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2016 (8) TMI 327 - KERALA HIGH COURT

2016 (8) TMI 327 - KERALA HIGH COURT - [2016] 386 ITR 597 - Assessment under section 153C - requirement of a notice under section 143(2) - Held that:- As there is no requirement of a notice under section 143(2) for completing an assessment under section 153C and if that be so, the question of time limit prescribed under the proviso to section 143 (2) does not have any relevance for assessments under section 153C. Therefore, that finding of the Tribunal that the assessments for the years 2001-02, .....

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ny Dominic, J. 1. Among these appeals which are filed by the Revenue, ITA. Nos.309/13, 315/13 and 301/13 are concerning the assessment years 2001-02, 2003-04 and 2004-05 respectively and ITA.Nos.296/13 and 314/13 are concerning the assessment year 2005-06. In these appeals, the Revenue is challenging the common order passed by the Tribunal, by which, out of the six appeals filed by the assessee concerning the assessment years 2001-02 and 2003-04 to 2007-08, appeals for assessment years 2001-02, .....

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s.Matha Enterprises, a concern of the aforesaid group, large scale suppression of sale was found. It was also found that M/s.P.A.Kuriakose Jewellers and M/s.Matha Enterprises had introduced loans and credits in the name of the family members. The respondent assessee is one of the family members of P.A.Kuriakose and Paulson P.Varkey. 3. Based on the aforesaid search, proceedings under section 153C of the Act were initiated against the assessee and assessments under section 153A read with section .....

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005-06 respectively. By the common order passed, the Tribunal allowed the appeals filed by the assessee for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 and the appeals for the assessment years 2006-07 and 2007-08 were partly allowed. The appeals filed by the Revenue were dismissed. It is in this background, the Revenue has filed these appeals and the questions of law framed in ITA.314/13, which are common in nature, are the following: 1. Whether the ITAT is right in law in holding .....

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s seized is not the assessment order valid and in accordance with law? 4. We heard the senior counsel for the Revenue and the learned counsel appearing for the assessee. 5. The first issue on which considerable arguments were addressed by both sides is regarding the finding of the Tribunal in the impugned order on the scope of assessment under section 153C of the Act. In so far as this issue is concerned, the Tribunal itself has posed a question whether there can be an addition in the proceeding .....

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under section 153C read with section 153A is liable to be sustained. 6. This contention, which was refuted by the learned counsel for the assessee, can be answered in the light of the statutory provisions itself. Section 153C (1) alone, being relevant, read as follows: 153C. Assessment of income of any other person- (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 any money, bu .....

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person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to section 153A shall be construed 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. 7. Reading of this provision shows that it begins .....

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ng Officer having jurisdiction over such other person and the jurisdictional Assessing Officer shall proceed against such other person and issue such person notice and assess or reassess the income of such other person in accordance with the provisions of section 153A. 8. Section 153A, together with its proviso, read thus: 153A. Assessment in case of search or requisition- Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in th .....

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anner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: provided that the Assessing Officer shall assess or reassess the total income in respect .....

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t authorises the Assessing Officer to issue notice to the other person mentioned in section 153C, requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. 10. A comparative analysis of the provisions contained in sections 153A and 153C .....

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er having jurisdiction over such other person. Thereupon, it is for the Assessing Officer having jurisdiction to proceed against such other person by issuing notice and complete assessments or re-assessments as the case may be, in accordance with section 153A. Therefore, the fundamental jurisdictional requirement for invoking the powers under section 153C is the seizure or requisitioning of books of account or documents or assets which belong to a person other than the person referred to in sect .....

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the context of an assessment under section 153A simplicitor and not an assessment under section 153C read with section 153A. Therefore, we do not find any relevance to the judgment in ITA.159/15 and connected cases in so far as these appeals are concerned. 12. However, after concluding on the necessity of the recovery of materials on search or requisitioning for initiating proceedings under section 153C, it is seen that the Tribunal has found that in the search, sale deed dated 27.10.2000 and b .....

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ished. The Tribunal found that the return of income for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 were filed on 30.7.2001, 28.11.2003, 27.7.2004 and 1.2.2006 respectively. The Tribunal took note of the fact that search was made only on 13.2.2007 and that by that time, 12 months' period had already expired from the date of filing of returns for the assessment years 2001-02, 2003-04, 2004-05 and that even for the assessment year 2005- 06, the period expired on 31.3.2007. On th .....

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o section 143(2) is not only against the statutory provisions but is also opposed to the principles laid down in the judgment of the Delhi High Court in Ashok Chaddha v. Income-Tax Officer [(2011) 337 ITR 138] and the Panjab and Haryana High Court in Tarsem Singla v. Deputy Commissioner of Income Tax [(2016) 385 ITR 138]. This contention was contradicted by the learned counsel appearing for the assessee and according to him, the terms of the proviso are plain and clear and that therefore, the ti .....

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section 153C. We have already extracted sections 153C(1) and also section 153A in the earlier part of this judgment. We have also taken note of the fact that both these provisions start with a non obstante clauses, excluding among others, section 149 in its totality. If that be so, the legislative intention is plain and clear that the restrictive provisions contained in section 149 are excluded to an assessment that is completed under section 153C. This precisely is the view taken by the Delhi .....

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ce under section 143 (2) must be issued and omission to do so cannot be a procedural irregularity and the same is not curable. It is to be noted that the abovesaid judgment was in the context of section 158BC. Clause (b) of section 158BC expressly provides that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, subITA. 296/13 & con. cases 14 sections (2) and (3) of section 143 .....

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thin a prescribed time and thus not applicable to be present case. The case of Pawan Gupta [2009] 318 ITR 322 (Delhi) related to a mandatory issue of notice under section 143(2) of the Act in the case of regular assessment as also on block assessment. This being not a case of assessment based on search under section 153A, the same is not applicable to the present case. In the case of Raj Kumar Chawla [2005] 277 ITR (AT) 225 (Delhi) {SB} relied upon by learned counsel for the assessee was that of .....

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that case also, this court has held that in the absence of any specific provision under section 147 of the Act, the issuance of notice under section 143(2) cannot be held to be a mandatory requirement. 11. It is also to be noted that section 143A provides for the procedure for assessment in case of search or requisition. Sub-section (1) starts with a non obstante clause stating that it was notwithstanding anything contained in sections 147, 148 and 149, etc. Clause (a) thereof provides for issua .....

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9. Learned counsel relies upon R.Dalmia v. CIT [1999] 236 ITR 480 (SC) wherein the question of issue of notice under section 143(2) was examined with reference to section 148 by the Supreme Court in the context of section 147. The apex court held as under (page 488): As to the argument based upon sections 144A, 246 and 263, we do not doubt that assessments under section 143 and assessments and reassessments under section 147 are different, but in making assessment and reassessments under section .....

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so far as may be in clause (a) of sub-section (1) of section 153A could not be interpreted that the issue of notice under section 143(2) was mandatory in case of assessment under section 153A. The use of the words so far as may be cannot be stretched to the extent of mandatory issue of notice under section 143(2). As is noted, a specific notice was required to be issued under clause (a) of sub-section (1) of section 153A calling upon the persons searched or requisitioned to file return. That be .....

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evance for assessments under section 153C. Therefore, that finding of the Tribunal that the assessments for the years 2001-02, 2003-04, 2004-05 and 2005-06 are terminated/concluded by operation of law and that the assessee cannot be re-assessed under section 153C is untenable and is set aside. 17. The third issue debated before us was regarding the finding of the Tribunal with respect to ITA.346/11 concerning the assessment year 2005-06, against which, ITA.296/13 has been filed by the Revenue. T .....

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s of the partners and therefore, the benefit received by the partners cannot be telescoped. In that basis, the Revenue impugned the correctness of the telescoping allowed by the first appellate authority. 18. The Tribunal considered the rival submissions and concluded the issue in paragraph 31 of its order thus: 31. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the document SSA-29 discloses capital contribution by the asses .....

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