TMI Blog2022 (9) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to the handing over of the materials would not be sufficient to initiate proceedings u/s 153C of the Act and would not confer any power on the AO to initiate proceedings u/s 153C - In order to initiate proceedings to assess or reassess u/s 153C of the Act, the AO should mandatorily possess the seized material or other books of accounts etc and only after handing over of the materials to the AO of the other person, the AO is empowered to issue notice u/s 153C of the Act and that too after recording necessary satisfaction. Initiation of action u/s 153C would arise only if the seized material are handed over to the AO of such other person having jurisdiction of such other person. In the present case, it will be relevant to note that there is neither any material on record nor any evidence has been placed on record by the assessee to demonstrate that the seized and impounded material of the searched person was handed over to the AO of the assessee when the AO had initiated proceedings u/s 147 of the Act and the AO had recorded satisfaction as contemplated u/s 153C of the Act. Thus in the light of the decision of Hon ble Madras High court in the case of Karti Chidambaram [ 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material on record are as under : 3. The assessee is a company who filed its return of income for A.Y. 2011-12 on 11.02.2013 declaring total income of Rs.3,360/-. The assessment was initially framed u/s 143(3) of the Act vide order dated 31.01.2017 assessing the total income at Rs.1,06,850/-. Thereafter, the case was reopened by issuing notice u/s 148 of the Act and consequently the assessment was framed u/s 147 r.w.s 144 of the Act vide order dated 03.10.2018 determining the total income at Rs. 19,42,995/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 27.11.2019 in Appeal No.10126/2019-20 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal before the Tribunal and has raised the following grounds: 1. Because the proceedings initiated under section 147 by notice under section 148 have neither been validly initiated nor concluded in accordance with the provisions of law and the assessment order passed in pursuance thereof is liable to be declared as void ab initio. 2. The CIT(A) has erred in law and on facts in upholding the addition Rs.18,36,145/- under section 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the front companies of Pradeep Jindal Group and was maintaining bank account with Corporation Bank Delhi and Yes Bank Delhi for the accommodation entry business. AO on the basis of the aforesaid facts and the detailed reasons noted in the order concluded that he had reason to believe that the income of the assessee has escaped assessment and accordingly after obtaining the prior approval of PCIT issued notice u/s 148 of the Act on 28.03.2018 for reopening the assessment proceedings for A.Y. 2011-12. AO noted that subsequently notice was also issued through ITBA portal on 30.03.2018 but there was no compliance by the assessee. AO noted that notice issued u/s 142(1) of the Act also remained uncomplied by the Assessee. AO thereafter by invoking the powers u/s 133(6) of the Act obtained bank statements of the assessee from Corporation and Yes Bank with which the assessee was having the bank accounts. On perusing the bank statements, AO noted that total bank credits in Corporation Bank account was Rs.1,75,58,700/- and the credits in Yes Bank was Rs.5,58,87,000/- and the total aggregate credits in both its bank account to be Rs.7,34,45,790/-. He considered the aforesaid aggregate am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent satisfaction and not a borrowed satisfaction. In the present case, he submitted that the approval granted by Addl. CIT and PCIT were given in a mechanical way and without application of mind and therefore in the absence of proper satisfaction recorded by the competent authority, the assessment is invalid. In support of his aforesaid contention, he placed reliance on the decision of Hon ble Delhi High Court in the case of Synfonia Tradelinks P. Ltd. Vs. ITO (2021) 127 Taxmann.com 153. On the merits of the addition, he relied on the submissions of the assessee made before lower authorities. 12. Ld DR on the other hand supported the order of lower authorities and submitted that despite various notices issued by AO, the same remained uncomplied and therefore AO had no other option but to frame assessment u/s 144 r.w.s 147 of the Act. With respect to the contention of the Ld AR on improper recording of satisfaction, he submitted that Addl. CIT had after application of mind had recommended the proposal for reopening on the basis of reasons recorded by AO that thereafter PCIT after considering the material on record had recorded his satisfaction for reopening of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing/pertaining to such other person ) or even any information contained therein relates to a person other than the person on whom the said search is conducted; 3. Satisfaction of AO that it belongs to or relates to such other person 4. After finding any books account or documents or assets seized or requisitioned, the same shall be handed over to the AO having jurisdiction over such other person. The AO (having jurisdiction) has to be satisfied that the assets/documents seized or requisitioned have a bearing on the determination of the total income of such other person. Only then the AO (having jurisdiction) can proceed/s.153C against such other person in the manner provided u/s. 153A. It is apparent from the above that two separate satisfactions ought to be recorded which is: (i). First by the AO of the person on whom search was conducted i.e. searched person for any documents/assets found pertaining to or belonging to the such other person . (ii). Secondly by the AO of other person, regarding assets/documents seized or requisitioned have a bearing on the determination of the total income of such other person. 15. From the above analysis, it is clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO should mandatorily possess the seized material or other books of accounts etc and only after handing over of the materials to the AO of the other person, the AO is empowered to issue notice u/s 153C of the Act and that too after recording necessary satisfaction. Thus initiation of action u/s 153C would arise only if the seized material are handed over to the AO of such other person having jurisdiction of such other person. In the present case, it will be relevant to note that there is neither any material on record nor any evidence has been placed on record by the assessee to demonstrate that the seized and impounded material of the searched person was handed over to the AO of the assessee when the AO had initiated proceedings u/s 147 of the Act and the AO had recorded satisfaction as contemplated u/s 153C of the Act. 16. I also find that Hon ble Madras High Court in the case of Karti P. Chidambaram V. Principal Director of Income- Tax (Investigation) and others [2021] 436 ITR 340 (Mad) has held that there is distinction between the provisions of Section 147, 153A and 153C of the Act and has held that only after handing over of the materials to the Assessing Officer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer having jurisdiction over such person. Thus, only after handing over of the materials to the Assessing Officer of the other person, he is empowered to issue notice under section 153C of the Act and not otherwise. 99. Thus, the scope of section 147 for reopening of assessment is not comparable with the reassessment proceedings under section 153C of the Act. On receipt of certain information from the Investigation Wing, though the Assessing Officer in the present case instituted reopening proceedings under section 147/148 of the Act. On handing over of the seized or requisitioned materials, the Assessing Officer is bound to issue notice under section 153C of the Act. Reassessment under section 153C of the Act is wider enough to cover six assessment years. At each stage, the Income-tax Act provides various procedures, considering the instances and developments in the matter of gathering informations and during the search operations. Unless such powers are contemplated, it would be difficult for the authorities to deal with cases of tax evasions. 100. Section 153C further contemplates that on receipt of the seized materials, assets etc., shall proceed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and proceed for assessment or reassessment. This being the constructive interpretation to be adopted, even in cases, where there is a mistake in initiation of proceedings under section 147/148 proceedings, on receipt of complete seizure materials, the Assessing Officer is empowered to invoke section 153C of the Act on satisfaction and by issuing notice. 103. Therefore, initiation of action under section 153C of the Act would arise only if the seized materials are handed over to the Assessing Officer of such other person, having jurisdiction over the other person. In the present case, admittedly, the search was conducted in the premises of M/s. Agni Estates and Foundation Private Limited. The materials of the searched person was handed over to the Assessing Officer of the searched person on November 28, 2019. It was forwarded to the Assessing Officer of the other person (petitioner) on November 28, 2019 and thereafter, the Assessing Officer completed the satisfaction note on December 16, 2019 and issued show-cause notice, which is mandatory under section 153C of the Act. Thus, the procedure would be that, the seized materials are to be handed over to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the end of the relevant assessment year, unless the Commissioner is satisfied about the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. Before the Commissioner endorses the satisfaction on the reasons recorded by the Assessing Officer, the Commissioner has to apply his mind and he cannot pass orders mechanically and without having read the reasons. The perusal of the aforesaid form which is placed at page 39-40 reveals that the form has in total 13 entries. Entry No. 11 of the aforesaid form refers to the reasons for the belief that income has escaped assessment and the reply to which is stated As per Annexure A . Entry No 12 of the aforesaid form reads whether the Addl. CIT is satisfied on the reasons recorded by the AO in this case for A.Y. 2011- 12 that it is a fit case for the issue of a notice u/s 148 to which the Addl CIT in his own handwriting has noted Recommended for approval on the basis of reasons recorded by AO and it is signed on 23.03.2018. Entry No 13 of the aforesaid form reads Whether the PCIT is satisfied on the reasons recorded by the AO in this case for A.Y. 2011-12 that it is a fit case for the issue of a not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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