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2016 (7) TMI 385 - ITAT DELHI

2016 (7) TMI 385 - ITAT DELHI - TMI - Validity of assessment u/s 153C - Held that:- Respectfully following the judgement of Hon’ble Jurisdictional High Court in the case of RRJ Securities (2015 (11) TMI 19 - DELHI HIGH COURT ), and the facts of the case and provisions of Section 153C of the Act discussed above and the undisputed fact that no incriminating material was found in respect of other than searched person i.e. the appellant and following the principles laid down in the case of Kabul Cha .....

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se is related with section 153C/143(3) of the I.T. Act, 1961. The assessee has raised following grounds of appeal: 1. (i) That under the facts and circumstances of the case, the lower authorities were not justified to reject the claim of the appellant that the assessment framed u/s 153C of the Income Tax Act in this case was beyond jurisdiction and barred by limitation of time. (ii) That the authorities below were not justified to reject the claim ignoring the judgement of ITAT, New Delhi as wel .....

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ight to add, amend, delete or substitute any ground of appeal 4. That the order framed is against the facts of the case and bad in law. 1.1 The 1st ground of appeal is purely legal ground and the assessee challenged the action of Assessing Officer who passed order u/s 153C/143(3) of the I.T. Act, 1961. The 2nd ground of appeal is also on legal issue as well as on merits also. 2. The brief facts of the case are that the assessee filed its return of income on 10.08.2004 u/s 139(1) declaring an inc .....

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ces were issued on 18.07.2011. In response to the notices, the appellant filed written submissions / objections on 06.09.2011, placed at pages 10-14 of the Paper Book before ACIT, CC21, New Delhi. In response to the written submissions / objections of the assessee, Assessing Officer disposed of it on 23.09.2011, the contents of which are reproduced below: OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-21, NEW DELHI ROOM NO.344, 3RD FLOOR, E-2, ARA CENTRE, JHANDEWALAN EXTENTION .....

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ent proceedings u/s 153C is beyond time limit laid down in section 153A of the IT Act. That the search operation in the case of Shri Lalit Modi was carried on 19.06.2009 during which certain documents of the assessee company were seized on the basis on which proceedings u/s 153C have been initiated. That on the basis of Satisfaction Note recorded on 18.07.2011, the assessment u/s 153C could be undertaken up to 6 financial years prior to such date and these six years become FY 2005-06 to FY 2010- .....

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and shall be restricted to cover the concealed or undisclosed income based on the basis of incriminating seized documents found as result of search. It is not a case of regular assessment or reassessment and as such the provisions of section 153A of the IT Act which are parallel to provision u/s 153C of IT Act are to be considered in the context of purpose, object and scheme of IT Act. This legal proposition is also held in various decided cases on the subject. The assessment in this case may k .....

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he IT Act. The assessment In this case may kindly be made keeping In view these provisions. Your above objections have been considered but have not been found to be satisfactory and acceptable for the reasons given hereunder:- From the objections raised above at 1 (i), 1 (ii) and 1 (iii) by the assessee company, it is noted that in these objections the assessee company has raised issue that proceedings u/s 153C initiated in its case are not based on seized material belonging to the assessee comp .....

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er all the years falling within the mandate of proviso of section 153C(1) and read with section 153A(1) get attracted Moreover there is no legal requirement that initiation of proceedings should only be with respect to such years in respect of which there is some material. The requirement of the section 153C with reference to satisfaction seems to be only the prima facie satisfaction and not a conclusive satisfaction. Thus the AO must be prima facie satisfied that the documents etc. belong to th .....

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ho was to take over the seized material. Therefore, the issue of handing over and taking over of seized material is obviated. The plea taken regarding the date of search and subsequent date of handing over of seized material is also obviated as both the sides are manned by the same AO. The number of assessment years covered u/s 153C are the same as per the provisions of section 153A only. In view of the above stated facts it is clear that the notices u/s 153C read with section 153A of the IT Act .....

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153C with reference to satisfaction seems to be only the prima facie satisfaction and not a conclusive satisfaction. Thus the AO must be prima facie satisfied that the documents etc. belong to the other persons than the person searched. Further as regard to your contention that assessment under section 153C cannot be equated to regular and normal assessments and need to be based on incriminating and seized documents, your attention is invited to the decision of ITAT in the case of Shyam Lata Kau .....

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tion is hereby rejected. 3. Ld. A.R. also raised the question that no satisfaction has been recorded by the Assessing Officer of the searched person, only one satisfaction note has been recorded for the other than searched person which has been placed at pages 8-9 of the Paper Book. The Assessing Officer was not satisfied with the submissions / objections submitted by the assessee. During the course of search, no any incriminating material was found in case of other than searched person i.e. the .....

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before us which was earlier filed before Ld. CIT(A) on 05.07.2013 and 06.09.2011 before Ld. CIT(A) and A.O. respectively. Ld. A.R. vehemently contended that assessment proceedings done by the A.O. is beyond the period of 6 years prior to the date of recording satisfaction u/s 153C of the I. T. Act, 1961. On 23.08.2011. He referred section 153C of the I.T. Act which is as under: 153C. [(1)J Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and .....

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ue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.]. .. 3.2 He further submitted that the satisfaction u/s153C is to be recorded by the A.O. of the searched person and then he along with satisfaction note, should forward the copy of seized documents to the A.O. of the person to whom such documents belong. As per the provisions of Section 153C, the date of search is to be substituted by the date of receiving the books .....

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153A(l)(b)' the Assessing Officer is empowered to assess or reassess the total income of the six assessment years immediately preceding the assessment year relevant to the assessment year in which search is conducted. Thus, in other words, he has to assess the search year and six preceding years. As per proviso to Section 153C, for the purpose of Section 153C, the date of receiving the books of account or documents shall be considered the date of search. Therefore, with the combined reading .....

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he year in which seized material was seized is previous year 2008-09 relevant to AY 2009-10. The preceding six years would be AY 2008-09, 2007-08, 2006-07, 200S-06, 2004-05 and 2003-04. Therefore, after considering the facts of the assessee's case and combined reading of Section 153C as well as Section 153A, in our opinion, the issue of notice under Section 153C for AY 2001-02 & 2002- 03 is barred by limitation. Accordingly, we quash the same and consequentially, the assessment order pas .....

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that a person, that is, the person other than the one searched and to whom the seized documents/assets are said to belongs. It, plainly, follows that the recording of a satisfaction that the assets/documents seized belong to a person other than a person searched is necessarily the first step towards initiation of proceedings u/s 153C of the Act. In the case where the A.O. of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would .....

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nst such 'other person'. The initiation or proceedings against 'such other person' are dependent upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153. 26. Even in a case, where the Assessin .....

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153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C( 1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as .....

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003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the A.O., of the searched person. Thus, the date on which the AO of the per on other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for A Y 2003-04 and A Y 2004-05 were outside .....

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nd 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 or the Assessee for the years in question. Merely because a valuable article or document belonging to an Assessee is seized from the possession of a person searched under Section l32 of the Act, does not mean that the conclu .....

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O of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. 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 reass .....

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y 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 enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the i .....

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se of search against the assessee, therefore, as per the provisions of I.T. Act, no addition can be made on the other than searched person. He relied upon the decision of Hon ble Delhi High Court in case of CIT Vs Kabul Chawla in ITA 707/2014 decided on 28th August 2015. 4. Ld. D.R. relied upon the orders of authorities below. He submitted detailed written submissions citing various case laws, which are distinguishable on the facts of the present case. 5. After hearing both the parties, perusing .....

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