TaxTMI 
TaxTMI 
2013 (1) TMI 420
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....ss and residential premises of Shri P.C. Wadhwa and his family members. The assessee firm has been constituted during the year under consideration vide partnership deed dtd. 04.04.2002 with two partners viz. Smt. Neeru Wadhwa and Smt. Honey Arora having 50% share each. Smt. Neeru Wadhwa is the daughter-inlaw of Shri P.C. Wadhwa. Subsequently, Shri rohit Wadhwa and Shri Sanjay Arora have also been brought into partnership vide amended deed dtd. 01.04.2005. Shri Rohit Wadhwa is son of Shri P.C. Wadhwa and husband of Smt. Neeru Wadhwa. Therefore, the premises of the two partners of the assessee firm have also been searched during the course of operations on 22.06.07. A.O. has also issued notice u/s 153A on 05.03.09 requiring the assessee to file its return on or before 20.03.09. The same has been received by the assessee on 16.03.09. In response, return declaring income of Rs. 15,841/- has been filed on 21.05.09. The assessee has attended before the A.O. on 21.10.09 in response to information called u/s. 142(1)/143(2) in connection with proceedings u/s 153A. Vide letter dtd. 26.10.09, the assessee has informed the A.O. that no search warrant in the name of M/s. Global Estate has been ....
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.... IT Act. It was contended that during the course of search, no valuable items, account books or documents, much less, incriminating material was found against the assessee. The additions are made without reference to any incriminating material. No reasons have been indicated to the assessee as to why the proceedings u/s. 153C have been initiated against the assessee because the assessment u/s. 153C needs to be made on the basis of hidden assets/unaccounted money/incriminating material unearthed during the search. Therefore, the proceedings u/s. 153C are not valid in the case of assessee. The assessee relied upon some decisions of different benches of Tribunal in support of his contentions and it was, therefore, prayed that the assessment made u/s. 153C may be declared bad in law. 6. The ld. CIT(A), considering the submissions of the assessee and perusal of the record and material on record, found that the AO has nowhere recorded any satisfaction before issue of notice u/s. 153C of the IT Act and relying upon several decisions, held that the assessment made accordingly cannot be sustained in law and decided this issue in favour of the assessee and cancelled the assessment u/s. 15....
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....KN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19 SC, as under :- "We find that Sec. 158BD is somewhat analogous to Sec. 147 in so far as the procedure that is required to be followed. Sec. 147 contemplates that if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued u/s 148 of the Act. So far as section 158BD of the Act is concerned, the A.O. has to be satisfied that there is undisclosed income. Upon such satisfaction, the A.O. is required to forward the relevant documents, papers etc. to the A.O. who is required to assess the person in respect of whom the undisclosed income has been discovered. Once this is done, we feel that the person who is to be proceeded against under section 158BD and then Sec. 158BC, must be informed about the satisfaction of the A.O. which has been recorded and he must be given a reasonable opportunity to object to the same. Satisfaction can be arrived on some material. That material would provide the reasonable satisfaction. In the case of GKN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19, the Supreme Court, while considering the provisions of sec....
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....st the assessee. The burden shifts on the assessee and these provisions have draconian consequences. As the A.O. has not recorded his satisfaction, which is mandatory, as held by Hon'ble Supreme Court in Manish Maheshwari case (mentioned supra), assessment made in consequence thereof cannot be sustained." 7. The ld. DR relied upon the order of the AO and submitted that there is no provision in the Act, which provides that the reasons should be recorded u/s. 153C or the same should be communicated to the assessee. He has relied upon the decision in the case of Digvijay Chemicals, 248 ITR 381 (Alld.). The ld. DR submitted that in the search proceedings, the assessee has given ambiguous statements. Therefore, the proceedings were validly initiated u/s. 153C of the IT Act. 8. On the other hand, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that no satisfaction was recorded by the AO before proceeding u/s. 153C of the IT Act against the assessee. The assessee requested the AO to give reasons for issue of notice u/s. 153C of the IT Act, but the same were not communicated to the assessee. No material was found during the ....
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.... the AO did not attempt to establish a direct nexus between the production and electricity consumed and therefore, no addition was called for; however, for asst. yr. 2006-07, based on evidence found during search, addition of Rs.75,05,116 was sustained and benefit of telescoping was provided, which did not call for any interference." (iv). Decision of Madras High Court in the case of CIT vs. Late J. Chandrasekar (HUF), 338 ITR 61, in which it was held as under : "AO did not have the benefit of seized materials while issuing notice under s. 153C, there was no valid assumption of jurisdiction in the proceedings." (v). Decision of Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT, 289 ITR 341, in which it was held as under : "AO having neither recorded the satisfaction that undisclosed income belongs to any person, other than the person searched nor handed over the books of account, documents, etc. to the AO having jurisdiction over the matter, the impugned proceedings under s. 158BD cannot be sustained." (vi). Decision of Hon'ble Delhi High Court in the case of ....
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....hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years referred to in clause (b) of section 153A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, ....
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.... after the 1st day of June, 2007, the provisions of clause (a) or clause (b) of this sub-section shall, notwithstanding anything contained in clause (i) of the second proviso, have effect as if for the words "two years", the words "thirty three months" had been substituted: Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2005 or any subsequent financial year and during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the period of limitation for making the assessment or reassessment ....
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....g pronounced by it is received by the Commissioner under subsection (7) of section 245R,] shall be excluded : Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this section* available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. (2) The authorisation referred to in clause (a) and clause (b) of subsection (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer. ....
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....ving 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."] 9.1 Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT and others, 289 ITR 341 considering the earlier provisions of section 158BD of the IT Act (analogous to sec.153C of IT Act) held that - "The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. the said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent wherefor are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act; (ii) the book....
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....es that in respect of block assessment under section 158BB material collected during the survey under section 133A could not be taken into consideration. This was confirmed by the Tribunal. On appeal contending that the material gathered in the course of survey under section 133A could also be regarded as a material for the purpose of block assessment under section 158BB: Held accordingly, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal having decided the issue in accordance with the statutory provisions, it required no interference." 9.3. Sec. 153A of the IT Act starts with the word "notwithstanding anything contained", it is non-obstante clause. For applicability of above provision, the initiation of search is necessary. Once a warrant of authorization or requisition is issued and search is conducted and panchnama is drawn, the assessments for the all the relevant years would get reopened irrespective of whether any incriminating material is found or not in relation to a particular AY. In other words, even if the material found shows the concealment in only one year, all the completed assessments falling in the period of six AYs pr....
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.... 158BD are more or less similar to provisions contained in sec. 153C of the IT Act except "undisclosed income" which is mentioned in sec. 158BD, however, in sec. 153C, it is mentioned any money, bullion, jwellery or other valuable articles or things or books accounts or documents seized or requisitions. The conditions precedent for invoking provisions u/s 158BD as is held by Hon'ble Supreme Court in the case of Manish Maheshwari (supra) are therefore same as are provided u/s 153C of the IT Act. It is admitted fact that no search warrant was executed in the case of the present assessee u/s 132(1) of the IT Act, therefore, provisions of sec. 153A were not applicable. The AO has, therefore, proceeded against the assessee u/s 153C of the IT Act. This view is further strengthened by the judgment of Hon'ble Gujrat High Court in the case of Vijaybhai N. Chandrani vs. ACIT, 333 ITR 436 in which it was held as under : "Section 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that a....
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.... than the person with respect to whom search was made u/s 132 of the Act. Ld. DR did not produce any material before us to show if any such satisfaction as required u/s 153C was recorded by the AO in the case of person searched. No material is produced in reference to above requirement. No material is also produced before us to show that books accounts or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any adequate material produced by ld. DR, we find the contention of ld. counsel for assessee was justified that in this case, the AO has not recorded any satisfaction that any seized document or material belongs to any person other than the person searched. Since the revenue is in appeal, therefore, burden was upon them to prove that necessary ingredients of sec. 153C have been complied with in this case before invoking jurisdiction u/s 153C of the IT Act. We may also add here that the AO has not referred to any seized document or material in the assessment orders on the basis of which, additions on merit have been made. Therefore, the conditions of sec. 153C as noted above are also not satisfied in this case. We....
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....After hearing the assessee, the total income was computed at Rs.23,31,760/-. The assessee preferred an appeal before the Commissioner (Appeals). An additional ground taken before the Commissioner (Appeals) was that since the issuance of a notice under section 143(2) is a mandatory requirement, the assessment was bad in law and void ab initio and required to be cancelled. The Commissioner (Appeals) did not agree with the contention of the assessee and upheld the assessment as framed by the Assessing Officer. Another ground taken before the Commissioner (Appeals) was against the addition of Rs.10 lakhs under section 69A of the Act in the hands of the assessee in respect of cash seized from an employee of the assessee. The assessee contended that the amount belonged to his nephew S, who had sent the money for a property transaction. To support this contention, he filed a copy of a recovery suit filed by S. The Commissioner (Appeals) did not accept the explanation. This order was upheld by the Tribunal. On appeal to the High Court : Held, dismissing the appeal, that (i) no specific notice was required under section 143(2) of the Act when the notice as required und....
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....t year under appeal, the benefit should have been given in the next assessment year 2004-05 which is not given in the case of the assessee. The ld. CIT(A) was satisfied with the complete details filed by the assessee and, therefore, held that the addition is made on surmises and presumption and cannot be sustained. In view of these findings of ld. CIT(A), we do not find any infirmity in the order of ld. CIT(A) in deleting the addition. 13. On ground No. 3, the Revenue challenged the deletion of addition of Rs.14,37,693/- on account of disallowance of expenses by rejecting book results u/s. 145(3) of the IT Act. The AO disallowed 60% of the expenses. The ld. CIT(A) found that the assessee had made purchase of 90% through cheques which are reflected in the bank statement also and addition is made by relying upon the observations of ADIT(Inv.). The addition was accordingly deleted. In view of these findings of ld. CIT(A) and in absence of any contrary material on record, we do not find any justification to interfere with the order of the ld. CIT(A). This ground is, accordingly, dismissed. 14. On ground No. 4, the Revenue challenged the deletion of addition of Rs.3,51,020/- on ac....
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....n for the assessment year 2003-04 above, we confirm the order of the ld. CIT(A) in canceling the assessment orders u/s. 153C of the IT Act. In the result, ground No. 1 of departmental appeals are dismissed. 20. On rest of the grounds, substantial issues are same, i.e., non-issuance of notice u/s. 143(2) which has already been decided in favour of the Revenue, but the additions on the some issue on merits are different. As noted above, they need not to be decided on merits because the assessment orders u/s. 153C have already been quashed. In view of this, when the assessment orders u/s. 153C of the IT Act have been quashed, the additions on merits would be deemed to be deleted. Therefore, the departmental appeals have no merits and are accordingly dismissed. ITA No. 149/Agra/2011 (A.Y. 2008-09 : 21. This departmental appeal is filed against the order of ld. CIT(A), Gwalior dated 17.02.2011 for the assessment year 2008-09. In this case, regular assessment u/s. 143(3) has been passed. On ground No. 1, the Revenue challenged the order of the ld. CIT(A) in deleting the addition of Rs.77,75,000/- on account of unexplained capital. In this year also, capital wa....
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....n of Rs.54,289/- on account of unconfirmed unsecured loan. The addition was made in respect Sheetal Bhadoria for the reason that no documents relating to genuineness of the transaction or copy of account has been furnished by the assessee. It was submitted before the ld. CIT(A) that the confirmation was filed before the AO and further, the balance of Sheetal Bhadoria is old and only carried forward in the assessment year under appeal. The ld. CIT(A) accepted the contention of the assessee because the opening balance as on 01.04.2007 (PB-44) was Rs.5,56,880/-, which is closing balance of the last year. During the year under consideration, only quarterly interest of Rs.54,289/- was credited in the books of account along with confirmation. The addition was, accordingly, deleted. On consideration of the above facts and confirmation account (PB-44), we do not find any justification to interfere with the order of the ld. CIT(A) in deleting the addition. Ground No. 4 fails and is dismissed. 25. On ground No. 5, the Revenue challenged the deletion of addition of Rs.12,05,000/- on account of unconfirmed advances. These advances pertain to following : (i). Aditya Education Society ....