TaxTMI 
TaxTMI 
2021 (7) TMI 623
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....these years, the assessee has revised its grounds of appeal and the grounds of appeal taken by the assessee read as under: IT(SS)A.No.145/Ahd/2018 Asstt.Year 2012-13: "1. The Id. CIT(A) erred in law and on facts in upholding the action of the Id. A.O. to assume jurisdiction u/s 153C of the I.T. Act, 1961 though the seized documents relied upon do not 'belong' to the appellant. 2. The Id. CIT(A) further erred in law and on facts in upholding the action of the Id. A.O. to assume jurisdiction u/s 153C of the I.T. Act, 1961 in absence of any incriminating material pointed out in the satisfaction note. 3. The Id. CIT(A) erred in law and on facts in confirming the addition to the extent of Rs. 75,00,000/-as unexplained advances by the appellant despite the fact that business of the appellant firm has not actually commenced. 4. The Id. CIT(A) further erred in law and on facts in holding that the appellant has earned interest amounting to Rs. 2,25,000/-on the alleged unexplained advances. 5. Your appellant craves liberty to add, alter, amend, substitute or withdraw any of the grounds of appeal hereinabove." IT(SS)A.No.1....
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....on under section 132 of the Act. According to the AO, during the course of search, certain documents were found which were inventorised as Annexure A/1, A/2 and A/3. The AO is common qua the search group as well as to the assessee. During the course of assessment proceedings of BRG Group of Baroda, the AO recorded his satisfaction that documents inventorised as Annexure-A/1, page no.5, Annexure-A/2, page no.3 belongs to this assessee, and therefore action under section 153C is required to be taken. He transmitted these documents along with his satisfaction note, and ultimately, a notice under section 153C was issued and served upon the assessee. In the Asstt.year 2012-13, in response to such notice, the assessee has filed return of income on 20.1.2015 declaring total income at (-)Rs. 5,551/-. Thereafter, the ld.AO has issued notice under section 143(2) and 142(1) of the Act. The assessee was contemplating to settle this dispute with the Department before the Settlement Commission, and ultimately it did not, and appeared before the AO who has passed the assessment order in all these years under section 144 r.w. section 153C of the Income Tax Act. Dissatisfied with the assessment ....
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....bullion, jewellery and other valuable article or thing or books or document seized or requisitioned belong to a person other than 'the person referred to in section 153A. Subsequent to the amendment (wef 01/06/2015), section 153C{1) stipulates satisfaction of the AO that (a) any money, bullion, jewellery and other valuable article or thing seized or requisition belongs to: or'(b) any books of accounts or documents or requisition pertains or pertained to, any information contained therein, relates to a person other than the person referred to in section 153A. 9.4 From the perusal of the assessment order I note that the AO mentions the satisfaction required for proceeding u/s 153C in the beginning of the assessment order itself and that the partner of the appellant SBG Infra admitted that the unaccounted cash advances and unaccounted expenses in the seized papers came from M/s SBG Infra and that the aggregate amount will be offered to tax in the hands of SBG Infra, If the sources of the fund of those undisclosed and unaccounted loans and expenses are of SBG Infra, I fail to comprehend how the incriminating papers then do not belong/pertain to the appellant. After all....
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....of accounts, documents, assets seized and requisitioned shall be handed over to the AO having territorial jurisdiction of such other person who will issue notice under section 153C of the Act. Thus, the basic foundation for taking cognizance under section 153C is discovery of any money, bullion, jewellery or other article or things or documents belonging to other person. With effect from 1.6.2015 expression "belongs" has been replaced with "pertains to" in the section 153C. The ld.counsel for the assessee thereafter took us through this satisfaction note available on page no.7 to 9 of the paper book, and submitted that as far as this satisfaction note is concerned, the seized documents relied upon by the AO are page no.5 of Annexure A/1 and page no.3 of Annexure-A/2. On the basis of narrations available on these pages, the ld.AO was satisfied that action under section 153C is required to be taken for the Asstt.Yar 2008-09 to 2013-14. According to the ld.counsel for the assessee, this satisfaction note is wholly misplaced and based on misreading and misconstruction of the seized materials as well as statement of BRG directors. He took us through the copy of the seized material as....
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....icer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :] xxx xxx xxx Post-amendment: 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, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or ....
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....ught within the sweep of section 153C of the Act, which affects the substantive rights of the assessees and cannot be said to be a mere change in the procedure. Since the amendment expands the scope of section 153C of the Act by bringing in an assessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, inasmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendment has been brought into force and based on the amendment, the petitioners who were not included within the ambit of section 153C of the Act as on the date of the search, are now sought to be brought within its fold on the ground that the satisfaction note and notice under section 153C of the Act have been issued after the amendment came into force. Therefore, this c....
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.... did pertain to him or the information contained therein related to him, can the Assessing Officer of the searched person once again record satisfaction as contemplated under the amended provision and forward the material to the Assessing Officer of such other person. The answer would be an emphatic "no" as the Assessing Officer of the searched person after recording the earlier satisfaction would have already forwarded the material to the Assessing Officer having jurisdiction over the other person, therefore, there would be no question of his again forming a satisfaction as required under the amended provisions of section 153C of the Act." 9. Thus, the Hon'ble Court has held that by virtue of amendment in section 153C, its scope has been enlarged, and therefore, amended section will apply prospectively i.e. on the cases wherein the search has taken place after 1.6.2015. In the case on hand, search has taken place on 24.3.2014. Thus, old provision of section 153C would be applicable. According to this old provision, action under section 153C could be initiated against an assessee if during the course of search any money, bullion, jewellery or documents or other valuable articles....
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....or the land at Sun Pharma, Atladra. Ann.A-2 I) Page no.3-This page contains big figures with dates (in gujarati) - regarding advances given in cash to various person on different dates. 6. Relationship of the person referred in S.No.4 with the person referred to in S.No.2 Business transaction 7. Satisfaction of the Assessing Officer of the person referred to in section 153A that the seized material referred to in S.No.5 belongs to the person referred in S.No.4 As per Enclosure "A" annexed herewith separately. 8. Assessment Years involved A.Ys.2008-09 to 2013-14 Sd/- Baroda ....
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....'B' wing. Trident Complex, Opp. GERI Compound, Race Course, Baroda in which a search action u/s 132 was initiated, were seized. During the course of search proceedings, in the statement recorded u/s 132{4) as well as 131(1) of the Act, Shri Sargam Gupta, one of the partner of M/s. SBG Infrastructure LLP accepted the fact that in the documents seized are of transaction done by M/s. SBG Infra LLP and based upon which he had made disclosure of Rs. 12.00 crores in the hands of SBG Infrastructure LLP for F.Y. 2013-14. Section 153C of the Act provides that where the Assessing Officer is satisfied that any money, buFlion7 jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. In the....
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.... 132(4) as well as section 133(1A) of the Act, apart from the page no.3 of Annexure A/2 and page no.5 of the annexure A/1. Therefore, we would deem it appropriate to take note of the statement recorded under section 132(4) of the Income Tax. Copy of the statement is available on page no.27 to 38 and 39 to 40. The relevant part read as under: In the statement recorded on 26.03,2014, with respect to the noting of page no. 3 of Annexure A/2, Shri Sargam Gupta had in response to question nos. 13 & 14 had clarified as under {page nos. 19 8s 20 of the Paper Book): Q. 13 I am showing you Annexure A/2 which is a Diary (Vision Diary Pad). In this Diary, I am showing page no. 3. Please go through the same and explain the contents thereof. Ans. Page no. 3 of Annexure A/2 contains certain dates and figures. These figures represent the advance given in cash to the relatives and acquaintances on different dates. These advances are not recorded in the . regular books of accounts and no taxis paid on such amount. Q. 14 incase clariiy how much advance is given to your relatives- Ans. I have given an amount of Rs, 6,5Q,S8,500/- (Rs. Six Crore Fifty Lakh F....
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....age of Annexure A/2 as well as A/1. They do not contain any name of the assessee; they do not contain as to how they be construed as documents belonging to the assessee. A document can be construed as belonging to the assessee, if it has been obtained from the premises of the assessee under authorized signature. For example, an SMS sent by the partner to any other person, a fax message of page of any books of accounts, copy of any agreement signed by the assessee or by the authorized person of the assessee or any other documents, which forming part of the assessee's books of accounts or some unexplained transaction. On both these pages there are certain notings which on a prima facie perusal do not goad any adjudicating authority to reach at a firm conclusion unless explained by author. Now according to the Revenue these are being authored by Sargam Gupta and these pages put to him during the course of search, while recording statement under section 132(4) of the Act. Shri Sargam Gupta has explained these pages. We have taken cognizance of question no.13, 14 and 16 as well as their replies. But nowhere in these questions he has named the assessee that these are the papers of the....
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....al of the satisfaction note extracted(supra) would indicate that the AO has vaguly made reference of statement under section 131(1A) of the Act, but he has not referred which statement i.e. pre-search statement or consequent to the conclusion of the search. It is also pertinent to note that there are three paragraphs in this note; in the first para, he made reference of the facts, and in the second para he wrote that books of the accounts belonging to the assessee ..... can these pages i.e. A1(5) or A2(3) in page no.3 and 3 of the alleged seizure referred by the AO be construed as books of accounts belonging to the assessee. These documents do not contain names; even page no.3 of Annexure A/2 did not reflect to whom cash was given. There is no reference to this page. Therefore, on the basis of these documents, adjudicating authority could not goad to reach any firm conclusion that these documents belonging to the assessee. Thus, on a detailed analysis of the evidence available on record, we are satisfied that there is no material with the Revenue to form a belief that action under section 153C is required to be taken against the assessee in these two assessment years. Thus, prelimi....
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....CIT(A)- 12, Ahmedabad has erred in deleting addition to the tune of Rs. 6,50,58,500/-. The addition was based on the seized material and the statement of the managing partners of the LLP on oath during and after the search proceedings. On the basis of an affidavit filed by the managing partners of LLP, after 650 days of giving the statement, the addition has been deleted. Hence, the addition has erroneously been deleted by the Ld.CIT(A)-12, Ahmedabad. (2) On the facts and in the circumstances of the case, the Ld. CIT(A)- 12, Ahmedabad has erred in deleting the entire addition of Rs. 5,49,60,000/-. The addition was based on the seized material and the statement of the managing partners of the LLP on oath during and after the search proceedings. However, the same has been negated on the basis of DVO's report. Hence, the addition has erroneously been deleted by the Ld.CIT(A)-12, Ahmedabad. (3) It is, therefore, prayed that the order of the Ld.CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. (4) The appellant craves leave to add, alter, amend, alter, edit, delete, modify or change all or any of the ground of ap....
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....e through the record carefully. We have reproduced satisfaction recorded by the AO in the earlier part of this order. A perusal of this satisfaction would indicate that there is no satisfaction recorded for the Asstt.Year 2014-15 for taking cognizance under section 153C of the Act. At this stage, we would like to make reference to opening paragraph of the assessment order, which reads as under: "ASSESSMENT ORDER "Consequent to search u/s 132 of the I. T. Act in the case of M/s. BRG Infrastructure Ltd. on 24.03.2014, provisions of section 153C were attracted in the case of the assessee and proceedings u/s 153C of the Act were initiated. Accordingly, the case was selected for scrutiny as per Board's guidelines as well as per provisions of section 153B(2) of the Act. Since the assessee has not filed copy of return of income u/s 139(1) of the Act, notice u/s 142(1) of the Act was issued to the assessee on 03.11.2014 requiring it to furnish the copy of return of income/computation of income/tax audit report/ITR V in physical form by 11.11.2014, The said notice was served upon the assessee on 05.1112014." 18. A perusal of the above paragraph would indicate that the ld.....
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....l after taking note of section 153C. The Tribunal has made reference to the decision of Hon'ble Delhi High Court and the order of the Tribunal, Delhi Bench read as under: "7.1. The Hon'ble Delhi High Court in the case of Pr. CIT vs. Sarwar Agency P. Ltd., (2017) 397 ITR 400 (Delhi.) (HC) (supra), considering the identical issue held as under : "Sub-section (1) of section 153C of the Income-tax Act, 1961 provides that the assessment or reassessment of the income of the "other person" would be in accordance with the provisions of section 153A. The first proviso to sub- section (1) of section 153C further states that, in case of such other person, the reference to the date of initiation of search in the second proviso to section 153A(l) "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". In terms of section 153A(1)(b) of the Act. the Assessing Officer shall assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducte....
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....l was justified in holding that the notice issued to the assessee under section 153C of the Act for the assessment year 2006-07 was without jurisdiction since the assess- ment year was beyond the purview of issuance of notice in terms of the provision." 7.2. The ITAT, Delhi, B-Bench in the case of ACIT, C.C.-2, New Delhi vs. Empire Casting Pvt. Ltd., New Delhi (supra), held in paras 5 and 5.1 as under: "5. We have heard the rival submission on this issue and also perused the judgment dated 30th October, 2015 of the Hon'ble jurisdictional High Court in the case of CIT Vs RRJ Securities in ITA No. 164/2015 and ITA No. 175 to ITA.No.1772015. For ready reference, the relevant Para of the judgment is reproduced as under: "24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have ....
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....or applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year." 5.1. The fact that satisfaction u/s 153C of the Act in the case was recorded on 2nd November, 2009, is not disputed by both the parties. In the judgment cited above, the Hon'ble High Court has held that when the Assessing Officer of searched person and such other person in whose case proceedings under section 153C are initiated, is the same officer, then the date of recording of satisfaction would be construed as the date of handing over of the seized records by the Assessing Officer of searched person to the Assessing Officer of such other person in whose case proceedings under section 153C are initiated. Since the Hon'ble High Court has already construed the relevant provisions, we do not concur with the arguments advanced by the ld. CIT DR on this count. Respectfully following the above judgment of the Hon'ble High Court in RRJ Securities (su....
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.... been recorded on 03.10.2013. The A.O. passed the assessment order under section 153B(1)(b) of the I.T. Act, considering the assessment year under appeal i.e., A.Y. 2012-2013 to be the year of search. However, the First Proviso to Section 153C of the I.T. Act provides that the 06 assessment years for which assessments or re- assessments could be made under section 153C of the I.T. Act, would also have to be construed with reference to the date of handing-over of the assets or documents to the A.O. of the assessee. Therefore, the 06 assessment years under section 153C of I.T. Act in the case of assessee would be A.Y. 2008-2009 to 2013-2014. The A.O, therefore, shall have to pass the assessment order under section 153C of the I.T. Act. However, A.O. has not issued any notice under section 153C of the I.T. Act before initiating the proceedings against the assessee which is also admitted by the A.O. in reply to the assessee under RTI Act. The Amendment in Section 153C of the I.T. Act by the Finance Act, 2017, w.e.f. 01.04.2017 to the effect that block period for the person in respect of whom the search was conducted as well as the "other person" would be the same six assessmen....
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....s not sustainable, and accordingly quashed. 23. During the course of hearing, one more alternative contention was raised with regard to jurisdiction of the AO. It was submitted that even for the purpose of a regular assessment proceeding under section 144, the ld.AO has not followed the correct procedure. The scheme of the Income Tax Act contemplates that an assessee would be required to file return of taxable income by his own within the time limit provided under section 139(1) of the Act. If an assessee failed to file the return, and an information came in the possession the Revenue about the taxable income, then before the end of assessment year i.e. time limit to file return under section 139(1) ends, the assessee could be asked to file a return under section 142(1). After the end of relevant assessment year, but within the time limit provided in section 149, a notice under section 148 could be issued after recording reasons. The ld.counsel for the assessee at the time of hearing pointed out that in the present case the assessee has not filed return under section 139(1) of the Act. But return was filed on 28.9.2015 u/s.139(4) of the Act. According to him, either the AO shoul....
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....where any notice has been served under this subsection for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section: *** **** *** 26. The assessment has been framed under section 144 of the Income Tax Act. This section would also have bearing on the issue. Therefore, we take note of relevant part of this section also. It reads as under: 144. (1) If any person- (a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or (c) having made a return, fails to comply with all the terms of a notice issued under s....
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....bmit the aforesaid information at my office on or before, 11.11.2014 either in person or through your authorized representative. Yours faithfully, Sd/- (Mugdha Kiran Sardeshpande) Dy. Commissioner of Income-tax, Central Circle-2, Baroda. 28. Broadly scheme of the Income Tax Act permits assessment in three formats; (i) acceptance of returned income, (ii) acceptance of returned income subject to permissible adjustments under section 143(1) of the Act, and (iii) a scrutiny assessment under section 143(3) of the Act. It is pertinent to note that where an assessee has taxable income, he is supposed to file his returned income under section 139(1) of the Act within the due date provided under this clause. If an assessee does not file his return, and an information came to the possession of the Revenue about the assessable income in the hands of such person, then before the end of the relevant assessment year i.e. assessment year in which due date for filing of the return came to an end, the AO can issue a notice under section 142(1) of the Act directing such person to file return of income in the time given in the notices. If the relevant a....
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....s per sub-clause (i), the ld.AO would require such assessee to file return of his income or the income of any other person in respect of which he is assessable under this Act. In other words, before commencing an inquiry for collecting information for the purpose of scrutinizing the return, he is required to first provide an opportunity to the assessee to file his return under section 142(1) of the Act. After filing of such return, a notice under section 143(2) would be given. In a given case, in spite of opportunity given by the AO an assessee may fail to comply with the notice issued under section 142(1) and did not file the return. In such cases no notice under section 143(2) would be required for scrutinising the return. The dispute in the present case is that according to the assessee it has filed return under section 139(4); i.e. it did not file return under section 139(1) within the time frame, but filed such return on 28.9.2015 i.e. before the end of the relevant assessment year 2014-15. According to the assessee, it is a valid return for all purpose, and for making scrutiny assessment, the ld.AO should have issued a notice under section 143(2) of the Act. The AO did not....