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TMI Blog2021 (4) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... arised as follows:- i) M/s.S.R.Trust is a public charitable trust enjoying exemption under the Income Tax Act, 1961. It is running a hospital in the name and style of "Meenakshi Mission Hospital and Research Centre (MMHRC)" at Madurai. Both M/s.S.R.Trust as well as Dr.S.Gurushankar are assessees coming within the jurisdiction of the first respondent. ii) One C.P.Anbunathan and C.Giridharan, businessmen based in Karur came under the adverse notice of the Income Tax Department. Their residential and business premises were searched in the month of April 2016 by invoking power under Section 132 of the Income Tax Act. Their sworn statements were recorded on various dates. It was revealed that they were involved in money laundering. They had floated shell companies and unaccounted money was routed through them. C.P.Anbanathan was found to charge 5% towards commission for his services while C.Giridharan was found to take 1%. It also came to light that those two individuals had transactions involving MMHRC, Madurai. Based on the materials collected from C.P.Anbunathan and C.Giridharan, Income Tax Department decided to conduct a search operation in the residential and business premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued pertaining to some four entities. The petitioners' counsel wants to emphasize that all the transactions speak about the purchase of medical equipments for MMHRC. The invoices relate to the period from January to March 2014. He also pointed out that there was a search operation in the premises of Dr.S.Gurushankar in November 2014. That triggered the reopening of the assessments of both M/s.S.R.Trust and Mr.S.Gurushankar, for the previous six assessment years. Dr.S.Gurushankar admitted possessing undisclosed income and offered to pay tax thereon. His explanation was accepted and the issue was closed. As regards M/s.S.R.Trust, orders were passed cancelling the exemption earlier granted. That was challenged by the Trust before the appellate authority which allowed the appeal. The department took the matter before the Income Tax Appellate Tribunal but lost. T.C.A Nos. 161 to 167 of 2020 filed by the department before the Madras High Court were also dismissed on 24.11.2020. The contention of the learned counsel appearing for the petitioners is that the assessment of the petitioners herein was pending when the second search took place in September 2016. The earlier assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handrani) 8. I carefully considered the rival contentions and went through the materials on record. 9. Before going into the factual matrix, the legal position deserves to be taken note of. Sections 153A and 153C of the Income Tax Act, 1961 read as follows:- "153A. Assessment in case of search or requisition.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of search or other post-search material or information available with the assessment officer which can be related to the evidence found. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 11. The High Court of Gujarat in the decision reported in (2017) 81 taxmann.com 292(Gujarat) (Principal Commissioner of Income-tax-4 V. Saumya Construction (P.) Ltd.,) also held that if no incriminating material was found during search, no addition can be made on the basis of the material collected after search. The sheet anchor of the petitioner's counsel rests on the decision of the Hon'ble Supreme Court reported in (2017) 84 taxmann.com 290(SC) (Commissioner of Income-tax-III, Pune V. Sinhgad Technical Education Society). In the said case, the Hon'ble Supreme Court while quashing the notice issued under Section 153C of the Act held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous six years. It is true that the proceedings were initiated under Section 153 C of the Act against M/s.S.R.Trust and final orders were passed on 31.12.2016. The petitioners' counsel tried to make much out of the fact that the assessing officer ought to have aborted the first search assessment proceedings. It is true that the Second Proviso to Section 153A(1) of the Act states that the reassessment relating to any assessment year falling within the period of six years and for the relevant assessment year pending on the date of initiation of search under Section 132 shall abate. It is true that this proviso is worded in an imperative language. The petitioner Dr.S.Gurushankar was the searched person. M/s.S.R.Trust was the connected person. In September 2014, Dr.S.Gurushankar was the Managing Trustee of M/s.S.R.Trust. Search under Section 132 had been again conducted in September 2016. If the assessees wanted to invoke the Second Proviso, they could have filed a memo or an application seeking abatement of the first search assessment proceedings before the assessment officer. They did not do so. They allowed the assessment officer to pass final assessment order on 31.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lexogenic Technologies and that the advance received from Dr.S.Gurushankar was returned by way of pre-signed open cheque. He also admitted that for the money laundering service, C.P.Anbunathan used to take 5% commission of the total value on the demand draft which was exchanged for cash. C.Giridharan also got sub-commission of 1%. There is abundant damning material. 15. The learned Senior Standing counsel asserted before this Court that he is ready to produce the original file for perusal. If this cannot be called as incriminating material, I fail to understand what else can be. 16. Once I come to the conclusion that the materials seized by the department incriminate the petitioners herein, notices issued to Dr.S.Gurushankar for six assessment years have to necessarily be sustained. Of course, one other contention of the petitioners' counsel deserves to be considered. The petitioners' claim that nothing was seized from the residence of Dr.S.Gurushankar. The material was seized only from the residence of Sachithananth. Sachithananth was not an assessee. But this argument has to be stated only to be rejected. Sachithananth is not someone who is alien to the transaction. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.Trust cannot be reopened in respect of other years. This contention appears to be very attractive. However, on a deeper scrutiny, I am not able to accept the same. It is true that the seized material bears the dates for the period from January 2014 to March 2014. But again these dates cannot be taken at their face value. Only after enquiry one can come to the conclusion regarding the actual period to which they relate. I may refer to 'chaos theory' in this regard. The hypothesis of Edward Lorenz is that the mathematical models for weather systems can be extremely sensitive to initial conditions and that small changes in these initial conditions can result in big effects. The flapping of butterfly in Toronto can cause a typhoon in Tokyo. Correspondence between the two is revealed only with the benefit of hindsight. It is true that while taking action under Section 153C of the Act, the assessments can be reopened only for the period that correspond to the seized material. The question of correspondence with the assessment period has to be borne in mind when final order is passed. At the initial stage, the correspondence cannot be formulated with precision. Things may appear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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