessing Officer failed to give an iota of explanation how these documents cannot meet the credible evidence, without even a fair inquiry from his side. Thus, the Assessing Officer cannot allege that the assessee has not produced credible evidence. The AR further submitted that the onus cast upon the assessee to explain the credits by providing identity, creditworthiness and capacity of the creditor and genuineness of the transaction. Once, .....

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ssing Officer is rightly reopened the assessment u/s 147, because in this case there was no direct search action u/s 132 in assessee own case, but only a consequential proceeding has been taken up consequent to search in another case therefore, there is no necessity of invoking provisions of section 153A. Regarding merits of the case, the DR argued that the assessee failed to furnish proof for source of investments before the Assessing Officer as well as CIT(A) which is evident from the conduct .....

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or with substantial evidence. Therefore the additions made by the Assessing Officer should be confirmed. 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 in the premises of Sri. N.Suryanarayana Reddy and others. During the course of search, certain incriminating documents were seized from the premises of M/s Sai Lakshmi Township Pvt. Ltd., Vis .....

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ssessing Officer, based on the assessee statement issued notice u/s 148 to reopen the assessment and completed the assessment u/s 143(3), r.w.s. 147. The assessee contention is that the assessment cannot be reopened u/s 147 but, the Assessing Officer can issue notice u/s 153C r.w.s. 153A and proceed to assess or reassess the total income of each of assessment year falling within six assessment years as referred to in section 153A. 8. Now, the question before us is (i) whether the Assessing Offic .....

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earch assessments was governed by separate provisions of Block assessment under section 158BC and as per the said provisions, the concept of block assessment was in force. The amendment brought in to the statue w.e.f. 1-6-2003, replaces the existing provisions with the new section, i.e. 153A to 153C governed the new scheme of search assessments, which abundantly clear that search assessment are separate provisions governed by these sections is independent from any other provisions of the Act. 9. .....

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ks of account or documents seized or requisitioned belongs or belong 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 income of the other person in accordance with the provisions of section 153A, if, that As .....

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trued as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which .....

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reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 10. Section 153C deals with cases of persons other than the persons referred to in section 153A. As per the provisions of section .....

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03 dated 5-9-2003 reported in 263 ITR 62, explained the new scheme of assessment procedure in the following manner: 65. The special procedure for assessment of search cases under Chapter XIV-B be abolished 65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the perio .....

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ncome-tax Act to provide for assessment in case of search or making requisition. 65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of .....

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r section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject .....

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153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of t .....

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ng on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being reheard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and endi .....

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The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs 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 such .....

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June, 2003. 11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that .....

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essment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which th .....

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ection 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the .....

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e only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132 .....

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e new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, th .....

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ird party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is co .....

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The word shall used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction .....

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ation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory th .....

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ct in the case of All cargo Global Logistics Ltd &Ors. Vs DCIT (2012) 137 ITD 287 (Mum). The Special Bench after considering the provisions of section 153A and CBDT circular has held as under. 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used .....

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be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment wi l l be made under the aforesaid provisions as the two proceedings i .e. assessment or reassessment proceedings and proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reasses .....

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f search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Simi lar posi t ion wi l l obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- a) In so far as pending assessments are concerned, the jur isdict ion to make or iginal assessm .....

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course of search. .. …. … 58. Thus, question No.1 before us is answered a) as under (a) In assessments that are abated, the A.O. retains the original jurisdiction as wel l as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately ; 16. In yet another case, the ITAT Mumbai Bench, in the case of State Bank of India vs. Deputy Commissioner of Income Tax (2013) 22 ITR 609, had considered the issue. The Mumbai benc .....

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of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as ,,block assessment because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as ,,block period. Thou .....

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ction 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first .....

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ng within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, res .....

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ready been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the s .....

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cluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at .....

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That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place th .....

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come declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisi tion. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or .....

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tions 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessme .....

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epartment on 2-7-2005 on which date the assessment for the A.Y. 2001-02 was not pending. Therefore, in view of the nonobstinate clause with which sub section (1) of section 153A opens, the A.O. has no jurisdiction to issue notice u/s 148 of the Act in respect of those six assessment years which fal ls wi thin the exclusive jurisdiction of section 153A of the Act and accordingly the A.O. was not justified in issuing notice u/s 148 on 28-8-2006 and in completing the impugned assessment u/s 143(3) .....

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e facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessme .....

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