TMI Blog2020 (9) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... 3rd party. This fact is not rebutted by the revenue, therefore, in my considered view the assessee ought to have been provided opportunity of cross examination. The Assessing Officer purely based his finding on the statement made by third party and data recovered from third party - not providing opportunity of cross examination is ex-facie contrary to the principles of natural justice, therefore, on this ground also assessment so framed is against settled principles of law. In view of the above, hereby quash the assessment order being contrary to judicial pronouncements. The AO is directed to delete the impugned addition. Appeal filed by the assessee is allowed. - ITA No.655/Ind/2018 - - - Dated:- 9-9-2020 - SHRI KUL BHARAT, JUDICIAL MEMBER For the Appellant : Shri Girish Agrawal Nisha Lahoti, CAs For the Respondent : Shri Ashish Porwal, Sr. DR ORDER This appeal by the assessee is directed against order of the Commissioner of Income Tax Appeals [CIT(A)]-I, Indore dated 10.05.2018 pertaining to the assessment year 2010- 11. The assessee has raised following grounds of appeal: 1. In the facts and in the circumstances of the case, Ld. (IT(A)-I, Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of cash transactions pertaining to Bhoomi, Group was found in digital form. The directors of M/s Bhoomi Group, in his statement recorded u/s 131 dated 28.12.2015 had admitted that the digital date found during the course of search demonstrated the cash transactions executed by Bhoomi Group which was not recorded in regular books of accounts. It was noticed that the assessee paid an amount of ₹ 16,00,000/- in cash on 02.01.2010 for the purchase of Flat No. C/604 in project Bhoomi Elegant it was established during the course of search proceedings that M/s. Bhoomi Elegant of Bhoomi Group had accepted on money of ₹ 16,00,000/- from Shri Abhishek Dhanotiya the assessee herein in respect of the deal done on 08.01.2010. The sale consideration was ₹ 24,59,000/- as per sale agreement whereas the total sale consideration was paid of ₹ 40,59,000/- hence, the assessee had paid on money of ₹ 16,00,000/-. The Assessing Officer, therefore, reopened the assessment and issued a notice u/s 148 dated 31.03.2017 after recording the reasons and obtaining approval from the competent authority. Thereafter, the assessing officer framed assessment u/s 143(3) r.w.s. 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied .. Section 153C starts with a non obstante clause that is Notwithstanding . This non obstante clause has an overriding effect on the provisions of the other sections mentioned after this word. Thus, it is clear that, owing to the non obstante clause, provisions of section 139, 147, 148, 149, 151 and 153 are not applicable to the assessments covered by the provisions of section 153C. 3. CBDT Circular No. 7 of 2003 dated 05.09.2003 - Finance Act, 2003 Explanatory notes on provisions relating to Direct Taxes - Para 65.9 - The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs 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 such other person and issue such other person notice and assess or reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has mentioned in his letter that the necessary action may be taken as per law under s. 153C/148 of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of s. 153C of the Act, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. .. [emphasis supplied] This decision has been referred by Hon ble Pune Bench of ITAT in the case of Radheyshyam B Agrawal [2015] 61 taxmann.com 50 and by Hon ble Mumbai Bench of ITAT in the case of Skylark Build [2018] 97 taxmann.com 682. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and judicial precedents, assessee prays before your Honors that the impugned order passed u/s 143(3) rws 147 be quashed. Without prejudice to submissions above for Ground No. 01 B. Assessment completed u/s 143(3) rws 147 is without complying to the provisions envisaged thereunder 1. Reasons recorded very categorically demonstrate that the proceedings u/s 147 have been initiated merely on the basis of information received from the DCIT Central Circle 6(2), Mumbai. There is no independent application of mind by the Ld. AO on the information so received which pertains to search conducted in some other group. 2. Ld. AO noted in Para 3.3 The statement of Akshay Doshi accepting the cash against the sale proceeds of the flat in addition to the value so recorded in the books of account and mentioned on the registered deed itself becomes a strong evidence to reopen the case. [emphasis supplied] 3. Instant case was reopened on the basis of statement recorded u/s 131 of one Shri Akshay Doshi by DDIT(Inv.) Mumbai in the search case of M/s. Ekta Bhoomi Group wherein he made certain assertions of accepting on-money of ₹ 16,00,000 from the assessee. [PB 52] 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of M/s. Bhoomi Elegant of Bhoomi Group. b. The agreement value noted by the Ld. AO is ₹ 24,59,000/- which is the registered value. Figure of ₹ 40,59,000 does not appear anywhere, even in the documents supplied by M/s. Bhoomi Elegant. The excel sheet on which reliance is placed for alleged payment of cash of ₹ 16,00,000 by the assessee also very categorically states agreement value at ₹ 24,59,000/- only. [PB 55] c. Treatment of alleged acceptance of on-money by M/s. Bhoomi Elegant from the assessee has not been revealed for which assessment orders of M/s. Bhoomi Elegant and Shri Akshay Doshi are important documents and ought to have been verified as also made available to the assessee. d. Ld. AO did not apply his mind independently on the information received from the DCIT Central Circle 6(2), Mumbai but mechanically proceeded to initiate the proceedings u/s 148. The reasons so recorded to arrive at a belief that income has escaped assessment does not in any way reflect the application of mind by the Ld. AO. It is an approach adopted for making fishing and roving enquiries only. Reliance is placed on the decision of Hon ble Delhi ITAT in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confer jurisdiction on the AO to take action u/s 148 rws 147 of the Act. Reliance is placed on the decision of Hon ble Gujarat High Court in the case of Birla VXL 217 ITR 1. Action of the Ld. AO per se reflects that the matter required detailed investigation and further verification which at best could be categorized as AO having reasons to suspect and not reasons to believe. Assumption of jurisdiction by the Ld. AO on the basis of reasons to suspect is invalid and the entire proceedings so undertaken with the sole object of making open ended enquiries is not sustainable and liable to be quashed. Reliance is placed on the decisions of Hon ble Jurisdictional High Court of Madhya Pradesh in the following decisions a. Arjun Singh [2000] 246 ITR 363 (MP) b. Lokendra Singh Rathore [1985] 155 ITR 629 (MP) c. Bombay Pharma Products [1999] 237 ITR 614 (MP) 10. Without prejudice, the instant proceedings carried out without making available copies of documents, returns and computation of income for verifying the treatment of alleged cash of ₹ 16,00,000 and resulting assessment orders of M/s. Bhoomi Elegant, Shri Akshay Doshi and other relevant person is in gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re binding upon him in his own case only and the same cannot be foisted upon the other parties in the absence of sufficient corroboratory material. It is settled law that assessee cannot be penalized for hand written entries in the diary [digital record of entries in the instant case] maintained by third party unless any evidence is found against him. In support reliance is placed on following judgments: a) Eagle Seeds Biotech Ltd v. ACIT [2006] 6 ITJ 668 (Indore) - Held - Statement of third party or any evidence found during search in case of third party not confronted to assessee. Statement of accountant of third person given to assessee and opportunity to cross examine given to assessee, is not of much relevance as he is not accountable or connected with the case. b) ITO v. R.L. Narang (Dr.) [2008] 174 Taxmann 96 (Chand.) - Held - Assessee s income cannot be assessed on basis of statement of a third party, unless there is some material to corroborate that statement. Burden shifts on the Revenue to prove that assessee had deliberately suppressed his income . Para 4. .The mere fact that somebody made a statement, by itself, cannot be treated as havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and when the assessee denied the entries therein. e) Dy. CIT v. Mahendra Ambalal Patel [2010] 40 DTR 243 (Guj) - Held - Addition in the hands of the assessee having been made merely on the basis of a statement made by a third party without there being any corroborative evidence, the Tribunal was justified in deleting the addition particularly when the assessee was not allowed opportunity to cross examine the persons who made such a statement. f) Heirs L.Rs of Late Laxman Bhai S. Patel v.CIT [2008] 327 ITR 290 (Guj) - Held - The assessee s statement was recorded by the assessing officer and some discrepancies were pointed out but merely on the basis of such discrepancies, adverse presumptions could not be drawn against him. The Department had failed to establish any nexus between the promissory note and the amount said to have been given by the assessee to K. The Tribunal was not right in law in upholding the addition of ₹ 8,78,358/- in the hands of the assessee. g) CIT v. Naresh Khattar (HUF) [2003] 261 ITR 664 (Del HC) - Held - The addition in question was made only on the basis of the observations in the interim order passed by the Court in a civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt had considered the evidentiary value of any loose sheets or diary found with the party where search was conducted, which can be used against third party. Relevant observations of the Hon ble Apex Court are as under: From the above definitions of 'account' it is evident that if it has to be narrowly construed to mean a formal statement of transactions between two parties including debtor-creditor relation and arising out of contract, or some fiduciary relations undoubtedly the book MR 71/91 would not come within the purview of Section 34.. If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to s.34, Evidence Act, be the basis of a decree. From a combined reading of the above Sections it is manifest that an oral or documentary statement made by a party or his authorized agent, suggesting any inference as to any fact in issue or relevant fact may be proved against a party t the proceeding or his authorized agent as 'admission' but, apart from exception ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opposed the submissions and supported the orders of authority below. In respect of objection regarding legality of reopening of assessment, he submitted that there is no legal impediment provided under the Act. The language of section 147 of the Act is clear there is no ambiguity so far the provision is concerned. As per this section there has to be some reason with the assessing officer that makes him to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present case seller of the property admitted the fact of having received on money in excess of sale consideration recorded in the sale deed. Therefore, this reason was sufficient to believe that the assessee made unexplained investment in property. He submitted that non-granting of cross examination to the assessee is not fatal to assessment, it is only a procedural lapse. 7. I have heard the rival submissions, perused the materials available on records and gone through the orders of the authorities below. The objections against reopening of assessment and making additions are three fold; Firstly, the information which was with the assessing officer was gathered at the back of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 of the Act. Hence, notice issued under section 148 of the Act and proceedings under section 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of section 153C of the Act, section 147/148 stand ousted. In the instant case, the procedure laid down under section 153C has not been followed by the A.O. and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari Vs. ACIT and another, reported in (2007) 289 ITR 341, wherein it has been held that if the procedure laid down in section 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of section 153C are exactly similar to the provisions of section 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned DR that during the course of search, it was found at premises of M/s.Today Homes Infrast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned 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 case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section 153A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s.147 of the Income Tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence the assessment order dated 31.12.2010 passed u/s 143(3) r.w.s. 147 is quashed. 10. Reliance is also placed on the decision of Hon'ble High Court of M.P. in the case of Ramballabh Gupta vs. ACIT 288 ITR 347 (MP). The Hon'ble High court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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