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TMI Blog2020 (2) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ion can be done u/s 153C in the case of completed assessment, if no incriminating document has been found during search." 2. Briefly the facts of the case are that return of income was filed originally on 21.09.2010 declaring NIL income. The same was processed under section 143(1) of the I.T. Act, 1961. A.O. issued notices under sections 143(2) as well as 142(1) of the I.T. Act, 1961. The A.O. noted that search and seizure operation under section 132 of the I.T. Act, 1961 was carried out in Raj Darbar Group of Cases on 31.07.2008. The assessee was incorporated on 15.03.2004. During the year under consideration, assessee has claimed deduction of Rs. 2,58,07,534/- under section 80IA of the I.T. Act, 1961 which A.O. has denied and made the addition. The assessment was completed under section 143(3) of the I.T. Act, 1961, Dated 18.03.2013. 2.1. The assessee challenged the addition on merits before the Ld. CIT(A) and also taken additional ground of appeal stating therein that A.O. has erred in assessing the assessee without satisfying the substantive and procedural requirement under section 153C of the I.T. Act, 1961 and that A.O. has erred in making the addition which are not based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO was required to make assessment u/s 153C, in the manner as mentioned in S.153A of the Act, for the AYs 2005-06 to 2010-11 in terms of the 'date of satisfaction', i.e. 20.07.2010, and not AYs 2003-04 to 2008-09 in accordance with the date of search in the Rajdarbar group of cases as has been done by the AO (in fact assessments were made for AYs. 2005-06 to 2008-09 since the appellant firm was registered on 15.03.2004); (iii) the assessment/reassessment pending on that date (20.07.2010) would abate, and in respect of such assessments which have abated the AO would have the jurisdiction to proceed and make an assessment; (iv) however, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years; (v) for the purpose of making assessments or reassessments u/s 153C the Act, the AO of the searched person has to necessary record a satisfaction to the effect that the said documents or materials found during the search do not belong to the searched person and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, rather the assessment has been made u/s 143(3) of the Act without recording the mandatory 'satisfaction'. The assessment order is, therefore, not sustainable on this account itself. 4.1.6. I may, however, make mention of the fact that S.153A and 153C of the Act are special provisions for assessment or reassessment emanating from search u/s 132/132A of the Act, and the period after the date of search are to be assessed under the normal provisions of the Act. In terms of the provisions of the 1st Proviso to s. 153C of the Act the date of handing over the seized books/documents/assets, or the date of satisfaction in case the AO is the same as that of the searched personT (hereinafter referred to as the "specified date") shall be construed as the date of search for the purposes of 2nd Proviso to s. 153A(1), meaning thereby that the assessments pending as on the 'specified date' shall abate, and in terms of the principle laid down in Kabul Chawla (supra) and RRJ Securities Ltd. (supra) the completed assessments as on the specified date' (and not the date of search per se) cannot be reassessed u/s 153C of the Act in the absence of any incriminating material 'belonging to' the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory 'satisfaction'. The assessment order is, therefore, not sustainable on this account itself and held to be ab initio void." 3. The Ld. D.R. relied upon the Order of the A.O. and submitted that since it was not year of the search, therefore, A.O. correctly framed the assessment under section 143(3) of the I.T. Act, 1961. He has referred to comments of the A.O, in which, A.O. has highlighted that in previous years i.e., A.Ys. 2005-2006 to 2009-2010, the Ld. CIT(A) has decided the appeals in favour of the Revenue and the Ld. CIT(A) while deciding the appeal of the assessee for the A.Y. 2010-2011 under appeal has not considered the decision given by his predecessor in A.Ys. 2005-2006 to 2009-2010. Therefore, the Ld. CIT(A) has given a contrary findings. 4. On the other hand, Learned Counsel for the Assessee, reiterated the submissions made before the authorities below and submitted that though search has taken place under section 132 of the I.T. Act, 1961 on 31.07.2008, the documents were handed over on or the satisfaction by the A.O. of the assessee was recorded on 23.07.2010, then the limitation for counting assessment years to be covered under section 153C would start from A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year under appeal i.e., 2010-2011, therefore, A.O. was not justified in passing the Order under section 143(3) of the I.T. Act, 1961. In preceding A.Y. 2009-2010 similar view have been taken by Hon'ble Delhi High Court in the case of assessee and a specific question as noted above have been considered by the Hon'ble Delhi High Court and it was held as under : "Where in course of search carried out at premises of a third person, a hard disk was seized and on basis of same proceedings under section 153C were initiated against assessee, since Assessing Officer of searched person failed to record a specific satisfaction as to how said hard disk belonged to assessee, impugned proceedings under section 153C were unjustified." 6. The ITAT, Delhi A-Bench in the case of M/s. BNB Investment & Properties Ltd., Gurgaon vs., DCIT, Central Circle-1, Faridabad and Shri Ranjan Gupta, New Delhi vs., DCIT, Central Circle-1, Faridabad in ITA.Nos.504 & 503/Del./2015 vide Order Dated 27.06.2018 reported in 68 ITR 567 (Delhi-Tribunal) held as under : "IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES "A" : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moved an application for admission of additional grounds in which assessee raised the following additional grounds : 1. Additional Ground No. 1 "That under the facts and circumstances, in the absence of issuance and service of notice U/s. 153 C r/w. Sec. 153A of the I.T.Act, the jurisdiction for framing the impugned Asstt. has been wrongly assumed, hence, the impugned Asstt. is without jurisdiction, illegal and unsustainable in law." Additional Ground No. 2 "That without prejudice, As the seized documents in search of a 3rd party have been received by the AO of the assessee on 29.08.2013, therefore, in view of Sec. 153C(1) (first proviso), the search year is A.Y. 2014-2015 and not impugned A.Y. 2012-2013, hence, in case, if impugned Asstt. has been framed U/s. 153 B (1) (b) treating A.Y. 2012-2013 as the search year, the whole Asstt. Proceedings stands vitiated in law and unsustainable because the A.Y. 2012-2013 falls within period of preceding 6 Asstt. Years as provided in Sec.153A (1)(b), therefore, the Asstt. of A.Y. 2012- 2013 was to be framed only U/s. 153C and that too after issuance and service of notice U/s. 153C r/w. Sec. 153A of the I.T. Act which has never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the party who might be affected had sufficient opportunity of being heard given on that ground. Therefore, the Tribunal ought to have exercised its discretion in view of the fact that assessee intended raising only a legal argument without reference to any disputed question of facts." 5.1. Considering the issue in the light of the fact that additional grounds are legal in nature and shall have bearing on the validity of the assessment proceedings, therefore, the same is admitted for the purpose of disposal of the appeal. 5.2. Learned Counsel for the Assessee submitted that search was conducted in the case of M/s Krrish Group of cases on 09.11.2011. A survey u/s 133A of the Act was also carried out on 22.11.2011 at the business premises of the Assessee-Company and its Director. The seized/impounded documents in the group were received by the A.O. on 29.08.2013. These facts are mentioned in the assessment order. He has referred to PB-161 which is satisfaction note recorded under section 153C of the I.T. Act in the case of assessee dated 03.10.2013. The satisfaction note was, therefore, recorded in the A.Y. 2014-2015 in the case of the person searched. PB-190 to 195 are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 1st day of April, 2017." 6. On the other hand, Ld. D.R. submitted that Section 153A(1) deals with the years of reopening in the case of search proceeding and as per Section 153C(1) after the satisfaction, the A.O. shall proceed in accordance with provisions of Section 153A(1) of the I.T. Act. Section 153A(1)(b) is very clear that "A.O. shall assess or re-assess the total income of 06 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted". No where the Section contains the word "Date of initiation of the Search" which are referred to by the First Proviso to Section 153C of the I.T. Act. Hence, the First Proviso to Section 153C of the I.T. Act is only referring to the abatement of the existing proceedings mentioned in the Second Proviso to Section 153A(1) of the I.T. Act, as clearly mentioned in the First Proviso and further clarified by usage of words "the date of initiation of search" which are no where mentioned in Section 153A(1) of the I.T. Act. Even after the Amendment in Section 153C, the First Proviso stands as it is in the statute which makes it further clear that First Proviso to Section 153C always refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks 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 sub-section (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 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. 7.1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as well as the "other person" would be the same six assessment years immediately preceding the year of search is prospective. A search under section 132 of the Income-tax Act, 1961 took place on November 11,2010 in the T group of cases. The documents pertaining to the assessee were forwarded along with a satisfaction note by the Assessing Officer of the party in respect of which the search was conducted to the Assessing Officer of the*assessee on January 3, 2013. The Assessing Officer of the assessee issued notice to the assessee under section 153C of the Act on January 4,2013 for the assessment year 2006-07. The Tribunal held that the notice issued to the assessee under section 153C of the Act for the assessment year 2006-07, was without jurisdiction since the assessment year was beyond the purview of issuance of notice in terms of the provision under section 153C of the Act. On appeal: Held accordingly, dismissing the appeal, that the Tribunal was justified in holding that the notice issued to the assessee under section 153C of the Act for the assessment year 2006-07 was without jurisdiction since the assessment year was beyond the purview of issuance of notice in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant para-16 of the order is reproduced as under : 16. "We find the year for which the impugned assessment order has been passed u/s 143(3) is for assessment year 2011-12. This year falls within the period of six years when counted from the date of recording of satisfaction note u/s 153/153C of the I.T. Act which is deemed date of search. The Act h as been amended recently by the Finance Act, 2017 with prospective effect i.e., from assessment year 2018-19. Thus, the period is same now only for the searched parties as well as the other person as per the amended provisions of the said section. In view of the above, we hold that the assessment completed u/s 143(3) is invalid." 8. It is not in dispute that search was conducted on Krrish Group of cases on 09.11.2011. The impounded documents have been received by the A.O. on 29.08.2013. The satisfaction under section 153C have been recorded on 03.10.2013. The A.O. passed the assessment order under section 153B(1)(b) of the I.T. Act, considering the assessment year under appeal i.e., A.Y. 2012-2013 to be the year of search. However, the First Proviso to Section 153C of the I.T. Act provides that the 06 assessment years for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ranjan Gupta - A.Y. 2012-2013 11. In this appeal, the facts and issue is identical. The assessee also moved for admission of the additional grounds as have been considered in the case of M/s. BNB Investment and Properties Ltd. Following the reasons for decision in the case of M/s. BNB Investment and Properties Ltd., (supra), we admit the additional grounds of appeal, set aside the orders of the authorities below and quash the same. Resultantly, delete the entire addition. 12. In the result, appeal of assessee is allowed. 13. To sum-up, both the appeals of the assessees are allowed." 6.1. Considering the issue involved in the present appeal and in the light of above decisions, the A.O. was required to record satisfaction under section 153C of the I.T. Act, 1961 because the A.Y. 2010-2011 is covered by Section 153C of the I.T. Act, 1961 as satisfaction note was recorded on 23.07.2010. Therefore, there was no justification for the A.O. to pass Order under section 143(3) of the I.T. Act, 1961. Since mandatory conditions of Section 153C of the I.T. Act, 1961 are not satisfied in the present case, therefore, the Ld. CIT(A) was justified in quashing the assessment order under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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