TMI Blog2022 (1) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. See cases BATTA YADAMMA [ 2018 (11) TMI 1694 - ITAT HYDERABAD] and SRI SURYADEVARA AVINASH [ 2019 (9) TMI 898 - ITAT HYDERABAD] . The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - Decided in favour of assessee. - ITA No. 1897/MUM/2020 - - - Dated:- 6-1-2022 - Shri C.N. Prasad, Hon'ble Judicial Member And Shri S. Rifaur Rahman, Hon'ble Accountant Member For the Assessee : Shri Anuj Kisnadwala For the Department : Shri B.K. Bagchi ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents found during search and basis of initiation of proceedings u/s.147 of the Act was only the documents found during search. Other grounds raised by the assessee on the merits of the case. Since the jurisdictional issue is crucial to decide the validity of the assessment, we proceed to decide this issue first. 4. The brief facts relating to initiation of reassessment proceedings are, assessee filed its return of income on 29.09.2011 declaring total business income at Rs.(-) 40,202/-. The assessing officer initiated the reassessment proceedings by issue of notice u/s 148 and served the notice. The assessee was supplied with the reasons recorded u/s 148(2) of the Act, the same is given below: - During the course of search proceedings at the residence of Shri Somanathan Nair at D-02, Vastu Shrusti CHS Ltd., Lodha Heritage, Bhopar Road, Desle Pada, Dombivaii (E), Thane a file Annexure A/1 containing loose papers numbered 1-49 were seized. On perusal of this loose papers especially page numbers 40 to 47 it Is observed that M/s. Lodha Construction P.Ltd. has taken cash loan from various parties as detailed herein under: - Sr.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that these amounts have been added in the hands of Shri Somanathan Nair and therefore the same should not be added in the income of the assessee Company. This contention of the assessee is not acceptable. These papers belong to the assessee and the taxability of this amount in the hands of the assessee cannot be questioned. The fact that the mount appearing in the above mentioned papers has been added in the hands of Shri Somanathan Nair does not absolve the assessee of the tax liability arising in the hands of the assessee company as per the I.T. Act. 6. From the above para, it is clear that the initiation of the reassessment proceedings is based on the documents found during the search operation and from the above para, Assessing Officer is fully satisfied that the documents found during search belongs to assessee only. However, Assessing Officer proceeded to complete the reassessment on the basis of these documents and dealt with the merits on record. We observe from the record that the assessee first time raised the issue of jurisdiction before Ld.CIT(A) by raising grounds of appeal. We observe from the appellate order that Ld.CIT(A) recorded the various objections r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,00,000/- 1% per month i.e. 12% per annum Total 3,75,00,000/- 2.2 On the basis of above documents, the Appellants case has been reopened vide notice dated 25.02.2013 issued u/s 148 of the Act. After considering the various submissions made by the Appellant during the re-assessment proceeding, an addition of ₹ 3,75,00,000/- has been made under section 69D of the Act to the returned income of the Appellant vide order dated 29.03.2014 passed under section 143(3) r.w.s. 147 of the Act. 2.3.1 The Appellant, at the very outset, object the action of the AO in assuming the jurisdiction u/s 148 of the Act. The Appellant submits that the undisputed facts in its case are that the loose papers showing the alleged cash loan taken by the Appellant has been found and seized during the search action at the residence of Shri Nair. For such circumstances, there are separate and complete mechanism stated in section 153A to 153C of the Act dealing with the search cases which needs to be followed. Therefore, in the cases of search action, recourse to section 148 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson 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 subsection (2) 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. 2.3.3 Section 153C deals with cases of persons other than the persons searched u/s 132 of the Act. As per the provisions of section 153C, where the Assessing Officer of the searched party is satisfied that any money, builion, jewcllery or valuable article or thing or books of account or other documents seized or requisitioned belongs to a person other than the searched person referred to in section 153A, then the books of accounts or documents shall be handed over to the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 65.6 The new section 153B provides for the time-limit for completion of search assessments. It provides that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling within six assessment years under section 153A within a period of two years 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. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Commissioner of Income-tax (Appeals). 65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections. 65.12 These amendments will take effect from 1st June, 2003. 2.3.4 A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A or 153C of the Act. 2.3.5 The Appellant submits that under the provisions of section 147 of the Act, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of Satisfaction note should also be decided in the light of the above Judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court. In view of the above facts, the Appellant submits that the re-assessment order passed u/s 143 (3) r.w.s. 147 of the Act shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken place at the premises of the third person where the documents belonging to the assessee has been found. The AO instead of using the methodology stated ins section 153C of the Act, re-opened the case u/s 148 of the Act and made the addition pertaining to undisclosed investment. The case travelled upto Hon'ble ITAT and Hon'ble ITAT had to decide whether AO was correct in reopening the assessment when the documents giving rise to re-assessment has been found in search action at the premises of third parties?. The reassessment order has been quashed by the ITAT. The operational part of the order reads as under: 17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153B (page 21 paragraph 15 of ITAT. (Vizag) order) State Bank of India vs DCIT [122 ITR 609 Mum] 18. . After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is Initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. (page 22 paragraph 16 of ITAT (Vizag) order) The judgment in the case of Allcargo (supra) has been confirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment u/s 147 based on the material found during search. He brought to our notice the relevant discussions of Assessing Officer in his order on reasons for reopening and justification of initiation of proceedings u/s 147. He submitted that the proper method to reassess the income of the assessee under section 153C and not under section 147. In this regard, he relied in the following case law: (i). Batta Yadamma v. ITO in ITA No. 1695/Hyd/2017 and others for A.Y. 2008-09 dated 29.11.2018. (ii). Sri Suryadevara Avinash v. Dy. CIT in ITA No. 496-498/Hyd/2017 for A.Y.s 2007-08 to 2009-10 dated 09.08.2019. (iii). M/s Kalyan Buildmart Pvt. Ltd. v. ACIT in ITA Nos 152 and 153/JP/2018 for A.Y.s 2007-08 and 2008-09 dated 28.06.2018. (iv). Kalyanji Velji HUF v. DCIT CC 8(4) in ITA Nos 2284/Mum/2019 and others for AYs 2010-11 to 2013-14 dated 08.01.2021. (v). Shri V.L. Khandee in ITA No 1971/Pun/2014 for AY. 2006-07 dated 24.04.2018. (vi). Sanjay singhal (HUF) v. DCIT (207 TTJ 853 (Chd)) dated 19.06.2020. (vii). Asst. CIT v. Shri Srinivas Rao Hoskote in ITA Nos 1154 and 1155/Bang/2015 for A.Y.s 2010-11 and 2011-12 dated 21.02.2018. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Lodha group in which the employee, Shri Somnath Nair, of the group is also covered. The documents found in his position were confiscated and the Assessing Officer has fully satisfied that these documents are belongs to assessee. After recording the satisfaction, he proceeded to initiate the proceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. We observe from the various decisions of Tribunals on this issue. The Hyderabad bench in the case of Batta Yadamma v. ITO in ITA.No. 1695/Hyd/2017 and in Sri Suryadevara Avinash v. DCIT in ITA.No. 496-498/Hyd/2017, in which one of the member is a party, held as under: 7. Considered the rival submissions and perused the material on record. Similar issue was dealt by the Bengaluru Bench of ITAT in the case of Shri Srinivasa Rao Hostake (supra) wherein the coordinate bench has held as under: 06. We have heard the rival contentions and perused the record. In our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment u/s 147 has been removed by the non abstante clause used in section 153A. 14. In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Ltd (supra) was a decision on Section 158BD under the old Act. There is a significant difference in the construction, language and content of both the provisions i.e Section 158BD under the old Act and section 153C of new Act of 1961. Section 153C of 1961 Act, starts with a non-obstante clause, whereas this nonobstinate provision was not there in Section 158BD. Therefore, in our considered opinion the decision relied upon by the Revenue is not applicable to the facts and circumstances of present case. We hold accordingly. In view of the ratio laid down in the said case, we are of the view that the AO wrongly initiated the proceedings u/s 148 and completed the assessment u/s 143(3) rws 147 of the Act, instead of initiating the proceedings u/s 153C of the Act. Therefore, we set aside the order of CIT(A) and quash the assessment made by the AO u/s 143(3) rws 147 of the Act. Since the very assessment is quashed, the additions made in such assessment automatically get cancelled. 12. Respectfully following the above decision, the correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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