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TMI Blog2019 (4) TMI 1755X X X X Extracts X X X X X X X X Extracts X X X X ..... or amounts paid during the year has not become final and there are conflicting judgments of various high courts on the said issue. 3.1 The next common ground in ITA Nos. 64 to 68/Coch/2018 reads as follows: (3) Without prejudice to the above arguments, the disallowance under section 40(a)(ia) is not justified when the book results are rejected and income is determined on an estimate basis. Estimation of income takes care of irregularities committed by the appellant and further addition by invoking section 40(a)(ia) amounts to punishing the assessee for a same offence on double occasion, which is not permitted by law. 3.2 The assessee has also raised common additional grounds as follows: "The Assessing Officer should have appreciated that it is mandatory to record the satisfaction in the case of assessment of a connected person u/s. 153C. He should have known that, no incriminating documents or any money bullion, jewellery or valuable article or things or books of accounts or documents belonging to the appellant for the assessment year was seized or requisitioned. He should have appreciated that nothing has been brought on record by the Ao and no reference has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re decided upon by the chairman. Consequently, he had to wait till final decision was taken by Dr. K. Moidu. This caused some delay. Now he has made the decision to file all the returns of all the concerns and individuals for the above captioned years. Hence, we assure your good self we shall file the return of income before 30th November, 2012." 4.1 The assessee filed the return of income for the A.Y. 2006-07 on 06/12/2013 showing Nil income after set off of carry forward losses. On perusal of the return of income, it was found that the assessee had estimated the income at 8% of the total collection and 15% of medical check up collection. Later, it was submitted that due to under utilization of the infrastructure, there was adverse impact on the profit margin. In order to buy peace from the income tax department, the assessee admitted income from medical check up at 30%. The Assessing Officer arrived at the total collection at Rs. 26,18,000/- and an amount of Rs. 5,42,700/- was added to the total income for the A.Y. 2006-07. 4.2 While computing the income chargeable under the head profit and gains of business or profession, every person who was paying any interest, commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the notice u/s. 153A read with section 153C would be invalid. It was submitted that when the assumption of jurisdiction by the AO is not proper by issue of a valid notice, all consequential proceedings that follow such invalid notice would also be invalid . 7.1 The Ld. AR further submitted that for commencement of proceedings u/s 153C, the notice issued to an assessee should be based on the seized materials and issue of a valid notice is a sine-qua-non for commencement of assessment of a connected person u/s 153C. In the instant case, it was submitted that notice issued to the assessee for the year under consideration was not based on any searched materials. The notice had vaguely mentioned that "certain documents and books of account" pertaining to the assessee was seized. The fact is that nothing belonging to the assessee was seized and no specific mention as to what was seized was recorded anywhere. According to the Ld. AR when the notice u/s 153C is not based on any seized material the notice itself is invalid as was held by the Madras High court in CIT Vs, Late. J. Chandrasekhar(HUF) (338 ITR 61) (Mad). 7.2 The Ld. AR submitted that before assumption of jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act. 7.4 On the other hand, the learned DR submitted that there was a there was a survey u/s. 133A of the Act on 31/10/2011 in the case of M/s. Kunhitharuvai Memorial Charitable Trust, KMCT Corporate Office, Kozhikode and documents belonging to the present assessee were found during the course of search of that person.. Therefore, notice u/s. 153A was issued for framing the assessment u/s. 153C of the Act in the case of searched person. According to the Ld. DR, the AO had complied with the requirement of section 153C in its entirety before issuing the notice and assessment order framed u/s. 153C was valid. 8. We have heard both the parties and perused the material on record. In this case, here was a survey u/s. 133A of the Act on 31/10/2011 in the case of M/s. Kunhitharuvai Memorial Charitable Trust, Calicut. The search revealed that the assessee was receiving training charges for College of Nursing which is an institution under KMCT. A notice u/s. 153A(a) r.w.s. 153C was issued to the assessee for A.Y. 2006-07 to 2011-12 on 31/05/2012 and notice u/s. 142(1) dated 08/08/2012 was issued for A.Y. 2012-13 for furnishing the return of income. Notices were issued to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,- (i) the provisions of clause (a) or clause (b) of this subsection shall have effect as if for the words "two years" the words "twenty-one months" had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twenty-one months from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing [on or after the 1st day of April, 2005 but before the 1st day of April, 2009] and during the course of the proceedings for the assessment or reassessment of total income, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition under section 132A was executed during the financial year commencing on the 1st day of April, 2009 or any subsequent financial year and during the course of the proceeding for the assessment or reassessment of total income, in case of other person referred to in section 153C, a reference under subsection (1) of section 92CA is made, the period of limitation for making the assessment or reassessment in case of such other person shall, notwithstanding anything contained in clause (ii) of the second proviso, be the period of thirty-six months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twenty-four months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later. Explanation.-In computing the period of limitation for the purposes of this section,- (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Officer, shall be excluded : Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this 67[subsection] available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. (2) The authorisation referred to in clause (a) and clause (b) of sub-section (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn 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 subsection (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 by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 8.2 From a plain reading of these sections, we find that section 153A is procedural section which deals with the mode of assessment. A notice u/s. 153A of the Act can only be issued to such person where a search is initiated u/s. 132 of the Act or books of account or other documents or any assets are requisitioned u/s. 132A of the Act after 31st day of May, 2003, requiring him to furnish within such period as may be specified in the notice, return of income in respect of each assessment year following within six assessment years immediately preceding the assessment year relevant to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not mean that after completion of the assessment, the assessing officer who has passed the assessment order u/s. 153A in the case of searched person cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act. In other words, the person who has passed the order in the case of the searched person u/s. 153A of the Act is required to record the satisfaction note before completion of assessment u/s. 153A of the Act. 8.3 The contention of the assessee is that satisfaction is said to have been recorded by the AO who has passed the order u/s. 153A of the Act in the case of the assessee and it is also satisfaction note to that effect that there exists incometax belonging to any person other than the searched person in respect of whom search was made u/s. 132 of the Act or requisition of books of account were made u/s. 132A of the Act. The satisfaction note is to be recorded by the AO who has initiated proceedings for completion of assessment u/s. 153A of the Act and also it shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The conditions precedent for invoking the provisions of s. 158BD, thus, are required to be satisfied before the provisions of Chapter XIV-B are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under s. 132A. The impugned notice does not record any satisfaction on the part of the AO. Documents and other assets recovered during search had not been handed over to the AO having jurisdiction in the matter. No proceeding under s. 158BC had been initiated. There is, thus, a patent non-application of mind. A prescribed form had been utilized. Even the status of the assessee had not been specified. It had only been mentioned that the search was conducted in the month of November, 1995. No other information had been furnished. The provisions contained in Chapter XIV-B are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued u/s. 153A(a) r.w.s. 153C of the Act was not made before the authorities below. The assessee had filed the return of income before the Assessing Officer on 06/12/2012 for all the assessment years. It cannot be said that material and evidence connected with invoking the jurisdiction u/s. 153C of the Act are the internal record of the Department and the assessee could not lay hands on the same. All the materials connected with the assessments u/s. 153C are part of record of the Assessing Officer which the assessee could have asked for or get copy of the same by making a request in accordance with rule. The failure on the part of the assessee to do the needful will not support the assessee's case. In other words, the assessee has not brought on record all the facts necessary for adjudication of the issue. The latches on the part of the assessee is to be viewed as a factor against the assessee. From the judgment of the Supreme Court in the case of National Thermal Power Corporation Ltd. vs. CIT (229 ITR 383), the following principles emerge regarding the right of the parties to raise a new plea for the first time before the Tribunal: a) It is the discretion of the Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax at source, the fact that the recipient had subsequently paid tax would not absolve the payee from the consequences of disallowance. 9.2 Against this, the assessee is in appeal before us. The Ld. AR submitted that tax is deductible u/s. 193, 194A, 194C, 194H and 194J either at the time of payment or at the time of giving credit to the recipient. However, section 40(a)(ia) is applicable only in respect of TDS defaults if amount is payable. If amount is actually paid and tax is not deducted under the above section 40(a)(ia) is not applicable. Default with reference to actual payment of expenditure would not entail disallowance. 9.3 The Ld. DR relied on the order of the lower authorities. 9.4 We have heard the rival submissions and perused the record. Reliance is placed on the judgment of the Supreme Court in the case of Palam Gas Service vs. CIT (394 ITR 300) wherein it was held as under: "Under section 194C of the Income Tax Act, 1961, it is the statutory obligation of a person making payment to a sub-contractor to deduct tax at source at the rates specified therein at the time of credit of such sum to the account of the contract or at the time of payment thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as cylinders. The main contract of the assesses for carriage of liquefied petroleum gas was with the Indian Oil Corporation. The assessee received the total freight payments from the Corporation to the tune of Rs. 32,04,140 and in turn, got the transportation of liquefied petroleum gas done through three persons, to whom it made payment for freight amounting to Rs. 20,97,689. These payments were made to subcontractors without deduction of tax at source as required under section 194C of the Income-tax Act, 1961. On account of the assessee's failure to do so the Assessing Officer disallowed the freight expenses in terms of the provisions of section 40(a)(ia) of the Act. The Commissioner (Appeals) upheld the order as did the Appellate Tribunal, on further appeal, and the High Court. On appeal to the Supreme Court: Held, that the view of the High Court was correct." Thus, it was held that section 40(a)(ia) of the Act covers not only those cases where the amount is payable but also when it is paid. 9.5 In view of the above judgment of the Supreme Court in the case of Palam Gas Service, cited supra, we do not find any infirmity in the order of the CIT(A) on this issue. This gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is an unexplained cash credit, it is open to the ITO to hold that it is income of the assessee and no further burden lies on the ITO to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed." 10.4 In the case of Kale Khan Mohammed Hanif vs. CIT (50 ITR 1), the Supreme Court held that the ITO having assessed the income of the assessee on a percentage basis was also justified in treating the unexplained cash credit as profits from an undisclosed source. The entries found in the books of account of the business must be referable to the income of the business which had been computed on the basis of estimate without accepting the return filed by the assessee which amounts to double taxation of the same income. The Court ruled thus: "The question would seem to suggest that because the income from a disclosed source has been computed on the basis of an estimate and not on the basis of the return filed in respect of it, an income represented by a credit entry in the books of account of that source cannot be held to be income from another and undi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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