AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 530
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.... 2.1 A search operation under section 132 of the Income Tax Act, 1962 (in short 'the Act') was conducted in the case of one Shri. H. B. Sudarshan on 08.06.2012. Consequent to the search in the case of Shri. H. B. Sudarshan, notices under section 153C of the Act were issued, inter alia, to the assessee for Assessment Years 2008-09, 2011-12 and 2012-13, on 15.09.2014 requiring her to file returns of income. The assessee filed Returns of income for these Assessment Years on 17.12.2014 and the assessments were concluded under section 143(3) r.w.s. 153C of the Act vide orders dated 30.03.2015. The CIT(A)- 11, Bangalore, in orders dated 24.11.2017 cancelled the orders of assessment for Assessment Year 2008-09, 2011-12 and 2012-13 as being void-ab-initio. 3. Aggrieved by the separate orders of CIT(A)-11, Bangalore, dated 24.11.2017 for Assessment Years 2008-09, 2011-12 and 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds:- 3.1 Assessment Year 2008-09 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. w....
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....erson and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act. 3.3 Assessment Year 2012-13 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it ....
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....iction raised by the assessee for the first time before him. Secondly, the satisfaction recorded by the AO is in order and that there was no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material. Initiation of proceedings under section 153 of the Act need not be based on incriminating material, but can be done even on the basis of material which is not incriminating. The learned DR thirdly contended that the CIT(A), whose powers are co-terminus with that of the AO, while considering the issue of jurisdiction, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153C of the Act and done whatever is required to strengthen the orders of assessment. In this regard, the learned DR, inter alia, placed reliance on the decisions of the Hon'ble Delhi High Court in the case of CIT Vs. Safetag International Pvt. Ltd., in 332 ITR 622 (Del.) and of the Hon'ble Apex Court in the case of CIT Vs. Singhad Technical Education Society C.A. No.11080 of 2017 and others dated 29.08.2017. 4.2 P....
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....e assessment proceedings without objecting to the same during the said proceedings, the learned DR has placed reliance on the following judicial pronouncements; which we shall deal with. (i) CIT Vs. Vijaybhai Chandari (357 ITR 713) (SC) - Briefly, the facts of this case are that the Department invoked proceedings under section 153C of the Act against the assessee. The assessee was provided with copies of the documents seized which formed the basis for invoking the provisions under section 153C of the Act. The assessee challenged the notice issued thereunder before the Hon'ble Gujarat High Court by way of a writ petition, on the ground that the seized documents did not belong to him. The Hon'ble High Court in its order quashed the notice. Revenue filed an appeal before the Hon'ble Apex Court, which held that the assessee ought to have objected to the notice before the AO and follow due process of law as he had alternate remedy and ought not to have filed the writ before exhausting the alternate remedy available to him. In that view of the matter, the Hon'ble Apex Court set aside the judgment of the Hon'ble High Court. In our humble view, the above case does not hel....
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...., (82 taxmann.com 357) (Del. HC) The Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. (ix) CIT Vs. Smt. Sudha Gafoor in 408 ITR 246 (Kar. HC) The Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. (x) Rajesh Sunderdas Vaswani Vs. ACIT in (76 taxmann.com 311) (Guj. HC) The Hon'ble High Court held on the facts therein that the AO of the 'Person Searched' had indeed recorded a satisfaction that the seized material did not belong to the person searched but to the 'other person'. This decision is not applicable to the issue before us in the case on hand. (xi) Raymond Woolen Mills Ltd., Vs. CIT (236 ITR 34) (SC) This decision was rendered in respect of the sufficiency and adequacy of th....
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.... argued that it was improper on the part of the ITAT to allow that ground, questioning the jurisdiction under section 153C of the Act, to be raised by the assessee when it had not objected to the same before the AO (para 17 of the order). The Hon'ble Apex Court observed that the Tribunal / ITAT entertained the ground, even though not objected to before the AO during assessment proceedings, for the reason that jurisdictional issue was a legal ground taken up on the basis of facts on record and therefore could be raised at an appellate forum. The Hon'ble Apex Court at paras 18 and 19 of its order held that the reasoning of the Tribunal to be logical and valid and that it had correctly admitted the ground and dealt with the same on merits as well. Thus, it is clear that the Hon'ble Apex Court has decided this issue in favour of the assessee and against the Revenue, thereby giving a finality to this issue. 4.5.2 On the proposition put forth by Revenue that the satisfaction recorded by the AO is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material and can b....
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....ation Society (supra) approves the view / decision of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in 385 ITR 346 on the proposition that proceedings initiated under section 153C of the Act was not valid for the reason that there being no satisfaction recorded to the effect that the documents found / seized during the course of search were incriminating in nature and prima facie represented undisclosed income. 4.5.3 On the proposition that the CIT(A), while considering the issue of jurisdiction, whose powers are co-terminus with that of the AO, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153 of the Act and should have done whatever was required to strengthen the order of assessment, the learned AR contended as under:- It is contended that the CIT(A) had to necessarily consider and decide the question of jurisdiction at the threshold / outset of proceedings and if the same was found to be in order, he could proceed to consider and adjudicate upon the additions made to the income of the assessee. It is submit....
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....ng at satisfaction for assumption of jurisdiction under section 153C of the Act. 4.6 On a careful perusal and appraisal of the above cited judicial pronouncements by Revenue and the assessee, and after considering the rival arguments / contentions put forth, we proceed to adjudicate the following ground raised by Revenue hereunder: 4.7 Ground No.1 4.7.1 "1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713." 4.7.2 The Hon'ble Apex Court in the case of CIT Vs. Sinhgad Education Society in C. A. No.11080 of 2017 arising out of SLP (C) N:2527 of 2015 has categorically held that an assessee is not precluded from raising the issue of jurisdiction, merely because it did not object to the same during assessment proceedings and participating therein, as the is....
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....e Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those Assessment Years for which there is incriminating seized material which prima facie represent undisclosed income. 4.8.4 In the course of arguments, the learned DR for Revenue put forth the proposition that the learned CIT(A) ought to have sustained even those additions based on material, not relied upon to invoke proceedings under section 153C of the Act and that the CIT(A) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition; in as much as the CIT(A) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C of the Act in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the orders of assessment for Assessment Years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue's appeals for Assessment Years 2008-09, 2011-12 and 2012-13 are dismissed. 5. Assessment Year 2008....
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.....06.2012. Consequent to the search in the case of Shri. H. B. Sudarshan, notices under section 153C of the Act were issued, inter alia, to the assessee for Assessment Years 2008-09 to 2012-13, on 15.09.2014 requiring her to file returns of income. The assessee filed Returns of income for these Assessment Years on 17.12.2014 and the assessments were concluded under section 143(3) r.w.s. 153C of the Act vide orders dated 30.03.2015. On appeal by the assessee, the CIT(A)- 11, Bangalore, in orders dated 24.11.2017 cancelled the orders of assessment for Assessment Year 2008-09 to 2012-13 as being void-ab-initio. 9. Aggrieved by the separate orders of CIT(A)-11, Bangalore, dated 24.11.2017 for Assessment Years 2008-09 to 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds:- 9.1 Assessment Year 2008-09 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag Int....
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.... precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of Rs. 1,75,00,000/-, on account of miscellaneous receipts based on seized CD whereas Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective addition of Rs. 2,55,91,960/- on election related expenses when in the case of Gujarat High Court in 140 ITR 517 where it was settled that protective assessment should not be decided till substantive assessment reaches finality. 5. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act. 9.3 Assessment Year 2010-11 1. Whether on the facts and the circ....
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....tiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of Rs. 1,78,28,445/-, on account of Undisclosed Investment in residential House where as Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective addition of Rs. 63,45,500/- on election related expenses when in the case of Gujarat High Court in 140 ITR 517 where it was settled that protective assessment should not be decided till substantive assessment reaches finality. 5. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act. 9.5 Assessment Year 2012-13 1. Whether on the facts and the circumstances of the....
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....tion under section 153C of the Act takes away his right to raise this ground. It is contended that in view of the above, the CIT(A) has erred in entertaining the ground on jurisdiction raised by the assessee for the first time before him. Secondly, the satisfaction recorded by the AO is in order and that there was no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material. Initiation of proceedings under section 153 of the Act need not be based on incriminating material, but can be done even on the basis of material which is not incriminating. The learned DR thirdly contended that the CIT(A), whose powers are co-terminus with that of the AO, while considering the issue of jurisdiction, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153C of the Act and done whatever is required to strengthen the orders of assessment. In this regard, the learned DR, inter alia, placed reliance on the decisions of the Hon'ble Delhi High Court in the case of CIT Vs. Safetag International Pvt....
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.... 10.4.1 On the issue that the assessee did not have the locus standi to object to the assumption of jurisdiction under section 153C of the Act since he participated in the assessment proceedings without objecting to the same during the said proceedings, the learned DR has placed reliance on the following judicial pronouncements; which we shall deal with. (ii) CIT Vs. Vijaybhai Chandari (357 ITR 713) (SC) - Briefly, the facts of this case are that the Department invoked proceedings under section 153C of the Act against the assessee. The assessee was provided with copies of the documents seized which formed the basis for invoking the provisions under section 153C of the Act. The assessee challenged the notice issued thereunder before the Hon'ble Gujarat High Court by way of a writ petition, on the ground that the seized documents did not belong to him. The Hon'ble High Court in its order quashed the notice. Revenue filed an appeal before the Hon'ble Apex Court, which held that the assessee ought to have objected to the notice before the AO and follow due process of law as he had alternate remedy and ought not to have filed the writ before exhausting the alternate remedy ava....
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....ng two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. (viii) PCIT Vs. 3VS Instronics Ltd., (82 taxmann.com 357) (Del. HC) The Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. (ix) CIT Vs. Smt. Sudha Gafoor in 408 ITR 246 (Kar. HC) The Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. (x) Rajesh Sunderdas Vaswani Vs. ACIT in (76 taxmann.com 311) (Guj. HC) The Hon'ble High Court held on the facts therein that the AO of the 'Person Searched' had indeed recorded a satisfaction that the seized material did not belong to the person searched but to the 'other person'. This decision is not applicable to the issue before us ....
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.... (i) CIT Vs. Sinhgad Technical Education Society (C. A. No.11080 of 2017) (SC) In this case, the Solicitor General of India, appearing on behalf of Revenue, argued that it was improper on the part of the ITAT to allow that ground, questioning the jurisdiction under section 153C of the Act, to be raised by the assessee when it had not objected to the same before the AO (para 17 of the order). The Hon'ble Apex Court observed that the Tribunal / ITAT entertained the ground, even though not objected to before the AO during assessment proceedings, for the reason that jurisdictional issue was a legal ground taken up on the basis of facts on record and therefore could be raised at an appellate forum. The Hon'ble Apex Court at paras 18 and 19 of its order held that the reasoning of the Tribunal to be logical and valid and that it had correctly admitted the ground and dealt with the same on merits as well. Thus, it is clear that the Hon'ble Apex Court has decided this issue in favour of the assessee and against the Revenue, thereby giving a finality to this issue. 10.5.2 On the proposition put forth by Revenue that the satisfaction recorded by the AO is in order and that t....
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....ate prima facie undisclosed income. In view of the above, it is contended that it would be fair and reasonable to conclude that the judgment in the case of Sinhgad Technical Education Society (supra) approves the view / decision of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in 385 ITR 346 on the proposition that proceedings initiated under section 153C of the Act was not valid for the reason that there being no satisfaction recorded to the effect that the documents found / seized during the course of search were incriminating in nature and prima facie represented undisclosed income. 10.5.3 On the proposition that the CIT(A), while considering the issue of jurisdiction, whose powers are co-terminus with that of the AO, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153 of the Act and should have done whatever was required to strengthen the order of assessment, the learned AR contended as under:- It is contended that the CIT(A) had to necessarily consider and decide the question of jurisdiction at the threshol....
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....ossible to justify the decision to transfer the jurisdiction of assessments in the case on hand from the AO at Chikkamagaluru to Central Circle, Bangalore; 2 years prior to arriving at satisfaction for assumption of jurisdiction under section 153C of the Act. 10.6 On a careful perusal and appraisal of the above cited judicial pronouncements by Revenue and the assessee, and after considering the rival arguments / contentions put forth, we proceed to adjudicate the following ground raised by Revenue hereunder: 10.7 Ground No.1 10.7.1 "1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713." 10.7.2 The Hon'ble Apex Court in the case of CIT Vs. Sinhgad Education Society in C. A. No.11080 of 2017 arising out of SLP (C) N:2527 of 2015 has categorically held that an assess....
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.... IBC Knowledge Park P. Ltd., (supra) is impliedly approved by the Hon'ble Apex Court in the case of CIT Vs. Sinhgad Technical Educaiton Society (supra) as the Hon'ble Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those Assessment Years for which there is incriminating seized material which prima facie represent undisclosed income. 10.8.4 In the course of arguments, the learned DR for Revenue put forth the proposition that the learned CIT(A) ought to have sustained even those additions based on material, not relied upon to invoke proceedings under section 153C of the Act and that the CIT(A) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition in as much as the CIT(A) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C of the Act in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the orders of assessment for Assessment Years 2008-09, 20....
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....08-09 to 2012-13 are dismissed as indicated above. Order pronounced in the open court on this 5th day of July, 2019. ============= Document 1 55. If the observations made by the Tribunal are considered in this regard, it is noted by the Tribunal that it is not necessary that satisfaction should be recorded that documents or valuable assets found in the course of search showed undisclosed income. In view of the aforesaid discussion, we do not think that such can be the correct position of law. 56. Further, in the judgments referred to by the learned counsel for the Revenue, where incriminating material leading to undisclosed income of another assessee was detected in a search operation, in those cases, reopening of the concluded assessment have taken place. There has been no single decision cited by the learned counsel for the Revenue where the assumption of jurisdiction of the Assessing Officer is in the absence of any incriminating material or undisclosed income having been detected during the course search leading to reopening of a concluded assessment. In the instant case, though documents belonging to the assessee were seized at the time of....