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TMI Blog2020 (10) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... first set of Appeals. Similarly, ITA Nos. 1813 to 1815/Bang/2017 are appeals by the assessee relating to assessment years 2008-09 to 2010-11, while ITA No.1791/Bang/2017 is a cross appeal by the revenue relating to assessment year 2010-11. All these appeals are directed against the 3 orders, all dated 27.6.2017 of the CIT(Appeals)-XI, Bengaluru. These appeals relate to the Assessee M/S.Sree Lakshmi Venkateswara Transports. We shall collectively refer to these appeals as the second set of Appeals. 2. Common issues are involved in all these appeals and arises out of identical facts and circumstances. We therefore deem it fit and convenient to pass a common order. ITA Nos.1816 to 1818 and 1789 & 1790/Bang/2017 3. We shall first take up for consideration the first set of appeals pertaining to assessee Sri Lakshmi Venkateshwara Minerals, Hospet. The assessee is a partnership firm. The business of the firm was trading in iron ore. The partners of the partnership firm were Mr. K. Mahesh Kumar, Mr. K. Kumar, Mr. K. Sadashiva & Mr. I. Yerriswamy. 4. There was a search & seizure action conducted on 25.11.2010 u/s. 132 of the Income Tax Act, 1961 [the Act] in the case of K. Mahesh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Vidyanagar/5 - Pages: 1 to 27 and 28 to 29 A/KM/Vidyanagar/6 - Pages: 1 to 97 A/KM/Vidyanagar/7 - Pages: 1 to 97 A/KM/Vidyanagar/9 - Pages: 1 to 98 A/KM/Vidyanagar/10 - Pages: 1 to 58 A/KM/Vidyanagar/11 - Pages: 1 to 42 A/KM/Vidyanagar/12 - Pages: 2 to 101 A/KM/Vidyanagar/13 - Pages: 1 to 94 I am satisfied that the proceedings u/s 153C required to be initiated in this case. Hence, the notice u/s. 153C of the IT Act 1961 dated 18-11- 2011 is issued calling for return of income for the above Asst. year. Sd/- DCIT-CC-2(2)" 7. The assessee filed return of income in response to the notice issued u/s. 153C dated 18.11.2011. In the course of assessment proceedings the assessee could not participate in the proceedings and therefore the AO proceeded to frame the assessment in the absence of proper details from the assessee. The AO made a disallowance of 20% of the expenses claimed in the P&L account. The gross receipts and expenses claimed in the P&L account for AYs 2008-09 to 2010-11 were as follows:- AY Gross Receipts Expenses claimed 2008-09 3,13,25,578 39,75,60,876 2009-10 7,26,95,976 5,59,40,723 2010-11 48,86,94,442 3,06,82,078 8. The AO disallowed 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "5. However, considering a sum of Rs. 7,26,95,976 which has been shown as gross receipts by the assessee in the return, the remaining amount of (Rs. 17,03,42,265 - Rs. 7,26,95,976) = Rs. 9,76,46,289 is treated as Undisclosed Business receipts and the same is added to the returned income of the assessee M/s Venkateshwara Minerals is a partnership firm in which Mr Karapudi Mahesh is a key person. During the course of search action in the case of Mr-Mahesh on 25-10-2010, Mr Mahesh had admitted vide letter dated 28-03-2011 total turn over of Rs. 204 crores in his hands, which is not disclosed to tax. The undisclosed business receipts for A.Y 2009-10 in the case of M/s Venkateshwara minerals of Rs. 9,76,46,289/- shall be protectively added in the case of M/s lakshmi Venkateshwara minerals. 6. The same amount shall be substantively added in the hands of Mr Mahesh. The digital data seized during the course of search in the case of Mr Mahesh, Annexed as 'Payment betails.xls', 'Sha Received amount 01.02.2010.xls clearly records the transactions done by Mr Mahesh for the period 10-11-2009 to 31-07¬2010. Moreover in the letter dated 28-03-2011, Mr Mahesh has owned up to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses @ 20% was without any basis and cannot be sustained. 14. The CIT(Appeals), however, upheld the addition made by the AO. The CIT(A) did not address the issue as to whether, addition can be made in an assessment u/s. 153C of the Act in the absence of any incriminating material pertaining to the said addition. 15. As far as protective addition made in the hands of assessee and substantive addition in the hands of K. Mahesh Kumar are concerned, the CIT(Appeals) deleted the addition made by the AO by observing that addition made protectively in the hands of assessee and substantively in the hands of K. Mahesh Kumar was confirmed in the hands of K. Mahesh Kumar on substantive basis. The CIT(Appeals) therefore deleted the addition on protective basis in the hands of assessee. 16. Aggrieved by the order of the CIT(Appeals) in sustaining the disallowance of expenses made by the AO the assessee has preferred the appeals and aggrieved by his order in deleting the protective assessment made in the hands of assessee of undisclosed income, the revenue has preferred appeals before the Tribunal. 17. We have heard the submissions of the ld. counsel for the assessee and the ld. DR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63F Status : Company Reasons/Satisfaction note for taking up the case of M/s. Super Malls (P.) Ltd. Sector-12, HUDA, Karnal Regd. Office at 51, Transport Centre, Punjabi Bagh, New Delhi under section 153C of the Income-tax Act, 1961. The jurisdiction of this case has been assigned to this Office u/s 127 of the Income-tax Act, 1961 by the worthy Commissioner of Income Tax-III New Delhi vide order F. No. CITIII/Delhi/Centralization/1012-1312455 dated 15-1-2013. By virtue of the authorization of the Director of Income-tax (Investigation), Chandigarh, a search & seizure operation u/s 132(1) of the Act was carried out on 8/9-4-2010 at the residential/business premises of Sh. Tejwant Singh & Sh. Ved Parkash Bharti Group of cases, Karnal, Panipat & Delhi and a survey u/s 133A of the IT Act, 1961 was also carried out at the business premises of M/s. Super Mall (P.) Ltd. Karnal & New Delhi. During the course of search on 8/9-4-2010 at residence of Sh. Ved Parkash Bharti who is a Director in the assessee company M/s. Super Mall (P.) Ltd., Pen drives were found and seized as per Annexure-3 from vehicle No. HR 06 N-0063 parked in front of the residence of Sh. Ved Parkash Bharti. Some d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a decision of the Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society, 397 ITR 344 (SC) wherein the principle for proceedings u/s. 153C of the Act were laid down as follows:- " The Income-tax Appellate Tribunal permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any corelation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich assessment the present appeal arises. 23. In this regard, the learned counsel for the Assessee brought to our notice that assessments were for AYs 2008-09 to 2010-11 were already completed prior to the search and therefore the AO cannot make an assessment or addition without any incriminating material. In this regard it was clarified that as per the proviso to section 153C(1) of the Act, the date of search in the case of the Assessee will be the date on which the AO of the searched person hands over the seized material to the AO of the other person. It is undisputed that it was only on 18.11.2011 such handing over took place and therefore that dated i.e., 18.11.2011 has to be regarded as the date of search in terms of 1st proviso of section 153C(1) of the Act. The relevant dates with regard to the assessment in the case of the Assessee for AY 2008-09 to 2010-11 having already been completed prior to the date of Search in the case of the Assessee i.e., prior to 18.11.2011 are as follows:- AY Date of filing of return of income Date of issue of notice u/s. 143(2) Remarks 2008-09 07.10.2008 20.9.2009 No notice u/s. 143(2) issued. 2009-10 05.12.2009 30.9.2010 No notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :" The provisions of Sec.153C of the Act, shown in bold letter and underlined as given above were substituted by the Finance (No.2) Act, 2014 w.e.f 1.10.2014 for the following words "and that Assessing Officer shall proceed against each of 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" 27. The Assessments in the present case relate to the period prior to the amendment referred to above. The aforesaid amendment has been held to be clarificatory in nature and therefore has to be held as applicable retrospectively from the inception of Sec.153C of the Act in the statue, by the ITAT Kolkata Bench in the case of Trishul Hi-Tech Industries Vs. DCIT IT(SS)A.Nos.84-86/Kol/2011 (AY 04-05, 05-06 & 06-07) order dated 24.9.2014. In the aforesaid decision the Hon'ble Kolkata Bench of ITAT, after considering the amended ..... 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 and for the relevant assessment year or years referred to in sub-section (1) of section 153A :" The Kolkatta Bench of the ITAT in the case of Trishul Hi-Tech Industries (supra) dealt with the purpose behind the aforesaid amendment and as to why it should held to be retrospective. The condition precedent for assessing or reassessing income u/s.153C is that the AO has to be satisfied that the seized material in the course of search has a bearing on determination of the total income of the other person i.e., it should be incriminating in nature. 28. We are in respectful agreement with the view expressed by the ITAT Kolkata Bench in the case of Trishul Hi-Tech (supra). We may also add that it is settled rule of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. Ordinarily the Courts are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pell out the nature of seized documents and how it belongs to or relates to the assessee. Before the Hon'ble High Court of Karnataka in the case of IBC Knowledge Park, 385 ITR 346 [Kar] the issue for consideration and adjudication was whether the Tribunal was right in holding that it was not necessary to record a satisfaction to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that "the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act". The Honble Court came to the above conclusion 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 and CBDT, Circular No.24/2015 dated 31.12.2015. The Hon'ble High Court also took the view that the AO is expected to spell out as to how the documents were incriminating in nature and prima facie represent undisclosed income. In this regard, we also find that in the order of assessment, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to the Assessee and therefore the said addition can also not be sustained as it is contrary to the provisions of Sec.153C of the Act. There is no basis for protectively assessing the income in the hands of the Assessee and substantively in the hands of K.Mahesh Kumar. There is no material to show that the income declared by K.Mahesh Kumar is either his income or that of the Assessee. From the fact that K.Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K.Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. The declaration of income by K.Mahesh Kumar is in his hands and not in the hands of the Assessee firm in his capacity as partner. Even going by the theory of the AO that there are differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K.Mahesh Kumar. As we have already observed assessment u/s.153C of the Act has to be based on material found in the course of search which are relate to or belong to Assessee. 32. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .24/CIT-(C)/2011-12 dated 22-07- 2011. "During the course of search operations the following incriminating documents which belong to the above mentioned assessee firm were seized. 1.A/DP/10 - Pages 34, 35 and 36 I am satisfied that the proceedings u/s 153C required to be initiated in this case. Hence, the notice u/s. 153C of the IT Act 1961 dated 18-11-2011 is issued calling for return of income for the above Asst. year. DCIT-CC-2(2)" 35. It is further seen from the satisfaction note filed before us that the reference is to a search in the case of one Dada Peer. The date of handing over of the seized material on 18.11.2011 which is the same date as in the first set of cases i.e., the case of other assessee, Sri Lakshmi Venkateshwara Minerals. The seized document referred to as Document A/DP/10 Pages 34 to 36. Therefore, there is a contradiction in the assessment order and satisfaction note with regard to the person searched. The assessment order refers to search in the case of K.Mahesh Kumar. Be that as it may. As far as this assessee is concerned, all the assessments for 3 assessment years became final prior to the date of handing over the assessee's documents i.e., 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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