TMI Blog2019 (7) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the invoking of the provisions of section 153C in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the orders of assessment for Assessment Years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue s appeals for Assessment Years 2008-09, 2011-12 and 2012-13 are dismissed. Initiation of proceedings as barred by limitation in view of the proviso to section 153C - HELD THAT:- We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. - CIT(A) was correct in deciding this ground in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-12 and 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds:- 3.1 Assessment Year 2008-09 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting additions of a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting additions of a sum of ₹ 43,04,115/-, on account of Unexplained Cash Deposits when the assessee has not discharged the onus of explaining the credit. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting the estimated the undisclosed profit of ₹ 46,97,851/- based on the material found whereas as the decision of Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of jurisdiction, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153C of the Act and done whatever is required to strengthen the orders of assessment. In this regard, the learned DR, inter alia, placed reliance on the decisions of the Hon ble Delhi High Court in the case of CIT Vs. Safetag International Pvt. Ltd., in 332 ITR 622 (Del.) and of the Hon ble Apex Court in the case of CIT Vs. Singhad Technical Education Society C.A. No.11080 of 2017 and others dated 29.08.2017. 4.2 Per contra, in response to the above contentions of the Revenue, the learned AR for the assessee submitted that firstly, there was no requirement of law that the assessee must first object to the assumption of jurisdiction by AO under section 153C of the Act for the same issue to be taken up in appellate proceedings. The issue of assumption of jurisdiction involves purely a question of law and the assessee is in no way precluded from raising this issue / question before an appellate authority even if the same is not raised before the AO and the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153C of the Act. The assessee challenged the notice issued thereunder before the Hon ble Gujarat High Court by way of a writ petition, on the ground that the seized documents did not belong to him. The Hon ble High Court in its order quashed the notice. Revenue filed an appeal before the Hon ble Apex Court, which held that the assessee ought to have objected to the notice before the AO and follow due process of law as he had alternate remedy and ought not to have filed the writ before exhausting the alternate remedy available to him. In that view of the matter, the Hon ble Apex Court set aside the judgment of the Hon ble High Court. In our humble view, the above case does not help Revenue as the same cannot be applied to the facts of the case on hand; which are distinctly quite different. In the case on hand, the assessee has challenged the jurisdiction before the CIT(A) after completion of assessment proceedings and has followed the due process of law. There is no dispute that the seized material belong to the assessee in the case on hand. The subject matter of dispute is whether the said seized material, not being incriminating in nature, can be the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to the issue before us in the case on hand. ( ix) CIT Vs. Smt. Sudha Gafoor in 408 ITR 246 (Kar. HC) The Hon ble High Court held that when the AO for the person searched and the other person is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. ( x) Rajesh Sunderdas Vaswani Vs. ACIT in (76 taxmann.com 311) (Guj. HC) The Hon ble High Court held on the facts therein that the AO of the Person Searched had indeed recorded a satisfaction that the seized material did not belong to the person searched but to the other person . This decision is not applicable to the issue before us in the case on hand. ( xi) Raymond Woolen Mills Ltd., Vs. CIT (236 ITR 34) (SC) This decision was rendered in respect of the sufficiency and adequacy of the reasons recorded for re-opening assessment under section 147 of the Act and therefore in our humble view, would not be applicable to the issue of dispute in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ITAT to allow that ground, questioning the jurisdiction under section 153C of the Act, to be raised by the assessee when it had not objected to the same before the AO (para 17 of the order). The Hon ble Apex Court observed that the Tribunal / ITAT entertained the ground, even though not objected to before the AO during assessment proceedings, for the reason that jurisdictional issue was a legal ground taken up on the basis of facts on record and therefore could be raised at an appellate forum. The Hon ble Apex Court at paras 18 and 19 of its order held that the reasoning of the Tribunal to be logical and valid and that it had correctly admitted the ground and dealt with the same on merits as well. Thus, it is clear that the Hon ble Apex Court has decided this issue in favour of the assessee and against the Revenue, thereby giving a finality to this issue. 4.5.2 On the proposition put forth by Revenue that the satisfaction recorded by the AO is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material and can be initiated even on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the case of Sinhgad Technical Education Society (supra) approves the view / decision of the Hon ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in 385 ITR 346 on the proposition that proceedings initiated under section 153C of the Act was not valid for the reason that there being no satisfaction recorded to the effect that the documents found / seized during the course of search were incriminating in nature and prima facie represented undisclosed income. 4.5.3 On the proposition that the CIT(A), while considering the issue of jurisdiction, whose powers are co-terminus with that of the AO, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153 of the Act and should have done whatever was required to strengthen the order of assessment, the learned AR contended as under:- It is contended that the CIT(A) had to necessarily consider and decide the question of jurisdiction at the threshold / outset of proceedings and if the same was found to be in order, he could proceed to consider and adjudicate upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chikkamagaluru to Central Circle, Bangalore; 2 years prior to arriving at satisfaction for assumption of jurisdiction under section 153C of the Act. 4.6 On a careful perusal and appraisal of the above cited judicial pronouncements by Revenue and the assessee, and after considering the rival arguments / contentions put forth, we proceed to adjudicate the following ground raised by Revenue hereunder: 4.7 Ground No.1 4.7.1 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 4.7.2 The Hon ble Apex Court in the case of CIT Vs. Sinhgad Education Society in C. A. No.11080 of 2017 arising out of SLP (C) N:2527 of 2015 has categorically held that an assessee is not precluded from raising the issue of jurisdiction, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdictional High Court in the case of IBC Knowledge Park P. Ltd., (supra) is impliedly approved by the Hon ble Apex Court in the case of CIT Vs. Sinhgad Technical Educaiton Society (supra) as the Hon ble Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those Assessment Years for which there is incriminating seized material which prima facie represent undisclosed income. 4.8.4 In the course of arguments, the learned DR for Revenue put forth the proposition that the learned CIT(A) ought to have sustained even those additions based on material, not relied upon to invoke proceedings under section 153C of the Act and that the CIT(A) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition; in as much as the CIT(A) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C of the Act in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. C. T. Ravi Revenue s appeals in ITA Nos.282 to 286/Bang/2018 for Assessment Years 2008-09 to 2012-13 8. Briefly stated, the facts of the case are as under:- 8.1 A search operation under section 132 of the Income Tax Act, 1962 (in short the Act ) was conducted in the case of one Shri. H. B. Sudarshan on 08.06.2012. Consequent to the search in the case of Shri. H. B. Sudarshan, notices under section 153C of the Act were issued, inter alia, to the assessee for Assessment Years 2008-09 to 2012-13, on 15.09.2014 requiring her to file returns of income. The assessee filed Returns of income for these Assessment Years on 17.12.2014 and the assessments were concluded under section 143(3) r.w.s. 153C of the Act vide orders dated 30.03.2015. On appeal by the assessee, the CIT(A)- 11, Bangalore, in orders dated 24.11.2017 cancelled the orders of assessment for Assessment Year 2008-09 to 2012-13 as being void-ab-initio. 9. Aggrieved by the separate orders of CIT(A)-11, Bangalore, dated 24.11.2017 for Assessment Years 2008-09 to 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of ₹ 1,75,00,000/-, on account of miscellaneous receipts based on seized CD whereas Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective addition of ₹ 2,55,91,960/- on elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of ₹ 1,78,28,445/-, on account of Undisclosed Investment in residential House where as Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act. 10. Ground Nos. 1 and 2 (for Assessment Years 2008-09 to 2012-13) 10.1 In these grounds (supra), Revenue has, inter alia, raised legal grounds assailing the impugned orders of the CIT(A). The learned DR for Revenue vehemently contended that the CIT(A) has seriously erred in relying the decision of the Hon ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., 385 ITR 346 (Kar). The learned DR, in submissions, put forth the following arguments / propositions. According to the learned DR, firstly, the assessee did not raise the issue of assumption of jurisdiction under section 153C of the Act during the course of assessment proceedings and he is therefore precluded from objecting to the same in appellate proceedings; since his participation int eh assessment proceedings without objecting to the Assessing Officer s (AO) assumption of jurisdiction under section 153C of the Act takes away his right to raise this ground. It is contended that in view of the above, the CIT(A) has erred in entertaining the ground on jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to invoke proceedings under section 153C of the Act were not incriminating as they did not result in any addition by way of undisclosed income. The material based on which additions were made in the orders of assessment were not the ones relied upon to arrive at the satisfaction for invoking proceedings under section 153C of the Act. According to the learned AR, though the powers of the CIT(A) are co-terminus with that of the AO, the CIT(A) has no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also submitted that the judicial pronouncements cited by the Revenue were not applicable to the facts of the case on hand. 10.3 We have considered the rival submissions / contentions put forth and carefully perused the material on record and proceed to consider and adjudicate the legal grounds raised by Revenue at Sl. Nos. 1 and 2 for Assessment Years 2008-09 to 2012-13. 10.4 In this regard, the propositions put forth by Revenue are dealt with hereunder. 10.4.1 On the issue that the assessee did not have the locus standi to object to the assumption of jurisdiction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 and not section 153C of the Act. ( iii) CIT Vs. Sohan Lal Sewa Ram Jaggi in 222 CTR 412 (All). This case deals with the delay in issue of notice under section 143(2) of the Act and is not applicable to the case on hand. ( iv) CIT Vs. British India Corporation Ltd., in 337 ITR 64 (All). ( v) Vaishali Builders Colonizers Vs. Addl. CIT (138 ITD 227) (ITAT Jodhpur) The above cases deal with the issue of jurisdiction under section 124 of the Act and are not applicable to the case on hand. ( vi) PCIT Vs. Sheetal International Ltd., (ITA Nos.375 to 379/2017) (Del. HC) The Hon ble High Court held that when the AO for the person searched and the other person is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. ( vii) PCIT Vs. Nau Nidh Overseas Pvt. Ltd., (Delhi HC) The Hon ble High Court held that when the AO for the person searched and the other pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of material which is not incriminating in nature, the learned DR placed reliance on the following judicial pronouncement. ( ii) SSP Aviation Ltd., Vs. DCIT in 346 ITR 176 (Del. HC). In a writ filed by the assessee, the Hon ble Delhi High Court held that the assessee could not get the notice issued under section 153C of the Act quashed for the reason that in the satisfaction note there was no firm conclusion / opinion that the seized material showed undisclosed income. In our view, this judicial pronouncement does prima facie help the Revenue in the case on hand and we shall come back to the same later. 10.5 In respect of the legal grounds raised by Revenue at Sl. No. 1 and 2 for Assessment Years 2008-09 to 2012-13, the counter propositions put forth by the learned AR on behalf of the assessee are considered and dealt with hereunder. 10.5.1 On the proposition put forth by Revenue that the assessee did not have locus standi to object to the assumption of jurisdiction under section 153C of the Act since he participated in the assessment proceedings without objecting to the same during the said proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for invocation of section 153C of the Act . After considering the decision of the Hon ble Apex Court in the cases of Manish Maheshwari Vs. ACIT (289 ITR 341) and CIT Vs. Calcutta Knitwears (2014) 362 ITR 673 and other judgments of the Hon ble Apex Court and other Hon ble High Courts; including the case of SSP Aviations Ltd., Vs. DCIT (2012) 20 taxmann.com 214 (Delhi) which supports the Revenue and on consideration of the CBDT, Circular No.24/2015 dated 31.12.2014, the Hon ble Karnataka answered the question of law at paras 55 and 56 thereof as under:- ( ii) CIT-III, Pune Vs. Sinhgad Technical Education Society (CA No.11080 to 11083 of 2017 dated 29.08.2017) (SC). In this case the Hon ble Apex Court held at paras 18 and 19 of its order that proceedings under section 153C of the Act can be initiated only in respect of those assessment years pertaining to which incriminating material has been seized. In our humble opinion, it is clear from this judgment of the Hon ble Apex Court that initiation of proceedings under section 153C of the Act can be done in the case of an assessee only in respect of those Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153C of the Act. It is also contended that the CIT(A) had no choice / option but to cancel the orders of assessment as he was bound by the judgment of the Hon ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., (supra). According to the learned AR, the CIT(A) could not have strengthened the orders of assessment, despite the fact that his powers are co-terminus with that of the AO, as the very proceedings, initiated under section 153C of the Act was void-ab-initio and he had no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also contends that it is important to note the fact that the assessment jurisdiction of the assessee was transferred from his regular AO at Chikkamagalur and notified to the Office of the DCIT, Central Circle 2(3), Bangalore by order dated 07.12.2012 and the satisfaction to invoke the provisions of section 153C of the Act was arrived only on 15.09.2014 by issue of notice thereunder. It is argued that there was no reason why the AO could not have specified the seized materials which actually led to the additions made to the income of the assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 10.8.2 It is an undisputed facts that the following two seized material were the only seized material that formed the basis for initiation of proceedings under section 153C of the Act in the case on hand:- ( i) A/HBS/10, Page 15 Lease Agreement entered into by the assessee with one Somegowda; ( ii) A/HBS/10, Page 34 Share allotment certificate issued in favour of the assessee by Pantaloon Ltd., giving details of allotment of Bonus shares as well as original shares held by the assessee in the said company. Admittedly, no additions to income / undisclosed income have been made in the orders of assessment based on these two seized materials (cited above at (i) and (ii) (supra). Therefore, it is admittedly an undisputed fact that these two seized material cannot be considered to be incriminating in nature as, prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 11.2 After due consideration of the contentions put forth, we find that Assessment Year 2008-09 is outside the ambit of the provisions of section 153C of the Act in view of the proviso thereto. We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C of the Act is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. In coming to this view, we drew support from the decision of the ITAT, Pune Bench in the case of Sinhgad Technical Education Society (16 taxmann.com 101), and accordingly hold that the CIT(A) was correct in deciding this ground in favour of the assessee. 12. In view of the fact that we have held that the very initiation of proceedings unde ..... 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