TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 625
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....ame of M/s. Mohtisham Estates Pvt. Ltd. ["MEPL" for short]. 3. A search u/s. 132 of the Act was conducted in the case of MCPL on 13.2.2009. During the course of search, incriminating documents were found and seized, which contained the MoUs between the assessee and MCPL for acquisition of land. A survey operation u/s. 133A of the Act was also carried out at the business premises of the assessee on 28.4.2009, during the course of which, incriminating documents were impounded. Thereafter, notices u/s. 153A r.w.s. 153C of the Act were issued by the AO on 30.12.2009 for the A.Ys. 2007-08 & 2008-09, which were duly served on the assessee. In the previous year relevant to A.Y. 2007-08, the total registrations of land of Rs. 5,36,67,000 were made by the assessee and in the absence of any books of accounts regularly maintained for its business, the assessee estimated its income from business at 10% of the total registrations, which came to Rs. 53,66,700. After claiming loss of Rs. 51,45,479 on account of deal cancellation against the income so estimated, the total income of Rs. 2,21,221 was declared by the assessee in the return of income filed in response to the notice issued by the AO u....
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.... 2,89,75,467 was more than the income of Rs. 2,68,33,500 estimated by him, addition of Rs. 2,89,75,467 was made by the AO to the total income of the assessee u/s. 69 of the Act without making any separate addition on account of business income estimated at Rs. 2,68,33,500. Accordingly the total income of the assessee for the A.Ys. 2007-08 and 2008-09 was computed by the AO at Rs. 2,89,75,467 and Rs. 9,96,83,350 in the assessment completed u/s. 153C r.w.s. 143(3) of the Act vide orders dated 27.12.2010 after disallowing the claim of the assessee for loss on deal cancellations. 7. Against the orders passed by the AO u/s. 153C r.w.s. 143(3) of the Act for both the years under consideration, the appeals were preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the said assessments on various grounds as well as disputing the additions made therein by estimating its business income on a higher side. 8. By her impugned orders, the ld. CIT(Appeals) disposed of the appeals filed by the assessee, whereby she dismissed the grounds raised by the assessee challenging the validity of assessments as not pressed. As regards the additions made by the AO by estimating ....
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.... both the years under consideration i.e., A.Ys. 2007-08 & 2008-09 were thus partly allowed by the ld. CIT(A) by her impugned orders and aggrieved by the same, the assessee and revenue, both are in appeals before the Tribunal. 12. We have heard the arguments of both the sides and also perused the relevant material on record. 13. The ld. counsel for the assessee, at the outset, has raised the preliminary objection that the legal issue raised before the ld. CIT(Appeals), challenging the validity of assessments made by the AO u/s. 153C r.w.s. 143(3) by taking specific grounds, was never given up on behalf of the assessee and it is not a case where the same "was not pressed" by the assessee, as stated by the ld. CIT(A) in her impugned orders. He has also filed an affidavit of Shri P. Narendra Pai, Chartered Accountant, who appeared before the ld. CIT(A) as the authorised representative of the assessee. The contents of the said affidavit are as under:- "1. I state that I am Chartered Accountant by profession. I was the authorized representative appeared on behalf of the assesse,ie., M/s Prithvi developers & Builders before the Commissioner Of Income Tax Appeals - VI, Bangalore in case....
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.... 6. Without prejudice, the order of assessment is further bad in law, as the assessment and addition were not supported by the seized materials found at the time of Search and is made on estimation basis." 15. It is also observed that not only the grounds as above were raised by the assessee before the ld. CIT(A) challenging the validity of assessments on different grounds, but even detailed submissions were made in support thereof, which, as reproduced by the CIT(A) in her impugned orders, were as under:- 7. The order of assessment is bad in law as the notice issued u/s. 153A r.w.s 153C is void-ab-intio, as the mandatory conditions to invoke the jurisdiction under section 153C of the Act did not exist 7.1. It is submitted that a search was conducted in the case of M/s. Mohtisham Complexes Pvt. Ltd., on 13.02.2009 and 17.03.2009, during the search some document pertaining to the Appellant herein were found and impounded. Subsequently a survey u/s. 133A of the Act was conducted in the business premises of the Appellant on 28.04.2009, since documents were found, which as per the assessing officer was incremental in nature, notice u/s. 153A r.w.s 153C dated 30.12.2009 was issued on....
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....terial coming into the possession of the assessing officer after invoking survey u/s. 133A cannot be considered for exercising such jurisdiction. 8.3 It is further submitted that in fact, even the assessment order passed in the case of M/s. Mohtisham Complexes Pvt. Ltd does not show any "satisfaction" that any undisclosed income belongs to the appellant herein. 8.4 In the absence of such satisfaction, the assessment made on any other person would, be illegal and void-ab-initio since jurisdiction to assess other person can be exercised validly only in accordance with provisions of section 153C. Reliance is placed on the decision of Manish Maheshwari Vs. ACIT & Another reported in 289 ITR 341 (S.C), wherein the Hon'ble Supreme Court has held that recording of satisfaction by the AO of the searched person that any undisclosed income belongs to any person, other than the person searched, was a condition precedent. It was further held that the AO must reach a clear conclusion that good ground exists for the AO of the third person to initiate proceedings as material before him shows or would establish "undisclosed income" of a third person. There must be rational and tangible nexus bet....
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....der section 133A. Any other material cannot form basis for computation of undisclosed income. Reference is drawn to para 6.13 of assessment order wherein a clear finding is drawn that the documents were impounded from the business premises of the assessee. Thus the impugned addition in the assessment u/s.153C r.w.s 143(3) is bad in law. 10. Without prejudice, the order of assessment is further bad in law, as the assessment and addition were not supported by the seized materials found at the time of Search and is made on estimation basis. 10.1 It is submitted that the assessment is made on estimation basis and not on the basis of incriminating documents found and seized at the time of search. Estimation is bad in search proceedings, assessment and addition ought to have been made based on the incremental documents found and seized at the time of search. In the instant case the assessing officer made the addition on estimation basis and that too on the documents impounded at the time of survey, and not on the basis of documents found and seized at the time of search. The assessing officer's estimation is without any factual material arising out of search. 10.2 Reliance is placed o....