TaxTMI 
TaxTMI 
2011 (4) TMI 1348
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.... passed u/s 263 of the Act setting aside the above referred orders of the AO/CIT(A) is the impugned order. The assessee is in appeal against order of the CIT in respect of the AYs 2000-01 to 2005-06 with the exception for the AY 2003-04. Thus, there are 5 appeals in this regard. Third category of the appeals are the 10 cross appeals of the assessee and the revenue against the fresh assessment orders passed by the AO u/s 153C rws 143(3) rws 263 of the Act. 2. To start with, we shall take up the first category. On finding that the grounds in all these 7 appeals are either common or interlinked or overlapping on the issues, we proceed to adjudicate all of them in a consolidated manner. For the sake reference, we consider the impugned orders for the AY 2000-01 and the relevant grounds for the said AY 2000-01 are reproduced as under. 3. The following grounds including the additional ground are taken by the assessee for the AY 2000-01 and they are without prejudice to each other - On facts and in law, 1. The ld CIT(A) erred in not appreciating that the notice issued u/s 153C was not valid and therefore, the assessment made u/s 153C r.w.s. 153A was null and void. 2. The ld CIT(A) ....
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....pendent on the same. Therefore, we proceed to take up this crucial and legal ground in the very beginning of this order. 4. Relevant facts of the case in general and the said legal ground no 1 in particular are that a search and seizure action was conduced on 20.7.2005 in the case of Shri Ramchandra Dada Shinde at his office premises at Bharati Vidya Bhavan as well as at his residence at "Ashirwad" Bharati Nagar, Paud Road, Kothrud. Shri Ramchandra Dada Shinde is the trusted employee of Bharati Vidyapeeth, Pune and he worked as an Accounts Officer looking after the accounts of various trusts of Bharati Group including the assessee-trust. During the course of search action, number of documents relating to assessee were seized from Shri R D Shinde vide Panchanama dt 22.7.2005.The said seizer also includes Bundle No 10 which is the ledger of the assessee trust for the F.Y 2003-04. The case was assigned to this charge vide CIT (Central) Pune's order No Pn/CIT(C)/ Assign.Juris/2006-07/15 dt 26.4.2006. On the basis of documents seized/ impounded from Sri R D Shinde and also on the basis of certain facts revealed during the course of post search enquiries the then AO after satisfying him....
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....is a legal issue in nature and it was raised before the other revenue authorities and therefore, it can be raised before us and has to be entertained and addressed by us in this appeal. In particular, validity of the notice u/s 153C was raised before the CIT(A) who dismissed the said ground during the first appellate proceedings. Para 5 of the impugned order contains the relevant facts and the discussion on the issue. We proceed to the same in the preceding paragraphs. It is required to clarify here tha the impugned order is a common order passed by the AO attending to the grounds raised on the issues arising out of the search Assessment Order passed under section 153C r w s 143(3) and also the fresh assessment order passed u/s 153C r w s 143(3) r w s 263 of the Act. During the first appellate proceedings the assessee made various written submission on this issue relating to the validity of the notice u/s 153C of the Act issued to the assessee in respect of the six AYs under consideration ie 2000-01 to 20005-06. After considering the same, the first appellate authority dismissed the ground of the assessee and upheld the validity of the notice. It is the consistent view of the reven....
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....or issue of notice u/s 153C. Section153C states that where any money, bullion, jewellery or valuable article or thing or books of accounts or documents seized belong to a person other than the person referred to section in 153A, then notice u/s 153C can be issued to the person whose books of accounts, etc. are seized. The assessee submits that the documents found with Shri Shinde which are mentioned in the satisfaction note recorded by the ld AO are not incriminating documents but they are the documents for the transactions which are duly accounted by the assessee trust in its books and therefore, there was no reason to issue notice to the assessee u/s 153C. The assessee contends that where regular documents which are accounted and can be verified are seized, then no notice u/s 153C can be issued. It is submitted that the ledger accounts for F Y 2003-04 were found with Shri Shinde. It is submitted that all these accounts were duly accounted and no incriminating material was found pertaining to the assessee during the search on Shri Shinde. Hence, we submit that the notice issued u/s 153C is not valid at all since no incriminating evidence has been found pertaining to the assessee. ....
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....T. Rules. On merit also s. 153C r.w.s. 153A refers to materials seized during search, which may or may not be incriminating. The word 'incriminating' is missing in these sections and therefore, its existence cannot be presumed. Assumption of jurisdiction u/s 153C is a prerequisite for the AO to enable him to verify the documents or materials seized whether the same is incriminating or not. On the submission of the appellant that the assessment year 2000-01 is beyond the purview of section 153C on the basis of the judgment given by Hon'ble ITAT Ahmedabad in Vijay M Vimawal, it is seen the above argument is based on the interpretation of amendment brought in proviso to s. 153C by Finance Act, 2005 with retrospective effect from 1.6.2003. However, in that process, the appellant seem to be ignoring other amendments brought in simultaneously through the same Finance Act in other related sections for bringing in harmony in the entire process of assessment and re-assessment required to be done after searches. The proviso to sub-section 1 of s. 153C was inserted along with second proviso to sub-section 1 of s. 153A and proviso to sub-section 1 o s. 153B. Along with the same, certain other ....
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.... issue of validity of the notice was not raised before the AO; (ii) the said issue was pending before the ITAT at the relevant point of time and therefore, CIT(A) did not want to interfere by giving his decision on the issue; (iii) However, the CIT (A) opined that the expression 'incriminating' is not borne out of the statute and it our words it is not case of caucus emmicus; (iv) CIT(A) is of the view that the provisions contained u/s 292B and 292BB of the I.T. Act has a cure for such deficiencies if any. Accordingly, CIT(A) dismissed the submissions of the assessee and dismissed the relevant legal grounds. With regard to the validity of the notice u/s 153C for the AY 2000-01, the CIT(A) mentioned that the submissions of the gets answered by the departmental circular and finally, he held that the notice issued for AY 2000- 01 is also valid. Otherwise, for the AY, the assessee submitted that the search on Shri R D Shinde took place on 20.7.2005 and notice issued u/s 153C was on 30.3.2007. As per the proviso to section 153C, the date of reckoning the date of initiation of asst. proceedings for earlier years is the date of handing over the documents by the AO. But the AO wrongly cons....
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....part from the said ledger, no other document pertaining to the assessee trust for the said AYs under consideration was found with Shri Shinde and transferred to the AO of the Assessee. (ii) On incriminating material: It is submitted that for the purpose of invoking the provisions of section 153C, there has to be some incriminating evidence found pertaining to the assessee with the third party. In the absence of any incriminating evidence, the proceedings u/s 153C cannot be initiated. Secondly the ledger book is duly accounted and not an incriminating document. (iii) Purpose of 153C - Unfettered Powers: It is submitted that the stand of the department is grossly incorrect in law as the purpose behind the introduction the special provision of section 153C is the same as that behind the provisions of section 158BD. That is, in short, to enable the department to proceed against a third person for bringing to tax any income of such third person, in search action, the diary, loose papers, assets etc have to be found unaccounted and incriminating in nature or not disclosed found to be belonging to a third person. Then only the AO gets the jurisdiction to assess such third person u/s 153C....
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....y for initiating the proceedings u/s 153C of the Act and they are: Vijaybhai N Chandrani (231 CTR 474 (Guj); Panchuram Deshmukh & Ors 133 TTJ 53 (Bilaspur) and Shyam Lata Kaushik 114 ITD 305 (Del). 9. During the rebuttal time also Sri Pathak stated that the documents belonging to the party is incriminating or the asset found belonging to the third party or undisclosed, then only, the proceedings u/s 153C of the Act would be justified. On the other hand, if the AO is authorized to proceed against any third party just because some document, whether accounted and not incriminating, of the third part is found during search, it would lead to the cases mentioned in above wherein genuine parties for the fully accounted documents or assets will be subjected to the harassment of undergoing the block assessments ordeal to million of citizens as a consequence of wrong invoking of the provisions of u/s 153C of the Act. In short, as the departmental stand will lead to a harassment for the assessees in general and an arbitrary authority for the officers, such interpretation has to be avoided. In this context, the assessee relies upon the following decisions wherein the courts have held that whe....
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.... 114 ITD 305 (Del), the assessment in that case was completed u/s 153A and not u/s 153C. Thus, the facts are distinguishable. Where a person is searched, his assessment is to be completed u/s 153A and in that context, Hon'ble ITAT held that no incriminating evidence is necessary to complete the assessment u/s 153A. 11. Accordingly, it is submitted that the decisions cited by the ld DR are distinguishable and not applicable to the facts of the present case. It is submitted that since no incriminating evidence is found during the course of search on Shri R D Sinde pertaining to the assessee, the notice issued u/s 153C for the AYs 2000-01 to 2005-06 may be declared null and void. Without prejudice, only one document is found for the AY 2005-06 i.e. the inward register. Hence, for other five years since no document has been found and therefore, in view of the decision of ITAT, Pune in the case of Sinhgad Technical Education Society v ACIT (ITA Nos 114 to 117/PN/10) and M/s Kumar & Co. vide ITA No 463/PN/08 for the AY 2000-01, it is submitted that the assessment completed for these 5 years be declared null and void. 12. Further, the AO in the satisfaction note referred to the statemen....
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....e, pertaining to assessee trust for the concerned years. The assessee's contention that no incriminating material was found during the search on Sri R D Shinde, pertaining to assessee, is not correct. This is clear from the satisfaction note recorded prior to issue of notice u/ 153C, a copy of which is enclosed herewith. The assessee has not contested the fact that the documents referred to in the satisfaction note were seized during the search on Shri R D Shinde and that they belong to the assessee. The conditions precedent for initiation of the proceedings u/s 153C are therefore satisfied and the proceedings are therefore valid. If it is the assessee's contention that the books of accounts or documents seized during the search should be specific to particular A.Y and that these should contain incriminating material, these contentions deserve to be rejected. In this contention your honour's kind attention is invited to the provisions of section 153C of the I.T. Act. It may kindly be seen that as per the provisions of section 153C, the satisfaction required to be arrived at by the AO for issue of notice u/s 153C is that "any money, bullion, jewellery or other valuable article....
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....umble submission that before taking action 153C, the AO is not required to arrive a satisfaction regarding incriminating nature of the documents and it is not necessary that documents pertaining to each of the six assessment years should have been seized." 14. As per the above note, stand of the revenue is clear that the AO at the time of handing over of the documents to the AO of the assessee is not required to arrive at the satisfaction regarding incriminating nature of the documents and further, as per the express provisions, it is not necessary that documents pertaining to each of the six assessment years should have been seized and handed over to the AO of the assessee. 15. We have heard the parties and perused the voluminous papers filed before us involving all the six AYs including the written submissions of the parties.As stated in the preceding paragraphs, we proceed the adjudicate the issue relating to the validity of the notice issued u/s 153C of the Act for the Six years in question. For this purpose we examine - SATISFACTION NOTE RECORDED BY THE HANDING OVER-AO; SATISFACTION NOTE: "Satisfaction note for proceedings u/s 153C of the I. T. Act, 1961 in the ca....
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....nd trust fund credited in the books are not genuine. Since the receipt credited n the books of a/c not from the genuine source for the charitable purpose of the trust, apparently the income of assessee trusts is not liable for exemption u/s 11,12,13 of the IT Act 1961. Therefore notices u/s 153C is hereby issued for the following A. Yrs. A.Y 2000-2001, 2001-2002, 2002-2003, 2003-2004, 2004-2005, 2005-2006 Sd/- Date: 30 March 2007 Assessing Officer. 16. From the above, it is clear that there is seizure of ledger involving the assessee by way of Bundle No. 10 - This is ledger of Bharati Vidyapeeth Medical Foundation and we find it relates to AY 2004-05 and not for A.Y 2003-04 as mentioned by the AO in the above extracted 'satisfaction note'. It is also a fact that there is no other seized documents/other listed ones pertaining to other AYs under consideration and belonging to the assessee. Further, it is the inescapable observation that rest of the documents relate to the AY 2006-07, which is not the subject matter of this order. As stated above, the CIT(A) dismissed the said legal ground of the assessee on the reasoning that the (i) issue of validity of the notice was no....
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.... assessments must not be disturbed merely based on the dumb documents gathered and seized by the revenue. It is also the finding of the Tribunal that the such incriminating documents must be Assessment Year Specific and it is the finding of the Tribunal that AO has no power to issue notice us/ 153C of the Act in respect of an AY where there is no Asst Year Specific Incriminating seizure of the documents or other listed items. AO cannot issue notice in respect of an AY, when the incriminating material belonging to the assessee pertains to some other AY. We proceed to import relevant portions of an unreported decision of the Tribunal of this bench in the case of Sinhgad Technical Education Society Vide ITA NO 114 to 117/pn/10. This extract consists of the relevant portions again imported from the order of the Tribunal in the case of the Kumar and Company vide ITA No. 463/PN/08 for the same A.Y 2000-01. Extraction of paragraphs 8 to 15 from the order of the Sinhgad Technical Education Society vide ITA NO 114 to 117/Pn/10. "8. Additional Ground: Invalid Notices U/s 153C: In this regard, we have perused the reasons recorded by the AO of the assessee. We find that there exists the reas....
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.... of STES on or before 25.06.2005. Bundle no. A-4 8) page no. 50 & 54 - these pages contains the details of staff arrangements made by the STES college of Engineering for admission process for F.Y. 2003-04. 9) page no. 58 to 60- these pages contain the details of expenses incurred by STES." 10. From the above, it is demonstrated by the Ld Counsel that the items at sl no 1 to 5 above belongs to the AY 2004-05 or thereafter. Referring to the rest of the items at sl 6 to 9 above, the Counsel mentioned the said documents seized are either recorded in the books of account or involves cheque transactions. Thus, he summed up stating that the documents in question are neither the incriminating ones nor unaccounted transactions of the assessee and nor they relate to the impugned four AYs. In such circumstances, the AO not only assumed jurisdiction invalidly but also erred in disturbing the settled and completed assessments. Accordingly, AO should not assume jurisdiction in respect of such AYs in the absence of any incriminating information or transactions specific to any of the impugned four AYs ie 2000-01 to 2003-04. The contrary argument from the side of the revenue is that the ove....
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....3) of the Act, such document cannot be said to be containing the incriminating information. What is the point in disturbing the settled assessment when the revenue does not have incriminating information for an AY and the information what is available is only routine one and when the AO merely makes an addition in the assessment u/s 153C based on change of opinion and when such additions are likely to be deleted in view of the settled nature of the issues? Income Tax provisions are not merely for the issue of notice u/s 153C but it is essentially for taxing the income of the person. What is point in issuing notice u/s 153C on flimsy grounds and finally tax nothing? Such proceedings only creates avoidable nuisance both to the over-burdened taxman and the much hazzled taxpayers. In the instant case, provisions of section 153C are invoked merely to apply the provisions of section 45(4) in this year, the issue which was already examined and concluded as inapplicable to the facts of the case. Such issue of notice is unwarranted and such reopening of the assessment for the AY 2000-01 is uncalled for. 26. Therefore, the proceedings initiated u/s 153C is not valid in view of the decision....
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.... incriminating nature of the same is out of question. Therefore, reliance of the DR on the said case is misplaced. 13. Further, we have examined various other judicial propositions mentioned by the Ld Counsel and some of them are reproduced as under. 1) Anil Kumar Bhatia & Ors. (2010) 1 ITR (Trib) 484 (Del) Conclusion:- "In respect of an assessment under s. 153A, where processing returns under s. 143(1)(a) stood completed in respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made." 2) Suncity Alloys (P) Ltd. (2009) 124 TTJ (Jd) 674 Conclusion:- "Assessments or reassessments made pursuant to notice under s. 153A are not de novo assessment and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation of action under s. 132." 3) Meghmani Organics Ltd. (2010) 129 TTJ (Ahd) 255 Conclusion:- "Record maintained by a person for his own purpose though referable to the assessee cannot be said to be belonging to the assessee within the meaning of s. 153C. Further, where none of the assessments are....
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....the Assessing Officer on 18/04/2007, this assessment was not pending. Attending to these arguments of the counsel is superfluous and merely an academic exercise as we have upheld the applicability of the decision of the Tribunal in the case of LMJ International Ltd (supra) for the proposition that the "where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed" and other local decision cited above. Accordingly, the additional ground raised by the assessee for all the 4 appeals under consideration are allowed and in favour of assessee. 15. As the additional ground for all the four years are allowed in favour of the assessee, we are of the considered opinion the adjudication of the grounds relating to the merits of the additions is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic." 18. We have discussed the existing legal proposition on the issue of validity of the notice in the light of the provisions of section 153C r w s Rs. 153A of the Act. From the above, it is the decision of this bench of the Tribunal, taken relying on the de....
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.... notice by the revenue contrary to the above and the decisions relied on by the DR are otherwise distinguishable on facts. 21. In the present case of the assessee and in the appeals arising from the order of the AO under section 153C rws 143(3) of the Act for the AY AYs 2000- 01 to 2005-06, there are six AYs. Based on the existence of the seized documents, these six AYs can categorized into two categories. (i) the AYs without seizure of any documents or any other seizures as referred to in the provisions of section 153C of the Act; and (ii) the AY with the seizure of some documents as referred to in the provisions of section 153C of the Act. 22. Appeals by the Assessee - AYs 2000-01 to 2003-04 & 2005-06: In connection with the AYs at sl no (i) above ie AYs 2000-01 to 2004-05, admittedly, there is no seizure of the documents as evident from the satisfaction note and the tables explained by the assessee. Considering the above scope of the provisions and legal propositions already adopted by this bench in the case of Sinhgad Technical Education Society (supra), we are of the opinion that the issuance of notices u/s 153C for the AYs 2000-01 to 2003-04 & 2005-06, where there are no se....
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.... issues is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic. 25. In the result all the six appeals of the assessee are allowed and consequently, the cross appeal by the revenue vide ITA1039/PN/10 for AY 2003- 04 is dismissed. Second category of the appeals (Five appeals of Assessee against the order of the CIT u/s 263 of Act) 26. These are the assessee's appeals arising out of the orders passed by the CIT u/s 263 of the Act. The ITA numbers under consideration here are as under.659/PN/08 for the AY 2000-01, 660/PN/08 for the AY 2001-02, 661/PN/08for the AY 2002-03, 662/PN/08 for the AY 2004-05 and 663/PN/08 for the AY 2005-06. As per Sri Sunil Pathak, Ld Counsel, all these appeals have to be quashed in case the notices issued by the AO u/s 153C in respect of all the AYs under consideration are held null and void. Ld DR relied on the orders of the revenue. We heard the parties and considered the arguments of the parties and the documents filed before us. We find that the legal ground raised by the assessee questions the validity of the review order of the CIT passed u/s 263 of the Act. From the above paragraphs of thi....