TMI Blog2021 (5) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment for the year of search. The amendment to clarify this position u/s. 153C (1) was brought in the statute by the Finance Act, 2017 w.e.f. 01.04.2017, wherein it has been provided that the six preceding assessment years for the person covered u/s 153C would be same as that of the searched person covered u/s 153A. In other words, in case of the other person (i.e. person covered u/s 153C), six preceding assessment years has to be reckoned from the year of search. This amendment has been held to be prospective by the Hon ble Jurisdictional High Court in the case of CIT vs. Sarwar Agency P Ltd . [ 2017 (8) TMI 733 - DELHI HIGH COURT ] Here in this case, since the date of search is 21.07.2016, therefore, the amendment brought by the Finance Act, 2017 would not be applicable and ex consequenti the assessment for the instant Assessment Year 2017-18 ought to have been completed u/s.153C of the Act and the order of assessment dated 18.12.2018 passed u/s 143(3) in pursuant to notice u/s. 142(1) is bad in the eyes of law in view of the law interpreted and upheld by the Hon ble Jurisdictional High Court in CIT vs. RRJ Securities Ltd. [ 2015 (11) TMI 19 - DELHI HIGH COURT] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral), Gurgaon has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the learned Principal Commissioner of Income Tax has erroneously assumed jurisdiction u/s 263 of the Act by failing to appreciate that the order sought to be revised dated 18.12.2018 u/s 143(3) of the Act was an illegal and invalid order. 2.1 That the finding that assessee did not file any appeal against the order dated 18.12.2018 and it attained finality and therefore assessee having failed to do so cannot challenge it during the revisionary proceedings u/s 263 of the Act is based on complete misconception of facts and law and hence unsustainable. 2.2 That reliance is placed on the judgment of Hon ble Kerala High Court in the case of CIT v. Jacob J. Thailiath reported in 11 taxmann.com 12 and Hon ble Madras High Court in the case of CIT v. A. Samarapuri Chetty reported in 64 Taxman 344 is based on complete misconception of facts and law and hence unsustainable. 3. That the learned Principal Commissioner of Income Tax has failed to appreciate that proceedings for the instant ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment proceedings notice u/s 143(2) was issued by the AO twice on 28.9.2018 and 16.10.2018 which was within the prescribed time limit for issue of notice u/s 143(2) with reference to the revised return filed on 18.9.2018 and return filed on 11.10.2018 in response to notice u/s 142(1) of the Act is factually incorrect legally misconceived and contrary to record; and has been recorded without any opportunity to the appellant company. 4.2 That furthermore even the conclusions that issuing of notice under section 143(2) of the Act is not mandatory requirement of search cases for the years for which notice under section 153A/153C was issued and even in case of situation covered u/s 153C(2) is also misplaced, misconceived and also untenable. 5. That furthermore the learned Principal Commissioner of Income Tax has failed to appreciate that since approval u/s 153D of the Act was invalid and illegal, the instant _ order of assessment dated 18.12.2018 u/s 153B(l)(b)/143(3) of the Act was vitiated order and therefore could not be revised under section 263 of the Act. 5.1 That the finding that since, there was no detailed reply furnished by the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/w Explanation 2 of the Act in respect of the three issues which are as under: a) The assessment order was passed by the AO without making proper enquiries or verification and invoking the provision of section 50C(1) and 50C(2) of the Act. b) The AO failed to carry out any enquiry or verification in respect of the cost of seven plots and the amount of ₹ 37,27,570/- which was written off as land cost covered by Panchayat written off which was used for computation of income under the head capital gains by the assessee. c) The AO failed to carry out the enquiries in respect of other expenses of ₹ 76.32 lakh especially legal and professional fees of ₹ 71.01 lakh out of which ₹ 61,66,921/- + ₹ 4,60,000/- was required to be capitalized being in the nature of capital expenses and ₹ 4,60,000/- was required to be disallowed as the same was not incurred for the purpose of the business of the assessee The finding is factually incorrect, legally misconceived, contrary to record and untenable. 9. That the learned Principal Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and cost of land parcels/loss claimed by the assessee of ₹ 37,27,570/- as land cost covered by panchayat written off, hence the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in view of provision of section 263 read with Explanation 2(a) of the Act is also not based on correct appreciation of facts and law. 14. That the learned Principal Commissioner of Income Tax has further failed to appreciate that another allegation that the assessment order was passed by the AO without making proper enquiries or verification and other expenses of ₹ 76.32 lakh were allowed under the head business income which is against the provision of the Act is also contrary to facts and law and therefore untenable. 15. That finding and conclusion of the learned Commissioner of Income Tax that the assessment order passed by the AO is, therefore, set aside on these issues. The AO is directed to call for the details and make necessary enquiries in respect of these issues and passed the order in accordance with the law after proper verification is illegal, invalid and without jurisdiction 16. That various advers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Holdings (P) Ltd. iv) M/s Misty Meadow (P) Ltd. iv) 25.9.2018 That pursuant to the aforesaid search, notices under section 153C of the Act had been issued to the appellant company for assessment years 2011-12 to 2016-17 and notice dated 25.09.2018 u/s.142(1) of the Act for assessment year 2017-18. v) 25.09.2018 That proceedings u/s.153C of the Act was initiated on the basis of a satisfaction note. 3. Brief facts qua this issue are that, a search and seizure operation was initiated on M/s. M3M Group u/s.131 on 21.07.2016 and in pursuance to the aforesaid search, notice u/s.153C has been issued to the assessee right from the Assessment Years 2011-12 to 2016-17 on 25.09.2018 and on the same date notice u/s. 142(1) was also issued for Assessment Year 2017-18. The satisfaction note recorded by the Assessing Officer to acquire jurisdiction u/s.153C on 25.09.2018 reads as under:- By virtue of the authorization of the Director of Income Tax / (Investigation), Chandigarh, a search seizure operation u/s 132 of the Income Tax Act, 1961 (hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings u/s.263. She pointed out that, this issue was raised even before the ld. PCIT which has been dealt by him in the impugned order in detail in paragraph 4 to 4.2.4. She submitted that there are two specific judgments of Hon ble Kerala High Court and Hon ble Madras High Court which has been relied upon by the ld. PCIT, wherein the Hon ble High Court has clearly held that the validity of the assessment proceedings cannot be challenged in the proceedings u/s.263. She further submitted that, if at all the assessee was aggrieved by the assessment order, then it could have filed an appeal before the ld. CIT (A) and once the assessee itself has accepted the assessment order, then same cannot be challenged in a collateral proceedings wherein the ld. PCIT has specifically highlighted various points as to how the assessment order is erroneous and prejudicial to the interest of Revenue. Therefore, neither such a plea should be entertained nor should be permitted to be raised when the ld. PCIT has set aside the assessment order which was earlier accepted by the assessee. Ld. CIT-DR further submitted that otherwise also, in this case for initiating proceedings u/s.153C, the date of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember, 2010 - and not the date of search. 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings by virtue of Section 153C(1) of the Act would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recordings of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion not is prepared by the AO of the searched person and a notice is issued pursuant thereto. The date of the Satisfaction Note is 21st July, 2014 and the notice under Section 153C of the Act was issued on 23rd July, 2014. The previous six AYs would therefore be from AY 2009-10 to AY 2014-15. This would therefore not include AYs 2007-08 and 2008-09. 8. If we apply the ratio laid down by the Hon ble Jurisdictional High Court, in the present case, then the date of satisfaction, i.e., 25.09.2018 has to be reckoned as the date of reference from where six assessment years immediately preceding assessment years has to be construed and therefore, six preceding assessment years in this case shall be from Assessment Year 2012-13 to Assessment Year 2018-19. The instant Assessment Year, i.e., Assessment Year 2017-18 ergo would be covered in the earlier six assessment years where the assessments have to be framed u/s.153C only, whereby the Assessing Officer was required to issue a notice u/s.153C, and frame the assessment u/s.153C/143(3). Contra to the law as interpreted by the Hon ble Jurisdictional High Court, the ld. Assessing Officer had issued notice u/s.142(1) and resultant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153A of the Act shall apply where search under section 132 of the Act is initiated or requisition under section 132A of the Act is made on or after 1st day of April, 2017. It is further stated therein that section 153C of the Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income-tax Act. It is also stated therein that hus, the amendment will take effect from 1st April, 2017. Therefore, even the CBDT, in the context of the amended provisions of section 153A of the Act, has clarified that it would apply when search or requisition is made after the date of the amendment. Evidently, therefore, even the amended provisions of section 153C of the Act would apply when search or requisition is made after the amendment. 10. Similar amendments have been made from time to time in Section 153C and one of such amendment was in the Finance Act, 2015 brought in the statute from 01.06.2015, whereby the statute extended the scope of Section 153C by holding that not only the specified items belonging to other person would trigger the provision of Section 153C but also any books of account or documents, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents either 'pertain' to the Assessee or contains information that 'relates to' the Assessee. 11. Here in this case, since the date of search is 21.07.2016, therefore, the amendment brought by the Finance Act, 2017 would not be applicable and ex consequenti the assessment for the instant Assessment Year 2017-18 ought to have been completed u/s.153C of the Act and the order of assessment dated 18.12.2018 passed u/s 143(3) in pursuant to notice u/s. 142(1) is bad in the eyes of law in view of the law interpreted and upheld by the Hon ble Jurisdictional High Court in CIT vs. RRJ Securities Ltd. and ARN Infrastructure India Ltd. v. ACIT as cited supra. 12. Another core issue herein argued before us is, whether the legality of the assessment can be challenged in a collateral proceedings like revisionary proceedings u/s.263, which ld. PCIT has held that the same cannot be challenged and has been vehemently supported by the ld. CIT-DR. This precise issue has been dealt in detail by the Co-ordinate Bench of ITAT Mumbai Bench in the case of M/s. Westlife Development Ltd. v. Pr. CIT as reported in 49 ITR (T) 406 wherein the Tribunal has observed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties. ii) Balwant N. Viswamitra and Others v. Yadav Sadashiv Mul (dead) through IRS and Others reported in (2004) 8 SCC 706 (pages 657-667 of JPB-III) has held as under: 9 The main question which arises for our consideration is whether the decree passed by the trial court can be said to be 'null and 'void'. In our opinion, the law on the point is well settled. The distinction between a decree which is void and a decree which is wrong, incorrect, and irregular or not in accordance with law cannot be overlooked or ignored. Where a court lacks inherent jurisdiction in passing a decree or making an order, a decree or order passed by such court would be without jurisdiction non est and void ab initio. A defect of jurisdiction of the court goes to the root of the matter and strikes at the very authority of the court to pass a decree or make an order. Such defect has always been treated as basic and fundamental and a decree or order passed by a court or an authority having no jurisdiction is nullity. Validity of such decree or order can be challenged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its face in order to enable the executing court to take cognizance of such a nullity based on want of jurisdiction, else the normal rule that an executing court cannot go behind the decree must prevail. 7 Two things must be clearly borne in mind. Firstly, 'the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be a 'a nullity' and 'void' but these terms have not absolute sense: their meaning is relative, depending upon the court's willingness to grant relief in any particular situation. If this principle of illegal relativity is borne in mind, the law can be made to operate justly and reasonably in cases where the doctrine of ultra vires, rigidly applied, would produce unacceptable results.' (Administrative Law, Wade and Forsyth, 8th Edn., 2000, p. 308). Secondly, there is a distinction between mere administrative orders and the decrees of courts, especially a superior court. 'The order of a superior court such as the High Court must always be obeyed no matter what flaws it may be thought to contain. Thus, a party who disobeys a High Court injunctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, we also have no hesitation in holding that such orders were bad in law, and, therefore, the proceedings under section 263 of the Act, admittedly, originating from such orders could not be initiated against the appellants. Also, Hon ble Madhya Pradesh High Court in the case of CIT v. Kalyan Solvent Extraction Ltd. (supra) has held as under : Once the original order stands rectified then it loses its identity at least to the extent it stood rectified. In such circumstances, the Commissioner should have invoked his suo motu powers under section 263 of the Act against the subsequent rectified order dated March 14, 1989, if he was of the view that the same is erroneous and prejudicial to the interests of the Revenue. We are, therefore, of the view that the Tribunal made no mistake in coming to the conclusion that the order of the Commissioner passed under section 263 of the Act which had the effect of setting aside the assessment order dated March 13, 1987, is without jurisdiction. Accordingly, and in view of the aforesaid discussion, we answer the reference against the Revenue and in favour of the assessee. 15. Further, Hon ble Delhi High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter. 19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are provided in the same 20. In view of above discussion ground no.3 is allowed and revision order passed u/s 263 is quashed. [Emphasis supplied] iii) ITA No. 466/2017 dated 2.5.2017 (Del) Pr. CIT v. Kaizen Products (P Ltd. presently known as Aas Research Solutions (P) Ltd . iv) ITA No. 2808/D/2016 M/s Aas Research and Solutions (P) Ltd. (since kaizen Products (P) Ltd.) v) ITA Nos. 3825 to 3827/D/2018 dated 5.9.2018 M/s NKG Infrastructure Ltd. v. Pr. CIT wherein it was observed and held as under:- 15. Basing on this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Ltd (supra), we hold that the order which was barred by limitation cannot be revised under section 263 of the Act by the Learned principal Commissioner of Income Tax. vi) ITA.No.2857/Del/2017 dated 10.12.2018 in the case of M/s. SPJ Hotels Pvt. Ltd. vs The PCIT-8 13.2. Since the facts are totally different as A.O. had reason to believe that ₹ 10 lakhs has escaped assessment on account of ₹ 5 lakhs received from two companies referred to above, which was ultimately found to be incorrect and nonexistent, therefore, there may not be any application of mind on the part of the A.O. to proceed to initiate the re-assessment proceedings. There is no other material available on record except the information received from the Investigation Wing. The A.O. on the basis of the information and material received from Investigation Wing has recorded reasons for reopening of the assessment which was ultimately found to be incorrect and non-existent. It is well settled law that when no new material other than examined by the A.O originally found on record for the purpose of initiating the re-assessment proceedings, the proceedings under section 148 of the I.T. Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 263 of the I.T. Act and quash the same. In view of the above, the remaining plea of the assessee are not required to be adjudicated. However, we may briefly note that A.O. examined entire seized material at the time of recording reasons and re-assessment stage. The assessee produced sufficient evidences at the re-assessment proceedings to prove the identity of the creditors, their creditworthiness and genuineness of the transaction. The A.O. also made direct enquiry by issuing summons under section 133(6) of the I.T. Act to the Investors who have also replied directly to the A.O. Therefore, A.O. rightly accepted the credits as genuine. In view of the above finding, there is no need to give a finding in detail on merits. In view of the above, we allow the appeal of assessee. 17. Ld. PCIT as well as Ld. CIT-DR has strongly relied upon the judgment of Hon ble Kerala High Court in the case of CIT vs. Jacob J. Thaliath as reported in 343 ITR 279 wherein it was held that Tribunal being the second appellate authority, consider the validity of re-assessment order while considering the appeal against order issued u/s.263. Their Lordships observed as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent but the ratio thus culled out is that the assessee cannot challenge the validity of the assessment in the appeal filed against order u/s. 263. However, the Hon ble Jurisdictional High Court in the case of CIT vs. Software Consultant, 341 ITR 240 in the context of assessment order passed u/s. 147/148, it was held that if the Assessing Officer could not have made the addition in the proceedings u/s.148, the ld. CIT could not have exercised the jurisdiction u/s.263. 19. It is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the provisions of the statute or was barred by limitation, then such an invalid order cannot be subject matter of further proceedings so as to validate the said assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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