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2020 (11) TMI 168
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....ssment Order passed by the Ld. A.O. u/s.153 of the Income Tax Act, 1961 for the concerned assessment year is bereft of jurisdiction for not being based on any such incriminating material found during the course of the search conducted at the premises of the "searched person" i.e., Mani Group on 22.06.2016. 2. That the Ld. A.O. has erred in making and the Ld. CIT(A) has erred in upholding the impugned additions when no such incriminating material qua the concerned assessment year has been found during the course of the search conducted at the premises of the "searched person" i.e., Mani Group on 22.06.2016 to warrant any such addition u/s 153C of the Income Tax Act, 1961. 3. That the Impugned Order passed u/s. 143(3)/153C of the Income Tax Act, 1961 is void ab initio and against the settled law decided by Hon'ble Supreme Court in the case of Sinhgad Technical Education Society(2017) 397 ITR 344 (SC). 4. That, without prejudice to the above grounds, the Ld. A.O. and the Ld. C.I.T.(A) have erred in sustaining the impugned addition of Rs. 50,00,000/-as a bogus donation incomplete ignorance of the documents evidencing the valid donation of Rs. 50,00,000/- ....
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....nvoking special provision of assessment u/s. 153C of the Act without satisfying the requirement of law as stipulated u/s. 153C of the Act, so according to assessee the action of AO is ab-initio void. Without prejudice to the above legal challenge, the second challenge (ground nos. 4 to 6) are against the action of the AO to have made the addition of Rs. 50 lakhs without any incriminating material seized from the third party premises where search was conducted on 22.06.2016 and for having erroneously relied upon the statement of Shri C. K. Ladia recorded u/s. 131 of the Act which was admittedly recorded behind the back of the assessee during survey dated 23.09.2016 u/s. 133A of the Act and that too without furnishing a copy of the statement to the assessee before framing of reassessment and relying upon the same for making the addition without affording opportunity to the assessee to cross examine Shri Ladia. The third challenge (ground no. 8, there is no ground no 7, wrongly numbered) is against the action of Ld. CIT(A) to have erroneously assumed that M/s. Parthiba Holding Pvt. Ltd. (donor of donation of Rs. 50 lacs) has disclosed the amount donated to assessee (Rs. 50 lakhs) unde....
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....revious year in which such search is conducted or requisition is made [and for the relevant assessment year or years] : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years [and for the relevant assessment year or years] : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the relevant assessment year or years] referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : II. Assessment in case of any other persons 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein....
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....urnished by such other person and no notice under subsection (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under subsection (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before 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, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 5. We note that Section 153A/153C of the Act was introduced by Finance Act, 2003 w.e.f. 1.6.2003. It replaced the provisions relating to block assessment contained in Chapter XIVB and introduced the new procedure for making assessment u/s. 153 of the Act, which is now a part of Chapter XIV of the Act, "Procedure for Assessment" and contains provisions from section 139 - 158A of the Act. The sub-heading of Section 153A of the Act is "Assessment in case of Search....
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....ed or requisitioned pertains to or any information contained therein relates to "other than the person" searched u/s. 153A of the Act, [i.e a third party in this case the 'assessee' foundation], then the AO of the searched person has to record his satisfaction that the money, bullion, jewellery or other valuable articles or things seized or requisitioned belongs to the other person (third party, the assessee foundation in this case) or any books of account or documents seized or requisitioned pertains to the other persons (third party, the assessee in this case) or any information contained therein relates to the other person (third party, the assessee in this case), then the AO of the searched person has to prepare a satisfaction note that during the search u/s. 132 of the Act of a person (Mani Group in this case), the search team has found/un-earthed money, bullion, jewellery or valuable articles or things, which were seized and the AO has found that among the such seized material, certain specific valuable article or thing belongs to a third party (other person as referred in section 153C of the Act who was not searched and in this case, the assessee) or books of account or docu....
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.... person notice and assess or reassess income of such other person in accordance with the provisions of section 153A". And this part of Section 153C was substituted by insertion by the Finance (No.2) Act, 2014 with the following amendment w.e.f 01.10.2014 which reads "and that assessing officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person". [Emphasis given by us] 8. Thus, we note that by the aforesaid amendment brought in section 153C of the Act, the Parliament has stipulated another condition-precedent before the Assessing Officer of the third party, (i.e, the assessee in this case) can resort to issue notice u/s 153C read with 153A of the Act only when he (AO) is satisfied from a perusal of the books of account or documents or assets seized or requisitioned have a bearing in the determination of the total income of the such other person (third party, the assessee in this ....
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....unearthed during search with the Assessing Officer before he/she arrives at the satisfaction that the seized asset/document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of 'satisfaction' and the same interpretation has been given by various courts. [refer 55 [2019] taxmann.com 202 (Gujarat) PCIT v. Himanshu Chandulal Patel (Para 20, 21)]. 10. It is noted from the scheme of the Act u/s. 153A of the Act, the Assessing Officer gets jurisdiction to assess six assessment years prior to the previous year on which search is conducted. The assessment under section 153A of the Act can be broadly divided in two categories, one is in respect of "completed assessment" on the date of search by the AO already made under section 143(3)/147/153A/153C and will also cover those years which period of notice u/s. 143(2) of the Act has expired and only processing of return u/s. 143(1) of the Act has been made. The second category "Pending Assessment" is related to the years for which the assessments are pending before the AO on the date of search meaning notices have been issued by the AO u/s. 143(2)/ 148 have been issued. For dete....
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....search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending....
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....ect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search abate. 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 AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court ....
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....#39; to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.' 22. The aforesaid principles would be equally applicable to proceedings initiated under Section 153C of the Act as Section 153C(1) of the Act expressly provides that once the AO has received "money, bullion, jewellery or other valuable articles or thing or books of account or documents seized" from the AO of the searched person, he would proceed to assess or reassess the income of the person to whom such ass....
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.... Income Tax Appellate Tribunal, "E" Bench, Kolkata, in CIT v. Veerprabhu Marketing Ltd. ITA Nos.2172 and 2174/Kol/2006, pertaining to the assessment years 1998-99 and 1999-2000, and I.T.(SS) A. Nos.61-63/Kol/2007, pertaining to the assessment years 2001- 02, 2002-03 and 2003-04, allowed the appeals preferred by the assessee. The aggrieved revenue has come up in appeal. .......... 2. Mr. Jain, learned Advocate appearing for the assessee, submitted as follows: (a) The assessment under section 153C read with section 153A read with section 144 of the Income Tax Act was altogether without jurisdiction because such assessment was made for all the five years on the basis of survey conducted under section 133A of the Income Tax Act. He submitted that the power under section 153C read with section 153A cannot be exercised on the basis of any discovery made during survey under section 133A. (b) His next submission was that in any event, during the survey, no incriminating material was found which may have led the revenue to exercise power under section 153C read with section 153A. 4. He contended that even when assessment is made on the b....
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....ction 153C of the Act." ......... 7. With respect to the second submission advanced by Mr. Jain, we called upon Mr. Nizamuddin in vain to show us the incriminating material, if any, found either during the search or during the requisition or even during the survey which is or may be relatable to the assessee. Mr.Nizamuddin as unable to show that any such incriminating material was unearthed at any of the three stages pertaining to the assessee. 8. We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. 9. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. 10. We find no infirmity in the aforesaid act of the learned Tribunal. The appeal is, therefore, dismissed.....
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....were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded by him. He has to speak through the reasons." Their Lordships added that " the reason recorded should be self explanatory and should not keep the assessee guessing for reasons. Reasons provided the link between the conclusion and the evidence.....". Therefore, reasons are to be examined only on the basis of reasons as recorded by the AO. This analogy/ratio decidendi of the Hon'ble High court is applicable to the 'Satisfaction- Note' prepared by the AO when he recorded his satisfaction note in respect of a third person (assessee in this case) against whom he/AO proposed to invoke the special provision and issue notice under section 153C of the Act. For that the AO of the searched person (Mani Group in this case) is duty bound to record his satisfaction that during search conducted on those persons, the third party (assessee's) assets which belongs to it (assessee) or documents pertained/relates to the third party/ other person/assessee as envisaged in section 153C of the Act was seized and th....
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....9A(V)45) We note that these materials are described in the Panchnama dt. 23.06.2016 (a copy of which are found placed at Annexure L of the Paper Book at Pgs. 105-109(U) which is seen as 'A contribution /donation receipt book of M/s SPS Synergy Foundation (now the assessee) with pre-printed serial no. 01 to 50'. The Appellant's explanation in this regard, is that the said seized material is in fact nothing but counter foils of the money receipts issued to the donors for the FY 2013-2014 (A Y 2014-2015) - all of which form part of the books of accounts of the Appellant for the said FY. In order to substantiate/corroborate this fact, the Ld. AR drew our attention to the documents below: 1. The ledger copies of the Appellant Society for the period between 19.12.2013 to 28.03.2014 (copies of which are found placed at Annexure W of the Paper Book at Pgs.117- 119). 2. Bank statements of the Appellant evidencing the receipt of the said donations from the various parties during the said period (copies of which are attached herewith at Annexure 0 of the Paper Book at Pgs. 120-137). 3. We have carefully examined the ID-MSL/3, and we find that this is the contributio....
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.... with counter foil - for the FY 2014- 2015 (AY 2015- 2016) - all of which form part of the books of accounts of the Assessee for the said FY. In order to substantiate/corroborate this fact, the Ld. AR drew our attention to the documents below: 1. Ledger Copies for the period between 28.07.2014 to 31.03.2015 (copies of which are attached herewith at Annexure R of the Paper Book at Pgs.141-144). 2. Bank statements of the Appellant evidencing the receipt of the said donations from the various parties during the said period. (copies of which are attached herewith at Annexure S of the Paper Book at Pgs.145-169). 3. We have carefully examined the ID-MSL/5, and we find that this is the contribution/donation receipt book of assessee foundation for the AY 2014-15 and this material is counterfoils of the money receipts issued to the donors and the all of which form part of the books of account of the assessee for AY 2014-15 and cannot be called as a new discovery of material during search and so cannot be termed as incriminating material. 15. From a perusal of the aforesaid finding of fact it can be seen that these documents are in no way related to AY 2016-17 and so it cannot be....
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.... the assessee qua the said assessment year would be without the satisfying the jurisdictional fact required to invoke section 153C of the Act. We draw the attention in this regard to the following excerpts of the decision of the Hon'ble Supreme court in Singhad Technical Education (supra), wherein their Lordship took note of the Hon'ble High Court's findings while confirming Tribunals view which is as under;- "6. The tribunal has found that incriminating material seized and stated to be pertaining to all six assessment years did not establish any co-relation document-wise with the assessment year in question. In other words, the tribunal concluded that the present matter indicates that the issue of notice could be on the basis that there is specific incriminating information in possession of the Assessing Officer. It is in these circumstances that the tribunal found and as indicated in paragraph 8 of the impugned order that the revenue's assertion that the Assessing Officer is empowered under the statute to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is condu....
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....e termed as perverse and given the above-noted factual background. None of these appeals raises any substantial question of law. They are accordingly dismissed. No costs." And the aforesaid finding of Hon'ble High Court has been affirmed by the Hon'ble Supreme Court by observing as under: 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was dis....
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....la has made a statement on 23.06.2016, which was recorded u/s. 132(4) of the Act wherein he admitted that the said cash (Rs. 40 lakhs) belongs to M/s. I Q City Foundation (the assessee in this case). It was submitted by the Ld. DR that the seizure of cash belonging to the assessee was the reason for AO to ask for the list of the donors who gave donation to the assessee foundation. According to the ld. DR, after receiving the list of donors, the AO conducted survey on one of the Donor's premise i.e M/s. Pratibha Holding Pvt. Ltd. (M/s. PHPL) which entity had donated the so called donation of Rs. 50 lacs to the assessee for the AY 2014-15. According to Ld. CIT DR, in the survey u/s. 133A of the Act, the statement of Shri Chandra Kant Ladia, Director of M/s. PHPL was recorded on oath u/s. 131 of the Act wherein he admitted that M/s. PHPL had donated Rs. 50 lakhs to M/s. SPS Synergy Foundation (now assessee foundation) and in lieu of the donation given, cash was received back from them. It was pointed out by the Ld. D.R that the donor (M/s. PHPL) had admitted of doing this in order to reduce its tax liability. According to Ld. D.R, based on this discovery of relevant fact, and the mate....
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....on and for purchase of several materials which at times requires cash to be withdrawn from the bank for payment; and even though the donations were received by assessee through bank account/RTGS, still the assessee at times have to withdraw the money for application of the fund. And it was also brought to our knowledge that the assessee also collects fees in cash as well as on line for services rendered by it as well as the assessee receives remittance of tuition fees from students either in cash or online. So, according to Ld.AR, since the cash seized on 22.06.2016 is not incriminating against the assessee for AY 2017-18, so he wondered as to how it (Rs. 40 lakhs cash) can be termed as incriminating in nature for AY 2014-15. And since Rs. 40 lakhs seized does not pertain to AY 2014-15 which is under consideration before us, this seizure of Rs. 40 lakhs found during search on 22.06.2016 cannot by any stretch of imagination be linked to this A.Y. (AY 2014-15) and be termed as incriminating material qua against the assessee for AY 2014-15. 19. The Ld. AR also contended that in any case, the statement of Shri Ladia of M/s. PHPL cannot be relied upon by the AO since the same was rec....
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.... the addition on illegal presumptions and since there was no incriminating material found against the assessee qua this AY 2014-15 in the unabated assessment for AY 2014-15, no additions could have been made and so the actions of AO to issue notice u/s 153C of the Act was wholly without jurisdiction and, therefore, the contention of Ld. CIT DR needs to be rejected. 20. The ld. A.R countering the arguments of the ld. CITDR that ld. CIT(A) has taken note of the fact that the donor M/s PHPL has remitted Rs. 12 lacs as tax for undisclosed income of Rs. 25 lacs for the AY 2014-15, and this fact was also a factor in confirming the order of the AO, according to Ld AR was devoid of any merit. According to ld. A.R., this fact of M/s PHPL offering the undisclosed income by utilizing the Income Declaration Scheme, 2016 (in short IDS, 2016) was not taken note by the AO while preparing satisfaction note on 03.09.2018 and has not made a whisper about the same while framing the assessment order u/s 153A / 153C / 143(3) dated 31.01.2018. According to Ld. A.R., this fact of the donor M/s PHPL disclosing their undisclosed income through IDS Scheme, 2016 came to light during the remand proceedings....
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.... survey u/s. 133A of the Act the statement of Shri Chandra Kant Ladia was recorded on oath u/s 131 of the Act, [which has been reproduced by the Assessing Officer in the order] and he noted that though Shri Ladia has admitted to have given donation to assessee foundation, he added that it has been given back to it in cash. So the Assessing Officer concluded that the donation was bogus and made the addition of Rs. 50 lakhs. So when the merit of this addition is adjudicated, we have to keep in mind that assessment year under consideration i.e. A.Y. 2014-15 was a completed assessment by framing scrutiny assessment u/s 143(3) on 31.12.2016, so when the satisfaction note was prepared by the Assessing Officer u/s. 153C against the assessee on 03.09.2018 the assessment for AY 2014-15 was not pending before the AO, so AY 2014-15 is an unabated assessment. So according to settled position of law any addition ought to have been made by the AO only on the basis of incriminating material as held by the Hon'ble Supreme Court in Singhal Technical Education (supra) and by the jurisdictional High Court in Veeraprabhu Marketing Ltd. (supra). And we have already while adjudicating the legal issue (s....
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.... as incriminating for AY 2014-15. So, this contention of Ld. CIT D.R cannot be countenanced. Coming next to the contention of Ld. CIT DR that the statement of Shri Ladia of M/s PHPL recorded u/s. 131 during survey that donation was made in lieu of cash justifies addition of Rs. 50 lakhs, we have given our thoughtful consideration and we are of the opinion that following facts are necessary to be taken into consideration for appreciating this contention. (a) We note that there is no mention about survey at M/s PHPL and the statement of Shri Ladia found place in the 'satisfaction note' prepared by the AO on 03.09.2018; and after the issue of notice u/s. 153C of the Act against the assessee, the Assessing Officer for the first time by notice dated 10.10.2018 brought to the notice of assessee that survey u/s 133A of the Act was carried out at M/s PHPL on 23.09.2016 and that the director Shri Ladia had made an admission of receiving back in cash the donation they gave to assessee. (b) Pursuant to the notice of AO dated 10.10.2018, it is noted that the assessee/appellant filed its response to the Notice u/s. 143(2) vide Letter dt. 03. 12.2018, a copy of which is found p....
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....ss examine Shri Ladia, the AO has framed the reassessment u/s. 153A read with section 153C/143(3) of the Act which is per- se bad in law inter alia for violation of Natural Justice. 24. According to us, the Assessing Officer before framing the reassessment order dated 31.12.2018 was bound to give a copy of the statement of Shri Ladia, which was recorded during survey and which was admittedly recorded behind the assessee's back. The Assessing Officer ought not to have kept the assessee in the dark by not furnishing the statement of Shri Ladia and should have been fair enough to give an opportunity to assessee to meet the allegation if any against the assessee which according to AO, have been discovered during survey. And further, the AO should have provided an opportunity to assessee to cross examine Shri Ladia to test the veracity of the statement of Shri Ladia, which was not done by AO before framing the reassessment order dated 31.12.2018. Therefore, there is per-se violation of Natural Justice and so the non furnishing of statement of Shri Ladia to the assessee before framing of reassessment order dated 31.12.2018 and not giving an opportunity to assessee to cross examine ....
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....this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cros -examination. That apart. the Adjudicating Authority simply relied upon the price-list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-li t itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may ....
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....ailable at such place, (ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and (iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act. Explanation.-For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept. (2) An income-tax authority may enter any place of business or profession referred to in subsection (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset. [(2A) Without prejudice to the provisions of sub-section (1), an income-tax authority acting under this sub-section may for the pu....
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....ll, on no account, remove or cause to be removed from the place wherein he has entered, [***] any cash, stock or other valuable article or thing. (5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act. (6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information ....
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....ng survey of M/s. PHPL is without jurisdiction and so null in the eyes of law. For that, we rely on the decision of Hon'ble Punjab & Haryana High Court in Gheru Lal Bal Chand Vs. ITO (1982) 137 ITR 190 (P&H) wherein it has been held as under: "3. The learned counsel for the petitioner has argued that the ITO, A-Ward, wrongly issued notices (Annexures P1 to P4) and wrongly passed the order (Annexure P5) during the process of survey under section 133A. This contention of the learned counsel for the petitioner must prevail. Under sub-section (1) of section 133A, the ITO was competent to enter the business premises of the petitioner and further to inspect the books of account or other documents as he may require. It is admitted that the ITO did enter the business premises of the petitioner and whatever books of account and other documents he wanted to examine were made available to him. Under sub-section (3) of section 133A, the ITO could place marks of identification of the books of account, or other documents inspected by him, or could make inventory of any cash, stock or other valuable article or thing checked or verified by him, or record the statement of any person which ....
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....ng Officer found that the assessee and his brother Rewa Chand Ahuja had disclosed the cost of construction of a building owned by them along with one Deepchand as Rs. 8,00,000, of which Rs. 4,40,000 was shown as contributed by the assessee and his brother Rewachand and the balance of Rs. 3,60,000 by the other co-owner Deepchand. The Assessing Officer referred the matter to the Departmental Valuation Officer (the DVO) on November 29, 1989, who estimated the cost of construction of the portion owned by the assessee and his brother Rewachand at Rs. 6,51,000. The difference in cost of construction, namely, Rs. 2,11,000 was held to be unexplained investment. As a consequence, Rs. 1,05,500 being 50 per cent, of Rs. 2,11,000 was added to the assessee's income under section 69 of the Act and the remaining Rs. 1,05,500 was added to the income of Rewachand Ahuja. On appeal, the Commissioner of Income-tax (Appeals) reduced the addition to Rs. 81,000. Both the assessee and the Revenue challenged the order of the Commissioner of Income-tax (Appeals) before the Tribunal. The Tribunal found that the reference to the DVO was made by issue of a commission under section 131(l)(d) of the....
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....eeding is a sine qua non. Pari materia, therefore, power in respect of matters mentioned in sub-section (1) of section 131, viz., (a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions, can be exercised only if a proceeding is pending before the concerned officer and not otherwise. For the exercise of such power, existence or pendency of a proceeding is, therefore, a must... The Taxation Laws (Amendment) Act, 1975, introduced sub-section (1A) in section 131. Under this sub-section, if the Assistant Director of Inspection has reason to suspect that any income has been concealed...then, for any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) of section 131, 'notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority'. Absence of this non obstante clause in section 131(1) is significant. Reading section 131(1) and section 131 (1A) together, it is obvious that whereas ....
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....corded of Shri Ladia u/s. 131 of the Act during search conducted u/s. 133A without satisfying the condition precedent as envisaged in subsection (6) of section 133A was without jurisdiction and consequently non-est in the eyes of law. Therefore relying on the decision of the Hon'ble Punjab & Haryana High Court in Gheru Lal Bal Chand Vs. ITO (1982) 137 ITR 190 (P&H) and the decision of the Hon'ble M.P.High Court in the case of CIT Vs. Nendram Ahuja 290 ITR 453(MP) the statement of Shri Ladia cannot be taken into consideration for drawing adverse inferences against the assessee. Moreover, as we have noted earlier the statement of Shri Ladia recorded during the survey u/s. 133A admittedly under oath, [when not sanctioned by law to take statement on oath during survey ]cannot have evidentiary value as held by the Hon'ble Supreme Court in the case of Kader khan (supra). Thus, looking from any angle the statement of Shri Ladia of M/s. PHPL recorded behind the back of the assessee and without being tested on the touch stone of cross examination, the veracity/correctness/truthfulness of the statement not being verified, cannot be the basis for drawing adverse inference against the assessee....
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....In case if the AO suspected that the assessee was indulging in collecting bogus donation, he could have verified the veracity of those donations given by other donors, who have donated more than Rs. 7 crores other than M/s. PHPL, which the AO for reasons best known to him has not bothered to do. And without doing any such exercise, we note that the AO has drawn an adverse finding against the assessee in respect of the donation of Rs. 50 lakhs from M/s PHPL as bogus donation based only on the statement of Shri Ladia, which for the various legal infirmities pointed out (supra) is a nullity as per the decision of the Hon'ble Supreme Court in the case of Andaman Timbers and other case laws discussed. We are of the view that the statement of Shri Ladia cannot be the basis for drawing adverse inference against the assessee and therefore, no addition could have been made against the assessee only on the said statement. So, when we remove this statement, and we note that there was no incriminating material which were unearthed during search qua the assessee/appellant foundation qua AY 2014-15, which would conclusively show that Rs. 50 lakhs was transferred from one side to another, we find....
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....dered we find force in the argument of ld. A.R that Shri Ladia's statement during the survey on 23.09.2016 that M/s PHPL has received back the donated amount of Rs. 50 lacs from the assessee foundation does not corroborate with their subsequent action of only disclosing an amount of Rs. 25 lacs for AY 2014-15 during the IDS Scheme, 2016. We note that for AY 2013-14 to 2016-17 M/s PHPL has disclosed in IDS Scheme, 2016, a total of Rs. 71.25 lacs which fact goes on to show that M/s PHPL had enough money in its kitty to give donation to assessee foundation. Therefore, the action of M/s PHPL declaring Rs. 25 lacs as undisclosed income for AY 2014-15 cannot be considered to justify the action of ld. CIT(A) in confirming the addition of Rs. 50 lacs as against the assessee foundation. Thus we find the contentions raised by the Ld. CIT DR are devoid of merits and so it is rejected and therefore on merits also the assessee succeeds. However, since we allow the legal issue raised by the assessee, we hold that the action of AO to invoke section 153C of the Act was without jurisdiction and, therefore, the impugned action of AO to issue notice u/s. 153C of the Act is null in the eyes of law and....
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.... jurisdiction to assess the assessee/appellant foundation invoking the power u/s. 153C of the Act and framed assessment u/s. 153A read with sec. 143(3) of the Act. In this respect, we have already discussed in details (supra) the legal provision governing section 153C and sec. 153A of the Act and, therefore, for the sake of brevity it is not again repeated. The only question that needs to be looked into is whether the satisfaction note [which we have already reproduced (supra)] that was prepared by the AO u/s. 153C of the Act satisfies the requirement of law for assumption of jurisdiction u/s. 153C of the Act against the third party which is the assessee foundation in this case for AY 2016-17. We note from the perusal of the satisfaction note (supra) dated 03.09.2018, the AO mentions about ID mark MSL-3, ID mark MSL-4 and ID mark MSL-5 which were seized from the search conducted u/s. 132 of the Act on 22.06.2016 at Mani Group. We note that MSL 3 (pages 1 to 50), MSL 4 (pages 51 to 56 & 62-63) and MSL 5 (pages 1, 4, 17 to 36) are the counterfoils which are in the nature of donation receipts issued by the assessee society (formerly known as M/s. SPS Synergy Foundation for FY 2013-14 ....