AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1249
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....action u/s 132 & also survey action u/s 133A of the Act. From the seized documents it revealed that the co-owners of the following premises namely A) 24/1, Masjid Bari Street, Kolkata-700006 B) 142, Masjid Bari Street, Kolkata-700006 C)12, AbinashKabiraj Street, Kolkata-700006 D)14B, AbinashKabiraj Street, Kolkata-700006 have substantial rental income. The appellant were the co-owners of the above stated four house properties. The assessment orders u/s 153C/143(3) for AYs 2009-10 to 2015-16 were passed on 15.12.2016 in case of the appellants. The details of the assessments are reproduced herein chart below: Sl. A.Y. Order u/s Date of order Disclosed Income Assessed Income 1 2009-10 153C/143(3) 15.12.2016 17,84,085/- 31,26,900/- 2 2010-11 153C/143(3) 15.12.2016 19,98,177/- 36,69,120/- 3 2011-12 153C/143(3) 15.12.2016 22,37,959/- 43,21,900/- 4 2012-13 153C/143(3) 15.12.2016 26,06,641/- 52,40,770/- 5 2013-14 153C/143(3) 15.12.2016 28,07,259/- 62,08,180/- 6 2014-15 153C/143(3) 15.12.2016 31,44,489/- 84,34,600/- 7 2015-16 153C/143(3) 15.12.2016 35,21,786/- 83,00,750/- 3. Being aggrieved by the ....
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....s erroneous and bad in law. Now on verification of the assessment records it gathered that 'satisfaction note' was written by the AO on 03.10.2016. As per various decision of the Hon'ble Supreme Court, High Court and ITAT the writing of 'satisfaction note' or assumption of the possession of seized assets / documents would be the relevant date of initiation of proceedings u/s 153C in the case of a person who has been covered in course of search of another person. As per decision of Delhi High Court in the case of CIT Vs RRJ Securities Ltd. reported at 62 taxmann.com 39 i [2015] wherein it was observed as: "In this case, it would be the date of the recording of satisfaction under section 153C. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the Assessing Officer of the searched person. It is contended by the revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the reve....
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....e, the Hon'ble High Court also commented at para 18 of the order: "It, plainly, follows that the recording of a satisfaction that the assets/documents seized belong to a person other than the person searched is necessarily the first step towards initiation of proceedings under Section 153C of the Act. In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched. " Further in the very recent order of ITAT, Kolkata in the case of I Q City Foundation Vs. ACIT reported at 123 taxmann.com 134 [2021] the Hon'ble Members of 'C' Bench observed at page 5 para 6 as under: "However, during the search u/s. 132 or requisition under section 132A of the Act if it is found that any third party's money, bullion, jewellery or other valuable articles or things seized or requisitioned belongs to or any books of account or documents seized or requisitioned pertains to or any information contained therein relates to "other than the person" searched u/s. 153A of t....
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....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 case) then he should proceed as per sec. 153C(2) of the Act and assess or reassess the total income of such other person, (the assessee in this case)in the manner provided in section 153A of the Act. So in this case before us, since the AO of the searched person as well as that of the other/ third party / assessee foundation are the same, he / AO of assessee can issue notice u/s 153C of the Act only after satisfaction of this condition precedent also in addition to the requirement of Satisfaction of searched person of AO as discussed supra. [Emphasis given by us]" Again in the same order Hon'ble ITAT further observed at page 8 para 11: "And it is noted that the department preferred an S.L.P against the aforesaid order, which has been dismissed by the Hon....
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....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." In the same order it is further observed by the respected Members of Hon'ble Tribunal at para 15 of page 13: "Since there was no incriminating material against the assessee which has been unearthed /seized during the search conducted on 22-06-2016 from the premises of Mani Group, the satisfaction note prepared by the AO does not satisfy the requirement of law as stipulated u/s. 153C of the Act and since the legal requirement has not been met in the "satisfaction note" recorded by the AO, the very assumption of the. jurisdiction for AY 2014-15 is bad in the eyes of law as held by the Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society 120171 84 taxmann.com 290/250 Taxman 225/397 ITR 344 and, therefore, it is to be quashed. We note that the Hon'ble Apex Court in the case of Sin....
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....rred." 7. In this case, admittedly, the search and seizure operation u/s 132 of the Act was carried out in the case of some other person, however, from the documents seized, it was revealed that the assessee was a co-owner in the 4 premises as noted above. Therefore, the proceedings were initiated against the assessee u/s 153C of the Act and the assessments for six years prior to the searched year were re-opened u/s 153C of the Act. Now, the fact in this case is that the search operation was conducted in the case of Rupa Singh & Ors. on 03.04.2014. In this case, since the AO of the assessee and that of the searched person was the same officer, therefore, there was no requirement of sending the accounts/seized documents to any another officer. To proceed with the assessments as per the provisions of Section 153C of the Act, what was required as per the settled law, was that the AO should have recorded satisfaction in the case of the searched person that certain documents/material seized from the searched person belongs/related to the person other than the searched person ( the assessee in this case) . The satisfaction note was written by the AO on 03.10.2016. Now at this stage, it ....
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....e previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished 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 sub-section (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.]" 7.1. As per the proviso to Section 153C of the Act, as reproduced above, the date of initiation of search, shall be taken as the date of receiving of books of accounts or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. As per the law settled b....
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....law laid down by the Hon'ble Jurisdictional High Court on this issue. The judgment of the Hon'ble Kerala High Court relied upon by the Id. D/R is dealt with in the order of this Tribunal in the case of Majestic Commercial (P) Ltd. (supra). As the undisputed fact is that the additions made in this order passed u/s 153A r.w.s. 143(3) of the Act. are not based on any incriminating material found during search and as the assessment for the Assessment Year 2011-12 has not abated, abated we delete the additions by the Assessing Officer applying the principles laid down by the Hon'ble Jurisdictional High Court on this issue. Even otherwise, on merits all the share applicant companies have been assessed to tax by the Income Tax Department and their assessment orders are passed u/s. 143(3) of the Act. Hence it cannot be said that the identity of these shareholders is not proved. Be it as it may, we do not adjudicate this issue on merits, as we have granted relief to the assessee on the legal issue, as otherwise, it would be an academic exercise." Again in the case of CIT Vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta), the Hon'ble Calcutta High Court express....
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.... had constructed the assessee's house. In the statements recorded u/s 133A, these connected persons had admitted of receiving payments in cash which were not found recorded in the books of the assessee. On these facts and evidences the question arose whether any addition was permissible while framing the assessee for the block period. Although the Hon'ble Apex Court upheld the addition made, it also held that, "It is a cardinal principle of law that in order to add any income in the block assessment, evidence of such must be found in the course of the search under Section 132 of the IT Act or in any proceedings simultaneously conducted in the premises of the assessee, relatives and/or persons who are connected with the assessee and are having transaction/dealings with such assessee." So, from the above cited case laws it is clear that when there is no incriminating materials found in course of search and seizure operation then there is no scope of addition in the case of search and seizure related assessment." 7.4. The sum and substance of the above submissions of the ld. Counsel for the assessee is that the seized incriminating materials have to pertain to the assessmen....
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....d hence the notice under Section 153C and the assessment under Section 153A, read with Section 153C, pursuant thereto are invalid. 14) We have bestowed our due consideration to the respective submissions of the counsel for the parties. 15) At the outset, it needs to be highlighted that the assessment order passed by the AO on August 7, 2008 covered eight Assessment Years i.e. Assessment Year 1999-2000 to Assessment Year 2006-07. As noted above, insofar as Assessment Year 1999-2000 is concerned, same was covered under Section 147 of the Act which means in respect of that year, there were reassessment proceedings. Insofar as Assessment Year 2006-07 is concerned, it was fresh assessment under Section 143(3) of the Act. Thus, insofar as assessment under Section 153C read with Section 143(3) of the Act is concerned, it was in respect of Assessment Years 2000-01 to 2005-06. Out of that, present appeals relate to four Assessment Years, namely, 2000-01 to 2003-04 covered by notice under Section 153C of the Act. There is a specific purpose in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment. 16) In these appeals, qua the aforesaid fou....
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....-01 and 2001-02 was even time barred. 19) We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 7.5. In view of the aforesaid decision of the Hon'ble Supreme Court, wherein it has been held that for framing assessment u/s 153C of the Act, there must be an incriminating material relevant to that assessment year. On the basis of the aforesaid decision of the Hon'ble Supreme Court, the facts have to be examined for each assessment year before us. Assessment Years 2009-10 & 2010-11 8. As per our findings arrived, while adjudicating the additional ground no. 1 taken by the assessee, the assessment framed u/s 153C of the Act in this case is without jurisdiction and therefore, the same is bad in law. Further, no incriminating material was found for the assessment years AY 2009-....
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....on of Rs. 2,815/- under the head income from other sources. As the assessment was not abated, so the non-search related issues cannot be taken for assessment purpose. Hence, the addition is beyond jurisdiction. At the time of passing of assessment order u/s 153C/143(3) dated 15.12.2016, the AO made addition of Rs. 47,45,232/- in respect of the rental income of the four properties. The facts and merit of addition of this year is similar to AY 2011-12 & on the basis of same grounds as discussed in details in AY 2011-12. The addition of Rs. 47,45,232/- should be deleted. At the time of passing of assessment order the AO also made addition of Rs. 11,820/- under the head income from other sources. As the assessment was not abated, so the non-search related issues cannot be taken for assessment purpose. Hence, the addition is beyond jurisdiction." 9.1. A perusal of the assessment order would show that no incriminating material was found for the assessment years under consideration also. Therefore, in the light of the decision of the Hon'ble Supreme Court in the case of Singhad Technical Education Society(supra), assessment framed u/s 153C of the Act in this case is also bad in law....
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....nancial year 2012-13, for the assessee from all four properties in which he is a co-owner works out to be an amount of Rs. 1,06,64,520/- (39,12,500/- + 11,76,400/- + 45,53,875/- + 10,21,745/-)." So from the own admission of the AO it is clear that no incriminating material was seized and the addition was on estimated basis." 10.1. A perusal of the assessment order for the AY 2013-14 reveals that the incriminating documents seized in respect of one building only i.e. 24/1, Masjid Bari Street, Kolkata, the relevant part of the finding of the AO is reproduced as under: "4.1 Rent collected from 24/1 Masjid Bari Street: During the search & seizure operation conducted at 24/1, Masjid Bari street, Shri Jagdish Prasad Singh, assessee and one of the co-owners, stated in his statement, that the rooms of the building are rented and rent can vary from 20,000/- to Rs. 70,000/-. Statements of tenants were also recorded who stated that the rent is around Rs. 40,000/-. Shri laxman Bag, cook of the building, during the course of search stated that around 27 rooms are given out on rent. Even Shri Jagdish Prasad Singh had also stated in his statement that the same number of rooms have been ren....
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....ms, it can be safely presumed that rent collected from other rooms will also be same. Hence the total rent of the building from 27 rooms comes to Rs (39,12,500 X 3) = 1,17,37,500/-.The assessee's share at 1/3 of the rent receipt amounts to Rs. 39,12,500/- (rounded off to the nearest '00)." 10.2. A perusal of the above reproduced relevant part of the assessment order reveals that a diary containing the rental income for the whole year was found during the search and seizure operation. The rent from nine rooms was noted in the aforesaid diary. The ld. Counsel for the assessee has brought our attention to his submissions made before the ld. CIT(A) in this respect, which for the purpose of ready reference are reproduced as under: "That this book shown rental income only from 9 rooms that were rented during the relevant period. Your attention is drawn to the fact that when a person maintains details of income and expenses. He maintains to the fullest. Further in the relevant case, different books are therefore different yrs. no one will maintain khata for different yrs. showing income for some months and will not write income for some months. Thus the khata seized and un-seiz....
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....the less taxes have been found to be offered. Assessment Year 2014-15 12. The ld. Counsel for the assessee, for the AY 2014-15, has made the following submissions: "Again in this case for AY 2014-15 the AO made addition of Rs. 87,63,571/- in respect of the rental income of the appellant from four properties as stated in the first para of this submission. Though there was substantial addition but no incriminating materials were seized in respect of properties except for the property mentioned at S.I. No. (A) at fist para of this submission. But in respect of other 3 properties no incriminating materials were seized. In respect of property at 24/1, Masjid Bari Street, Kolkata-700006 incriminating materials were seized in respect of 9 rooms only. But on estimate basis without any incriminating materials the AO estimated the rental income from ether eighteen rooms of that property. Similarly, in respect of properties, which was mentioned at Sl. B, C and D at first para of the submission, no incriminating documents or materials were seized in course of search operation and no document pertains to appellant. But in spite of that the AO on estimate basis made the addition. Your Honour....
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..../-. Therefore, the total rental income of the assessee would be (1304166+692000+5357500+600850) at 79,54,516/- . After granting deduction u/s 24(1) of the Act, at the rate of 30% , the total income of the assessee during the year comes out at Rs.55,68,161/- whereas the assessee has offered the income of the year under consideration at Rs.31,44,095/-. Therefore, the addition to the extent of Rs.24,22,066/- is sustained for the assessment year under consideration. However, the assessee will be entitled to the adjustment of the taxes paid for the assessment years AY 2009-10, AY 2010-11, AY 2011-12, AY 2012-13 and of excess taxes paid for AY 2013-14 against the taxes due for the AY 2014-15 in view of the assessment quashed for A.Y. 2009-10 to A.Y. 2012-13 and additions sustained for A.Y. 13-14 as ordered above. Assessment Year 2015-16 13. The ld. Counsel for the assessee, in respect of the AY 2015-16, has made the following submissions: "At the time of passing of assessment order u/s 153C/143(3) dated 15.12.2016, the AO made addition of Rs. 83,86,274/- in respect of the rental income of the four properties. The AO passed order u/s 143(3), but since this year falls under search a....