TaxTMI 
TaxTMI 
2021 (10) TMI 1249
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.... the group were covered for search & seizure 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,....
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....the case, the initiation of proceeding u/s 153C is erroneous and bad in law. It is submitted that the contention of the first ground was the initiation of proceedings u/s 153C is 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 r....
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.... searched person). Thus, by virtue of the second proviso to section 153A of the Act, the assessments/reassessments that were pending on the date of receiving such assets, books of account or documents would abate. " Furthermore, 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, bul....
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....ct to assess the income of other person (third party) as per section 153A of the Act." The respected Members also observed as under in page 6 para 8 of their order: "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 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 Satisfact....
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....arched 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." 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 t....
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....his assessment year also no notice/s 143(2) or 142(1) issued in due course of time and no assessment order was passed. So at present there is no scope for assessment for AY 2017-18. So, assessment orders passed u/s i53C/143(3) for AY 2009-10 & 2010-11 are bad in law and for AY 2016-17 & 2017-18 no assessment order passed and now both the years are time barred." 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 ....
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....sition is made except in cases where any assessment or reassessment has abated.] 8[(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the 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 no....
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....& 2015-16 I want to present a general submission in respect of incriminating materials. Now as per plethora of case laws addition without incriminating materials / documents is not sustainable at all in the case of search and seizure assessment. In the case of Sensitive Vanijya Pvt. Ltd. Vs. ACIT, CC-4(1), ITA No. 53/Kol/2018, the Hon'ble Members of 'A' Bench, ITAT Kolkata observed as under at para 15: "We are bound by the propositions of 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....
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....nts of an assessee, no addition is permissible in the order u/s 153A unless it is based on any incriminating material found during the course of search." In the same line the appellant wants to mention the Supreme Court's decision in the case of CIT Vs. Ajit Kumar [2018] 93 taxmann.com 294 / 255 Taxman 286 / 404 ITR 526 (SC). "In the case along with the search u/s 132 against the assessee, simultaneous survey proceedings were conducted against the assessee's contractor and the interior decorator who 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....
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....Assessment Years prior to 2002-03. Therefore, notice for the Assessment Years 2000-01 and 2001-02 was clearly time barred. In respect of Assessment Years 2002-03 and 2003-04, the submission of Mr. Mistri was that one of the jurisdictional conditions precedent to the issue of a notice under Section 153C is that 'money, bullion, jewellery or other valuable article or thing' or any 'books of accounts or documents' must be seized or requisitioned. In the present case, nothing was seized relating to any of the Assessment Years in question and 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 Assessmen....
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....erial which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 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 fo....
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.... AO. The addition without any incriminating materials in search and seizure assessment has no basis and legal support. So, the arbitrary addition may kindly be deleted. The AO has extrapolated the income in an arbitrary manner without bringing any material on record or without even examining the assessee or the tenants to arrive any conclusion. Estimated addition has to be bad in law even on merits of the case. The estimates are neither bona fide nor on any rational basis because there was no date or information available for this period. At the time of passing of assessment order the AO also made addition 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....
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....entioned at page 6, 3rd para of the assessment order which is reproduced here: "As the figures of rent for this building pertaining to AY 2013-14 was not available in the seized books of account, the most logical way to estimate the same is to determine the figure of rent for AY 2014-15 for which the data was available and then to allow a reduction on account of lower rent realized in the earlier year. Accordingly, a 15% reduction is allowed from the rent realized during the AY 2014-15 to arrive at the figure of rent collection for AY 2013-14 amounting to Rs. 10,21,745/-[12,01,700/- 15% of 12,01,700/-] Total estimated receipts from rent, during the financial 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 r....
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.... 35000 40000 40000 40000 40000 40000 40000 40000 40000 40000 298000 298000 305500 330000 330000 330000 326000 336000 331000 2884500 Rent collection from 24/1, Masjid Bari for 2013 Month/entry no. January February March Total 1 35000 40000 40000 2 40000 40000 40000 3 41000 41000 41000 4 35000 35000 40000 5 35000 40000 40000 6 35000 35000 35000 7 35000 35000 35000 8 35000 40000 40000 9 40000 40000 40000 331000/- 346000/- 351000/- 10,28,000/- Hence, collection for the months from April 2012 to March 2013 from 9 rooms is (2884500+1028000) = Rs. 39,12,500/-. From the rent collected from 9 rooms, 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/- (round....
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.... property in question was at Rs.39,12,500/-. The assessee having one third share in the said property, the rental income from the said property would be Rs.13,04,166/- upon which the assessee would be entitled to deduction at the rate of 30% u/s 24(1) of the Act. However, the assessee, for the AY 2013-14, has already offered an income of Rs.28,07,259/- which is more than the income that can be arrived at from the incriminating documents. We find force in the contention of the Ld CIT(A). AR that the assessee had offered the income in lumpsum of Rs. 1,80,00000/- which was bifurcated on approximation basis and that the excess income offered in an year may be adjusted against the year in which less income is found to have been offered. The additions made by the AO in respect of the aforesaid assessment year are set aside and it is directed that the taxes paid over and above the income of Rs. 1304166/- would be adjusted against other years for which 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.....
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....for the assessment year under consideration, the incriminating material was found in respect of four premises. The total rent collected from 24/1, Masjid Bari Street for the year under consideration was Rs.39,12,500/-. The assessee has 1/3rd share, hence his income comes from this property at Rs. 13,04166/- The rent collected from 142, Masjid Bari Street, as per the incriminating documents from October, 2013 to March, 2014, was Rs.41,52,000/-. The assessee has one sixth share in the said property, which comes out at Rs.6,92,000/-. Similarly, in respect of total rent collected from 12, Abinash Kabiraj Street, as per the incriminating documents was Rs.3,21,45,000/-. The assessee has one sixth share in the said property, which comes out at Rs.53,57,500/-. Similarly, in respect of the total rent collected from 14B, Abinash Kabiraj Street, as per the incriminating documents was Rs.36,05,100/-. The assessee is having one sixth share in the said property, which comes out at Rs.6,00,850/-. 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....