TaxTMI 
TaxTMI 
2018 (6) TMI 1794
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....since the ld. CIT (A) has given a finding in favour of the assessee on merits of the issue, the assessee did not file the appeals against the impugned orders of the ld. CIT (A). However, when the assessee received the notice of the appeals by the revenue, the assessee has consulted its Chartered Accountant and after the advise of the Counsel, the assessee preferred these cross appeals wherein the validity of reopening of the assessments is challenged. The ld. A/R of the assessee has submitted that the ld. CIT (A) has not adjudicated the grounds of the assessee challenging the validity of reopening of the assessment by giving the reason that since the appeals on merits were decided in favour of the assessee, therefore, the legal ground raised by the assessee becomes infructuous. Hence the ld. A/R has pleaded that once the revenue preferred the appeals against the impugned orders of the ld. CIT (A), the assessee also filed these cross appeals and raised the issue of validity of reopening of the assessment. It is pleaded that the delay in filing the appeals may be condoned as it was neither willful nor deliberate but due to the facts and circumstances as explained. 2.1. On the other ....
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....e disposed off by the Tribunal as if it was an appeal presented within the time prescribed in sub-section (3) of section 253 of the IT Act. Therefore, the assessee could have very well file the cross objection after receiving the notice of appeals filed by the revenue against the impugned orders of the ld. CIT (A). The ld. CIT (A) has not adjudicated the grounds raised by the assessee regarding validity of reopening on the reason that the issue of quantum has been decided in favour of the assessee as observed at page 73 of the impugned order :- " Further, it view principle of piercing the corporate veil to book behind it, no addition required to be made in the hands of the assessee M/s. Shri Kalyan Buildmart Pvt. Ltd. as additions (supra) are required to be made in the hands of (i) Sh Rajendra Kr. Jain, (ii) Sh Navrattan Kothari, (iii) Sh Vimal Chand Surana & (iv) Sh Kushal Chand Surana. Further, no addition is also required to be made on protective basis in the hands of Sh Madan Mohan Gupta. As issue of the quantum has been decided in favour of the assessee, the issue pertaining to re-open u/s 147 of the Act, has become academic in nature, hence not adjudicated." Hence, if th....
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....ade by the AO on protective basis and, in not issuing directions u/s 150(1) of the I.T. Act for taxing the said amount in the hands of Sh. Madan Mohan Gupta and Smt. Shashikala Gupta who were the share holders of the assessee company, as the land rights were transferred through sale of shares of assessee company. The Appellant crave leave or reserves the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 5. For the assessment year 2007-08 the assessee has not pressed ground No. 2. The ld. A/R of the assessee has stated at Bar that since the assessment year 2007- 08 is beyond the period of six years from the date of search, therefore, the assessee does not press ground no. 2 and the same may be dismissed as not pressed. The ld. D/R has raised no objection as the ground no. 2 of the assessee's appeal for the assessment year 2007-08 is dismissed as not pressed. Ground No. 1 of the assessee's appeal is regarding validity of reopening the assessment. 6. There was a search and seizure operation under section 132 of the IT Act in case of Shri Rajendra Jain Group and his associates group members on 23rd May, 20....
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....d that the reasons recorded by the AO for reopening of the assessment do not reveal any income assessable to tax in the hands of the assessee escaped assessment. The assessee had duly recorded the transaction of purchase of land in its books of account and also shown in the Balance Sheet as on 31st March, 2007. Therefore, in the absence of any material or even in the absence of any allegation in the statement of Shri Madan Mohan Gupta that the assessee has paid any money over and above shown in the Sale Deed and duly recorded in the books of accounts, the AO was having no basis to form the belief that the alleged income of Rs. 5,00,00,000/- has escaped assessment in the hands of the assessee. The ld. A/R has further contended that there must be some material on record to enable the AO to entertain belief or for initiating reassessment proceedings. The material on record should be such as to lead to the inference that income has escaped assessment. In support of his contention he has relied upon the decision of Hon'ble Supreme Court in case of ITO vs. Lakhmani Mewal Das, 103 ITR 437 (SC) and submitted that there should be a rational connection/direct nexus or live link between the m....
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....ion vide Sale Deed dated 24.08.2006. The said transaction of purchase of land was duly recorded in the books of accounts of the assessee and also reflected in the Balance Sheet as on 31st March, 2007. The original return of income was filed by the assessee on 20th February, 2008 which was processed under section 143(1) by the AO. The reopening of the assessment is based on the seized material and statement recorded under section 132(4) of Shri Madan Mohan Gupta pursuant to the search under section 132 of the Act on 23rd May, 2013 in the case of Shri Rajendra Jain Group. Since this assessment under consideration is beyond the period of six years from the date of search, therefore, it was not falling in the scope of section 153A/153C of the Act and consequently the AO reopened the assessment by issuing the notice under section 148 on 27th March, 2014. The reasons recorded by the AO for reopening of the assessment are as under :- " During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exh....
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....is duly recorded in the books of accounts, there is no material or document found and seized during the search and seizure action which reveals or indicates payment of any cash by the assessee. The transactions recorded in the seized material were explained by Shri Madan Mohan Gupta as the amount received from Shri Rajendra Jain and, therefore, in the absence of any allegation or any fact recorded in the seized document or revealed in the statement made by Shri Madan Mohan Gupta that the alleged payment was made by the assessee, there is no rational in forming the belief that an amount of Rs. 5,00,00,000/- was assessable to tax in the hands of the assessee has escaped assessment particularly keeping in view the fact that the assessee itself was incorporated on 21.08.2006. The Hon'ble Bombay High Court in case of DHLF Venture Capital Fund vs. ITO (supra) has held in para 18 and 19 as under :- " 18. A protective assessment as the learned author indicates is regarded as being protective because it is an assessment which is made ex abundanti cautela where the department has a "doubt as to the person who is or will be deemed to be in receipt of the income". A departmental practice, wh....
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....mpt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment' in future. Writing legislation is a constitutional function entrusted to the legislature. 19. In the view which we have taken it has not been necessary for the Court nor is it appropriate for this Court to enter upon the merits of the other issues raised by the learned senior counsel appearing on behalf of the assessee. The appeal before the Tribunal is still pending and hence, it would not be proper for this Court to express any opinion thereon. We clarify that we ar....
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.... deed made in favour of Shri Kalyan Buildmart Pvt. Ltd. made on 24.08.2006. However, the cash transactions detailed above have been made during FY 2007-08 i.e. AY 2008-09. The assessee has failed to satisfactorily explain the transactions recorded on this page. I have thus reason to believe that income to the extent of Rs. 14,24,12,650/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961." Thus it is clear that the reopening is based on the incriminating documents seized during the search and seizure action and were inventorized as Exhibit 1-5 of Annexure AS and Exhibit 1-8 of Annexure-A. When the AO himself has initiated the proceedings of reassessment on the basis of the seized material, then a question arises whether invoking of provisions of section 147/148 by the AO was right and legal course or not. At the outset, we note that an identical issue was considered by this Tribunal in case of Shri Navratan Kothari vs. ACIT vide order dated 13.12.2017 in ITA No. 425/JP/2017 in para 6 as under :- "6. We have considered the rival submissions as well as relevant material on record. The matter revolves around the transaction of purchase and sale of land s....
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....adan Mohan Gupta submitted that the following pagers of various exhibits are related to land transactions at Chainpura behind Entertain Paradise, Jaipur. Sr. Annexure No. & Exhibit No. Page No. Found/seized from 1 Annexure A Exhibit-1 15 to 24,27,38,43,44, and 69 to 74 Residential premises 2 Annexure A Exhibit-2 47 and back side of 48, 50 to 54 Residential premises 3 Annexure A Exhibit-5 1 to 77 Residential premises 4 Annexure AS Exhibit-1 1 to 3,7,9,10 Office premises 5. Further in the statements of Shri Madan Mohan Gupta, he submitted that on the above page, details w.r.t. a land transactions at Village chainpura behind entertainment Paradise, Jaipur has been recorded which was purchase by Shri Rajendra Kumar Jain resident of D-25, Lal Bahadur nagar, Jaipur, through him i.e. Shri Madan Mohan Gupta. The deal was finalized at Rs. 12,43,27,000/- out of which discount of Rs. 1% was allowed for registration of land. Therefore, Rs. 13,30,84,000/- were net payable to the seller and the details of the same have been recorded on page No. 15-18 of Exhibit-1 of AnnexureA, found and seized from his residence. Later on this land was sold to Shri K.G. Kothari. Shr....
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.... 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 82a[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A] :] 83[Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to 84[sub-section (1) of] section 153A 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 :] 85[Provided further that the Central Government may by rules86 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be r....
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....person, the Assessing Officer shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. The Amritsar Bench of this Tribunal in case of ITO vs. Arum Kumar Kapoor (supra) while deciding an identical issue of validity of initiation of proceedings u/s 147/148 on the basis of seized material has held in paras 7.2 and 8 as under:- "7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case of M/s. Today Homes & Infrastructure (P.) Ltd. on 28th March, 2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the Dy. CIT, Central Circle-22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under s. 153C/148 of the Act. It is after that that during the....
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.... it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal." A s....
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....sts that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the reassessment proceedings, he has to cross the hurdles attached with reassessment by way reasons for reopening of assessment, time limit for issue of notice and provision for obtaining sanction of higher authority in certain circumstances. Under the provisions of section 153A to 153C these hurdles are cleared by using the non abstante clause in the said section. In other words, under the new provisions of section 153A, the AO is not required to satisfy these conditions before issue of notice. The only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes i....
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....sment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of ac....
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....sessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the bas....
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....nder Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess....
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....ear falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate'. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the 'six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, t....
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....sue notice u/s 148 of the Act in respect of those six assessment years which falls within the exclusive jurisdiction of section 153A of the Act and accordingly the A.O. was not justified in issuing notice u/s 148 on 28-8-2006 and in completing the impugned assessment u/s 143(3) r.w.s. 147 of the Act on 31-10-2006. The A.O. instead of complying with the requirement of section 153A proceeded with the provisions of section 147/148 which are not applicable in the assessment u/s 153 A of the Act, therefore, the impugned assessment completed u/s 143(3) r.w.s. 147 of the Act is a nullity and as such the assessment order dtd. 31-10-2006 passed u/s 143(3) r.w.s. 147 of the Act is illegal, arbitrary, wholly without jurisdiction and, hence, the same is quashed." 17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls w....