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Rajeev Behl Versus DCIT Central Circle-15, New Delhi

2016 (8) TMI 686 - ITAT DELHI

Assessment u/s 153C - Held that:- The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon’ble Delhi High Court in the case of RRJ Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT )we hold that assessment for AY 2007-08 was outside the ambit of the block per .....

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h only when some incriminating material was found during the course of search. He referred to the assessment order passed by the AO and pointed out that both the additions made by AO have no relation with the seized material and therefore, additions could not be made to the income assessed under the regular assessment. - We have considered the submissions of both the parties and have perused the record of the case. We find that as far as addition u/s 14A made for both the assessment years is .....

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by the ld. CIT(Appeals) relating to asstt. Years 2007-08 to 2010-11 and 2012-13. Since common issues are involved for adjudication, therefore, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. Brief facts of the case, as noted by the AO, are that a search and seizure action in Kalra group of cases was initiated on 28.07.2011. Main company of the group was Consortium Securities Private Ltd. and it was a stock brokering company, h .....

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d Sh. Bikramjit Singh Kalra were also associating him in controlling the affairs of the group companies. The group was also engaged in the real estate dealings. 3. The AO observed that during the search operation in M/s Consortium group of cases on 28.7.2011 certain documents were retrieved and it was found that those documents related to Shri Rajeev Behl (page nos. 14 to 36 of Annexure A-8) & (page nos. 94 to 139 of Annexure A-11). The AO has observed that these were mainly MOUs between the .....

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exure of MOU, wherein working of assets and liabilities of different projects of Realtech Group had been mentioned. The AO has further referred to clause 1.1 of MOU and pointed out that as per the said clause Company means any of the group company of Realtech , namely (i) Realtech Infrastructure Private Limited (ii) Realtech Construction Private Limited (iii) Realtech Projects Private Limited (iv) Realtech Maintenance Services Private Ltd. (v) Realtech Sports Academy Private limited (vi) Realtec .....

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did not pertain to him. It was explained that due to dispute between the promoters of Realtech Group, namely, Shri Pankaj Dayal, Shri Yogesh Gupta and Shri Rajeev Behl, a memorandum of understanding was drawn by the partners for partition of the group. As per the terms of the MOU, each partner had to appoint one arbitrator which should be acceptable to the remaining two promoters of the Group and in that process, he (Shri Parminder Singh Kalra), was appointed as arbitrator by the Realtech Group .....

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oborate the various entries in the seized documents. 5. The AO has further pointed that in the absence of production of books of account of Realtech Group, it could not be ascertained whether the entries/liabilities mentioned/noted in the seized documents had actually been recorded in the respective books of account maintained by the Realtech Group. He pointed out that since Shri Pankaj Dayal, Shri Rajeev Behl and Shri yogesh Gupta were promoter/director/shareholders in equal proportion of Realt .....

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New Delhi s order F.No. CIT(C)-II/Cent./2002-13/1368 dt. 06.11.2012. 6. Accordingly, notice u/s 153C was issued on 12.8.2013 for assessment years 2007-08, 2008-09, 2009-10, 2010-11 & 2012-13. Assessee filed returns for all these years as under Asstt. Yr. Income (Rs.) 2007-08 67,03,657 2008-09 1,56,77,698 2009-10 71,31,946 2010-11 34,67,524 2012-13 31,89,334 7. The AO has pointed out that notice u/s 142(1) of the Income-tax Act along with questionnaire was issued on 13.1.2014 and in complianc .....

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had failed to furnish complete details in respect of AYs 2007-08: i. Loan received from Sh. Manish Mehta HUF amounting to ₹ 10,00,000/- ii. Loan received from M/s Incredible Capital Ltd., amounting to ₹ 50,00,000/- iii. Loan received from Sh. Shailesh Dhir/ AR Securities amounting to ₹ 40,00,000/- 8. He, accordingly, made addition u/s 68 of ₹ 1 crore. Further disallowance u/s 14A read with Rule 8D was made of ₹ 40,794/- and on account of telephone and car expenses .....

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itted both these grounds being legal in nature and adjudicate the same before taking the other grounds of appeal. The first contention of assessee vide letter dated 27.10.2014 was that 153C/153A proceedings were wrongly initiated in this case. The contention was that these proceedings could be initiated only in respect of years where there was some incriminating material. The assessee also claimed before ld. CIT(A) that the MOU comprising of the working of assets and liabilities of Raltech Group .....

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ings. The assessee had relied on the decisions in the cases of All Cargo Global Logistics Ltd. Vs. DCIT 23 Taxmann.com 103 (Mum) (SB); Sinhgad Technical Education Society v. ACIT 16 Taxmann.com 101 (Pune); and CIT v. Shaila Agarwal 2011-TIOL-778-HC-All-IT. Ld. CIT(A) further pointed out that vide letter dt. 28.10.2014, the assessee further claimed that he had objected to the issue of notice u/s 153C and had also requested for the copy of the satisfaction note and copy of the seized material from .....

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ew Delhi on 28.03.2014, was filed as evidence of the claim that 153C proceedings had been objected by him before the AO. 11. Ld. CIT(A) examined the contents of MOU and after detailed consideration of the facts concluded that the seized material did not pertain to the Arbitrators, but to Rajeev Behl (assessee), Shri Yogesh Gupta and Sh. Pankaj Dayal, the promoters, directors and shareholders of the Realtech Group. Accordingly, ld. CIT(A) held that proceedings u/s 153C were rightly invoked in the .....

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other than the searched person is seized. 13. Ld. CIT(A) further examined the assessee s argument that 153C proceedings should be limited to only to the years in respect of which there was some material and that addition was to be confined to the material found during search and rejected the same following the decision of Hon ble Jurisdictional High Court in the case of Anil Kumar Bhatia (supra), after referring to following paras of the judgment: Para 18 .... Under Section 153A and the new sch .....

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;total income' of the six assessment years ill 'question III separate assessment orders. Para 20... With all the stops having been pulled out, the Assessing Officer under Section 15JA has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 115JA, by even making reassessments without any fetters, if need be . 14. In this regard ld. CIT(A) further referred to the decision in the case of CIT v Chelan Dass Lachman Dass 25 Taxman.co .....

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sment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found: in the course of the search or other post- search material or information available with the Assessing Officer which can be related to the evidence found. 15. Accordingly, ld. CIT(A) observed as under:- 4.7. It is thus evi .....

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fined to the material or relatable to the material found during search. Indeed, this is the distinguishing feature of the: assessments u/s 153A, vis a vis the erstwhile block assessments under Chapter XIVB, where such a condition was built into the provision itself. That the powers of the AO, under the provisions of section 153A, are beyond sections 147, 148, 151 and 153, has been taken note of in Anil Kumar Bhatia (supra). It is also relevant that section 153A refers to the determination of the .....

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er section 158BD there was a need to examine whether the seized material represented undisclosed income of the assessee other than the one searched, under section 153C, as discussed above, there is no such mandate. 4.8. Therefore, considering Anil Kumar Bhatia (supra) and Chetan Dass Lachman Dass (supra), a harmonious interpretation of section 153A/ 153C with all the other provisions would lead to the inevitable conclusion that the AO is required to assess the total income in cases where notice .....

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ass (supra) were discussed. 4.9. In view of the facts of the case and interpretation by the jurisdictional High Court, the invocation of section 153C and completion of assessment u/s 153A in the case of the appellant is held to be in order. The additional ground of appeal relating to the 153C proceedings is therefore dismissed. 16. Ld. CIT(A) has also pointed out that the assessee in order to save himself from the application of the provisions of section 292BB claimed that he had objected to the .....

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t survive. Ld. CIT(A) after elaborate consideration of facts concluded that assessee had been given reasonable opportunity of being heard. 17. On merits, ld. CIT(A) after rejecting the assessee s application for admission of additional evidence under Rule 46A, after detailed discussion, confirmed the additions made by AO, dismissing the assessee s appeal. 18. Being aggrieved with the order of ld. CIT(A) the assessee is in appeal before us and has taken following grounds of appeal: 1. That on the .....

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: is no requirement of incriminating material at all u/s 153C and can make unrestricted and unbridled de novo examination u/s 153C That there is valid and requisite satisfaction u/s 153C to intimate proceedings; That there is no embargo on Ld AO s power u/s 153C which according to CIT(A) is unfettered; c. Section 292BBwhich is limitedly applicable to service of notice etc. is extrapolated to adjudicate and block legitimate jurisdictional plea u/s 153C; f. That issues closed and settled in previo .....

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O in impugned order referring to assumption of jurisdiction has stated that same is initiate I for alleged revenue implication where there is none found subsequently; b. That L I AO has referred to words "relating to" on face of order in beginning portion; That no addition at all is made on alleged an I stated seized documents being basis of instant proceedings u/s 153C; That document seized were having no hearing ( direct or indirect) to computation of income of assessee; Awarding of .....

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rcumstance of the case and in law, Ld CIT(A) erred in not deleting the addition made Ld AO on adhoc basis which is impermissible, on a/c of telephone, car running and maintenance expenses etc without any defect in supporting voucher and audited ledger acc etc. 6. That on the facts and in the circumstances of the case and in law, Ld CIT(A) erred in not deleting the addition made Ld AO u/s 68 (alleged unexplained cash credit) being genuine loans where Ld AO remained sitted with folded hands and fa .....

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ting the addition made Ld AO u/s 14A (rule 8D) on self suited reasoning and not considering Jurisdictional high court available orders covering assessee's case . 19. Ld. counsel for the assessee reiterated the submissions raised before ld. CIT(A) vide additional grounds taken before him. Ld. counsel submitted that satisfaction has not been recorded as per the requirement of section 153C. Ld. counsel further submitted that the initiation of proceedings u/s 153C were without jurisdiction as no .....

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1.2012 vide CIT Central-II, New Delhi order F.No. CIT(C)-II/Cent./2002-13/1368. 20. As regards assessment years 2008-09 and 2009-10, ld. counsel submitted that since the assessment had been completed u/s 143(3) on 30.12.2010 for AY 2008-09 and 30.12.2011 for AY 2009-10, therefore, they were completed assessments, hence, could not be tinkered with unless there was some incriminating material found in course of search in the case of searched person belonging to assessee. 21. As regards AY 2010-11, .....

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is date (construed date of search), no time limit was left for issuance of notice u/s 143(2) for AY 2010-11 and, therefore, this assessment could not abate. Accordingly, this has to be considered completed assessment and, therefore, no addition could be made in absence of incriminating material. 22. As regards AY 2012-13, ld. counsel pointed out that AO has passed the assessment order u/s 143(3) on 29.3.2014 but since this assessment year fell within the block with reference to the construed dat .....

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orated in the Act to decide under which section assessment is to be completed. She, therefore, submitted that assessment framed u/s 143(3) for AY 2012-13 was a valid assessment. 24. We have considered the rival submissions and have perused the record of the case. The first plea of ld. counsel for the assessee, regarding validity of assessment u/s 153C is in regard to not recording of satisfactgion by AO in terms of section 153C. 25. The submission of ld. counsel is that the satisfaction was reco .....

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This is evident from the mandate of section 153C itself. The AO of searched person has to record a satisfaction 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 searched person. Thereafter the AO of searched person has to hand over the books of a/c, documents, assets se .....

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o in sub-section (1) of section 153A. It is pertinent to note that the tenor of satisfaction, as contemplated in this section at two places is different. Whereas the AO of searched person has to simply record a satisfaction regarding seized material being related to the other person, but when it comes to the recording of satisfaction by the AO of other person, then he can issue notice only if he is satisfied that the assets seized have a bearing on the determination of the total income of such o .....

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on the determination of the total income. This is so mandated by legislature so that proceedings in case of persons other than searched person are not reopened without due application of mind by AO of person other than searched person. One of the submissions of ld. counsel for the assessee in the context of this part of section 153C was that unless the AO of a person other than the searched person reaches the conclusion that the seized document represents incriminating material, the proceedings .....

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t the seized document represented incriminating material. The purpose of phrase have a bearing on the determination of the total income of such other person , is to meet such contingency where though the material seized may be related to a person other than searched person, but if that material has no bearing at all on the determination of total income, then proceedings u/s 153C need not be initiated. The object is that AO should duly apply his mind to the material seized before issuing notice u .....

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centralize with this office u/s 127 of the Income-tax Act, 1961, vide vide CIT, Central-II, New Delhi s order F.No. CIT(C)-II/Cent./2002-13/1368 dt. 06.11.2012. 28. Thus, it is evident that the AO of searched person, had duly recorded the satisfaction and then only the case got centralized. Therefore, the plea of ld. counsel for the assessee that no satisfaction was recorded by the AO of searched person is devoid of any merit. 29. As regards the satisfaction recorded by AO of the person other th .....

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notice u/s 153C he is not required to reach a conclusions regarding seized material being in the nature of incriminating material, which will lead to addition to total income of assessee. In this regard we may refer to the decision of Hon ble Delhi High Court in the case of CIT Vs. RRJ Securities (2015)62 Taxmann.com 391 (Del), on which ld. counsel has placed heavy reliance. In para 35 & 36 of its decision, the Hon ble High Court has observed as under: 35. The AO of the person other than th .....

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ct any undisclosed income of the Assessee (i.e. a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO 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 m1y undisclosed income, the assessments already made cannot be interfere .....

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ized 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 disclosed 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 undisclose .....

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the search operation in the case of M/s Consortium group of cases on 28.7.2011, following documents were retrieved: (i) page no. 14 to 36 of Annexure A-8. (ii) Page nos. 94 to 139 of Annexure A-11. These documents have been filed before us both, by assessee as well as the department. From pages 14 to 36 of Annexure A-8, it is noticed that the same is memorandum of understanding between Sh. Pankaj Dayal, Sh. Yogesh Gupta and Sh. Rajeev Behl (assessee). Further, page nos. 95 to 117 of Annexure A-1 .....

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him Shri B.N. Chandhok and Shri Kuldeep Ahuja were also appointed arbitrators. These three promoters were issued summons but only Shri Yogesh Gupta appeared before the Investigation Wind. The AO has noticed that he remained evasive on various replies. The books of a/c were not produced to corroborate the various entries in the seized documents. Under such circumstances, it cannot be said that AO could not arrive at the satisfaction as contemplated u/s 153C that the valuation ( assets minus liab .....

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We find considerable force in this argument of ld. counsel for the assessee in view of observations of Hon ble Delhi High Court in para 24, which is reproduced hereunder: 24. As discussed hereinbefore, in terms of proviso to Section 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 ju .....

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ments to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003- 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 AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years pr .....

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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 .....

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t 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 AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. 34. The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were han .....

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re completed u/s 143(3) on 30.12.2010 and 30.12.2011 respectively u/s 143(3), the plea of ld. counsel for the assessee is that they were completed assessments and, therefore, the assessee s total income could be tinkered with only when some incriminating material was found during the course of search. He referred to the assessment order passed by the AO and pointed out that both the additions made by AO have no relation with the seized material and therefore, additions could not be made to the i .....

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made in respect of loans in AYs 2008-09 and 2009-10 as under: A.Y. 2008-09: Sh. Sandeep Sehgal ₹ 35,00,000/- Ms. Asha Hiryani ₹ 4,80,000/- M/s TKS Projects P. Ltd. ₹ 4,00,000/- A.Y: 2009-10: Sandeep Sehgal ₹ 35,00,000/- Manish Mehta HUF ₹ 10,00,000/- M/s Maheshwari Synthetics ₹ 15,00,000/- Asha Hiryani ₹ 4,80,000/- M/s Alpex Exports P. Ltd. ₹ 29,00,000/- 38. When we compare these loans with the seized documents, we find that at page 125 on the liab .....

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11. Ranbir Nanda ₹ 1000000/- 12. S.K. Verma ₹ 1250000/- 13. Asha Chordia ₹ 1000000/- 14. Gange Developres & Infrastructure ₹ 1000000/- 15. Mahesh Vishnu Trade Credit(P) Ltd. ₹ 1000000/- 16. Ashok Aggarwal ₹ 1000000/- 17. Sanjay Shanker Gaikwad ₹ 500000/- 18. Benu Agarwal ₹ 500000/- 19. Yagya P Gupta ₹ 500000/- 20. Achla Aggarwal ₹ 1000000/- 21. Nandni Paints P. Ltd. ₹ 500000/- Total: ₹ 28050000/- 39. Further, at page 13 .....

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the parties in respect of which additions have been made were mentioned in the seized documents. 41. At this juncture we may observe that though the AO has noticed that inspite of repeated opportunities the assessee neither furnished the necessary details nor explained the seized documents but has not made any addition with reference to seized documents. In this regard we notice that the AO in para 4 has observed that the details filed by the assessee had been correlated with the claims made in .....

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red with by the AO on the basis of any incriminating material found during the course of search or requisition of the document, therefore, the assessment made for AYs 2008-09 and 2009-10 are quashed because they were the completed assessment on the date of construed search. 42. Now coming to the assessment year 2010-11. For this assessment year admittedly no intimation u/s 143(1) was issued. The assessee in the paper book has filed the copy of acknowledgement of filing return of income on 1.10.2 .....

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r not on the date of search, we have to find out whether time limit for issuance of notice u/s 143(2) was there or not on the date of search, in view of the decision of Hon ble Jurisdictional High Court of Delhi in the case of CIT Vs. Income Tax Settlement Commission, rendered in WP(C) 213/2012 (C.M. Application 452/2012) vide order dated 20.11.2012. The Hon ble Jurisdictional High Court has observed as under: 10. The expression "pending" in this case, has to be viewed contextually. In .....

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Supreme Court had ruled that an assessment proceeding commences from the date when the assessee files its return. The terminus quo therefore would be the last date by which the Assessing Officer can legally pass an order. Once that period lapses, the officer loses jurisdiction and authority to issue any order …. . 44. Determination of this aspect is necessary in order to find out whether the assessment for a particular will abate or not. If it is a case of pending assessment, then in view .....

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sment is to be considered as a pending assessment if on the date of search, time was available for issuance of notice u/s 143(2). 45. The search in the present case took place on 28.7.2011 and on this date the time for issuance of notice u/s 143(2) was available because the notice could be issued up to 30.9.2011. However, in the present case the construed date of search would be 6.11.2012, being the date on which the seized documents were handed over to the AO of assessee. As held by us in prece .....

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0,00,000/- M/s Van Guard Media P. Ltd. ₹ 75,00,000/- 47. When compared with the details of loans as per the seized documents, noted earlier, it is evident that there is no nexus between the additions made by AO with the seized documents. Therefore, the assessment for AY 2010- 11 is also quashed. 48. Now coming to the assessment for AY 2012-13. For this assessment year the AO had passed the assessment order u/s 143(3) and not u/s 153C. The submission of ld. counsel is that since this assess .....

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second proviso to section 153C in case of person other than the searched person, is only limited for determining the applicable period and it cannot be extended for determination of the section under which assessment order is to be passed. We find considerable force in the submission. No where u/s 153C, it is mentioned that the assessment for assessment year after the date of actual search has to be made in accordance with the provisions of section 153A. This is clearly evident from the provisi .....

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of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned .....

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nsequence of this would be to reckon the block period from this date. Therefore, legislature has incorporated section 153C(2) as per which, assessment u/s 153A/153C is to be made only if conditions contemplated in either of clause (a),(b) or (c) u/s 153C(2) are fulfilled. All these clauses contemplate various situations where assessment has to be treated as completed assessment. However, in respect of pending assessment no such provision has been made. Therefore, for pending assessments AO has t .....

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