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TMI Blog2017 (9) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in law and in facts in not holding that the notice issued u/s. 153C and the consequential assessment are bad in law and without jurisdiction. 2. The learned CIT(A) erred in holding that there is nothing on record to say that the satisfaction is recorded only in the file of 153C and not in the file of 153A person. 3. The learned CIT(A) has erred in holding that and documents seized were belonging to the appellant and that books of account and documents seized were incriminating in nature." 3. Briefly stated facts are that a search and seizure action under section 132 of the Act was carried out on the business and residential premises of M/s Flemingo and Bermaco group of companies as well as their directors on 31-10-2009. During the course of search unaccounted cash, incriminating documents, assets etc. were found and seized. The assessee is one of the group companies and consequent to search and seizure action, a notice under section 153C of the Act was issued on 12-04-2010. The notice under section 153C of the Act was issued for the reason that incriminating material relating to assessee was found during the course of search. The assessee filed its original return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be handed over to the A.O having jurisdiction over such other person and that A.O shall proceed against such other person and issue notices to such other person so as to assess or reassess income of such other person in accordance with the provisions of section 153A of the Act. The books of account and documents seized in this group are in the custody of the same officer who has jurisdiction over the persons subjected to search & seizure proceedings and also over the appellant against whom proceedings uls.153C of the Act are invoked. Since the officer is common in respect of the cases where proceedings have been initiated uls.153A of the Act as well as u/s.153C of the Act, there was no requirement of handing over the materials to another A.O. Therefore, the A.O was justified in taking into account of the factual information about the group of cases available in his possession and the books of account and other documents that were seized during the search & seizure operations so as to arrive at a prima facie decision to initiate proceedings u/s 153C of the Act. Initiation of proceedings u/s.153C of the Act is only the first step in the process of enquiry to establish any undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n need not establish undisclosed income prior to the issue of notice u/si 53C of the Act. However, a question would arise as to what would happen if there is no discovery of income out of the seized materials after the issue of notice u/s.153C of the Act. It is held in the case of SSP Aviation Ltd. vs. DCIT (346 FIR 177) (Delhi) that the A.O may drop the proceedings in such circumstances. The procedure and the rationale behind the issue of notice u/s. 1 53C of the Act have been described in detail in the case of SSP Aviation Ltd. referred supra which is reproduced as under: "The judgment of this court in Saraya Industries Ltd. (2008) 306 ITR 189 (Delhi) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of Section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the revenue authorities to investigate into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two provisions in order to deal with the contention put forward by the learned counsel for the petitioner that the seizure itself is invalid or illegal on the ground that there could not have been any satisfaction before issuing the warrant of authorization under section 132 of the Act that the petitioner had earned undisclosed income because the income reflected in the seized documents, namely, the collaboration agreement dated August 24, 2006, and the assignment agreement dated July 21, 2006, had already been taken note of in the account books of the petitioner This is a debatable issue as is apparent from the submission of the Revenue. They have submitted to the contrary. It cannot be said that the seizure of the documents was unwarranted or contrary to law. As noticed above, the Revenue has highlighted that finalization and audit of accounts was after the date of the search. The accounts for the year ended March 31, 2009, now relied upon by the petitioner, were finalized after the search on January 5, 2009. Seizure has to be judged in the perspective and the facts known and within the knowledge when it was made. On that date, the Revenue was riot in a position to know whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re proceedings is vitiated. This contention of the appellant is not acceptable. There is nothing on record to say that the satisfaction is recorded only in the file of 153C person and not in the file of 153A person. On verification of assessment records, it is seen that the satisfaction note in this case is a separate loose sheet and it is kept in a separate folder including the satisfaction note of other cases in the group. I am of the opinion that it does not matter whether the satisfaction note is kept in a separate folder or in the assessment records of the searched person. It is learnt from the A.O that since joint warrant of authorization was issued in the case of 153A persons, there was difficulty in choosing a particular case wherein the satisfaction note should be placed and therefore, the satisfaction notes were kept in a separate folder. I do not find any infirmity in the action of the A.O. In view of above, the contention of the appellant is found to be untenable. 7.3 Further, it may also be mentioned that the books of account and documents seized are incriminating in nature. The authorized officer on the basis of the findings during the course of search showed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recoded by the AO to initiate search assessment proceedings under section 153 read with section 143(3) of the Act." 5. The learned Counsel for the assessee further referred to Page 105 of assessee's paper book wherein satisfaction note drawn by Dy. Commissioner of Income Tax (DCIT) Centre Circle-9, Mumbai is enclosed and the relevant satisfaction note which was read out by the learned Counsel for the assessee and same is reproduced as under: - "Search & Seizure action u/s. 132 of the IT Act 1961 was carried out at the residence and business premises of M/s. Flemingo/Bermaco Group on 31-10-2009 by the DDIT(Inv,) Unit-11(3), Mumbai. The assessee was connected with the Flemingo/Bermaco Group of cases arid the directors who were covered u/s. 153A of the search company were also involved in the above company. Further during the course of search action the following incriminating documents were found and seized which had great bearing in the assessments covered u/s. 153A of the Bermaco Group Companies. 1) Annexure A/15 :- This annexure contains 16 pages containing final accounts of M/s. Bermaco Energy Ltd. 2) Annexure A/21 :- Pages 1 to S containing ledger accounts of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and assessments are abated, the AO retains original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of six assessment years separately. It was further held that in cases of abated assessment where addition to income that has already been assessed, assessment u/s 153A or 153C of the Act will be made on the basis of incriminating material i.e. books of account, other documents, assets etc. found in the course of search but not produced in the course of original assessment or undisclosed income or property discovered in the search. The learned CIT DR also argued that in the present case before us, the remand report contains seized materials which are copies of accounts in the books of assessee and accordingly, once the Tribunal under section 153C of the Act has clearly held the books of account means even the ledger extracts. In the present case, the seizure was of accounts of the assessee. Hence, he requested for confirmation of assumption of jurisdiction by the AO. In view of this, the learned CIT DR stated that on the basis of assumption of jurisdiction, the AO rightly framed the assessment based on incriminating materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment/reassessment proceedings that are pending on the date of conducting search u/s. 132 of the Act stand abated and not the assessments/reassessments already final for those assessment years covered u/s. 153A of the Act. Hon'ble High Court also discussed the CBDT Circular No. 8 of 2003 dated 18.09.2003 reported in 263 ITR (st.) 61 at page 107 wherein CBDT has clarified that on initiation of proceedings u/s. 153A of the Act the proceedings pending in appeal, revision or rectification proceedings against final assessment shall not abate. It is only because the final assessments do not abate the appeal, revision or rectification pending against final assessments would not abate. Therefore, Hon'ble High Court rejected the arguments of the Revenue that on initiation of proceedings u/s. 153A of the Act, the reassessment final for assessment years covered u/s. 153A of the Act stands abated. Only the pending assessments get revived u/s. 153A of the Act. Hon'ble High Court further held that once assessment has attained finality, then the AO while passing independent assessment order u/s. 153A/143(3) of the Act could not disturb the assessment order which has attained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 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 is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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