TaxTMI 
TaxTMI 
2015 (9) TMI 961
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....s u/s 153C being valid, whether the Hon'ble Accountant Member was justified in setting aside the order of the ld CIT(A) on merits for re-examination." 2. The Hon'ble Third member has agreed with the view taken by the Hon'ble Judicial Member in respect of both the questions referred above. Accordingly, as per the majority view, the appeal filed by the revenue is dismissed and the Cross Objection filed by the assessee is allowed. 3. In the result, the appeal filed by the revenue stands dismissed and the Cross Objections filed by the assessee is allowed. (Order pronounced in the open Court on this 16.9.2015) IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, COCHIN ITA No.472/Coch/2013, CO No.37/Coch/2013 Deputy Commissioner Of Income Tax Versus M/s Royal Cartons Pvt Ltd. D Manmohan, VP, Date of Decision: August 21, 2015 NOTE Consequent to the difference of opinion between Hon'ble Judicial Member as well as Hon'ble Accountant Member, it was requested to nominate Third Member to resolve the points of reference and while forwarding the points of reference, there was no unanimity and separate questions were forwarded to the Hon'ble President. 2. At the time o....
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....eturn of income within 30 days from the date of receipt of notice. In response to the said notice, the assessee filed its return of income declaring loss of Rs. 2,65,510/-, which was originally returned. It deserves to be noticed that the assessee filed the return of income on 27/03/2006 for the assessment year 2005-06 and the same was processed u/s. 143(1) of the Act and intimation dated 16/02/2007 was forwarded to the assessee. It is not in dispute that the return was processed after initiating the search proceedings in the case of M/s. Matha Enterprises Ltd. It is well-settled that a return processed u/s. 143(1) of the Act can be taken up for scrutiny by issuing notice u/s. 143(2) of the Act within a period of 12 months from the date of filing of return of income. In this case, notice u/s. 143(2) could have been issued on or before 31/03/2007. No such notice having been issued, the proceedings u/s. 143(1) of the Act attained finality. 2. In this case, the jurisdiction of the assessee was originally vested with Assessing officer, Ward-1, Ernakulam w.e.f. 27/11/2007. It was transferred to Central Circle-I, Ernakulam. Accordingly jurisdiction, to initiate the proceedings u/s. 153C....
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.... have been handed over to the Assessing officer on or after 27/11/2007 by which date assessment proceedings completed on the strength of return filed on 27/03/2006 attained finality. Since assessment proceedings attained finality, by operation of law, the same cannot be re-opened by invoking provisions of section 153C of the Act. The Ld. Judicial Member extracted the provisions of section 153C to highlight that the said section comes into play only when an assessment has to be made on a person, other than a person searched, subject to fulfilling two conditions, i.e., (1) a finding that money bullion, jewellery or other valuables or books of account or other documents seized belongs to a person other than the searched person (2) the same has to be handed over to the AO having jurisdiction over such person, other than searched person, for proceeding further. Thereafter the concerned Assessing officer has to record satisfaction. As per the proviso to section 153C, the date of initiation of search proceedings u/s. 132 is the date of receipt of books of account, etc. by the Assessing officer having jurisdiction over such other person. The said proviso reads as under: "Provided that in....
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....d profit and loss account reveals the income of the assessee which would be sufficient for the Assessing officer to reopen the assessments u/s. 153C of the Act. In his opinion, the documents seized during the course of search in the premises of the assessee, can be treated as incriminating material. The Ld. AM also extracted provisions of section 153A and 153C of the Act and observed that proviso to section 153A mandates Assessing officer to assess or reassess the total income in respect of each assessment year falling within six assessment years. The proviso further mandates that any assessment or re-assessment in respect of any of those six years which are pending shall not abate. In his opinion, a careful perusal of the provisions show that the assessments have to be compulsorily made for all the six years and nowhere it is mentioned that no regular assessment or re-assessment can take place for any particular year if there is no incriminating material found. In this regard, he relied on the decision of the Shyam Lata Kaushik vs. ACIT (114 ITD 305) wherein it was held that there is no requirement for an assessment made u/s. 153A to be based on any material seized in the course o....
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....fficer on or after 27-11-2007, whether the addition made by the Assessing officer to the extent of Rs. 12,42,000/- was correct especially when copy of the balance sheet said to be found during the course of search operation was filed by the assessee along with the return of income on 27/03/2006 itself? (2) In the facts and circumstances of the case, is it proper for a judicial authority/Tribunal to place reliance on the decision/judgment of the Bangalore Bench of this Tribunal dated 05/12/2014 in Nandini Deluxe vs. ACIT in I.T.A. Nos. 446 to 448/Bang/2013 (ld. AM referred the order in paragraph 4.10 of his order) especially when the present appeal itself was heard on 29/10/2014 itself (two months before the order of the Bangalore Bench) without giving any opportunity to both parties? 11. The Ld. Accountant Member on the other hand was of the opinion that the questions framed by the Ld. Judicial Member do not appropriately cover the issues in dispute and therefore, he framed the following questions which in his opinion, would help in properly adjudicating all the issues: (1) In the facts and circumstances of the case, whether the assessment framed u/s. 153C r.w.s. 153A of the....
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....2006 which shows that the assessee had sufficient income and therefore, that can be taken as incriminating material for the purpose of invoking provisions of section 153C of the Act. 16. On the other hand, the Ld. Counsel for the assessee submitted that the proceedings initiated by the Assessing officer are invalid in law since there is no incriminating material found during the course of search. The concerned assessment year was 2005-06. He mainly contended that the assessment proceedings for the assessment year 2005-06 are terminated by the operation of law on expiry of time limit for issuing notice u/s. 143(2) on 13-02-2007 whereas the loose sheets containing balance sheet and profit and loss account, found during the course of search was received by the Assessing officer on or after 27/11/2007. He also submitted that the Ld. Accountant Member committed an error in law in relying on the decision of the Bangalore Bench of Tribunal in the case of Nandini Deluxe (cited supra) since the said order was pronounced on 05/12/2014 whereas the assessee's appeal was heard on 29/10/2014. The Ld. Judicial Member had passed the draft order before the date of pronouncement of the order by the....
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....e Assessing officer, while framing the assessment, had taken note of the same and hence, in the absence of specific document found during the search and seizure proceedings, the Assessing officer cannot make any addition in this year wherein proceedings have attained finality. It was also submitted that while drafting 153C of the Act, the legislature did not envisage the situation of third party having to undergo assessment proceedings in six previous years, even if there is no material to indicate undisclosed income in the hands of a third party. Therefore, in section 153C(1) of the Act suitable amendment was made by the Finance Act, 2014 wherein it was clarified that the proceedings u/s. 153C can be initiated only if the Assessing officer is satisfied that the books of account or documents seized or requisitioned have a bearing on the total income of the assessee of the other person for the relevant assessment year. Since the provisions were amended to eliminate practical difficulties, the same has to be considered as clarificatory in nature, i.e. it has to be treated as procedural provision and clarificatory in nature. 20. The ld. Counsel relied on various case law in support o....
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....e reference: "The provisions of s.153C of the Act was amended to obviate practical difficulties which arose in its interpretation from time to time. The amendment made by Finance (No.2) Act, 2014 as the Legislature found that different authorities were assigning different meanings to the provisions. As such, a state of affairs resulted in ambiguities which gave rise to conflicting decisions on subject, the Legislature in its wisdom thought it prudent to change the language thoroughly explicit. It so happened from time to time that during the course of conducting a search and seizure operation u/s. 132 of the Act, money, bullion, jewellery or other valuable article or thing or books of account or documents belonging to another person were seized. On one hand, the seized materials were sent to the Assessing Authority having jurisdiction over the other person and on the other hand, the Assessing Authority receiving such seized material acts mechanically initiates proceedings u/s. 153C of the Act without any verification. Such interpretation is never the intendment of the Legislature. The Legislature found that multiplicity of proceedings resulted and confusion reigned supreme. In or....
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....deration, the assessee has not disclosed income whereas, in the instant case, the assessee has filed its return of income much before the date of search and on the strength of the profit and loss account and the balance sheet filed before the Assessing officer, the return was processed u/s. 143(1) of the Act. In fact, there was clear finding by the Ld. CIT(A) in his order, in respect of assessment year 2006- 07, wherein it was stated that there was no incriminating document found during the course of search; the Revenue has not preferred any appeal against the order of the CIT(A). Under these circumstances, it cannot be said that the same document can be treated as incriminating material for the assessment year under consideration. Since Point No. 1 is decided in the negative, i.e. the document found cannot be considered as incriminating document, Question No. 2 does not require adjudication and therefore, need not be answered. 27. The matter may now be placed before the Division Bench which has to decide the matter according to the majority view. N R S Ganesan, JM & Chandra Poojari, AM, JJ. Date of Hearing: October 29, 2014 Date of Decision: November , 2014 ORDER Per: N R S....
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....was completed on the basis of the regular return of income filed cannot be reopened in view of the specific provision contained in section 153A of the Act. 3. The ld.representative further submitted that the notice requiring the assessee to file the return of income u/s 153C r.w.s. 153A was issued only on 12-02-2008. Therefore, the completed proceedings cannot be reopened. Referring to the assessment order, the ld.representative submitted that no material was found during the course of search operation. The only material relied upon by the assessing officer is the balance-sheet as on 31-03-2005 filed alongwith the return of income e. The assessee has disclosed the unsecured creditors in the balance-sheet filed alongwith the return of income filed in the regular course on 27-03- 2006. Therefore, the unsecured creditors declared in the balance-sheet which was filed alongwith the return of income cannot be taken up for enquiry or adjudication in the block assessment u/s 153C unless and until there is some search material found during the course of search operation. Referring to the provisions of section 153C, the ld.representtive submitted that unless, the assessing officer satisfied....
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....risdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to subsection (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1....
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....e assessee has filed the return of income on 27-03-2006. The period of 12 months for issuing notice u/s 143(2) expires on 31-03-2007. It is also not disputed that the Commissioner of Income-tax by an order dated 27-11- 2007, in exercise of his powers u/s 127(2) transferred the jurisdiction from Ward.1, Ernakulam to DyCIT / ACIT, Central Circle.1, Ernakulam. Therefore, the assessing officer of the assessee, the DyCIT / ACIT Central Circle, Ernakulam might have received the records on or after 27-11-2007 only and certainly not before that. Therefore, the assessment proceedings on the basis of the return of income filed in the regular course on 27-03- 2006 got terminated by operation of law on 31-03-2007. In other words, the assessment proceedings on the basis of the return of income filed on 27-03-2006 is not pending as on 27-11-2007 when the assessing officer is supposed to have received the seized document of the assessee. Hence, the income disclosed in the return filed in regular course on 27-03-2006 on the basis of the balance-sheet as on 31-03-2005 cannot be disturbed by the assessing officer unless there is a specific material found during the course of search operation. In thi....
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....e assessee to file return of income . The said notice was served on the assessee on 18.2.2008. In response to the said notice, the assessee filed its return of income on 30.4.2008 declaring a loss of Rs. 2,65,510/- which was originally returned. There was an unsecured creditor in the balance sheet as on 31.3.2005 filed with the return of income for which the AO called for confirmation, which was not filed and the same was considered as unexplained credit. 3.1 The ld AR now submitted before us that the framing of assessment u/s 153C r.w.s 153A/143(3) of the Act is bad in law. According to the ld AR, section 153C of the act confers jurisdiction, if the AO is satisfied that 'document' seized belong to a person other than the person referred to in sec 153A, so as to be able to assess that other person, the document must have prima facie incriminating information. The document seized must not only a 'speaking one' but also be prima facie 'incriminating one' for attracting sec.153C. 3.2 The ld AR of the assessee submitted that unless the AO is satisfied that the material found during the course of search operation belong to the person other than the searched person, there c....
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....may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-(1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-so (1) or s. 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-so (1), shall stand revived with effect from the date of receipt of the order of such annulment by the CIT : Provided that such revival shall cease to have effect, if such order of annulment is set aside." "153C. (1) Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s.153, where the AO is satisfied that any money, bullion, jewellery or other valuable article orthing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance wi....
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.... 4.2 Sec. 153C only mandates that where the AO is satisfied that the material, including books of accounts or documents seized or requisitioned belongs to other person, then those materials will be handed over to the AO having jurisdiction over the other person. Admittedly, in this case, books of accounts/documents pertaining to assessee were seized and AO had recorded satisfaction in this regard as mandated in the Act. The assessment of undisclosed income is very much based upon the books of accounts/documents. The satisfaction on the part of AO is not in dispute as the assessee is contending that assessment made has to be with reference to incriminating search materials. 4.3 The Delhi Bench of this Tribunal in the case of Ms Shyam Lata Kaushik vs ACIT, (114 TTJ 940), it was held that there is no requirement for an assessment made u/s 153A to be based on any material seized in the course of search. Again, the Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarain India Ltd vs DCIT reported in 117 TTJ 480, it was held that the AO is entitled to make assessment under special provisions even if no material is found during search. 4.4 The Hon'ble Jharkhand High Court ....
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....his regard as mandated in the Act. The assessment of undisclosed income is very much based upon the books of accounts/documents. The satisfaction on the part of AO is not in dispute as the assessee is contending that assessment made has to be with reference to incriminating search materials." 4.6 Further, The Hon'ble Andhra Pradesh High Court in the case of Gopal Lal Bhadruka v. Deputy Commissioner of Income-tax reported in 346 ITR 106(AP) held that; "By virtue of section 158BI of the Act, the various provisions of Chapter XIV-B of the Act are made inapplicable to proceedings under section 153A/153C of the Act. The effect of this is that while the provisions of Chapter XIV-B of the Act limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation, no such limitation is found in so far as section 153A/153C of the Act are concerned. Therefore, it follows that for the purposes of section 153A/153C of the Act the Assessing Officer can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee" 4.7 Further, the Hon'ble....
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....ndicate a doubt in the mind of the High Court as to whether the proceedings under section 153 A. of the Act can still be initiated. 4.9 It is in this context that the decision of the High Court of Karuataka in the case of Canara "Housing Development Co., Vs DCIT in ITA No.38/2014 dt.25.7.2014, assumes significance where it is held that once the assessment is reopened, the Assessing Officer can take note of the income disclosed in the earlier return, any undisclosed income found during the course of search and also any other income which is not disclosed in the earlier return of income or which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. 4.10 Same view has taken by the Bangalore Bench of this Tribunal in the case of M/s Nandini Deluxvs ACIT in ITA No. 446 - 448/BANG/2013 vide order dtd 5TH Dec 2014 wherein it has been held as under: 6.3.1 We have heard the rival submissions at length and perused and carefully considered the material on record, including the judicial decisions cited. The relevant portions of section 153A of the Act a....
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....Delhi High Court in the case of Anil Kumar Bhatia (supra), there is no dispute to the proposition that where a search is carried out under section 132 or a requisition under section 132A of the Act, the Assessing Officer shall issue notice requiring the person searched to furnish his return of income in respect of each assessment year relevant to the previous year in which such search is conducted or requisition is made. Therefore, the Assessing Officer gets jurisdiction for passing orders under section 153A of the Act, once search action is initiated, whether or not any incriminating material is found during the course of search action. 6.3.3 The next issue is the scope of assessment under section 153A of the Act. The jurisdiction to issue notices under section 153A cannot be equated with the scope of assessment under this section. This has been lucidly explained by the order of the ITAT, Mumbai in the case of Pratibha Industries Ltd. (supra) wherein it has been observed that when we examine the provisions of section 153A(1)(b) of the Act, the 2ndproviso thereto and the judicial decisions cited before us, three possible circumstances emerge on the date of the initiation of sear....
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....tion of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." 6.3.6 Therefore, where no incriminating material is found in the search proceedings relating to any assessment year, then the scope of assessment will depend on whether the original assessment is pending or completed. Where the original assessment in any assessment year is pending on the date of search, then the proceedings relating to the pending assessment shall abate and the proceedings initiated as a result of search will be continued. The scope of this assessment would cover issues arising from the pending assessment and the freshly initiated proceedings will cover issues which arise from the search and the originally pending proceedings also. 6.3.7 The third circumstance at (iii) above, i.e. where proceedings are not pending and no incriminating material is found in the course of search; has been left un-answered by the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra). In this case, the H....
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...., relate to returns, assessment and reassessment provisions. Prior to the introduction of these three Sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as "block assessment" because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as "block period. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 13....
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....mposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be." 10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sec....
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....question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed Income would be brought to tax. When once the proceedings are initiated under Section 15 3A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during th....
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....he course of search and also any other income which is not disclosed in the earlier return of income or which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. The grounds of appeal raised by the assessee at S.Nos. 2 to 5 are accordingly dismissed for all four assessment years 2005-06 to 2008-09." 5. In view of the above discussion, I am of the opinion that since there was a document found in the case of search action which belongs to the assessee and on that basis, notice us 153A was issued so as to frame assessment u/s 153C of the Act and the conditions precedent for issuance of notice is fulfilled ; therefore, the AO has taken action u/s 153C of the Act, which is valid. Accordingly, the Cross Objection filed by the assessee is dismissed. 6. Now, coming to the revenue's appeal, it is with regard to deletion of addition made by the AO. 7. The first issue relates to deletion of addition of Rs. one lakh received from K. V. Nelson. 7.1 The assessee received the following loans from Mr. K. V. Nelson: i) Rs. 50,000/- on 18.8.2004 vide cheq....
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....lly gone through the records and the submissions made by both the parties. I find that before the AO the assessee has not filed any details. The assessee first time produced the above documents before the CIT(A). Therefore, in my opinion, the issue should be remitted back to the file of the AO. Accordingly, this issue is remitted back to the AO with a direction to examine the details produced by the assessee before the CIT(A) and decide the issue afresh in accordance with law. 12. Next issue is with regard to the deletion of addition of Rs. 25,000/- out of Rs. 3,25,000/- advanced by Mrs. Iby Jonshon. 12.1 The assessee received Rs Rs. 50,000/- from Mrs. Iby Johnson during the assessment year under consideration. According to the ld DR, the assessee failed to prove the genuineness of the transaction and hence the addition has to be confirmed. 12.2 On the other hand, the ld AR of the assessee submitted that the amount of Rs. 50,000/- vide cheque No.950781 was received on 17.8.2004 from NRE SB account no.20567 with Federal Bank, Thottakattukar vide remittance slip no.111155583. He also placed on record the proof, which is placed at pgs. 117 & 118 of the paper book. 13. I have caref....