TaxTMI 
TaxTMI 
2011 (4) TMI 1348
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....e appeals, the review order of the CIT 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....
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....lidity of other appeals of the assessee for the AY 2001-02 to 2005-06 too. Further, the decision of all six cross appeals of the revenue is also dependent 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/ impo....
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....C, making it clear that the same was not raised before the AO. However, the issue came up substantially before the first appellate authority. Thus, it 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....
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.....Accordingly, the ld AO is of the opinion that since various documents seized from Shri R D Shinde pertain to the assessee, the notice u/s 153C is valid. The assessee submits that there is no justification for 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 foun....
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....he I.T Act subsequent to the search. In view of the above, the same cannot be challenged to be invalid because of provisions contained u/s 292B and 292BB of the I.T. Act. The grounds are also inadmissible under Rle 46A of the I.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-a....
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....e issues raised in submissions, it is held that even on merit, they are not liable to be accepted. 6. We find from the above that the CIT(A) dismissed the said legal ground of the assessee on various reasoning and they are: (i) 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 ....
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....thak, cross tallied certain entries in the ledger book vis-à-vis the amounts recorded in the balance sheet of the assessee. Thus, it was demonstrated that the ledger book is accounted ledger book. It was also clarified that apart 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 act....
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....ets or documents or books belonging to the third party are found with the person search, the AO will proceed against such third party. Sri Singh relied on certain decisions for the propositions that no incriminating evidence is necessary 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....
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....some documents were found pertaining to the assessee which indicated some prima facie benami transactions. Thus, ITAT held that the notice issued is valid. As regards the issue in the case before ITAT Delhi in the case of Shyam Lata Kaushik 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....
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....sessment order passed u/s 153A r.w.s. 153C is itself null and void. It is further contended that proceedings u/s 153C are bad in law for the reasons that there was no incriminating material found during the search conducted in the case of Shri R D Shinde, 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 ....
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.... are sought to be covered u/s 153C should be seized in order to bestow jurisdiction on the AO for action u/s 153C will be a throwback to the provisions of section 148, negating the very purpose of introduction of the special provisions contained in sections 153A to section 153D. It is, therefore, my humble 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....
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....counts of the assessee trust shows that the amount credited in various dates in the ledger a/c of dev fund and trust fund claimed to be receipts towards the corpus of the trusts has been received entirely in cash, and the donors has not been mentioned in the books of a/c. In view of the above facts, I am satisfied that, the receipts on account of dev. Fund and 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 documen....
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....inating' or 'undisclosed income'. However, considering the search seizure provisions, where there is no scope for estimations and surmises, Ho'ble Tribunal took the view that there is need for seizure of the documents and those documents handed over to the AO of the third party covered u/s 153C of the Act must be belonging to the said party and should be 'incriminating' too. Settled 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 ....
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....s voucher of STES dt. 27.09.2004 for cash payment of Rs. 1 lacs to Shaki Amir Shaikh 5) page no. 15- this is voucher of STES dt. NIL for cheque payment of Rs. 50,000/- to Shaikh Amir Shaikh. 6) pahe no. 45- this is an office copy of letter dt. 23.06.2007 written to director of DTE, Mumbai by Sinhgad College of Pharmacy, owned by STES. Bundle no. A-2 7) page no. 35- there are the balances available to various institute 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 t....
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.... proceeding u/s 153C. In other words, the document seized must not only be a 'speaking one' but also be prima facie 'incriminating one' for igniting the proceedings u/s153C. Unlike other AYs, there is nothing made out by the AO what is called incriminating for the current AY under consideration. When the impugned documents merely contains the notings of entries, which are already found place in the books of accounts or subjected to scrutiny of the AO in the past in regular assessment u/s 143(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....
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.... and M/s Kumar Company (supra) are not to be followed in this case. Our perusal of another order of the Tribunal in the case of M/s Kumar Company for the AY 2201 to 2003-04 vide ITA No 1020,1250,1021,1251,1022 & 1252/PN/2008, relied upon by the Ld DR is found distinguishable in so far as the existence of the incriminating document for the relevant AY is concerned. Whereas, in the instant case, first of all, there is no mention of any document in the said reasons relatable to the impugned four years and the 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 reassessm....
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.... is seized pertaining to A.Y 2000-01 to 2003-04 obviously there is no question of recording satisfaction note. On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the AY 2000-01 to 2001-02 is impermissible in view of the judgment of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TTJ 508. Further, he also argued that the assessment of A.Y 2003-04 was actually completed u/s. 143(3) on 30/03/2006 ie prior to receipt of the impugned documents by 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 ....
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.... year relevant to the previous year in which such search is conducted.." (first proviso). It is also fact that the decision in the case of LMJ International Ltd. (2008) 119 TTJ (Kol) 214 is undisturbed as on date and it is relevant for the proposition that "Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed; items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings." Nothing is brought to our 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 s....
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....e instant case relevant for the AY 2004-05, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assasable u/s 153C of the Act. Accordingly, the legal grounds raised in all these appeals of the assessee relating to the validity of the notice u/s 153C of the Act are allowed in favour of the assessee in respect of all the AYs under consideration. Further, we are of the considered opinion that the adjudication of the other grounds relating to the other legal and merit oriented 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....