TMI Blog2017 (12) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 153C of the Act, the AO cannot resort to invoke the provisions of Section 147/148 of the Act to assessee or reassess income of the assessee. The action of the AO to initiate the proceedings Under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the Assessing Officer shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. Also AO has not recorded in his satisfaction or believe that the income chargeable to tax has escaped assessment on account of failure of the assessee to disclose fully and truly all material facts necessary for assessment then the notice issued u/s 148 beyond the period of 4 years was without jurisdiction and is not sustainable. AO has failed to set out in the reasons recorded as to what facts the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than assessing officer of assessee and relying and considering the remand/enquiry report sent by said other officer while only the assessing officer of assessee can be directed to send required report u/s 250(4). ( b) without affording proper opportunity of cross examination as the said cross examination has to be before the adjudicating authority/officer and not before any other officer. ( c) has erred in law in allowing the DCIT-Central Circle-1 to review the order of ACIT Central Circle-2 and further erred in himself being directed by the remand report rather that deciding the same in appeal himself. ( d) wrongly held that assessee belongs to Rajendra Jain Group and considering and relying on various absolutely wrong facts as appear from appeal order; ( e) only relying on statement of third party-Madan Mohan Gupta without examining the authenticity thereof which is unsupported with any evidence or corroborative evidence on record more so without any testimony or examination of the primary persons i.e. farmers who were owners of impugned land for which undisclosed investment in cash by assessee is alleged and even no proceedings under I.T. Act have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dra Jain Group. This diary allegedly contained transactions of cash dealing in respect of land situated at Village Chainpura, Tehsil Sanganer, Jaipur, Rajasthan. The statements of Shri Madan Mohan Gupta were recorded during the search and post search enquiry wherein he stated that the land in question was purchased by Shri Rajendra Kumar Jain through him. The deal was stated to be finalized at ₹ 12,43,27,000/- out of which discount of 1% was allowed for registration of land. Therefore, ₹ 12,30,84,000/- was net payable amount to the seller. Later on this land was sold to Shri K.G. Kothari the assessee in this case. It was also stated by Shri Madan Mohan Gupta that the land was purchased in the name of M/s kalyan Buildmart Pvt. Ltd. (SKBPL) in which he was a Director along with his wife Smt. Shashi Kala Gupta. We think it proper to clarify hear that in fact the transaction of purchase of land in question was between the M/s kalyan Buildmart Pvt. Ltd. and the land owner as per the registered sale deed. It is only in the statement recorded during search and post search investigation Shri Madan Mohan Gupta stated that he purchased the land on behalf of Shri Rajendra Jain. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 292C r.w.s. 132(4A) of the act is that the documents belong to the persons i.e. the assessee, Shri Vimal Chand Surana HUF and Kushal Chand Surana. The ld. CIT(A) also held that the seized documents are not third party documents as Sri Madan Mohan Gupta being deed writer of them has been accepted by the assessee and other persons in the statement recorded on oath. Therefore, the authorities below have proceeded to reassess the income and made the addition only on the basis of the seized material found during the search. That being the case the reassessment could be done u/s 153C r.w.s. 153A and recourse of section 147/148 is contrary to the specific provisions of law and therefore, the reassessment order is void abinitio and liable to be quashed. The ld. AR has forcefully contended that sections 147 and 153C are not inter changeable but are mutually exclusive sections. It is not the choice of the AO to invoke either of two sections at its whims. The Scope of two Sections have been legislated differently with a definite purpose. The ld. AR has relied upon the decision of Amritsar Bench of this Tribunal in case of ITO vs. Arum Kumar Kapoor 140 TTJ 249 and submitted that the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns recorded that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Thus, the ld AR has submitted that when the Assessing Officer has not mentioned in the reasons recorded that the assessee has failed to disclose fully and truly all material facts necessary for the assessment which has resulted into escapement of income, the reopening after 4 years from the end of relevant assessment year is bad in law. In support of his contention he has relied upon the following decisions:- CIT vs. Arvind Remedies Ltd. 378 ITR 547 (Madras). Sitara Diamond (P.O Ltd. 345 ITR 91 (Bombay). Gujara Lease Financing Ltd. 219 Taxman 70 (Gujarat H.C.) Accordingly, the ld. AR of the assessee has submitted that when the Assessing Officer has not alleged any failure on the part of the assessee to disclose fully and truly all the facts necessary for the assessment then the reopening of the assessment after 4 years is not valid liable to be quashed. 5. On the other hand, ld. DR has submitted that there is no bar on the powers of the AO to issue notice u/s 148 instead of section 153C of the Act. The AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer in the course of initiation assessment completed u/s 143(3) r.w.s. 153A on 31.03.2013. Thereafter the AO proposed to reopen the assessment to assess the consideration paid by the assessee for alleged purchase of land by issuing notice u/s 148 on 25.03.2014. The AO recorded the reasons for reopening of the assessment as reproduce at page 4 of the assessment order are as under:- During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exhibit 1 to 5 of Annexure-AS and Exhibit 1 to 8 of Annexure- A. The documents found and seized from the residence and business premise of Shri Madan Mohan Gupta during the course of search proceedings revealed that on various page of Exhibit- 1,2 5 of Annexure-A as well as Exhibit-1 of Annexure-As, some date wise amounts have been written in the name of KGK . These transactions noted on page no. 28,43,69 and 73 of Exhibit-1 of Annexure-A total up to ₹ 14,24,12,650/-. The assessee has failed to satisfactorily explain the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector along with hiswife Smt. ShashiKala Gupta. This land was purchased during the year 2006-07 and sold to K G. Kothari, Prithviraj Road, C-Scheme, Jaipur and Shir vimal Chand Surana in the month of March, 2007 and the details of the same have been recorded on page Nos. 27 28 of Exhibit of Annexure-A. During the course of statement, Shri Madan Mohan Gupta admitted that the amounts mentioned against dates have been recorded in coded form such as ₹ 1.00 crore have been written as 1=00 and ₹ 50.00 lacs have been written as .50. This sale transactions were finalized for ₹ 20,83,39,232/- and the payments to the sellers were made through Shri Rameshwar Prasad Sharma resident of Barkat Nagar, Tonk Phatak, Jaipur. Shri Madan Mohan Gupta further admitted that he got ₹ 8.00 lacs as his reimbursement from this land transaction. Thus it reveals from the assessment order that after the initial assessment u/s 143(3) r.w.s. 153A the AO got the alleged incriminating material in the shape of diary and transactions recorded therein found and seized in the search and seizure operation in case of Rajendra Jain Group. Accordingly, the AO proceeded to reassess the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made 86a [ and for the relevant assessment year or years as referred to in sub-section (1) of section 153A ] except in cases where any assessment or reassessment has abated.] 87[(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- ( a) no return 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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the CIT(A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO under s. 148 are illegal and void ab initio. In the instant case, the learned CIT(A) has correctly observed that the AO should have issued notice under s. 153C of the Act and should have framed the assessment under s. 153C r/w s. 153A of the Act. Sec. 153C of the Act reads as under : 153C. Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, where the AO is satisfied that any money, bullion or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A. 8. On a perusal of the above provisions, it would be clear that the provisions of s. 153C of the Act were applicable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Visakhapatnam Bench of this Tribunal in case of G. Koteswara Rao vs. DCIT (supra) in para 11 to 17 as under:- 11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish the returns of income for each assessment years falling within the six assessment years immediately preceding the assessment year in which search or requisition is made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid period which includes disclosed and undisclosed income. Therefore, the new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary. 15. A similar issue came up for consideration before the Special Bench of this tribunal and the special bench had an occasion to deal with the interpretation of section 153A of the Act in the case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum) (SB). The Special Bench after considering the provisions of section 153A and CBDT circular has held as under: '52. The provision comes int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the findings of the search and any other material existing or brought on the record of the A.O. ( b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 58. Thus, question No. 1 before us is answered a) as under ( a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately ;' 16. In yet another case, the ITAT Mumbai Bench, in the case of State Bank of India v. Dy CIT [2013] 22 ITR (Trib.) 609, had considered the issue. The Mumbai bench after considering the relevant sections and CBDT circular has held as under: 18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer is empowered to assess or reassess the total income' of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section 153A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12-2010 passed u/s 143(3) r.w.s. 147 is quashed. Thus, it is clear that the Tribunal has taken a consistent view on this issue and further the Delhi Benches of this Tribunal in case of Rajat Shubra Chatterji vs. ACIT (supra) has held in para 7 as under:- 7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147/148 by the AO to reassess the income is illegal being without jurisdiction and consequently the reassessment order passed u/s 147 r.w.s. 143(3) is also illegal and void abinitio and is liable to be quashed. 7. As regards the second objection of the assessee against the reopening of the assessment u/s 148 we find that undisputedly the notice u/s 148 issued on 25.03.2014 is after the expiry of 4 years from the end of the assessment year under consideration. The initial assessment was framed by the Assessing Officer u/s 143(3) r.w.s. 153A and therefore, the proviso to section 147 comes to play and the Assessing Officer cannot reopen the assessment except when there is failure on the part of the assessee to disclose fully and truly all the facts necessary for the assessment. The reasons recorded by the AO has been reproduced by us in the foregoing part of this order and it is clear that the AO has not stated in the reasons that the assessee failed to disclose fully and truly all the facts necessary for the assessment. The AO while completing the initial assessment on 31.03.2013 Under section 143(3) r.w.s. 153A accepted the transaction of purchase of 8000 shares of M/s Kalyan Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in case of CIT vs. Remedies Ltd. (Supra) has held in paras 10 to 12 as under:- 10. We find from the order of the Tribunal and also on the facts as has been culled out from the assessment order in question that there is no element of failure to disclose fully and truly all material facts necessary for assessment. Therefore, there was no justification for the department for invocation of proceeding under Section 147 r/w 148 of the Income Tax Act. 11. Our stand is further fortified by the decision of this Court in TCA No.217/2015 dated 2.6.2015, wherein in a similar matter, this Court has held as under :- '16. Our view is fortified by the decision of the Full Bench of the Delhi High Court in the case of Commissioner of Incometax v. Kelvinator of India Ltd. reported in [2002] 256 ITR 1 (Del), wherein, the Delhi High Court held as follows: We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation were claimed and the assessee had furnished the invoices for purchase of assets on which 100 per cent. depreciation were claimed, there was no failure on the part of the assessee and if at all there was any failure, according to the Commissioner of Income-tax (Appeals), it was on the part of the Assessing Officer, who made the original assessment without going behind the nature of the transactions accepting the details furnished by the assessee. The Tribunal also extracted that portion of the order and found on the fact that there was no fault on the part of the assessee so as to enable the Department to reopen the assessment as the proviso to section 147 of the Income-tax Act would squarely apply to the case of the assessee. We find no infirmity in the order passed by the Tribunal. Hence, the appeal is dismissed. 19. In an identical circumstances, a learned single Judge of this Court considered the issue in the decision reported in Fenner (India) Ltd. v. Deputy Commissioner of Income-Tax [2000] 241 ITR 672 (Mad), wherein, it was observed as follows: The pre-condition for the exercise of the power under section 147 in cases where power is exercised withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147.... . . . . . . . . . . . . . . . . . . . . The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment. On the contrary, it was the Assessing Officer, who failed to consider the materials placed before him at the time of regular assessment for which the assessee cannot be found fault with. Therefore, the notice issued under Section 147 of the Income Tax Act beyond the period of four years was wholly without jurisdiction and cannot be sustained. Accordingly, for the reasons stated above, the substantial question of law is answered in favour of the respondent/assessee and against the appellant/Revenue. Thus, when the AO has not recorded in his satisfaction or believe that the income chargeable to tax has escaped assessment on account of failure of the assessee to disclose fully and truly all material facts necessary for assessment then the notice issued u/s 148 beyond the period of 4 years was without jurisdiction and is not sustainable. Hon ble Bombay High Court in case of Sitara Diamond (P.) Ltd. vs. DCIT (supra) while considering the validity of notice issue u/s 148 after 4 years has held in para 6 as under:- 6. We have considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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