TMI Blog2021 (12) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... made addition/s of Rs. 50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. credit entries in bank account etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153C of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, for which he seeks to re-assess the income of the assessee for the 7th to 10th AY. When the AO fails to make any addition for the undisclosed asset , then it tantamounts to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153C for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option but to drop the assessment proceedings. For this conclusion of ours, we rely on the ratio laid down in the judgments of CIT Vs Jet Airways [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] Ranbaxy Laboratories Ltd. [ 2011 (6) TMI 4 - DELHI HIGH COURT] Though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabated assessments of an assessee, no addition is permissible in the order u/s 153C of the Act unless it is based on any incriminating material found during the course of search. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion, but should be of such nature which would prima facie indicate that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to the transactions reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be incriminating in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjections also stands allowed. CIT(A) s action of holding the assessment order passed u/s 153C/143(3) to be ab initio void, for the AO s failure to issue notice u/s 143(2) of the Act prior to completion of assessment - We find merit in the submission of the Ld. DR that issuance of notice under section 143(2) is not mandatory for finalization of assessment under section 153A/153C of the Act. We note that the Ld. CIT(A) s had wrongly relied on the decisions of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] which were distinguishable in as much as it were rendered in the context of assessments framed u/s 143(3)/158BC, where issuance of notice u/s 143(2) of the Act to assume jurisdiction over the assessee is mandatory. However, Section 153A/153C of the Act is a special provision and we find that there is no specific provision in the Act requiring the assessment to be made under section 153A/153C after issue of notice under section 143(2) of the Act. As decided in Ashok Chaddha [ 2011 (7) TMI 252 - DELHI HIGH COURT] . There is no specific provision in the Act requiring the assessment made under s. 153A to be after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, the facts of the present case are that, search u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) was conducted against the Sagar Group on 22-12-2017 [i.e., Assessment Year 2018-19, herein after referred shortly as AY 2018-19].From the copies of panchnamas available on record, it is noted that the assessee was not the searched person . The AO however initially issued notices u/s 153A of the Act dated 27-09-2019 for AY 2012-13 to AY 2017-18 assuming that the assessee was searched. Thereafter, he also issued notices u/s 142(1) of the Act dated 11-11-2019 calling for several details/information. Later on, the AO realized the mistake that the assessee was not the searched person . Thereafter the AO vide order sheet noting dated 05-12-2019, observed that a bunch of loose sheets comprising of 90 pages was seized from the premises of the Sagar Group, bearing identification mark SST-01. According to him, Pages 61 to 69 of SST-01 pertained to the assessee, which comprised of journal ledger and bank ledger of the assessee for the period 01-04-2010 to 04-07-2011. The AO was of the view that the said document seized from the office premises of M/s Sagar Steels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore concluded that he was not satisfied with the explanations provided by the assessee regarding the proceeds of Rs. 9,63,00,000/- received upon sale of investments and thus added the same by way of unexplained cash credit u/s 68 of the Act. Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the Ld. CIT(A) called for the assessment folder of the assessee and granted relief to the assessee on the following grounds viz., (a) the satisfaction note was recorded on factually perverse and incorrect facts and for that reason the proceedings initiated u/s 153C of the Act was bad in law and thus the consequent order passed was void so it was quashed, (b) the AO had initially issued notices u/s 153A of the Act and thereafter switched over to proceedings u/s 153C of the Act without consigning (sic) the earlier proceedings and therefore according to him, the assessments which were framed u/s 153C based on the returns filed u/s 153A of the Act were a nullity and (c) the AO had not issued the mandatory notice u/s 143(2) of the Act after the assessee had filed the return of income and therefore non-issuance of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r preceding the searched AY. And that the jurisdictional fact is sine qua non for valid assumption of jurisdiction to issue notice for AY 2011-12. Shri Dudhwewala pointed out that despite specific request, the AO never provided the details of the asset which had purportedly escaped assessment of assessee for AY 2011-12 and so according to Ld AR, the AO could not have issued notice u/s 153C of the Act for the relevant Assessment Year 2011-12, without valid assumption of jurisdiction. Further according to him, the Pages 61 to 69 of SST-01 found and seized from the premises of M/s Sagar Steels did not reveal any such asset which had escaped assessment. Shri Dudhwewala contended that the scope of fourth proviso to Section 153A of the Act was restricted in the sense that the assessment for four years beyond the six assessment years could be reopened only where any income represented in form of asset had escaped assessment. Meaning thereby, only if any unexplained or undisclosed asset is found in the course of search, which can be added or assessed u/s 69 or 69A or 69B of the Act, that the AO can validly initiate proceedings u/s 153C for such relevant assessment year. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A. (emphasis supplied) 6. Regarding the second legal challenge according to Shri Dudhwewala, it is not the case of the AO that the assessee s case fell under clause (a) of Section 153C(1) of the Act in as much as there was no money, bullion or jewellery or any other valuable article or thing found in the course of search at Sagar Group which belonged to the assessee. Inviting our attention to the satisfaction note, he submitted that the AO had tried to make out a case under Section 153C(1)(b) of the Act by stating that Pages 61 to 69 of SST-01 found and seized from the premises o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or documents. Shri Dudhwewala took us through the various facets of the contents of the satisfaction note dated 05-12-2019 and contended that the same was recorded by the AO by donning the hat of the AO of the other person and not that of the searched person . Relying on the decisions rendered by the coordinate Benches of the Tribunal in the cases of Super Malls Pvt Ltd Vs DCIT (88 taxmann.com 273) and Skylark Build vs ACIT (97 taxmann.com 682), he submitted that since the AO of assessee when in the capacity of AO of M/s Sagar Steels did not record the satisfaction which was essential condition precedent u/s 153C of the Act, the assessment framed consequent thereto was ab inito void. 9. Per contra, the Ld. Addl. CIT DR Shri Nongothung Jungio contended that there was no requirement in law for the AO to have pointed out the asset to the assessee for which the relevant assessment year 2011-12 was being re-assessed u/s 153C read with fourth proviso to Section 153A of the Act. According to him, any item of income escaping assessment unearthed in the course of search in relation to 7th-10th AY was amenable to the fourth proviso to Section 153A of the Act. He further contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other person (third party i.e. the assessee in this case) only on 05-12-2019. Hence, by virtue of first proviso to section 153C of the Act, this date (05-12-2019) had to be reckoned as the date of search for the purpose of assessment u/s 153C of the Act, for determining the total income for six assessment years preceding the AY 2020-21. The satisfaction note recorded by the AO on 05-12-2019 is extracted below: Satisfaction recorded u/s. 153C of the Income Tax Act, 1961 A search operation u/s. 132 of the Income Tax Act, 1961, was conducted on 22.12.2017 at the business premise of M/s. Sagar Steels at S. J. Road, Athgaon, Guwahati. In the course of search a bunch of loose sheets were seized, having put identification mark SST-01, containing pages 1 to 90. Examination of pages 61 to 69 reveal that they are journal ledger and bank leger of M/s. Fortune Vanijya Pvt. Ltd. For the period 01.04.2010 to 04.07.2011. Further examination of the ledgers revealed that during the FY 2010-11, M/s. Fortune Vanijya Pvt. Ltd. had liquidated its investments in shares and converted it into cash held with bank. Shri Hemant Agarwal, in his statement recorded u/s. 132(4) of the Act had acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urth proviso to Section 153A of the Act, which has a bearing on the controversy in hand is being reproduced below: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.- For the purpose of this sub-section, the expression relevant assessment years shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, which according to him, lends credence to his argument that the jurisdictional fact was indeed absent and hence, the action of AO is bad in law for want of jurisdiction. 14. So, first let us examine whether this legal contention of Shri Dudhwewala that existence of the undisclosed asset valued Rs. 50 lakh or more discovered during search qua the assessee qua AY 2011-12 is the jurisdictional fact or not; and if it is the jurisdictional fact, then the next question is whether the AO was in possession of this jurisdictional fact prior to issuance of notice u/s. 153C for AY 2011-12. Since determination of this legal issue in favour of assessee will go to the root of the very jurisdiction of AO to even issue notice in this case for AY 201112 u/s 153A/C of the Act, let us first examine the same. For this, first of all we have to understand, what is jurisdictional fact? For that, let us look at the ruling of the Hon ble Supreme Court in the case of Arun Kumar Ors. Vs Union of India Ors. 2006 (12) SC 121 wherein it was held/explained as to what is jurisdictional fact. The Hon ble Supreme Court explained that, a jurisdictional fact is a fact which must exist, before a Court, T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a proceeding for a certiorari to determine whether or not the finding of fact by the District Collector, that land was waste land, was correct or not. It is noted that the Hon ble Supreme Court while upholding the contention and declaring the direction of the State Government to District Collector as without jurisdictions held that the District Collector had jurisdiction to acquire only if the jurisdictional fact existed i.e. if the land was waste land and if that fact is incorrect, then the District Collector does not have the jurisdiction to acquire the land. The Hon ble Supreme Court ruled as under; In our opinion, the condition imposed by s. 17(1) is a condition upon which the jurisdiction of the State Government depends and it is obvious that by wrongly deciding the question as to the character of the land the State Government cannot give itself jurisdiction to give a direction to the Collector to take possession of the land under s. 17(1) of the Act. It is well-established that where the jurisdiction of an administrative authority depends upon a preliminary finding of fact the High Court is entitled, in a proceeding of writ of certiorari to determine, upon its indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case, the ITO directed X to pay certain amount of tax rejecting the contention of X that it was not a non-resident firm. The Tribunal confirmed the order. A single Judge of the High Court of Allahabad held X as non-resident firm and not liable to deduct tax at source. The Division Bench, however, set aside the order observing that ITO had jurisdiction to decide the question either way. It cannot be said that the Officer assumed jurisdiction by a wrong decision on this question of residence . X approached the Hon ble Supreme Court. Allowing the appeal and setting aside the order of the Division Bench of the Hon ble High Court, the Hon ble Apex Court held as under: The Appellate Bench appears to have been under the impression that the Income-tax Officer was the sole judge of the fact whether the firm in question was resident or non- resident. This conclusion, in our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qua the assessee qua the 7th to 10th AY un-earthed from search, without which the AO cannot issue notice u/s 153A/153C of the Act for these extended AY s. It is only when there exists this jurisdictional fact the AO can validly reopen those extended AYs; and then only AO can validly assume jurisdiction and then only he is empowered to issue notice. In other words, unaccounted asset valued at Rs. 50 lakhs or more which were discovered during search qua the assessee qua the assessment year (7th 10th years) preceding the searched assessment year is the jurisdictional fact; and if the jurisdictional fact is in the possession of the AO, [and possession means physical possession; or personal knowledge of the existence of the undisclosed asset which need to be spelled out in clear terms (not vaguely) qua assessee qua AY 2011-12 discovered during search.] then he can assume jurisdiction u/s. 153C/153A of the Act and issue notice to assess the assessment of the escaped income for these assessment year s (7th to 10th year) which is the fact in issue or adjudicatory fact . On the other hand if the AO did not have in his possession the jurisdictional fact, then he is debarred from invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes items such as share capital, reserves, loans obtained (secured as well as unsecured) etc. which cannot be characterized or classified as Asset . Similarly, items of expenses or revenues in form of sales / turnover does not constitute asset . ( Asset below falls within the ambit of the fourth proviso to Section 153A of the Act): Profit Loss Account Particulars (Debit) Particulars (Credit) Expenses Revenues Balance Sheet Liabilities (Credit) Assets (Debit) Share Capital/ Reserves/Loan/ Current Liabilities Immoveable Property/ Loans Advances/ Shares/ Bank Balance 21. The above view of ours get bolstered from reading of Explanation 2 appended to the fourth proviso, which defines asset , for the purpose of fourth proviso to Section 153A, to include i) immovable property, ii) shares and securities , iii) loans and advances iv) Deposit in bank. Hence, where search action u/s 132 of the Act reveals that, (i) the assessee owns a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an undisclosed asset of the assessee qua the assessment year (7th to 10th) which is valued Rs. 50 lakhs or more. This, in our judgment is a foundational, fundamental or jurisdictional fact. 24. Having clarified the position of law regarding the jurisdictional fact (supra), now let us examine whether the jurisdictional fact existed before the AO when he issued notice u/s 153C of the Act dated 05.12.2019 for AY 2011-12. Here, we need to remind ourselves that, the fourth proviso was inserted by the Parliament w.e.f. 1.04.2017 by Finance Act, 2017, thereby extending the jurisdiction of the AO to assess/re-assess beyond six AY s to ten AY preceding the searched year. And as discussed at para 13, the fourth proviso clearly bars the AO to issue notice for the extended period (7th 10th AY) unless the AO is in possessions of the jurisdictional fact of undisclosed asset valued Rs. 50 lakh or more qua the assessee qua the extended assessment year. So the Legislative intent is very clear that the AO would be empowered to issue notice u/s 153A/153C only if he is in possession of the jurisdictional fact otherwise he cannot issue notice u/s 153A/153C of the Act. No such bar can be seen i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the satisfaction note, nor anything be deleted from the satisfaction note. It is for the AO to disclose and open his mind through the satisfaction note as to which seized material revealed existence of undisclosed/unaccounted asset valued Rs.50 lacs or more, so as to establish the existence of jurisdictional fact for assuming valid jurisdiction in terms of the fourth proviso to Section 153A read with Section 153C of the Act for reopening the assessment for 7th-10th AY. The satisfaction note cannot now be supplemented but it is to be examined only as they were recorded by the AO prior to the issue of the notice. 27. In the present case, perusal of the satisfaction note shows that, the AO had referred to Pages 61 to 69 of seized material bearing identification mark SST-01 for assuming jurisdiction u/s 153C read with the fourth proviso to Section 153A of the Act. The satisfaction note however does not reveal the asset which escaped assessment, and which was discovered from the aforementioned seized material. We find that, the AO himself has observed that these pages comprise journal ledger and bank ledger which evidenced that the assessee had liquidated its investments in shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153C of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153C dated 05-12-2019 was issued by the AO for AY 2011-12 without authority of law and without satisfying the essential jurisdictional fact, and hence the issuance of notice u/s. 153C of the Act is held to be bad in law. 29. The Ld. A.R Shri Dudhwewala in the alternate also pointed out that, even in the assessment order, the AO had singularly failed to identify and spell out such asset , as defined in Explanation 2 to the fourth proviso to Section 153A of the Act, which had escaped assessment for AY 2011-12 and did not make any addition to the income of the assessee u/s. 69, 69A or 69B of the Act. So, therefore, according to Shri Dudhwewala, since the AO did not make any addition on account of escaped income represented in form of undisclosed/unaccounted asset, the AO could not have made any other addition, in respect of cash credit u/s. 68 of the Act. For this, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed asset , then it tantamounts to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153C for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option but to drop the assessment proceedings. For this conclusion of ours, we rely on the ratio laid down in the judgments of CIT Vs Jet Airways (supra) Ranbaxy Laboratories Ltd. vs. CIT (supra).Though these judgments were rendered in the context of reopening u/s. 147 of the Act, however the ratio decidendi will apply in the present case, because, like Section 147/148 of the Act, the AO gets the authority to assess/reassess the income of a searched person or other person u/s 153A/153C for the extended assessment years (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed. If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced the provisions relating to block assessment contained in Chapter XIVB and introduced the new procedure for making assessment u/s. 153 of the Act, which is now a part of Chapter XIV of the Act, Procedure for Assessment and contains provisions from Section 139 - 158A of the Act. The sub-heading of Section 153A of the Act is Assessment in case of Search or requisition which is a special provision for assessment in case of an assessee against whom search u/s. 132 or requisition under section 132A of the Act is carried out by the Department. Section 153B of the Act prescribes the time limit for completion of assessment under section 153A and 153C of the Act. Section 153C of the Act bears the heading Assessment of income of any other person which is a special provision in respect of assessment of income of any other person (third party) against whom no search u/s. 132 or requisition u/s. 132A of the Act was carried out, provided certain condition precedents are satisfied as envisaged under section 153C of the Act. Section 153D of the Act is the provision regarding prior approvals to be obtained by the AO for completing the assessment in case of search or requisition u/s 153A/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction u/s. 153C of the Act to assess his income as per Section 153A of the Act. The aforesaid discussed exercise has to be carried out by the AO of the searched person as well as the AO of the assessee and the fulfilment of these conditions precedent, as discussed, are sine qua non to obtaining jurisdiction to issue notice u/s. 153C of the Act to the third party. We need to remind ourselves that Section 153C is a special provision as it empowers the Revenue to proceed against an assessee for six assessment years and relevant assessment year/s [7 to 10 AYs], who has not been searched by the department. Therefore, the safe-guard stipulated in the provisions contained in Section 153C read with Section 153A of the Act has to be strictly/scrupulously followed. 35. The rationale behind the above discussed exercise is because, ordinarily, in terms of Section 132(4A)(i) of the Act, when any document is found in the possession or control of any person in the course of a search, it may be presumed that such document belongs to such person i.e. the searched person. Section 292C(1)(i) of the Act further raises a presumption regarding the asset, books of accounts, documents etc. found in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37. For determining the abated/unabated assessment u/s 153C of the Act, the date of search is required to be ascertained in terms of first proviso to Section 153C of the Act. As already discussed in Para 18 above, the assessment for AY 2011-12 did not abate on the date of search i.e. 05-12-2019. In the circumstances, the assessment u/s 153C of the Act for the relevant AY 2011-12 could have been only with reference to any incriminating material found/unearthed during search. In support of this proposition, we rely on the judgment of Hon'ble Apex Court in the case of Singhad Technical Education Society (397 ITR 344), wherein the Hon ble Apex Court has dealt specifically with the invocation of jurisdiction u/s. 153C, and while doing so their Lordships have upheld the decision of the Hon'ble Bombay High Court reported in 378 ITR 84. The Hon'ble Supreme Court has held that, unless and until the AO can establish document-wise (or asset wise) correlation between what has been seized from the 'Searched person' - and - how the same is incriminating in nature qua each of the assessment years in question for which jurisdiction u/s. 153C is sought to be invoked for the & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned and the reasons assigned by the Assessing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Hon'ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391 (Delhi), wherein the Hon'ble Delhi High Court held as under: 1. As discussed hereinbefore, once the AO of the searched person is satisfied that the seized assets/documents belong to another person and the said assets/documents have been transferred to the AO of such other person, the proceedings for assessment/reassessment of income of the other person has to proceed in accordance with provisions of section 153A of the Act. Section 153A requires that where a search has been initiated under section 132 of the Act, the AO is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise. The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . Although Section 153A does not say that additions should be strictly made on the basis of evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that Revenue s SLP against the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (Supra) was dismissed by the Hon'ble Apex Court which is reported in 380 ITR (St.) 4 (SC). 42. The above judgments which were rendered in the context of Section 153A of the Act are mutatis mutandis applicable to Section 153C of the Act as well. Gainful reference may also be made to the decision of the Hon'ble Calcutta High Court in the case of CIT v. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Cal.) as under: 1. The subject matter of challenge is a judgment and order dated December 28, 2007 by which the learned Income-tax Appellate Tribunal, E Bench, Kolkata, in CIT v. Veerprabhu Marketing Ltd. ITA Nos. 2172 and 2174/Kol/2006, pertaining to the assessment years 199899 and 1999-2000, and I.T(SS) A. Nos. 61-63/Kol/2007, pertaining to the assessment years 2001-02, 2002-03 and 2003-04, allowed the appeals preferred by the assessee. The aggrieved revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to show that any such incriminating material was unearthed at any of the three stages pertaining to the assessee. 8. We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. 9. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. 10. We find no infirmity in the aforesaid act of the learned Tribunal. The appeal is, therefore, dismissed. (emphasis supplied) 43. Gainful reference may also be made to the following observations made by the Karnataka High Court in the case of CIT vs IBC Knowledge Park (P) Ltd. [69 taxmann.com 108], which is as follows: Materials such as books of account, documents or valuable assets found during a search should belong to a third party which would lead to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n books of accounts or documents seized from the premises of Sagar Group viz., Pages 61 to 69 of the SST01 pertained to the assessee which had a bearing on its total income for AY 2011-12. So, we have to examine this particular seized material pointed out by the AO in his satisfaction note dated 05-12-2019 and give our finding of fact as to whether these documents can be termed as incriminating material against the assessee qua AY 2011-12. 46. It was pointed out by the Ld. AR, Shri Dudhwewala that the documents referred at Pages 61 to 69 of the SST-01 were the journal ledger and bank ledger of the assessee forming part of the assessee s regular books for the FY 2010-11. This fact has also been acknowledged by the AO in his satisfaction note. The Ld. AR submitted that since the assessee had sold its investments; appropriate entries in its books were routed through journal day book which was part of the assessee s books of account maintained in the course of regular business and the bank ledger reflected the payments received through banking channel upon sale of investments. Having examined the same, we also find it to be print-outs of the day books from the regular books ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible or intangible, is of such nature, which incriminates or militates against the person to whom it pertains to. Some common forms of incriminating material for instance are, where the search action u/s 132 of the Act reveals information that the assets found from the possession of the assessee in the form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible, which suggests or leads to an inference that the assessee is carrying out certain activities outside books of accounts which is not disclosed to the Department. Incriminating material also comprises of document or evidence found in the course of search which demonstrates or proves that what is apparent is not real or what is real is not apparent. In other words, if an assessee has recorded transactions in his books or other documents maintained in the ordinary course then in order to hold the material or evidence found in the course of search to be incri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts pertained to the assessee, he proceeded to reopen the assessments of the assessee u/s 153C of the Act and added the share application monies received by the assessee u/s 68 of the Act. On appeal, the assessee challenged the validity of jurisdiction exercised by the AO u/s 153C of the Act on several grounds inter alia including that these seized documents cannot be said to be incriminating to justify additions made u/s 68 of the Act in the unabated assessments of the assessee. The Hon ble High Court found merit in this plea of the assessee and accordingly upheld the orders of the lower authorities deleting the impugned additions by observing as under: 32. In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income qua each Assessee without making any additions on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments for AY 2011-12 AY 2012-13. For arriving at this conclusion, this Tribunal relied on the following observations of theco-ordinate Bench in the case of M/s A ONE Infra Projects Pvt. Ltd Vs DCIT in IT(SS) A No. 91/Kol/2018. 8. In the present case, the addition of Rs. 15,00,000/- by treating the share application money as unexplained cash credit under section 68 was made by the Assessing Officer in the assessment completed under section 153A of the Act on the basis of Bank account found during the course of search and since the said Bank account as well as the transactions reflected therein were duly disclosed by the assessee in its return of income originally filed for the year under consideration, we find ourselves in agreement with the contention of the ld. Counsel for the assessee that the same cannot be treated as incriminating material found during the course of search. 50. We note that similar issue also came up for consideration before the Delhi Bench of this Tribunal in the case of HBN Insurance Agencies Vs ACIT in ITA No. 3783/Del/2014 dated 23.12.2019. In this case the AO had added cash deposits made in bank account in the assessments framed u/s 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Sinhgad Technical Education Society (supra) and, accordingly the consequent order dated 3112-2019 is quashed. 52. Now we deal with the arguments raised by the Ld. CIT, DR by mainly stressing on the statement of Shri Hemant Agarwal to justify the usurpation of jurisdiction u/s 153C of the Act and also addition impugned before us. According to Ld. CIT, DR, Shri Hemant Agarwal had admitted the assessee to be a conduit through which he had routed his own undisclosed monies into his companies, M/s Bajrangbali Ispat Pvt. Ltd. M/s Sagar Hardware and Steels Pvt. Ltd. and therefore claimed that the AO had rightly assumed jurisdiction u/s 153C of the Act to make addition u/s 68 of the Act. Let us examine the contention of Ld CIT DR. 53. From examination of the statement of Shri Agarwal, we have to see whether the statement does contain any material which implicates the assessee or based on which one may infer any undisclosed income in the hands of the assessee. The relevant extracts are as follows: Q.No.10: A computer printout has been taken from your office computer which form a part of this statement as Annexure 1 wherein it is clearly and explicitly ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreover the Ld. AR further pointed out that this statement was not reliable for the reason that the alleged computer print-out titled Annexure -1 [which image was reproduced in the statement], and based on which the Investigating Officer recorded the statement of Shri Agarwal was actually non-existent. He submitted that this alleged Annexure -1 was neither found in the course of search nor seized from the premises of the assessee. Inviting our attention to the panchnamas which contain the inventory of books of accounts and documents seized from the premises of Sagar Group, he pointed out that the alleged computer print-out titled Annexure -1 does not feature anywhere therein, so according to assessee it is cooked up or planted material. We indeed find it unfathomable that, a document supposed to have been unearthed in the course of search, based on which disclosure had been taken by the search team was neither inventorized with identification mark, like rest of the documents books of accounts nor was the file path of the seized computer hard disk mentioned in the statement. 56. It was brought to our notice that, even the AO, despite specific requests neither gave the cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abated assessment for AY 2011-12 was unsustainable since it was not based on any incriminating material found in the course of search. In that view of the matter, the order dated 31-12-2019 passed by the AO is held to be a nullity and is accordingly quashed. Hence, Ground No. 1 of the cross objections also stands allowed. 59. The Ld. AR had also pointed out that the impugned order was passed by the AO without seeking prior approval u/s 153D from the jurisdictional Additional Commissioner of Income-tax, Guwahati. He invited our attention to the Note Sheet of the AO, which was reproduced by the Ld. CIT(A) at Page 124 of the appellate order. It is noted that, upon examining the assessment folder, the Ld. CIT(A) had recorded a categorical finding that, apart from recording the factum of satisfaction on 05-12-2019, the AO had neither recorded any event prior to the said date nor post the said date. Hence, there was no noting regarding the date on which the AO sought for approval of the Additional Commissioner of Income-tax to pass the order impugned or the receipt of approval prior to passing of the impugned order. The Ld. AR further pointed out that, even in response to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of assessment under section 153A/153C of the Act. We note that the Ld. CIT(A) s had wrongly relied on the decisions of the Hon ble Supreme Court in the cases of CIT v. Hotel Blue Moon (321 ITR 362) CIT vs Laxman Das Khandelwal (Civil Appeal 6261-6262 of 2019) which were distinguishable in as much as it were rendered in the context of assessments framed u/s 143(3)/158BC, where issuance of notice u/s 143(2) of the Act to assume jurisdiction over the assessee is mandatory. However, Section 153A/153C of the Act is a special provision and we find that there is no specific provision in the Act requiring the assessment to be made under section 153A/153C after issue of notice under section 143(2) of the Act. In this regard, we may gainfully rely on the decision of the Hon ble Delhi High Court in the case of Ashok Chaddha Vs ITO (337 ITR 399) wherein it was held as under: 9. There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) of the Act. Learned counsel for the assessee places heavy reliance on the judgment of the Hon'ble Supreme Court in Asstt. CIT v. Hotel Blue Moon (supra) wherein it was held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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