TaxTMI 
TaxTMI 
2022 (1) TMI 735
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....ng that the learned Assessing Officer had no jurisdiction to reopen the assessment based on the document found and seized during search action as the IT Act prescribes completely separate mechanism under section 153A to 153C dealing with the search cases which should have been followed. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) erred in confirming the action of the Learned Assessing Officer in making addition of Rs. 3,75,00,000/- being alleged cash loan taken by the appellant, by invoking section 69D of the I.T. Act. 4. On the facts and circumstances of the case as well as in law, the learned CIT(A) erred in making addition of Rs. 3,75,00,000/being alleged cash loan taken by the appellant without appreciating that the same is already taxed in the hands of Shri Somnath Nair, from whose premises the alleged documents were found; hence, the same cannot be taxed again. 5. Without prejudice to the above, the learned CIT(A) erred in making addition of Rs. 3,75,00,000/- being alleged cash loan taken by the appellant without appreciating that ' the said amount is already considered in the petition filed before the Income Tax Settlement Co....
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....the above data is prima facie not reflected in the Return of Income filed by the assessee and thereby in the accounts of the assesses. I have therefore, reasons to believe that the income has escape assessment within the meaning of section 147 of the Income tax Act, 1961 for the A.Y.2011-12 to the extent of transaction mentioned above, Therefore, notice u/s. 148 is issued." 5. In response, assessee filed the objections vide letter dated 28.01.2014 and after considering the submissions and objections, Assessing Officer rejected the same with the following observations: "4. The submissions of the assessee and the contentions raised by the assessee have been considered and the same are not acceptable. These papers have been seized during the search and seizure operations and they bear the seal and signature of the assessee company. Assessee has argued that these amounts have been added in the hands of Shri Somanathan Nair and therefore the same should not be added in the income of the assessee Company. This contention of the assessee is not acceptable. These papers belong to the assessee and the taxability of this amount in the hands of the assessee cannot be questioned. The fact t....
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....45,00,000/- 1% per month i.e. 12% per annum Total 3,75,00,000/- 2.2 On the basis of above documents, the Appellants case has been reopened vide notice dated 25.02.2013 issued u/s 148 of the Act. After considering the various submissions made by the Appellant during the re-assessment proceeding, an addition of Rs. 3,75,00,000/- has been made under section 69D of the Act to the returned income of the Appellant vide order dated 29.03.2014 passed under section 143(3) r.w.s. 147 of the Act. 2.3.1 The Appellant, at the very outset, object the action of the AO in assuming the jurisdiction u/s 148 of the Act. The Appellant submits that the undisputed facts in its case are that the loose papers showing the alleged cash loan taken by the Appellant has been found and seized during the search action at the residence of Shri Nair. For such circumstances, there are separate and complete mechanism stated in section 153A to 153C of the Act dealing with the search cases which needs to be followed. Therefore, in the cases of search action, recourse to section 148 of the Act cannot be taken. 2.3.2 The Appellant submits that section 153A, 153B and 153C of the Act provides for new sc....
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....but no notice under subsection (2) 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." 2.3.3 Section 153C deals with cases of persons other than the persons searched u/s 132 of the Act. As per the provisions of section 153C, where the Assessing Officer of the searched party is satisfied that any money, builion, jewcllery or valuable article or thing or books of account or other documents seized or requisitioned belongs to a person other than the searched person referred to in section 153A, then the books of accounts or documents shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed in accordance with the provisions of section 153A. The CBDT issued a circu....
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....ssment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 65.6 The new section 153B provides for the time-limit for completion of search assessments. It provides that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling within six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition unde....
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....mendments will take effect from 1st June, 2003." 2.3.4 A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A or 153C of the Act. 2.3.5 The Appellant submits that under the provisions of section 147 of the Act, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that there is material which suggests 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. Before invoking section 148 o....
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....ew has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of Satisfaction note should also be decided in the light of the above Judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court." In view of the above facts, the Appellant submits that the re-assessment order passed u/s 143 (3) r.w.s. 147 of the Act shall be quashed as the same has not complied with the provision of the Act. 2.3.7 In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case (i.e. Shri Nair). The AO formed the opinion based on loos....
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....pto Hon'ble ITAT and Hon'ble ITAT had to decide whether AO was correct in reopening the assessment when the documents giving rise to re-assessment has been found in search action at the premises of third parties?. The reassessment order has been quashed by the ITAT. The operational part of the order reads as under: "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 within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section IS3A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable t....
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....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." (page 22 paragraph 16 of ITAT (Vizag) order) The judgment in the case of Allcargo (supra) has been confirmed by the Hon'ble Bombay High Court reported in 374 ITR 0645 Bom. In view of the above facts and judicial pronouncements, the Appellant submits that the re-assessment order passed u/s 143(3) r.w.s 147 of the Act shall be quashed." 7. After considering the detailed submissions of the assessee, Ld.CIT(A) rejected the above sub....
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....In this regard, he relied in the following case law: (i). Batta Yadamma v. ITO in ITA No. 1695/Hyd/2017 and others for A.Y. 2008-09 dated 29.11.2018. (ii). Sri Suryadevara Avinash v. Dy. CIT in ITA No. 496-498/Hyd/2017 for A.Y.s 2007-08 to 2009-10 dated 09.08.2019. (iii). M/s Kalyan Buildmart Pvt. Ltd. v. ACIT in ITA Nos 152 and 153/JP/2018 for A.Y.s 2007-08 and 2008-09 dated 28.06.2018. (iv). Kalyanji Velji HUF v. DCIT CC 8(4) in ITA Nos 2284/Mum/2019 and others for AYs 2010-11 to 2013-14 dated 08.01.2021. (v). Shri V.L. Khandee in ITA No 1971/Pun/2014 for AY. 2006-07 dated 24.04.2018. (vi). Sanjay singhal (HUF) v. DCIT (207 TTJ 853 (Chd)) dated 19.06.2020. (vii). Asst. CIT v. Shri Srinivas Rao Hoskote in ITA Nos 1154 and 1155/Bang/2015 for A.Y.s 2010-11 and 2011-12 dated 21.02.2018. 9. He also made submissions of Merit, since we are dealing with the jurisdictional issue, we are not adjudicating on merit. 10. On the other hand, Ld. DR submitted that Assessing Officer has limited say on the issue of initiation of assessment since the investigation wing decides the section under which the Assessing Officer can proceed to reassess the income of the assessee. He also s....
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.....CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. We observe from the various decisions of Tribunals on this issue. The Hyderabad bench in the case of Batta Yadamma v. ITO in ITA.No. 1695/Hyd/2017 and in Sri Suryadevara Avinash v. DCIT in ITA.No. 496-498/Hyd/2017, in which one of the member is a party, held as under: "7. Considered the rival submissions and perused the material on record. Similar issue was dealt by the Bengaluru Bench of ITAT in the case of Shri Srinivasa Rao Hostake (supra) wherein the coordinate bench has held as under: "06. We have heard the rival contentions and perused the record. In our view the scope of Section 153Cand 148 are clear from the bare reading of the two provisions insomuch as Section 153C it starts with 'Notwithstanding nothing containing in Section 139, 147, 148, 149, 151 and 153'. Thus if there is any contradiction between Sections 153C and 148 ,in that eventuality, Section 148 shall give way to Section 153C. There is a reason for saying so because if a notice u/s.153C is issued t....
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....ss the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests 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 cros....
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....has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment 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....