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TMI Blog2019 (2) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... ang/2017 for assessment year 2006-07. The revenue raised the following grounds of appeal: 1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The Ld. CIT (A) erred in not appreciating the fact that the AO had made addition on the basis of individual payments and receipts that the assessee had with Shri P. Dayananda Pai and M/s Canara Housing Development Company (CHDC) as found in the seized material. 3. The Ld. CIT (A) erred in not appreciating the fact that colour of the income changes whenever money passes from one hand to another. Thus nature of unaccountable income and its taxability needs to be examined in the hands of the assessee independently. 4. The Ld. CIT (A) erred in ignoring the fact that the assessee had presented the different versions of facts to the AO on different point of time i.e. initially in the statement recorded on oath, the assessee confirmed the cash transactions recorded in the ledgers of Dummy Tally Software (DTTE) and acknowledged that these were related with his investments in various properties, however, later on, during the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O dealt on the ledger account copies in the name of assessee in the search proceedings of Shri Dayananda Pai and such ledger account contained transaction from Dummy Tally Training Environment ['DTTE' for short] which the AO has referred at pages 3 and 4 of the assessment order. The assessee was provided an opportunity to explain the nature of transactions in seized ledger and the AO has worked out the peak credit. Show-cause notice was also issued. The assessee filed reply on 7/3/2013, 18/3/2018 and 25/03/2013 which was dealt by the AO at pages 5, 6 and 7 of the assessment order. The AO, considering the statements recorded and particular questions raised in the statements has concluded that the assessee could not explain the transactions found in the seized ledger; in spite of providing adequate opportunity and the assessee could not substantiate with any evidence or support, finally AO made disallowance of peak cash balance of Rs. 1,92,10,000/- as unexplained income of the assessee from other sources and passed order u/s 147 r.w.s. 143(3) of the Act dated 28/03/2012. 5. Aggrieved by the order, the assessee filed an appeal with the CIT(A). The CIT(A), considered the submissions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the applicant's income? The issue relates to the seized evidence marked as Annexure A/AK/PDP/06 which consists of a set of 6 CDs, a pen drive and floppy drive. The above CDs contained Tally accounts data complete with ledgers, cash book, balance hseet, P&: Account, etc. under the caption Dummy Tally Training Environment. This evidence was seized at the residence of 5mt.Adlene Kagoo, P5 to Dr.P.Dayananda Pai. The entries in the Dummy Tally have been owned up by Dr.Dayananda Pal as belonging to him and his firm i.e. CHDC. Page 63 of 74 - Point No.12.1.3 of the 5C order:-Thus the aggregate undisclosed income on the basis of the revised peak would be Rs. 171,33,35,796 (being the aggregate of peak credit set out in letter dated 16.09.2015 from Principal Commissioner of Income Tax, Central, Bangaluru) less expenses of Rs. 13,82,48,882 i.e net of 157,50,86,914. When this was pointed out to the AR during the course of the final hearing, he gave his consent to offer an additional undisclosed income being 75% of Rs. 157,50,86,914 which works out to Rs. 118,13,15,186/- in the hands of the present applicant." The CIT(A) having considered the Settlement Commission order, made ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained and deleted the addition and partly allowed the appeal of the assessee and passed order on 18/05/2017. 7. Aggrieved by the order, the Revenue has filed an appeal before the Tribunal. Before us, learned DR argued grounds and referred to the findings of the AO and the statements and particular documents seized. The learned DR emphasized that the addition made by the AO in respect of individual payments and receipts of Shri Dayananda Pai and CHD are lack of explanation of source of the assessee and has to be taxed in assessee's individual hands and cannot be viewed from the business point of view of Shri Dayananda Pai and CHD. The AO relied on the evidence available based on the Dummy Tally Account that the assessee was involved in making cash advances to Shri Dayananda Pai and others and such amounts are returned to the assessee. Though the assessee was provided adequate opportunity but could not establish with any evidence in support of the sources. 8. The learned DR mentioned that before the Settlement Commission, Shri Dayananda Pai and CHD have made application for disowning the funds but not the assessee sources which could not be explained and the fact remains that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement Commission on his assessment but only Shri Dayananda Pai and CHD have filed application and the Hon'ble Settlement Commission has passed orders dated 19/10/2015 which the CIT(A), on this specific issue, has referred at para.14 which is extracted in page 5 of this order. Further the contentions of the learned AR that the said amount does not belong to the assessee and are only advances for the property development and does not include profit or income element. The Settlement Commission considered the peak credit worked out in respect of transaction of Shri Dayananda Pai and CHD and granted the relief. Whereas the learned DR emphasized on the peak credit and argued that the individual peak credit of the assessee with parties was not worked out in the proceedings and CIT(A) order is silent on this issue, but the CIT(A) considered the fact that has been owned by the Settlement Commission applicants, but prima facie nothing was brought on record to substantiate the sources and the payments for this assessment year. We found the arguments of the learned DR are realistic. On perusal of the CIT(A) order, we found that the CIT(A) has referred to the observations of the Hon'ble Settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss objections, the assessee has filed application for condonation of delay in filing the cross objections. We, having considered the learned AR's submissions, the affidavit and application for condonation of delay and also there is no serious objection from the learned DR, we consider it appropriate to condone the delay in filing the cross objections and admit the same. 14. The assessee has raised common issues in the cross objections for assessment years 2006-07 to 2011-12. For the sake of convenience, we take up the CO No.27/Bang/2018 for the assessment year 2006-07. The assessee raised the following grounds of cross objections: 1. "The reassessment u/s 147/148 in the appeal filed by the Department is illegal as the reassessment proceedings are based on material seized during search in terms of provisions of section 132 at third party place. 2. The AO ought to have proceeded in terms of section 153C whenever material seized u/s 132 at third party place is utilised for reopening assessments related to the material seized. 3. The Hon'ble Tribunal may therefore kindly consider the cross objection raised and dismiss the departmental appeal." 15. Learned AR argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion over such other person and that Assessing Officer 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 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. (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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed" Issue of notice where income has escaped assessment. 3148. 4[(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve 5 on the assessee a notice requiring him to furnish within such period, 6[* * *] a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 147 of the Act and completed the assessment u/s 148 r.w.s. 143(3). The fact remains that the assessee is a third party and the documents seized in the search proceedings of Shri Dayananda Pai and CHD are related to assessee and belong to him. The learned AR submitted that the amount mentioned in the seized documents has been owned by the applicants of the Settlement Commission viz., Shri Dayananda Pai and CHD though belonging to the assessee. But the learned AR could not controvert with any material evidence except submitting that the amount owned by the applicants in the Settlement Commission belongs to the assessee Further, the decision of the co-ordinate bench in the case of ACIT vs. Srinvas Rao Hoskote in ITA Nos.1154 & 1155/Bang/2015 dated 21/02/2018 relied by the learned AR, the revenue filed appeal to the Hon'ble High Court and the Hon'ble High Court dismissed the revenue's appeal on the ground of low tax effect. As far as our view is concerned, on the assessment u/s 147 r.w.s 143(3) or 153C of the Act, we consider it appropriate to refer to the provisions and the decisions as envisaged in the case of Shailesh S. Patel vs. ITO (97 taxmann.com 570) (Ahmedabad.Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further --------- " 14.2 On a bare reading of s. 153C noted above, it is self evident that this provision governs assessment of income of a person other than a person in whose case search was initiated. 14.2.1 Also, this provision along with other provisions of s. 153A to 153D exerts an overriding effect over the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act since these provisions contain non-obstante clause. Secondly, the assessment proceedings under s. 153C are far more onerous qua s. 147 in the sense that proceedings are initiated for six assessment years immediately preceding the year in which search u/s. 132 is initiated or requisition is made u/s.132A. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner. . . . . . . . . . 14.5 The decisions cited on behalf of the assessee are clearly distinguishable and do not raise any conflict with position of law narrated above. The decision rendered by the Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1 has been rendered under a different scheme for assessment of search cases i.e. with reference to block period regime. The Hon'ble Gujarat High Court also echoes that in case of conflict between the operation of erstwhile Section 158BC of the Act (pertaining to erstwhile assessment procedure in the case of third person under old scheme) and Section 147/148 of the Act under normal provisions, provisions of erstwhile Section 158BC will prevail. The Hon'ble Gujarat High Court has also opined that proceedings under s.147/148 of the Act will not lie where it is repugnant to the procedure laid down under erstwhile Chapter XIV-B relating to search cases. In the instant case, where the onerous p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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