TaxTMI 
TaxTMI 
2022 (1) TMI 735
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the assessment u/s 147 of the IT Act without appreciating 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i.e. 12% per annum 8. Mahendrabhail K. Shah 01-01-2011 45,00,000/- 1% per month i.e. 12% per annum The information contained in 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r annum 6. Sampatbhal 04-01-2011 50,00,000/- 1% per month i.e. 12% per annum 7. B.P. Mehta 01-01-2011 5,00,000/- 1% per month i.e. 12% per annum 8. Mahendrabhail K. Shah 01-01-2011 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 de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 sub-section (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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se may be shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er person in accordance with the provisions of section 153A. 65.10 An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals). 65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections. 65.12 These amendments 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proceedings are completed under section 158BC of the Act of the searched person." 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view 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 me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he above contentions, the Appellant rely on following judicial pronouncements: i) G. Koteshwara Rag vs DCIT (ITA No 400/Vizag/2014) Facts of the case: A search action has taken place at the premises of the third person where the documents belonging to the assessee has been found. The AO instead of using the methodology stated ins section 153C of the Act, re-opened the case u/s 148 of the Act and made the addition pertaining to undisclosed investment. The case travelled upto 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceedings, then the abated assessment 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" " (page 21 paragraph 15 of ITAT. (Vizag) order) State Bank of India vs DCIT [122 ITR 609 Mum] "18. ................ After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is Initiated under 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 exe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....even discussing on the issue of applicability of assessment under section 153C of the Act. Aggrieved the assessee is in appeal before us. At the time of hearing, Ld AR submitted that Assessing Officer reopened the assessment u/s 147 based on the material found during search. He brought to our notice the relevant discussions of Assessing Officer in his order on reasons for reopening and justification of initiation of proceedings u/s 147. He submitted that the proper method to reassess the income of the assessee under section 153C and not under section 147. 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cord. We observe from the reasons recorded for initiation of reassessment proceedings that the proceedings u/s 148 of the Act were initiated heavily relying on the documents found during search conducted in the group concerns of the Lodha group in which the employee, Shri Somnath Nair, of the group is also covered. The documents found in his position were confiscated and the Assessing Officer has fully satisfied that these documents are belongs to assessee. After recording the satisfaction, he proceeded to initiate the proceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.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. Simila....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess 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 case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment u/s 147 has been removed by the non abstante clause used in section 153A. 14. In the present case on hand, admittedly, the Assessing Officer 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 p....