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2016 (6) TMI 51 - ITAT DELHI

2016 (6) TMI 51 - ITAT DELHI - TMI - Assessment u/s 144 or 153C - nature of assessment - Held that:- Material belonging to the assessee, which was seized in the search proceedings of Dhingra Group of cases was handed over to the AO of the assessee on the date on which satisfaction note was recorded by the AO of the searched person i.e. 5th July, 2010 and accordingly the six preceding assessment years from the assessment year relevant to the previous year in which the seized material was handed o .....

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roceedings under section 144 of the Act as illegal, we do not propose to adjudicate other grounds of the assessee. - Decided in favour of assessee - ITA No. 3305/Del/2014, ITA No. 2170/Del/2014, ITA No. 2656/Del/2014, ITA No. 2172/Del/2014 - Dated:- 27-4-2016 - SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Department : Sh. Rajiv Malhotra, CIT (DR) For The Assessee : Sh. Kapil Goyal, Adv. ORDER PER O.P. KANT, A.M.: These appeals consists of cross appeals of the ass .....

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p the appeal in ITA No. 2170/Del/2014, the grounds of which are reproduced as under: 1. That on the facts andcircumstances of the case and the provisions of law, the Ld Commissioner of Income Tax Appealshas failed to appreciate that the assessment order passed by the Ld AO u/s 144 is illegal, bad in law and wrong on facts. The additions made are unjust, unlawful and arbitrary and are made against the principles of natural justice. 2. That on the facts andcircumstances of the case and the provisi .....

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Bills, Details of party wise purchases, purchase return and sales returns, Bank Statements, Confirmations and Affidavits etc. tiled during the appellate proceedings. 4. That on the facts and circumstances of the case and the provision of law, the Ld CIT Appeal has erred in holding the conclusion that the audited books and transactions through bank notwithstanding, the book results are required to be rejected, since the narrations are artificial, sham and not reflective of the actual business / c .....

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ufficient opportunity of being heard to the appellant company and also wrongly calculated/confirmed the addition of ₹ 43,684/-being sum total of the peak of the financial transactions recorded in the cash book (i.e. ₹ 5,40,547/-) and bank book (i.e. ₹ 2,80,131/-) for the year under consideration (after reducing the corresponding opening balance of cash in hand as on 01.04.2008 i.e. ₹ 4,96,863/- and cash deposit into bank i.e. ₹ 3,25,000/- respectively). (C)That the .....

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C1T (A) has erred in concluding the alleged cash payment of ₹ 80,000/- to Phoenix Data Services Pvt. Ltd. as unexplained/unaccounted investments. 7. That on the facts and circumstances of the case, the various observations and findings of the Ld. CIT Appeals in the impugned appellant order is irrelevant and vitiated in the law. 8. That the Appellant craves the right to amend, append, delete any or all grounds of appeal. 3. The assessee also filed additional ground before the Tribunal, whi .....

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deserves to be quashed. Additional Ground of Appeal No. 2(b) That on the facts and in the circumstances of the cse, learned Commissioner of Income Tax(A) erred in not quashing the impugned assessment framed u/s. 144 of the Income Tax Act, 1961 {notice issued u/s 143(2)} whereas the subject years falls u/s. 153C and no assessment is framed there-under. Additional Ground of Appeal No. 2(c) That the learned Commissioner of Income Tax (Appeals) has failed to appreciated that the facts and circumstan .....

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carried out in the case of Sh. BK Dhingra, Smt. Poonam Dhingra, and M/s Madhusudhan Buildcon Private Limited on 20/10/2008 and in the course of the search action, certain documents belonging to the assessee were seized. The Assessing Officer initiated proceedings u/s 153C of the Act for assessment years 2003-04 to 2008-09. For the year under consideration, the Assessing Officer issued a notice under section 142(1) of the Act on 06/07/2010 requiring the assessee to file its return of income. In r .....

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notices were made and the assessment being barred by limitation on 31/12/2010, the Assessing Officer on the basis of the material available on record, assessed the income at ₹ 10,61,130/- under section 144 of the Act, increasing the income by 30% over the income for the assessment year 2008-09. 5. Aggrieved, the assessee challenged the assessment before the Ld. Commissioner of Income-tax(Appeals) on legal grounds and on the merit of the additions. The legal ground raised included as notice .....

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addition of ₹ 43,684/- computed on the basis of the peak credit appearing in bank book and cash book produced by the assessee before her. 6. Aggrieved, with the finding of the Ld. Commissioner of Incometax( Appeals), both the assessee and Revenue are in appeal before the Tribunal. 7. At the outset, the Ld. Authorized Representative of the assessee, submitted that additional grounds of appeal taken by the assessee, a purely legal in nature and the omission of the grounds from the appeal was .....

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e first time. We find that in the additional ground raised before us, the assessee has challenged jurisdiction under section 144/143(3) of the Act, which being purely legal in nature, we admit the same. 8. The Ld AR of the assessee preferred first to argue the additional ground No. 2(b) and submitted that in the case of the assessee, satisfaction note was recorded on 5th July, 2010 and it is to be assumed that on almost the same date, the material belonging to the assessee had been handed over b .....

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ote was recorded in assessment year 2011-12, the preceding six assessment years for reassessment proceedings under section 153C would be from assessment year 2005-06 to assessment year 2010-11. He further submitted that since the assessment year under consideration should have been completed under the provisions of section 153C read with one section 153A of the Act and not under section 144 of the Act as framed by the Assessing Officer, and therefore assessment completed under section 144 of the .....

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er hand, the Ld. DR submitted that proviso below the section 153C of the Act, which has construed the reference to the date of initiation of search under section 132 of the Act in case of persons other than the person searched, as the date of receiving of books of accounts or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, was with reference to second proviso of subsection (1) of section 153A and which was for the purpose of deciding the abetme .....

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ing to the assessee have been seized, was conducted on 20/10/2008, the assessment years from 2003-04 to assessment year 2008-09 were only covered under 153C proceedings. 10. We have heard the rival submission and perused the material on record. The Tribunal in the case of Inlay Marketing Private Limited (supra) has decided the same legal issue and held that in case of person other than searched person the six immediately preceding assessment years for reassessment has to be from the assessment y .....

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other person other than searched has taken over the possession of the seized document on 5.7.2010. Accordingly, as per section 153A(1) of the Act, the Assessing Officer can issue a notice under Section 153A of the Act for the previous year in which the search is conducted and the purpose of section 153C of the Act on the date on which the document is handed over to the Assessing Officer of the person other than the searched person for six AYs immediately preceding the assessment year relevant to .....

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1.4.2007 to 31.3.2008 2008-09 1.4.2006 to 31.3.2007 2007-08 1.4.2005 to 31.3.2006 2006-07 1.4.2004 to 31.3.2005 2005-06 32. In view of above, we are inclined to hold that the Assessing Officer has issued notice under Section 153C of the Act dated 5.7.2010 for 2003-04 and 2004-05 on 6.7.2010 which is clearly barred by limitation. Therefore, the issue of notice under Section 153C of the Act by the revenue cannot be sustained because it is legally not valid as the conditions laid down for valid ass .....

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has been expressed in the judgment of the Hon ble Delhi High Court in the case of Commissioner of Income Tax Vs. Shree Jasjeet Singh (supra). The Hon ble High Court affirmed the action of the ITAT in treating in the case of person other than searched, the date of satisfaction note prepared as the date of search for calculating the assessment years for the purpose of reassessment as provided in section 153A(1) of the Act. The relevant para of the judgment are as under: 3. The question raised bef .....

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132 or the requisition under Section 132A, in the case of the other person (like the Assessee in the present case) such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date . 4. Although, t .....

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ular clarifies as under: The AO of the other person assumes jurisdiction under Section 153C with the receipt of the relevant seized material from the AO of the searched person. Also, a copy of the satisfaction received from the AO of the searched person in this regard would enable him to proceed further in the case of the other person under Section 153C. Though there is no statutory requirement for the AO of such other person to record any satisfaction/reason before issuing notice under Section .....

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such other person. 5. It may be noted that in the present case satisfaction note was prepared by the AO on 25th February 2010. Consequently, the finding of the ITAT in the present case that the assessment made under Section 143(1) of the Act for the AY 2009-10 was not valid, calls for no interference. No substantial question of law arises in the facts and circumstances of the present case. 12. In the other decisions cited by the assessee similar findings have been given. Thus in view of the fac .....

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ial was handed over to the AO of the assessee would be assessment year 2005-06 to 2010-11. We, accordingly, hold that the relevant assessments which could be reassessed as per section 153C r.w.s. 153A(1) in the case of the assessee would be from AYs 2005-6 to 2010-11, thus the assessment completed under section 144 of the Act for the year under consideration i.e AY 2009-10, is illegal and invalid as same should have been completed under section 153C of the Act. 13. Since we have already held the .....

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0/- made by AO by increasing 30% of the income as taken last year without examining and adjudicating upon merits of the case. ii. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in restricting the addition to total sum of ₹ 43,684/- by adopting the peak amounts of Cash Book & Bank Book, after reducing the respective opening balances. iii. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in adopting the working of pe .....

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enable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 16. At the outset, the Ld. Authorized Representative of the assessee pointed out that the present appeal having tax effect below ₹ 10 Lacs, has been preferred by the Revenue in violation of CBDT circular No. 21/2005 dated 10/12/2015, hence not maintainable. 17. The Ld. CIT(DR) did not dispute the above submission on the .....

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illegal in ITA No. 2170/Del/2014 the subsequent proceedings in such illegal order also cannot survive. 19. In the result, the appeal is dismissed as such. ITA No. 2172/Del/2014 for AY: 2009-10 20. Now, we take up appeal of the assessee in appeal No. 2172/Del/2014 raising following grounds of appeal; 1. That on the facts and circumstances of the case and the provisions of law, the Ld CIT Appeals has failed to appreciate that the assessment order passed by the Ld AO u/s 144 is illegal, bad in law .....

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the provisions of law, the Ld CIT Appeals has erred in not admitting the additional evidences i.e. Cash Flow Statement, Ledger, Cash Book, Bank Book, Stock Register, Vouchers/Bills, Details of party wise purchases and sales returns. Bank Statements, Confirmations and Affidavits etc. filed during the appellate proceedings. 4. That on the facts and circumstances of the case and the provision of law, the Ld CIT Appeal has erred in holding the conclusion that the audited books and transactions throu .....

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tment/expenditure, ignoring the fact that the same are duly reflected in the books of accounts of the appellant company. (b) That the Ld CIT Appeal did not give sufficient opportunity of being heard to the appellant company and also wrongly calculated/confirmed the addition of ₹ 3,38,664/- being sum total of the peak of the financial transactions recorded in the cash book (i.e. ₹ 4.65.326/-) and bank book (i.e. ₹ 3,33,877/-) for the year under consideration (after reducing the .....

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ed on surmises, conjectures and suspicion, even when no adverse material is there. 6. That on the facts and circumstances of the case and the provisions of law, the Ld. C1T (A) has erred in concluding the alleged cash payment of ₹ 90,000/- to Phoenix Data Services Pvt. Ltd. as unexplained/unaccounted investments. 7. That on the facts and circumstances of the case, the various observations and findings of the Ld. C1T Appeals in the impugned appellant order is irrelevant and vitiated in the .....

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minating nature for the year under consideration and in absence of any incriminating seized document, assessment framed u/s. 153C of the Income Tax Act for the year under consideration, is bad in law and deserves to be quashed. Additional Ground of Appeal No. 2(b) That on the fact sand in the circumstances of the case, learned CIT(A) erred in not quashing the impugned assessment framed u/s. 144 of the Income Tax Act, 1961 {notice issued u/s 143(2)} whereas the subject year falls u/s. 153C and no .....

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e quashed. 22. The facts of the case are identical to the case of M/s Satkar Roadlines Private Limited in ITA No. 2170/Del/2014. In this case also on the basis of certain documents belonging to the assessee, seized in the course of search proceeding on 20/10/2008 at the premises of Sh. BK Dhingra, Smt. Poonam Dhingra and M/s Madhusudhan Buildcon Private Limited, proceedings under section 153C of the Act were taken up for assessment year 2003-04 to assessment year 2008-09 and for the assessment y .....

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d is identical to the additional ground raised in the case of M/s Satkar Roadlines Private Limited in ITA No. 2170/Del/2014, the additional ground raised in the case in hand is also allowed in favour of the assessee and the reassessment is held to be illegal and invalid. 25. In the result, the appeal of the assessee is allowed. ITA No. 2656/Del/2014 for AY: 2009-10 26. Now, we take up the appeal of the Revenue in ITA No. 2656/Del/2014 raising following grounds: i. That the Commissioner of Income .....

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