TMI Blog2023 (4) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... r Assessing Officer who has jurisdiction over such other person - See Commissioner of Income Tax-III vs. Calcutta Knitwares, Ludhiana [ 2014 (4) TMI 33 - SUPREME COURT] Thus notice issued by the AO under Section 153-C of the IT Act deserves to be quashed and accordingly had proceeded to quash the assessment orders framed by the Assessing Officer under Section 153-C read with Section 143(3) of the Income Tax Act. Accordingly, the additional ground was allowed in all the seven years. Decided in favour of assessee. - ITA No. 704 OF 2018 - - - Dated:- 31-3-2023 - HON'BLE MR JUSTICE K. SOMASHEKAR AND HON'BLE MR JUSTICE UMESH M ADIGA For the Appellants (By Sri. Aravind K. V.- Advocate) For the Respondent (By Sri. Mayank Jain - Advocate) JUDGMENT K. SOMASHEKAR, J., This appeal is directed against the order passed by the Income Tax Appellate Tribunal, Bengaluru (for short ITAT ) in M.P. No. 149/Bang/2016 (in ITA No. 1450/Bang/2014) dated 06.03.2018 for assessment year 2011-2012 vide Annexure-D. The prayer sought for in this appeal is to set aside the said order by allowing the appeal and confirming the order of the Appellate Commissioner and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the searched person (153A case) in the file of searched person. Therefore, the Tribunal held that mere recording of satisfaction in the file of the assessee would not suffice. The Tribunal quashed the assessment orders framed for all 7 assessment years by relying on the decision of Allahabad High Court in the cased of M/s. Gopi Apartments and the Hon ble Apex Court in the case of M/s. Calcutta Knitwears . After taking into account the best remedial action, since the time was available to reopen the assessment for the year 2010-11, the proceedings were reopened by issuance of notice under Section 148 and subsequently, the assessment proceedings were concluded by passing an order of reassessment under Section 147 read with Section 144 by bringing to tax all the income which formed part of total income under the original assessment order passed. However, it was noticed that though the assessment proceedings was initiated by issue of notice under Section 143(2), The Tribunal vide said order also knocked down the assessment proceedings completed under Section 144 read with Section 153D on similar ground that no satisfaction note was recorded by the assessing officer of the sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .V. Arvind who has taken us through the impugned order passed by the Appellate Tribunal whereby challenging under this appeal and wherein the Tribunal has erroneously given more credentiality in respect of the decision rendered by the Delhi High Court in which the Court has interpreted Section 153C beyond the scope of the statute leading to results that are not in harmony with the intention of the legislature. On this premise it requires the intervention of this Court, if not would cause miscarriage of justice. It is further submitted that the decision of the Delhi High Court in the case of CIT vs. RRJ Securities Limited relied on by the Tribunal is not applicable to the present case since it has not reached finality. 6. The second limb of the argument advanced by the learned standing counsel for the appellant is that the Tribunal erred in holding that the assessment year relevant to the financial year in which the satisfaction note is recorded under Section 153 C of the Act will taken as the year of search for the purpose of clause(a) and (b) of sub-section 1 of Section 153A by making reference to proviso to sub-section 1 of Section 153C despite the fact that the first prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars Smt. Lakshmi Aruna (wife) G. Brahmani (Daughter) G. Kireeti (Son) Salary Income Nil Nil Nil Rental Income 18,18,811 Nil Nil Income from Business (Unaudited) 45,96,38,679 Nil Nil Interest Income 2,42,26,434 9,90,386 6,33,782 9. The assessee was intimated, vide office letter dated 07.01.2013 to obtain copies of relevant material which are in possession of CBI or any other agency and prepare the return of income showing the correct income earned during the financial year 2010-11. Based upon this penalty proceedings under Section 271(1)(c) and 271F were initiated. 10. It is observed in paragraph 5.4 of the order dated 31.03.2013 that in the previous years, the assessee has opted to club the income of minor children with her income, as the TDS deducted from the Banks are in the name of assessee. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed following search and seizure action under Section 132 of the IT Act carried out in the case of Sri Madhu, Smt.Renuka, Sri Raghavacharyulu and others on 25.10.2010. 12. These are all the provision that has been appraised by the learned standing counsel Sri K.V. Arvind for the Revenue/appellant. It is stated that the proceedings initiated under Section 153C are therefore in order and in accordance with law, and the same are upheld for all the assessment years involved. It was also indicated in a tabular form in the aforesaid order. The issues involved on merits were discussed and also assigning the reasons it is relating to principles of natural justice. 13. Further in paragraph 7 of the order dated 25.08.2014 in the assessment of long term capital gains Rs.5,25,000/-, the Assessing Officer has brought on record that seized material marked as RB/1 , found from the premises of Sri K. Raghavacharyulu was sale agreement dated 26.12.2005 for land at Sl. No. 25A, Ganesh Nagar, measuring 4200 sq.ft as per which the appellant had sold the property in question and the capital gains earned thereon had not been declared for tax. Accordingly, a sum of Rs. 5,25,000/- was brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so seeks for intervention of this Court, if not, there will be miscarriage of justice to the appellant / Revenue. 17. The Assessee namely Smt. G. Lakshmi Aruna preferred appeals against the combined order of CIT(A) VI, Bangalore dated 25.08.2014 for the assessment years 2005-06 to 2011-12 before the Income Tax Appellate Tribunal, Bangalore Bench B Bangalore in ITA No. 1451 to 1457 (Bang) 2014 (Assessment years 2005-06 to 2011-12). The assessee has objected to the validity of the assessment order passed under Section 153C read with Section 144 of the IT Act. In the appeal serious objection raised with respect to initiation of proceedings under Section 153C of the I.T. Act by contending that no satisfaction was recorded by the assessing officer in the case of searched person that the incriminating material found during the course of search belongs to the assessee and therefore, the assessment completed under Section 153C of the Act is illegal. Even the written submissions were accepted on 07.09.2016. These written submissions of learned DR of the revenue submitted on 07.09.2016 were reproduced in the said order. In the said order certain reliances were referred to. The decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, being satisfied that the documents and book account belonging to Gali Janardhana Reddy have been found and seized from the searched premises of Sri Raghavacharyulu and Smt. G. Renuka. Notice was issued under Section 153C of the Income Tax Act, 1961. These are all the contentions made by learned standing counsel Sri K.V. Arvind referring to the aforesaid provisions and also various grounds. It is observed that before initiating proceedings under Section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 of the books of accounts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Sections 148 of the Act where recording of reasons in writing are sine qua non. Further, it is observed that under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pursuant to the search, proceedings under section 153C of the Act wee initiated in the case of the assessee for the Assessment Year 2005-06to 2010-11 after recording satisfaction required under section 153C of the Act. Assessments were completed under section 153C of the Act for the Assessment Year 2005-06 to 2010-11. The Assessment Year 2011-12 being the year of search, assessment proceedings were completed under section 144 read with Section 153D of the Act. Further, it is contended that the assessment orders for Assessment Year 200506 to 2011-12 was subject matter of appeal before the Commissioner of Income Tax Appeals. The assessee being aggrieved against the order of Appellate Commissioner preferred appeals before the Tribunal for Assessment Year s 2005-06 to 2011-12. The Tribunal by common order dated 17.10.2016 set aside the assessment orders for the Assessment Year s 2005-06 to 2011-12 on the ground that satisfaction under section 153C of the Act was not recorded by the Assessing Officer of the searched person. The assessment for the Assessment Year 2011-12 was regular assessment and no proceedings were initiated under section 153C of the Act. Hence setting aside of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of receiving the books of account or documents or asset seized or requisitioned by the Assessing Officer having jurisdiction over such other person. The effect of the first proviso is that the assessment pending in respect of the six assessment years referred to in section 153A(1)(b) of the Act would get abated on the date of receipt of books of accounts or documents or asset seized by the Assessing Officer having jurisdiction over such other person. Therefore, on a combined reading of section 153A(1)(b), first and second proviso to section 153A of the Act, Section 153C and the first proviso to Section 153C of the Act would mandate that period of six assessment years for the purposes of section 153A and 153C of the Act is one and the same and would not alter in respect of both the provisions. The above understanding is further strengthened by the language of section 153C(1) of the Act wherein issue of notice and assess or reassess the income of the other person in accordance with the provisions of section 153A of the Act is provided. Even if the proceedings under section 153C of the Act are initiated, the procedure is contemplated under section 153A of the Act. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment to the six assessment years will be examined with reference to such date. 24. He further contends that the reliance of the assessee on the judgment of the Delhi High Court in the case of RRJ securities Ltd is incorrect and the same has not dealt with the proposition canvassed above. The Delhi High Court has not considered the limited purpose of second proviso to section 153A and first proviso to section 153C of the Act, which mandates the point of abatement with respect to period of six assessment years referred to in section 153A(21)(b) of the Act. Further the Delhi High Court has not considered the implication of reference made to section 153A of the Act in section 153C of the Act enabling issue of notice and assess or reassess the income of the other person in accordance with the provisions of section 153A of the Act. Further the Delhi High Court has not specifically held that the period of six assessment years would be difference for the purpose of section 153A and 153C of the Act. Assuming without admission if the contention of the assessee that period of six years has to be recorded with reference to the date of receiving the books of account or documents or ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be examined in the appeal on restoration. Consideration of the fresh ground in he application under section 254(2) of the Act that to especially in the application filed by the revenue would be beyond the jurisdiction of the Tribunal. 25. Learned counsel would further contend that the reasons assigned by the Tribunal in the common order dated 17.10.2016 for the Assessment year 2005-06 and 2006-07 would be incorrect and contrary to the stand taken by the assessee. The satisfaction recorded in terms of Section 153C of the Act as has been reproduced at para-6 of the order of the ITAT dated 17.10.2016 would clearly indicate that the satisfaction was recorded for the Assessment year 2005-06 and 2010-11. While examining the correctness of the said satisfaction, the Tribunal has set aside the order of assessment for the Assessment year 2005-06 and 201011 for non-compliance of conditions contemplated under Section 153C of the Act. If the finding of the Tribunal in the order against Miscellaneous Petition is to be presumed to be correct, then the finding recorded in the main order dated 17.10.2016 is incorrect. This would substantiate the inconsistent stand / reasoning of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial 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. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to the aforesaid section makes it clear the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid subsection on the date of initiation of the search under section 132, the said proceeding shall abate. If such proceedings are already concluded by the Assessing Officer by initiation of proceedings under Section 153A, the legal effect is the assessment proceedings and reassess the total, income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the ey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-section (1) of Section 153A. Sub-section (2) of Section 153C states that where books of account or documents or valuable assets seized or requisitioned as referred to in sub- section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under Section 132 or requisition is made under Section 132A and in respect of such assessment year - (a) no return of income has been furnished by such other person 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) of 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 valuable assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue notice and assess or reassess total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the assumption of jurisdiction of the Assessing Officer is in the absence of any incriminating material or undisclosed income having been detected during the course of search leading to reopening of a concluded assessment. In the instant case, though documents belonging to the assessee were seized at the time of search operation, there was no incriminating material found leading to undisclosed income. Therefore, assessment of income of the assessee was unwarranted. Consequently, no satisfaction was recorded in the case of the assessee. We answer the substantial question of law No. 2 by holding that the Tribunal was not correct in holding that the assessment under section 153C was valid despite there being no satisfaction recorded to the effect that the documents found during the search on June 17, 2008 were incriminating in nature and prima facie represented undisclosed income. III) SSP Aviation Ltd., vs. Deputy Commissioner of Income-tax held as under: 12. The ld. sr. standing counsel for the income tax department also stated that the petitioner has already filed appeals before the CIT(Appeals) and has availed of the alternative remedy. 13. Sections 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of Section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under Section 132 of the Act. It is only a first step to the enquiry, which is to follow. The Assessing Officer who has reached the satisfaction that the document relates to a person other than the searched person can do nothing except to forward the document to the Assessing Officer having jurisdiction over the other person and thereafter it is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by Section 153A in an attempt to ensur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence between the two provisions in order to deal with the contention put forward by the ld. counsel for the petitioner that the seizure itself is invalid or illegal on the ground that there could not have been any satisfaction before issuing the warrant of authorization under Section 132 of the Act that the petitioner had earned undisclosed income because the income reflected in the seized documents namely, the Collaboration Agreement dated 24.8.2006 and the Assignment Agreement dated 21. 7.2006, had already been taken note of in the account books of the petitioner. This is a debatable issue as is apparent from the submission of the Revenue. They have submitted to the contrary. It cannot be said that the seizure of the documents was unwarranted or contrary to law. As noticed above, Revenue has highlighted that finalization and audit of accounts was after the date of the search. The accounts for the year ended 31.03.2009 now relied upon by the petitioner, were finalized after the search on 05.01.2009. Seizure has to judged in the perspective and the facts known and within the knowledge when it was made. On that date, the Revenue was not in a position to know whether any income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome as provided for in Section 158B(b) is necessary and, therefore, it is noticed. The same reads as under: Undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act [or any expense, deduction or allowance claimed under this Act which is found to be false] . 22. Section 158BC speaks of procedure for assessment of a person searched under Section 132 of the Act or books of accounts, other documents or assets are requisitioned under section 132A. The limitation for the purpose of completion of the block assessments for the purpose of Section 158BC of the Act is as provided under Section 158BE(1)(a) of the Act, that is the time limit for completion of block assessment. 35. It is also trite that while interpreting a machinery provision, the courts would interpret a provision in such a way that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sments under Section 158BD of the Act, the other provisions of XIV-B shall apply. 39. The opening words of Section 158BD of the Act are that the assessing officer must be satisfied that undisclosed income belongs to any other person other than the person with respect to whom a search was made under Section 132 of the Act or a requisition of books were made under Section 132A of the Act and thereafter, transmit the records for assessment of such other person. Therefore, the short question that falls for our consideration and decision is at what stage of the proceedings should the satisfaction note be prepared by the assessing officer: whether at the time of initiating proceedings under Section 158BC for the completion of the assessments of the searched person under Section 132 and 132A of the Act or during the course of the assessment proceedings under Section 158BC of the Act or after completion of the proceedings under Section 158BC of the Act . IV) CIT vs. RRJ Securities Ltd., held as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year . V) CIT vs. Sun Engineering Works (P.) Ltd held as under: 37. The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of notice under Section 22(2) of the 1922 Act (corresponding to Section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. What is set aside is, thus, only the previous under assessment and not the original assessment proceedings. An order made in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In Madhav Rao Jiwaji Rao Scindia Bahadur and Ors. v. Union of India this Court cautioned: It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment . 27 .These are all the contentions and various grounds taken by learned standing counsel Sri K.V. Arvind for appellant / Revenue by referring to the citations and submits that the aforesaid reliances are in conformity with the contentions taken in this appeal and are squarely applicable to the present case on hand the same may be considered and to set-aside the order passed by the Income Tax Appellate Tribunal, Bengaluru in M.P. No. 149/Bang/2016 (in ITA No. 1450/Bang/2014) dated 06.03.2018 for assessment year 2011-2012 vide Annexure-D and confirm the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t orders for A.Y.2005-06 TO 2011-12. The Hon ble Tribunal held that there is no satisfaction recorded by the Assessing Officer of the searched person which is mandatorily required for issuing notice u/s 153C of the Act. Thereafter, the Department filed MP No. 149/BANG/2016 in ITA No. 1450/BANG/2014 pertaining to A.Y. 2011-12 seeking rectification of order dated 17.10.2016 u/s 254(2) of the Act passed in ITA No. 1450/BANG/2014 on the ground that the assessment proceedings for A.Y. 2011-12 were completed u/s 144 read with Section 153D of the Act. It was the case of the department that the assessment for A.Y. 2011-12, being the year of search could not have been quashed on the basis that satisfaction as required u/s 153C of the Act was not recorded by the AO of the searched person as A.Y. 2011-12 was the year of search. The ITAT vide impugned order dated 06.03.2018 dismissed the aforesaid MP No. 149/BANG/2016 by relying upon the judgment of the Delhi High Court in the case of CIT vs. RRJ Securities Ltd., (2016) 380 ITR 612. 30. Whereas, the Department has challenged the aforesaid order passed by the ITAT before this Court u/s 260A of the Act. It is relevant to note that upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Appeal preferred by the department against the aforesaid judgment has been dismissed. Therefore, it is submitted that there is no error in law in the impugned order passed by the ITAT seeking intervention as there is no illegalities or error committed by the ITAT. 35. Further, it is contended that it is settled law that while construing penal statutes and taxation statutes, the Court has to apply strict rules of interpretation Article 226 of the Constitution prohibits the State from extracting tax from the citizen without authority of law. The natural corollary to the said provision is that State cannot burden the citizen without the authority of law and thus, taxation statutes has to be interpreted strictly. The Hon ble Supreme Court in the case of Commissioner of Customs v. Dilip Kumar Co., (2018) 9 SCC 1 held that if there are two view possible in the matter of interpretation of a charging section, the one favorable to the assessee needs to be applied. Applying the aforesaid ratio in the fact of the present case, it is humbly submitted that the Delhi High Court in CIT vs. RRJ Securities have on a strict interpretation construed Section 153C of the Act and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. In the aforesaid case of CIT vs. Gopi Apartment , the Allahabad High Court held as under:- (1) The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Officer of such 'other person', thereafter followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: 1) 2014 SCC OnLine All 16050: (2014) 365 ITR 411: (2014) 270 CTR 447 Commissioner Of Income Tax vs M/S Gopi Apartment 25. Thus, there are two stages: (1) The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of the assessment proceedings under Section 158BC of the Act and not after the completion of the said proceedings. The Courts below have relied upon the limitation period provided in Section 158BE(2)(b) of the Act in respect of the assessment proceedings initiated under Section 158BD, i.e., two years from the end of the month in which the notice under Chapter XIV-B was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after 01.01.1997. We would examine whether the Tribunal or the High Court are justified in coming to the aforesaid conclusion. 38. We would certainly say that before initiating proceedings under Section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Section 148 of the Act where recording of reasons in writing are a sine qua non. Under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... napplicability of, to an exempting provision held, every taxing statute including, charging, computation and exemption clauses, at the threshold state should be interpreted strictly further, though in case of assessee, but for an exemption notification or exemption clause the benefit of ambiguity must be strictly interpreted in favour of the revenue/state. 41. In the background of the contentions made by the learned Standing Counsel Shri Arvind K.V. for the appellants / Revenue and so also the learned counsel Shri Mayank Jain for the respondent / Assessee, it is to be seen that as on 25.10.2010, a search under Section 132 of the IT Act, 1961 was carried in the case of Sri. Raghavacharyulu, Smt. Renuka, and others. During the course of search proceedings, various documents belonging to the assessee were assessed and certain incriminating materials were found and seized during the course of search against the respondent / assessee. Consequently, the assessing officer of the searched person issued notice under Section 153C against the assessee for the assessment years 2005-2006 to 2010-2011 and a notice under Section 143(3) for the assessment year 20112012. Therefore, keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year (a) no return of income has been furnished by such other person 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 sub-section (2) of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year. Section 153D of the Income Tax Act reads thus: 153D. Prior approval necessary for assessment in cases of search or requisition. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner: Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the aforesaid MP No.149/BANG/2016 by relying upon the judgment of the Delhi High Court in the case of CIT vs. RRJ Securities Ltd., (2016) 380 ITR 612. 46. The Income Tax Department has challenged the aforesaid order passed by the Income Tax Appellate Tribunal under Section 260-A of the IT Act. But it is relevant to note that, upon the objection raised by the counsel for the respondent that against an order passed in a miscellaneous petition, appeal under Section 260-A of the IT Act was not maintainable without there being challenge to the main order passed in appeal by the Income Tax Appellate Tribunal. 47. The Department proceeded to amend the appeal and also included the challenge to the order dated 17.10.2016 passed in ITA NO. 1450/BANG/2016. In the aforesaid appeal, the Department proposed the substantial questions of law for its consideration. The Tribunal was right in law in holding that the assessment year relevant to the financial year in which satisfaction note is recorded under Section 153-C of the Act, will be taken as the year of search for the purposes of clause (a) and (b) of sub-section 1 of Section 153-A of the Act by making reference to the first prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that, notice was issued under Section 153-C of the IT Act. Whereas the learned counsel for the respondent in this matter facilitated the judgment of CIT vs. RRJ Securities Ltd. (supra). 53. In the aforesaid judgment, it was held that the period of 6 years stipulated in Section 153-C of the IT Act have to be construed with reference to the date of handing over the documents to the Assessing Officer of the assessee and not the year of search. The said reliance is squarely applicable to the present case on hand relating to initiation of proceedings in respect of certain incriminating materials which were found during the course of search of the respondent / Assessee. Whereas the Revenue / appellant submits that the relevant six Assessment years would be the assessment years even prior to the assessment year relevant to the previous year in which search was conducted. If this interpretation is taken into consideration and if the argument canvassed by the revenue is accepted, it would mean that in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be re-opened. But in case of any other person who is not se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 were never challenged and the finding that the satisfaction note was absent and there was lack of jurisdiction under Section 153-C of the Act, in the case of the respondent / assessee, had attained finality. Therefore, this appeal is filed challenging the impugned order by urging various grounds and framing substantial questions of law. However, it cannot arise for response merely because substantial questions of law have been proposed by the appellant / Revenue. 56. It is further contended that it is settled law that while construing penal statutes and taxation statutes, the Court has to apply strict rules of interpretation and Article 226 of the Constitution prohibits the State from extracting tax from the citizen without authority of law. The natural corollary to the said provision is that State cannot burden the citizen without the authority of law and thus, taxation statutes has to be interpreted strictly. The Hon ble Supreme Court in the case of Commr. of Customs v. Dilip Kumar Co., (2018) 9 SCC 1 held that if there are two view possible in the matter of interpretation of a charging section, the one favorable to the assessee needs to be applied. Applying the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded and the same must be recorded before issuance of notice to such other person u/s 153C of the Act. It was further held that even in a case where AO of both the persons is the same and there is no requirement of physical handing over of documents, the recording of satisfaction is still a must as the same is the foundation upon which subsequent proceedings against the other person is initiated. In the aforesaid case of CIT vs. Gopi Apartment , the Hon ble Allahabad High Court held as under:- (1) The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 Ss. 158-BD and 158BE(2)(b) Initiation of proceedings against any other person other than searched person stages at which satisfaction note may be prepared by AO as to undisclosed income to transmit documents to Jurisdictional AO to proceed under S.158-BD against any such person other than the searched person Limitation period, if any B. Income Tax Act, 1961 Ss. 158-BD, 158-BC, 132, 132-A and Ch.XIV-B Initiation of proceedings under S. 158-BD against person other than searched person as to existence of undisclosed income Satisfaction of assessing officer (AO as to existence of undisclosed income belonging to person other than searched person Requirement of documentary evidence for satisfaction Held, cogent and demonstrative material is sine qua non to AO s satisfaction in concluding that seized documents belong to person other then searched person for initiation of action under Section 158-BD. C. Interpretation of Statutes Particular Statutes or provisions Taxation laws Strict interpretation Held, where words of statute are absolutely clear and unambiguous, recourse cannot be had to principles of interpretation other than literal rule Rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bullion, jewellery or other valuable article or thing, seized 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. 65. Learned Standing Counsel for the appellant / Revenue had emphasized the other than provision. 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 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisioned by the Assessing Officer having jurisdiction over such other person. 66. The aforesaid Standing counsel has contended by emphatically referring to the aforesaid provision of the IT Act, 1961 relating to response to the substantial questions of law which have been proposed challenging the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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