TMI Blog2023 (6) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... .Somashekar And Hon'ble Mr Justice Umesh M Adiga For the Appellants : Sri. Aravind .K .V- Advocate For the Respondent : Sri. Mayank Jain - Advocate JUDGMENT This appeal preferred by the Revenue is directed against the order passed by the Income Tax Appellate Tribunal, Bengaluru (for short ITAT ) in M.P.No.152/Bang/2016 (in ITA No.1457/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 thereby confirming the order passed by the Deputy Commissioner of Income Tax, Central Circle 1(3), Bengaluru and with a further prayer seeking to set-aside the order passed by the Income Tax Appellate Tribunal in ITA No.1457/Bang/2014 dated 18.10.2016 for the assessment year 2011-12 vide Annexure-C. 2. Heard learned standing counsel Sri K.V.Aravind for appellant / revenue and the learned counsel Shri Mayank Jain for respondent/assessee. Perused the order passed by the Deputy commissioner of Income Tax Central Circle-1(3), Bangalore in respect of assessment order and the order passed by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, 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 searched persons which is factually not applicable to the proceedings for the year under consideration. 4. Being aggrieved with the decision of the Tribunal, the Revenue filed a miscellaneous petition before the Tribunal for modification of its order to that extent being mistake apparent from the record. But the Tribunal dismissed the Revenue s contention by solely relying on the decision of Delhi High Court in the case of M/s. RRJ Securities Ltd . Hence, this appeal is preferred by the Revenue / Appellant among the grounds urged therein and seeking for intervention. 5. In view of the grounds urged in this appeal pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited relied on by the Tribunal, is not applicable to the present case since, it has not reached finality. 8. 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 proviso to sub-section 1 of Section 153C refers to second proviso to sub-section 1 of section 153A specifically and therefore, not applicable at all to all the clauses (a) and (b) of subsection 1 of Section 153A of the Act. 9. It is further contended that Tribunal erroneously set-aside the assessment order passed for the year assessment year 2011- 12 holding that there is no satisfaction recorded by the assessing officer of the searched person (153A) in the file of the said person ignoring the intention of legislature and even when the assessing authority has passed assessment order after recording satisfaction as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12. 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. Therefore, the income of minor children are clubbed with the income of assessee and assessment is concluded as under: Income arrived as discussed above Income from salary 18,18,811 Income from business 45,96,38,679 Interest Income Smt.Lakshmi Aruna 2,42,26,434 Ms.G.Bramhani (Minor daughter) 9,90,386 Master G.Kireeti (Minor son) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice. 14. Further, at para No.7 of the order dated 25.08.2014 related to capital gains, it is stated as 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 Sy.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 to tax. 15. Further at paragraph 8 of the order relating to bogus transportation expenses claimed for the assessment years 2009- 10 and 2010-11, the assessing officer has brought on record that the appellant has claimed transportation expenses for the years in question. The same was indicated in the below tabular form. A.Y Total Transportation Expenses claimed (Rs.) Transport Expenses Disallowed (Rs.) (I) (II) (III) 2009-10 28,76,23,325 9,95,82, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision of the Hon ble Supreme Court in the case of CIT vs. Calcutta Knitwears 43 taxmann.com 446 (SC), which is rendered in connection with search assessments under Chapter XIV B (Sections 158B to 158BH) which are different provisions compared to assessments of the assessee which relate to the new search assessment procedure as contained under Sections 153A to 153C which are brought into statute w.e.f. 1.6.2003. 18. It was observed that the assessment of the person covered under provisions of Section 153A is the same as the officer of the person covered under provisions of Section 153C and, therefore, there is no issue of transmissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under Section 158BD. It is further observed that the conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act. It was observed that the Tribunal has not only followed the judgment in the case of M/s.Gopi Apartment (Supra) but the Tribunal has also considered and followed the judgment of Hon ble Apex Court reported in the case of Calcutta Knitwear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be rejected by the tribunal by holding that period of 6 years has to be counted from the date of handing over of the books of accounts and not the date of search. Assessment Year 2011-12 would be within the period of 6 assessment years, hence conditions required under Section 153C of the Act are required to be satisfied. 21. It is further contended that Section 153A(1)(b) of the Act provides for assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such searches conducted requisition is made. The date of search relevant for the present case is 25.10.2011 and Assessment Year 2011-12 relevant to the financial year in which search was conducted is excluded for the purpose of computing six assessment years in terms of section 153A(1)(b) of the Act. The first proviso to Section 153A of the Act provides for assess or reassess the total income in respect of each assessment year falling within such six assessment years. The reference to such six assessment years is with reference to 6 assessment years referred to in section 153A(1)(b) of the Act. Second proviso to Section 153A of the Act provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 taxmann.com214 Delhi SSP aviation Ltd vs. DCIT wherein at para-14 held as under:- 14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the Assessing Officer being satisfied that any money, bullion, jeweler or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A of the Act, thus on reading the above provision it is clear that proceedings can be initiated under section 153C of the Act on the basis of the above material found in the searched premises belonging to the other person. Proceedings under section 153C of the Act would always be post search under section 132 of the Act in the case of the searched person. When the searched person is subjected to proceedings under section 153A of the Act with respect to 6 assessment years relevant to previous year in which search is conducted, proceedings initiated under section 153C being on the basis of the material found belonging to the other person in the course of search, the period of six assessment years cannot be after the 6th assessment year of the searched person or period after the date of search. In any event in view of the specific language of section 153A and 153C of the Act, the period of proceedings under section 153A and 153C of the Act wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following reliances for consideration of the appeal: 1) (2014) 49 taxmann.com98(Kar) - Canara Housing Development Co. Vs. Deputy Commissioner of Income Tax, held as under 18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as block assessment because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as block period . Though a single assessment order was to be passed, the undisclosed income was to be as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search in order to find out what is the total income of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 2) (2016) 385 ITR 346 (Kar) - CIT VS. IBC Knowledge Park Pvt., Ltd ; held as under: 46. 153C is relevant for the purposes of this case. Sub-section (1) of Section 153C begins with a nonobstante clause and it states that notwithstanding anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 158BD of the Act and therefore, the above guidelines of the Hon ble Supreme Court, apply to proceedings under section 153C of the Income-tax Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by Central Board of Direct Taxes. 3. 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 Assessing Officer 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. 4. 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 judgment. 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. As per the aforesaid circular, at the time of or along with initiation of the proceedings, again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is initiated under Section 132 or books of account etc. are requisitioned under Section 132A. The procedure prescribed under Section 153A is that the Assessing Officer shall call upon the assessee who is searched to furnish returns of income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. The assessee, on receipt of the notice from the Assessing Officer, shall furnish the returns of income and thereafter the Assessing Officer is empowered to assess or re-assess the total income in respect of different assessment year falling within six assessment years. Now, a question may arise as to what would happen to the regular returns, if any, filed by the searched assessee for any of the six assessment years which are pending on the date on which the search was initiated. The answer is given by the second proviso to Section 153A, which says that if any of those returns is or are pending, the assessment or reassessment relating to those returns shall abate. The object obviously is to avoid multiplicity of assessment or reassessment proceedings in respect of the same assessment year or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e closed. If the returns filed by the other person for the period of six years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position. 18. A reference to Section 158BD of the Act, which falls under the Chapter XIV-B, may be of some use. This section provided for assessment of the undisclosed income by any person other than the person searched under Section 132. It applies to search conducted prior to 31.05.2003. It provided as follows: Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other 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 the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on the footing that there was undisclosed income in the case of the petitioner simply because action under Section 132 was taken not against the petitioner, but against the Puri Group of Companies. Section 153C postulates that while conducting the search on the person in whose name the search warrant is issued under Section 132, some valuable article or books of account or document is seized, which does not belong to the searched person but is seen to belong to any other person, the procedure stated therein should be followed. Therefore, nothing is to be gained from saying that the pre-conditions mentioned in clauses (a), (b) and (c) of sub-section (1) to Section 132 have not been satisfied vis- -vis the petitioner so as to confer legality upon the seizure of the documents in question. In our opinion, it is not necessary for the revenue authorities to have reasons to believe that the petitioner would not produce any books of account or document or that the petitioner is in possession of any money, bullion, jewellery or other valuable article or thing which it had not or will not disclose for the purpose of the assessment proceedings. The petitioner was not searched. Search was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts. In Mahim Patram Private Ltd. v. Union of India (UOI) and Ors., (2007) 3 SCC 668 this Court has observed that: 20. A taxing statute indisputably is to be strictly construed. [See J. Srinivasa Rao v. Govt. of Andhra Pradesh and Anr., 2006(13)SCALE 27 ]. It is, however, also well-settled that the machinery provisions for calculating the tax or the procedure for its calculation are to be construed by ordinary rule of construction. Whereas a liability has been imposed on a dealer by the charging section, it is well-settled that the court would construe the statute in such a manner so as to make the machinery workable. 21. In J. Srinivasa Rao (supra), this Court noticed the decisions of this Court in Gursahai Saigal v. Commissioner of Income-tax, Punjab, [1963] 1 ITR 48(SC) and Ispat Industries Ltd. v. Commissioner of Customs, Mumbai, 2006(202)ELT561(SC).In Gursahai Saigal (supra), the question which fell for consideration before this Court was construction of the machinery provisions vis- -vis the charging provisions. Schedule appended to the Motor Vehicles Act is not machinery provision. It is a part of the charging provision. By giving a plain meaning to the Schedule a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 income of such other person in accordance with the provisions of Section 153A . 6) (2016) 380 ITR 612 (Delhi) - CIT vs. RRJ Securities Ltd., held as under: 14. The proviso to Section 153C(1) of the Act expressly indicates that reference to the date of initiation of search for the purposes of second proviso to Section 153A shall be construed as a reference to the date on which valuable assets or documents are received by the AO of an Assessee (other than a searched person). Thus, by virtue of the second proviso to section 153A of the Act, the assessments/reassessments that were pending on the date of receiving such assets, books of accounts or documents would abate. 15. The controversy in this regard is no longer res integra. A Coordinate Bench of this Court in SSP Aviation Ltd. v. Deputy Commissioner of Income Tax: (2012) 346 ITR 177 has held that: in case of the sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. This Court had summarized the legal position in respect of Section 153A of the Act as under:- 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of search which were not produced or not already disclosed or made known in the course of original assessment. 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 recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003-04 and 2004-05 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 escaped turnover does not effect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in cases of underassessment based on Clauses (a) to (d) of Explanation (I) to Section 147, that the assessment of tax due has to be recomputed on the entire taxable income. The judgment in Jaganmohan Rao's case, therefore, cannot be read to imply as laying down that in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recompilation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.152/Bang/2016 (in ITA No.1457/Bang/2014) dated 06.03.2018 for assessment year 2011-2012 vide Annexure-D and confirm the order of the Appellate Commissioner confirming the order passed by the Deputy Commissioner of Income Tax, Central Circle 1(3), Bengaluru. Further, seeking to set-aside the order passed by the Income Tax Appellate Tribunal in ITA No.1451 - 1457/Bang/2014 dated 18.10.2016 for the assessment year 2011-12 vide Annexure-C. 29. On the contrary, learned counsel for respondent / assessee namely Mayank Jain, has taken various contentions relating to substantial questions of law which have been framed in this appeal. It is based upon the grounds urged by the appellant / revenue by referring to Section 153C read with Section 144 of the Act. Whereas he has filed written submission and also taken us through the said submission made therein. It is contended that the appeal has been preferred by the Department under Section 260A of the Income Tax Act (Act) seeking to challenge the order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Whereas, it is further contended that the Department has challenged the aforesaid order passed by the ITAT before this Court u/s 260A of the Act. The objection raised by the counsel for the respondent that against an order passed in a miscellaneous petition, appeal u/s 260A of the Act was not maintainable without there being challenge to the main order passed in appeal by the ITAT, the department proceeded to amend the appeal to include the challenge to the order dated 18.10.2016 passed by the ITAT in ITA No.1457/BANG/2014. 32. With regard to the substantial questions of law, it is contended that the decision of the Tribunal dated 06.03.2018 is squarely covered by the judgment of the Delhi High Court in the case of CIT vs. RRJ Securities Ltd. (supra). In the aforesaid judgment, it was held that the period of 6 years stipulated in Section 153C of the Act have to be construed with reference to the date of handing over the documents to the AO of the assessee and not the year of search. In the aforesaid judgment it was 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 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 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. 33. Further it is contended that in the facts of the present case, the satisfaction note was recorded on 14.12.2012 and therefore, the 6 years previous to the year in which handing over of documents took place would be A.Y. 2007-08 to A.Y. 2012-13. Thus, the relevant A.Y.2011-12 would fall within the purview of Section 153C of the Act. It is submitted that the Tribunal while allowing the appeal in ITA No.1451-1457/BANG/2014 vide order dated 18.10.2016 had held that the satisfaction as mandatorily required u/s 153C of Act to be recorded by the AO of the searched person was absent in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that 6 years contemplated under sub Section 1 of Section 153C have to be reckoned from the date of handing over of documents to the AO of searched person and not the date of search. Thus, even otherwise the interpretation given by the High Court to Section 153C of the Act is in terms of the aforesaid law laid down by the Hon ble Supreme Court. 36. It is further contended that as regards the issue of satisfaction raised in the main appeal i.e., ITA No.1457/BANG/2014, it is reiterated that the Department has not preferred any appeal before this Court u/s 260A of the Act challenging the finding of absence of satisfaction of AO of searched person in the case of the respondent-assessee. The Department having taken the aforesaid position cannot, at this stage, urge this Court to adjudicate upon the issue of validity of satisfaction note. Even otherwise, the requirement of recording of satisfaction note is clearly borne out of the provisions contained in Section 153C of the Act. The Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson' followed by handing over of all the requisite documents etc. to the Assessing Officer of such 'other person', thereafter followed by issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153C. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory . 38. It is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. 26. The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153C. 27. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessing officer in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C against the assessee for the assessment years 2005-2006 to 2010-2011 and a notice under Section 143(3) for the assessment year 2011- 2012. Therefore, keeping in view the aforesaid search and seizure which was carried under Section 132 of the IT Act, 1961 is concerned, it is relevant to refer to Section 153C of the IT Act, which reads thus: 153C.Assessment of income of any other person. 2[(1)] [Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, 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 and the Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021. 43. These provisions have been referred for the purpose of consideration in the given facts of the case. Whereas the Assessment proceedings were concluded vide orders dated 31.03.2013 for the Assessment years 2005-06 to 2010-11 as under Section 153C of the IT Act. Further, Assessment proceedings for the Assessment Year 2011-12 were passed under Section 144 read with Section 153D of the Act. For better appreciation relating to the ingredients of the aforesaid provisions such as Section 144 of the IT Act read with Section 153-D of the IT Act, which reads thus: 144. Best judgment assessment (1) If any person- (a) fails to make the return required under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner under subsection (12) of section 144BA. 44. For understanding relating to the search which was carried out in the aforesaid case stated and also found during the course of search against the respondent / assessee, the income of the respondent / assessee was assessed at Rs. 98,01,82,062/-. Aggrieved by the aforesaid Assessment order, the respondent / Assessee had preferred an appeal before the Commissioner of Income Tax (Appeals)-VI, Bangalore. The CITA (A), vide another order dated 25.08.2014 had confirmed the additions for the Assessment year 2005-06 to 2011-12. 45. The respondent / Assessee had challenged the aforesaid order passed by the CIT (A) before the Income Tax Appellate Tribunal, Bangalore Bench, in ITA Nos.1451-1457/Bang/2014. Whereas the Income Tax Appellate Tribunal, vide order dated 18.10.2016 allowed the appeal and consequently set aside the Assessment order for the Assessment years 2005-06 to 2011-12. The Income Tax Appellate Tribunal held that there is no satisfaction recorded by the Assessing Officer of the searched person, which is manda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (b) of sub-section 1 of Section 153-A of the Act by making reference to the first proviso to sub-section (1) of Section 153-C despite the fact that this first proviso to sub-section (1) of Section 153-C refers to the second proviso to sub-section (1) of Section 153-A of the Act and hence is not applicable at all to the clauses (a) and (b) of sub-section (1) of Section 153A of the Act. Therefore, the Tribunal is right in law in holding that no satisfaction was recorded by the AO of the searched person and therefore, the notice issued by the AO under Section 153-C of the Act will be taken as the year of search for the purpose of clause (a) and (b) of sub-section (1) of Section 153-A of the Act. 48. Whereas the learned Standing Counsel Shri Arvind K.V. for the appellant / Revenue has taken us through the facts and circumstances of the case for which proceedings were initiated against the respondent / assessee. Therefore, the substantial questions of law which have been proposed requires to be responded to keeping in view the aforesaid provisions of the IT Act, 1961. 49. The Tribunal is right in law in setting aside the Assessment order passed for Assessment Year 2011-12 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search takes place can be re-opened. But in case of any other person who is not searched but its assets are seized from the searched person, the period for which the assessments could be re-opened would be much beyond the period of six years. This contention is made by the learned Standing counsel Shri Arvind K.V for the Revenue but the counter arguments have been advanced by the learned counsel Shri Mayank Jain for the respondent / Assessee. 52. The rationale appears to be that 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 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. Accepting the contention that the Assessments were completed under Section 153-C of the Act for the Assessment years 2005-06 to 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, the one favorable to the assessee needs to be applied. Applying the aforesaid ratio to the facts of the present case, the Hon ble Delhi High Court in CIT vs. RRJ Securities have on a strict interpretation construed Section 153C of the Act and held that 6 years contemplated under sub Section (1) of Section 153C has to be reckoned from the date of handing over of documents to the AO of searched person and not the date of search. Thus, even otherwise the interpretation given by the Hon ble High Court to Section 153C of the Act is in terms of the aforesaid law laid down by the Hon ble Supreme Court. 56. As regards the issue of satisfaction raised in the main appeal i.e., ITA No.1450/BANG/2016, it is reiterated that the Income Tax Department has not preferred any appeal before this Hon ble Court u/s 260A of the Act challenging the finding of absence of satisfaction of AO of searched person in the case of the respondent / assessee. The Department having taken the aforesaid position, cannot at this stage urge this Hon ble Court to adjudicate upon the issue of validity of satisfaction note. 57. Even otherwise, the requirement of recording of satisfaction note is clearly born ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153C . Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be had to principles of interpretation other than literal rule Reiterated, a taxing statute should be strictly construed Common sense approach, equity, logic, ethics and morality have no role to play Nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less Interpretation of Statutes Basic Rules Literal or strict interpretation. Hence, the Hon ble Supreme Court had held that for the purpose of Section 158-BD of the Act, a satisfaction note is a sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: a) at the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act; b) along with the assessment proceedings under Section 158-BC of the Act; and c) immediately after the assessment proceedings are completed under Section 158-BC of the Act of the searched person. 61. It is relevant to refer to Section 153-A relating to Assessment in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial questions of law which have been proposed challenging the order passed by the Income Tax Appellate Tribunal. 66. In the present case on hand, the Income Tax Appellate Tribunal had arrived at a conclusion in ITA No.1451-1457/2014. It is seen that the Tribunal has not only followed the judgment of the Allahabad High Court rendered in the case of M/s. Gopi Apartment supra, but the Tribunal has also considered and followed the judgment of the Apex Court reported in the case of Calcutta Knitwears (supra), and the judgment of the Hon ble Apex Court in the case of Manish Maheshwari (289 ITR 341). In the facts and circumstances of the present case on hand relating to initiation of proceedings, has been discussed based upon the materials. No satisfaction was recorded by the Assessing Officer of the searched person because it is seen that the so-called satisfaction note prepared by the Assessing Officer in his capacity as Assessing Officer of the searched person, it could not be shown by the Revenue that any satisfaction note was prepared by him as the AO of the searched person. Therefore, it is to be accepted that no satisfaction was recorded by the AO of the searched persons an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
