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TMI Blog2023 (10) TMI 1383X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143 (3) is invalid and bad in law and is liable to be quashed? 3. Whether in the facts and circumstances of the above appeals and evidences on record, the authorities below are justified in making and confirming the addition under section 68 of the I.T. Act, 1961, particularly, when no enquiry or investigation have been carried out on the documentary evidences filed by the assessee before the A.O.? 4. Whether the decisions of Hon'ble jurisdictional Madhya Pradesh High Court as is referred in the proposed order of the judicial member are binding on the ITAT, Jabalpur bench?" 3. Of the above four questions, question Nos. 1 & 2 relate to the issue of jurisdiction for making a regular assessment u/s 143(3) of the Act in view of the special provisions concerning assessments of search cases, as prescribed u/s 153A and 153C of the Act. Question Nos. 3 & 4, on the other hand relate to the merits, i.e., the additions made u/s 68 of the Act. 4. The ld. Accountant Member has, by his separate order, framed separate questions as follows : A. Jurisdictional Issue (i) Is there, in the facts and circumstances of the case/s, a jurisdictional basis for a valid assumption of juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cast, on it u/s. 68 of the Act, i.e., as explained by the higher courts of law? (iii) Whether the entirety of the facts and circumstances of the case, considered as whole, actually disprove the assessee's explanation qua the genuineness of the impugned credits, or is the mere furnishing of the particulars, and the transactions being through the banking channel, sufficient to justify the same? (iv) Whether or not there has been, in deciding the issue of the applicability or otherwise of section 68 of the Act, in the facts and circumstances of the case and the law in the matter, any disregard of the binding judicial precedents? C. Common (i) Does the assessee's case on quantum, i.e., the absence of any adverse material on record impugning the credits under reference, rather, contradicts its' case of the assessment in the instant case/s being liable to be made u/s. 153C r/w s. 153A(1). 5. Both the appeals in question having arisen out of regular assessments in respect of assessment year 2014-15 and both the appeals having similar facts inter-se, for convenience, the facts are being taken from ITA 49/JAB/2018, "Kalyanika Infra Mega Ventures Pvt. Ltd. Vs DCIT". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took due notice of the material collected by the Investigation Wing. 7. Vide order dated 13.02.2018, the ld. CIT(A) dismissed the appeal filed by the assessee against assessment order. Therein, it was observed, inter-alia, that as per the provisions of the Companies Act, 2013, the assessee cannot take any unsecured loan from M/s Little Star Section securities Pvt. Ltd. and Shri Kal Yanika Arun Bansal, since as per the provisions of the Companies Act, 2013 and the rules framed thereunder, a Private Ltd. Company can take loan only from its Director and shareholders; that transferring funds on banking channels cannot by itself justify the transactions as genuine transactions; that the mere fact that the identity of the lenders stands established and the payment are made by cheques does not mean that they are genuine; that if the lenders do not have the financial strength to lend such huge sums and if there is no explanation as to their relationship with the assessee, no collateral security and no Agreement, the transactions have to be treated as bogus, explained credits. 8. On our asking, at the outset, the parties have addressed their arguments only qua Question Nos. 1 & 2 framed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x assessment years, for which assessment is contemplated u/s 153A, shall abate. 10.9 The ld. Counsel for the assessee has contended that by employing the word 'shall', the second proviso to Section 153A makes the provisions thereof mandatory, once the conditions prescribed thereunder are satisfied. 10.10 The ld. Counsel for the assessee contends that the second proviso to Section 153A stands, by reference, incorporated in the proviso to Section 153C(1), in relation to cases falling under Section 153C, with necessary amendments. 10.11 The ld. Counsel for the assessee contends that similarly Section 153C also incorporates, by reference, the procedure laid down u/s 153A, for cases falling u/s 153C of the Act. 10.12 The ld. Counsel for the assessee contends that as per Section 153A(2), abated assessment or re-assessment proceedings, which proceedings have abated as a consequence of the coming into play of the second proviso, can be revived only if the proceedings initiated u/s 153A(1) is annulled on appeal or in any other legal proceedings. 10.13 The ld. Counsel for the assessee contended that thus, the abatement of the pending proceedings is automatic and final and such proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that that in "Karti Chidambaram" (supra), it has been held that the assessment/re-assessment u/s 153A or 153C is to be done, if any search & seizure is made u/s 132 of the Act. 10.25 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that thus, the scope of Section 153A or 153C cannot be compared with the re-opening of proceedings u/s 147/148 of the Act. 10.26 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that therefore, initiation of action u/s 153C of the Act would arise only if the seized materials are handed over to the AO of such other person, having jurisdiction over the other person. 10.27 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that in that case, it was only after the material of the searched person was handed over to the AO of the searched person, and it was forwarded to the AO of the other person, that the AO contemplated the Satisfaction Note and issued the Show Cause Notice mandatory u/s 153C of the Act. 10.28 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately preceding the previous year in which the search is conducted or the requisition is made. 14. The ld. Counsel for the assessee has contended that the first provision to the Section mandates for the AO to assess or re-assess the total income in respect of each assessment year falling within said six assessment years. 15. The ld. Counsel for the assessee has contended that the second proviso to Section 153A abates all existing pending assessments or re-assessment proceedings for the period falling within the period contemplated for the purposes of Section 153A. 16. The ld. Counsel for the assessee has contended that section 153C is in three parts, i.e., satisfaction of the AO of the searched person and handing over of the books of account or documents or assets seized or requisitioned, to the AO having jurisdiction over a person other than the person referred to in Section 153A, i.e., the other person, issuance of notice to such other person and assessment or re-assessment. 17. It is contended that the as per the first part, the AO of the searched person needs to be satisfied that the material contemplated in clauses (a) and (b) belong to, pertain to or relate to a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with "Kabul Chawla", (2015) 61 taxmann.com 412 (Delhi) and "Saumya Construction", (2016) 387 ITR 529 (Guj), that even in respect of the unabated proceedings, fresh proceedings u/s 153A can be initiated only if incriminating material is found during search and that where, however, no incriminating material is found, recourse to Section 153A would not be available and that in respect of completed assessment, in absence of any incriminating material, no addition can be made. 21.6 The ld. Counsel for the assessee has contended that as such, in "Abhisar Buildwell P. Ltd." (supra), it was concluded that in the case of search u/s 132 or requisition u/s 132A, the AO assumes the jurisdiction for block assessment u/s 153A. 21.7 The ld. Counsel for the assessee has contended that in "Abhisar Buildwell P. Ltd." (supra), it was also concluded that all pending assessments/re-assessments shall stand abated. 21.8 The ld. Counsel for the assessee contended that in "Abhisar Buildwell P. Ltd." (supra), it was also concluded that in case any incriminating material is found/unearthed, even in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or re-assess the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination 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 Section 153A(1). 23.4 The ld. Counsel for the assessee has contended that once the AO assumes jurisdiction in case of abated proceedings, he would take into consideration all material available with him including the material unearthed during the search and handed over to him. 23.5 The ld. Counsel for the assessee has contended that the said unearthed material would be taken into consideration at the time of assessment if such documents have a bearing on the determination of total income. 23.6 The ld. Counsel for the assessee has contended that the relevancy of the material would have to be considered at the time of assessment and not at the time of issuance of notice. 23.7 The ld. Counsel for the assessee has contended that the AO, at the stage of assessment would, thus, determine the total income of the assessee and not only the undisclosed income. 23.8 The ld. Counsel for the assessee has contended that in case of abate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come is to be determined, both u/s 143(3) and u/s 153C, and since Section 153C contemplate abatement of the regular proceedings, Section 153C would override the normal proceedings and Section 153C will have to be inexorably invoked, since assessment of total income is to be made including on the basis of material found in the search which may have a bearing on the determination of the total income. 23.16 The ld. Counsel for the assessee has contended that where assessments have been completed, initiation of proceedings u/s 153A would not automatically annul such assessments. 23.17 The ld. Counsel for the assessee has contended that since u/s 153C, power to initiate action can be for a period shorter than the period contemplated u/s 153A, u/s 153C, the concluded assessments are not to be reopened unless the material received pertains to that specific assessment year. 23.18 The ld. Counsel for the assessee has contended that in case the material found during the search relates to any assessment year for which assessment has been completed, in such a case because of the non obstante clause, irrespective of the provisions of Sections 147 to 149, the assessment can be reopened either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per Section 153A(2), assessment proceedings which have abated as a result of the application of the second proviso to Section 153A, can get revived only if proceedings u/s 153A(1) are annulled on appeal, or other legal proceedings. 23.19.4 It has further been contended by the ld. Counsel for the assessee that the process gets initiated, in accordance with the provisions of Section 153A(1)(a), by issuance of a notice requiring filing of a return of income with regard to each assessment year falling within the period of six assessment years; that since assessment u/s 153A is not a block assessment, it would be six separate assessments for six assessment years; that however, the procedure and mechanism for the assessment would be exactly like that of a regular assessment for that assessment year. 23.19.5 The ld. Counsel for the assessee has contended that under the provisions of Section 153A(1)(b), a distinct independent power has been conferred on the AO for framing assessments and that therefore, no requirement arises to refer to the provisions of Section 143(3) so far as regards assessments of cases arising from a search u/s 132 or a requisition u/s 132A; and that as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the AO having jurisdiction over the person to whom such material relates, and the articles, books of account or documents or any information relates to any assessment year for which an assessment or re-assessment is pending, then, such proceedings would abate irrespective of the requirement of recording of any satisfaction by the receiving AO who is, even otherwise, under a statutory duty to act in the manner provided under the Statute. 25. So far as regards a situation where the AO of the searched person and the other person is the same, the ld. Counsel for the assessee has contended that in such a situation, the necessary requirements of Section 153C have been examined by the Hon'ble Supreme Court in the case of 'Super Malls Pvt. Ltd. Vs Pr. Commissioner of Income Tax" (2020) 4 SCC 581 and it has been held that it is sufficient for the AO to note that the documents seized from the searched person belong to the other person; that once the said requirement is fulfilled, the requirement of Section 153C of the Act is fulfilled; that the requirement is that the AO must be conscious and satisfied with the documents seized/recovered from the searched person belong to the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and redundant. 25.7 The ld. Counsel for the assessee has contended that Section 153C further provides an inbuilt protection against arbitrary assessment in view of Section 153D, which mandates approval of such an order by a higher authority, with due application of mind. 26. Apropos the facts of the case, the ld. Counsel for the assessee has contended that concerning assessment year 2014-15, the Department had issued notice u/s 143(2) of the Act on 03.09.2015, to initiate regular assessment proceedings, due to which, the said proceedings were pending. 26.1 The ld. Counsel for the assessee has contended that a search was conducted on the premises of Shri Tarachand Khatri, the Managing Director of the assessee companies, on 17.11.2015, u/s 132 of the Income Tax Act. 26.2 The ld. Counsel for the assessee has contended that in the course of the said search, ledger, bank statements and other documents pertaining to M/s Kalyanika Infra Mega Ventures (P) Ltd. and M/s Tarun Devcon (P) Ltd., i.e., both the assessees, for assessment year 2014-15, were found and seized. 26.3 The ld. Counsel for the assessee has contended that during the search, loan ledger and bank statement, in which, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial seized is not incriminating. 26.16 The ld. Counsel for the assessee has contended that on 01.06.2021 and 16.06.2021, a direction had been issued by this Bench to the Department to file a copy of the appraisal report of the case before the Bench. 26.17 The ld. Counsel for the assessee has contended that however, treating the same as confidential, the said appraisal report has not been submitted before the Bench. 26.18 that the addition made is regarding the loan received by the assessee from M/s Little Star Securities Pvt. Ltd. 26.19 The ld. Counsel for the assessee has contended that hence, it is an addition u/s 68 of the Income Tax Act. 26.20 The ld. Counsel for the assessee has contended that once the search was conducted, whether an investigation was carried out in relation to the said loan transaction or not, would have been mentioned in the appraisal report submitted to the AO by the Investigation Wing of the Department; that the same has been used and assessed as income of the assessee. 26.21 The ld. Counsel for the assessee has contended that if the issue had been investigated and if the documents seized by the Investigation Wing of the Department have been pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing material. 29.1 The ld. Counsel for the assessee has contended that the Department has not claimed privilege against the disclosure of the appraisal report. 29.2 The ld. Counsel for the assessee has contended that in any case, the appraisal report does not fall within the class of documents in relation to which a privilege can be claimed. 29.3 In this regard, the ld. Counsel for the assessee has placed reliance on "Yashwant Sinha Vs CBI", (2019) 6 SCC 1, paras 22 to 28 and 38 to 42. 29.4 The ld. Counsel for the assessee has contended that though the Department states that the appraisal report is a confidential document, no statutory provision has been indicated as to under which such confidentiality stands ascribed to an appraisal report. 29.5 The ld. Counsel for the assessee has contended that the appraisal report pertains to the search conducted in the premises of the Managing Director of the assessee companies and there is no reason why the appraisal report cannot be disclosed to the assessee. 29.6 The ld. Counsel for the assessee has contended that the Department is also liable to disclose such information under the provisions of the Right to Information Act and as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that in the assessment order, there is no mention of any of the documents comprising the seized material, i.e., Articles and Memorandum of Association of the company, Certificate of Incorporation, Bank Statements, TDS Challans and Ledger Accounts of parties. 30.3 The ld. Counsel for the Department has contended that none of the documents seized has any bearing on the determination of income of the assessees and the AO proceeded de hors the same. 30.4 The ld. Counsel for the Department has contended that the return of income furnished u/s 139, or called for u/s 142(1) may be proceeded with by the AO, for verification and examination, by issuing a notice u/s 143(2) of the Act. 30.5 The ld. Counsel for the Department has contended that after hearing the assessee on the evidence, the AO is to determine the assessee's total income and tax liability by issuing either a notice of demand or a refund. 30.6 The ld. Counsel for the Department has contended that the time limit for such an assessment is given u/s 153. 30.7 The ld. Counsel for the Department has contended that where no notice u/s 143(2) has been issued, the return is processed and an intimation is issued qua the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the limitation provided in Section 153B. 30.20 The ld. Counsel for the Department has contended that the provisions of Section 153A shall be applicable notwithstanding the provisions of Sections 139, 147 to 149, 151 and 153. 30.21 The ld. Counsel for the Department has contended that thus, a person, on being served with a notice u/s 153A(1), prior to his furnishing a return of income u/s 139, is, rather, required to furnish a return u/s 153A(1) of the Act. 30.22 The ld. Counsel for the Department has contended that it is likewise for a return in response to a notice u/s 148(1). 30.23 The ld. Counsel for the Department has contended that the assessment u/s 153A(1), or u/s 153C(1) read with Section 153A(1), shall be made for the relevant years irrespective of the status of the assessment, if any, for the said years. 30.24 that the year under consideration, i.e. assessment year 2014-15, precedes the assessment year relevant to the previous year in which the search was conducted, by one year. 30.25 The ld. Counsel for the Department has contended that there is no conflict about the special provisions prevailing over the general ones. 30.26 The ld. Counsel for the Department ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. 30.36 The ld. Counsel for the Department has contended that no separate procedure has been specified for an assessment or re-assessment u/s 153A(1) and u/s 153C(1) read with Section 153A(1), since other than the provisions of Section 153A to Section 153C, all the provisions of the Act are to apply to such an assessment and the return furnished in response to a notice u/s 153A(1) is to be regarded as one furnished u/s 139 and the assessment is to be made as per the procedure given in Section 143 or Section 144. 30.37 The ld. Counsel for the Department has contended that whereas Section 143(3) provides for making an assessment by a routine order after hearing the assessee, there is no reference to this basic element of making an assessment, in Section 153A. 30.38 The ld. Counsel for the Department has contended that the procedure for such an assessment is the same as that for regular assessment u/s 143(3) or Section 144. 30.39 The ld. Counsel for the Department has contended that Sections 153A or 153C do not over-ride the provisions of Section 143(3), rather, they prescribe the same procedure to be adopted as that provided in Section 143(3). 30.40 The ld. Counsel for the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment u/s 143(3) is to be of the total income and an instance of search does not annul or dilute the same. 30.49 The ld. Counsel for the Department has contended that this is also evident by the automatic revival of the abated proceedings if the proceedings u/s 153A fail. 30.50 The ld. Counsel for the Department has contended that the abatement of the proceedings is to ensure that only one proceeding for the assessment of the total income of the assessee for a particular year, is on at a particular time and, at best, it is a case of duplication of power. 30.51 The ld. Counsel for the Department has contended that the assessment under reference is itself, in law, entitled to be regarded as an assessment u/s 153C read with Section 153A read with Section 143(3) of the Act. 30.52 The ld. Counsel for the Department has contended that the assessee can challenge only an exercise of power or assumption of jurisdiction by the AO and not non-exercise thereof. 30.53 The ld. Counsel for the Department has contended that the decision of the Hon'ble Allahabad High Court in the case of "Pr. Commissioner of Income Tax Vs M/s Shri Mehndipur Balaji", delivered on 04.07.2022, in ITA No. 51 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search; that on a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same; that as per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years; that however, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material, is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law; that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act; that the object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition; that therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years' block assessment period even in case of completed/unabated assessment; that as per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessment; that it does not provide that all completed/unabated assessments shall abate; that if the submiss ..... 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