TaxTMI 
TaxTMI 
2018 (11) TMI 632
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....Building Material Supplier, Gautam Budh Nagar. Bank authorities were requested to put balance of Rs. 1,78,35,905/- standing to credit in A/c No.xxxx2277 of M/s. A.K Traders under restraint. Meanwhile, the team immediately visited Punjab National Bank and it was found that by that time the entire amount of Rs. 2.78 crores had been withdrawn in cash. The bank premises of HDFC Bank, Ambedkar Road, Ghaziabad in the case of bank A/c No. xxxx2277 of M/s. A.K Traders was searched on 11.10.2010 and balance standing to credit was seized. During examination Shri Ajay Sharma stated that he does not know about the source of amounts credited to above account and destination of the amounts debited as the entire affairs were being looked after by Shri Pankaj Sharma, his brother-in-law whose office address is 12, Navyug Market, Ghaziabad. Accordingly, survey under section 133A of the I.T. Act was conducted at 12, Navyug Market, Ghaziabad and Shop No. 3, Harish Chand Ka Bagh, Chhaparaula Police Chowki, Near Dharamkanta, Gautam Budh Nagar. The premises 12, Navyug Market, Ghaziabad was found to be office of Shri Manoj Kumar Jain, proprietor of M/s. Rishav Trading Co. and no business activities were f....
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....j Sharma admitted that bogus bills of steel/building material have been issued in favour of the beneficiaries of accommodation entries. 2.1. A Survey under section 133A was carried out at the given address of M/s. Tushar Building Material Supplier but no business activities were found. The assessee was examined on oath 28.10.2010. He informed that he was carrying on door-to-door marketing of Aloe Vera Gel and was earning Rs. 7000/- to Rs. 8,000/-per month. On being asked he stated that he was being paid Rs. 5,000/- per month by Shri Pankaj Sharma for using his concerns. He clarified that he was asked by Mr. Pankaj Sharma to allow him providing accommodation entries from the bank account of his concerns. He accordingly, handed over pre-signed cheque book of his concerns to Mr. Pankaj Sharma. He is not aware of any business activity being carried on in the name of that concern. The assessee as regards the amount of Rs. 2.78 crores stated that it was transferred through RTGS to the proprietary concern belonging to him which have been withdrawn either by Shri Pankaj Sharma or by any of his persons as he had already handed-over pre-signed cheque book which have been used for withdraw....
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....t, 1961. 3. The assessee challenged the initiation and completion of assessment proceedings under section 153C of the I.T. Act and the above additions before the Ld. CIT(A). The written submissions of the assessee was forwarded to the A.O. for his comments. The Ld. CIT(A) after considering the written submissions of assessee and material on record decided various issues in the appeal of assessee and dismissed the same. The assessee as regards the validity of issuance of notice under section 153C of the I.T. Act had submitted before Ld. CIT(A) that no material belonging to assessee was found during the course of search. Therefore, proceedings under section 153C are invalid and bad in law. The A.O. in the remand report submitted before Ld. CIT(A) that A.O. recorded satisfaction under section 153C on 18.09.2012 for A.Ys. 2005- 2006 to 2010-2011 and for A.Y. 2011-2012 under appeal, A.O. issued notice under section 142(1) of the I.T. Act. The Ld. CIT(A), therefore, noted that the present assessment is not under section 153C, but under section 143(3), therefore, this issue does not arise and proceeding have been rightly initiated under section 143(3) of the I.T. Act. The other point r....
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....r section 153C have been issued in the case of the assessee for assessment year under appeal. He has submitted that there is no reference of any incriminating material in the satisfaction note dated 18.09.2012. He has submitted that the present assessment for A.Y. 2011-2012 was required to be framed under section 153C as the period prescribed in proviso to Section 153C which is to be calculated from date of recording of the satisfaction note and not from the date of search under section 132 as is settled by various Hon'ble High Courts decisions mainly RRJ Securities 380 ITR 612 and Sarwar Agency 397 ITR 400. The prescription of law under section 153C in turn required issuance of notice under section 153C for present period, recording of satisfaction by AO of raided person in his assessment, on the basis of incriminating seized material qua subject period which is patently missing as admitted by AO/CIT-A in the impugned orders, without which entire exercise is a nullity. He has also referred the decision of Hon'ble Apex court in the case of Singhad Technical Education Society 397 ITR 344 and decision of Hon'ble Delhi High Court in the case of N.S. Software 403 ITR 259. Since date of....
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....t in this case, a search and seizure operation was conducted on M/s Krrish Group of cases on 09.11.2011. A survey under section133A of the Act was also carried out on the business premises of the assessee. Assessee earned income from business and other sources. The assessee filed its original return declaring total income of Rs. 2,08,95,242/- on 28.09.2012. In response to notice under section 153A(1) (a] r.w.s 153C, assessee filed revised return declaring total income of Rs. 2,22,43,593/-. Assessment was framed at Rs. 5,22,43,593/- by making addition of Rs. 3 crores as surrendered amount not incorporated in the return of income. Assessee challenged the validity of the assessment proceedings as well as addition on merit before the Ld. CIT(A). However, appeal of the assessee has been dismissed. 3. Assessee in the present appeal, challenged the validity of the proceedings under section 153C of the I.T. Act and addition of Rs. 3 crores. The assessee also moved an application for admission of additional grounds in which assessee raised the following additional grounds : 1. Additional Ground No. 1 "That under the facts and circumstances, in the absence of issua....
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....., 238 ITR 268 (Del.). 4. On the other hand, Ld. D.R. submitted that additional grounds have no merit and the same may be rejected. The assessment has been rightly framed under section 153A(1)(b) of the I.T. Act, 1961. 5. After considering the rival submissions, we are of the view that the additional grounds are legal in nature and no new facts shall have to be considered. The additional grounds go to the validity of the assessment proceedings under section 153C of the I.T. Act, therefore, the same should be admitted for deciding the appeal. The Hon'ble Punjab & Haryana High Court in the case of VMT Spinning Co Ltd., vs. CIT (2016) 389 ITR 326 (P & H) considering various decisions including the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., (1998) 229 ITR 383 (SC) held that "the Tribunal could decide the appeal on a ground neither taken in the Memorandum of Appeal nor by seeking its leave. The only requirement was that the Tribunal could not rest its decisions on any other ground unless the party who might be affected had sufficient opportunity of being heard given on that ground. Therefore, the Tribunal ought to have exercis....
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....nce the books of account/impounded documents have been received by the A.O. on 29.08.2013, therefore, A.Y. 2014-2015 will be the year of search and assessments under section 153C of the I.T. Act should have been computed for A.Ys. 2008-2009 to 2013-2014. Since, no notice under section 153C have been issued for assessment year in appeal, therefore, the assessment order is illegal, void and bad in law. He has relied upon the Judgment of Hon'ble Delhi High Court in the case of Pr. CIT vs. Sarwar Agency P. Ltd., (2017) 397 ITR 400 (Del.), Order of ITAT, Delhi, B-Bench in the case of ACIT vs. Empire Casting Pvt. Ltd., New Delhi in ITA.No.4018/Del./2011 and C.O.No.207/Del./2012 dated 21.11.2017 and Order of ITAT, Delhi, C-Bench in the case of PavitraRealcon Pvt. Ltd., New Delhi vs. ACIT, Central Circle-32, New Delhiin ITA.Nos. 3185, 3186 & 3253/Del./2015 dated 04.10.2017. He has also referred to Memorandum explaining Finance Bill 2017 in which it is provided that "Amendment in Section 153C shall apply in respect of search conducted or requisition made on or after 1st day of April, 2017." 6. On the other hand, Ld. D.R. submitted that Section 153A(1) deals with the years of reopen....
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....r 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 sub-section (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. [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section ....
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....arch under section 132, would abate. In CIT v. RRJ Securities Ltd. [2016] 380 ITR 612 (Delhi), the court held that in the context of proceedings under section 153C of the Act, the reference to the date of initiation of the search in the second proviso to section 153A has to be construed as the date on which the Assessing Officer receives the documents or assets from the Assessing Officer of the searched person, that further proceedings, by virtue of section 153(1) of the Act, would have to be in accordance with section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow' that the six assessment years for 'which assessments or reassessments could be made under section 153C of the Act would also have to be construed with reference to the date of handing aver of assets or documents to the Assessing Officer of the assessee. The amendment in section 153C of the Act by the Finance Act, 2017 with effect from April 1, 2017 to the effect that the Block Period for the person in respect of whom the search was conducted as well as the "other person" would be the same six asses....
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....3C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of....
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....the Act would also have to be construed as from the reference date of handing over of assets/documents to the Assessing Officer of the assessee. In the case in hand, it would be the date of recording satisfaction under section 153 of the Act i.e. 2nd November, 2009, and therefore, six assessment years which would eligible for assessment/re-assessment would commence from assessment year 2004-05 to assessment year 2009-10. The assessment/re-assessment in respect of assessment year 2003-04 would, thus, be beyond the period of six assessment year as reckoned with reference to the date of satisfaction recorded by the Assessing Officer of the searched person. We, therefore, hold that the learned CIT(A) was quite justified in considering the assessment for assessment year 2003-04 as outside the scope of section 153C of the Act, being barred by limitation and without jurisdiction. Accordingly, the impugned assessment order is liable to be quashed. We decide accordingly." 7.3. The ITAT, Delhi, C-Bench, in the case of Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT, C.C.32, New Delhi (supra) under the same circumstances held that "assessment completed under section 143(3) is invalid".....
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....Pvt. Ltd., New Delhi vs. ACIT, C.C.2, New Delhi and Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT, C.C.32, New Delhi (supra). The A.O, therefore, should have framed the assessment under section 153C of the I.T. Act in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice under section 153C of the I.T. Act which have not been done in this case. The issue of notice under section 153C is mandatory and a condition precedent for taking action against the assessee under section 153C of the I.T. Act. The assessment order, therefore, vitiate, void, illegal and bad in law and cannot be sustained. The contention of the Ld. D.R. have already taken care in the above judgments. 9. Considering the totality of the facts and circumstances of the case, we set aside the orders of the authorities below and quash the same and allow the additional grounds of appeals. Resultantly, all additions stands deleted. Since the assessment order is set aside on legal grounds, therefore, there is no need to decide the addition on merit which has been left with academic discussion only. 10. In the result, ITA.No.504/Del./2013 of the ....