TaxTMI 
TaxTMI 
2023 (9) TMI 335
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....ent Year 2017-2018 (WP No. 2424 of 2021), Assessment Year 2018-2019 (WP No. 2399 of 2021) and Assessment Year 2019-2020 (WP No. 2395 of 2021). Subsequent to filing of these petitions, assessment orders were passed pursuant to the above mentioned notices for the Assessment Years 2011-2012 to 2019-2020. The said assessment orders were also challenged by filing nine separate Writ Petitions mentioned in the cause title for Assessment Years 2011-2012 to 2019-2020 and the grounds of challenge included those raised in the earlier nine petitions. For the reasons set out in the order of this Court passed on 21st July 2023 in above mentioned Writ Petitions, those petitions were disposed as withdrawn. 2. Various independent grounds of challenge have been raised in the Writ Petitions. The petition number and Assessment Year are as under : WP No. 2593 of 2021 - A.Y. 2011-2012 WP No. 2598 of 2021 - A.Y. 2012-2013 WP No. 2847 of 2021 - A.Y. 2013-2014 WP No. 2597 of 2021 - A.Y. 2014-2015 WP No. 2594 of 2021 - A.Y. 2015-2016 WP No. 2588 of 2021 - A.Y. 2016-2017 WP No. 2595 of 2021 - A.Y. 2017-2018 WP No. 2625 of 2021 - A.Y. 2018-2019 WP No. 2696 of 2021 - A.Y. 2019-202....
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....assessed petitioner at loss of Rs. 270,23,38,422/-. 6. On or about 30th July 2019 Hubtown Limited was subjected to proceedings under Section 132 of the Act. During the course of proceedings above-mentioned under Section 132 of the Act, the Income Tax Department had come across a ledger account of petitioner in the books of Hubtown Limited. It appears, during the course of proceedings under Section 132 of the Act in the case of Hubtown Limited, certain statements were recorded of employees/officers of Hubtown Limited. Immediately, on the very next day after the search proceedings on Hubtown Limited, i.e., 31st July 2019, Officers of the Income Tax Department conducted a survey under Section 133A of the Act in the premises of petitioner to verify that the entries shown in the ledger account of petitioner in the books of Hubtown Limited, agreed with entries in the ledger account of Hubtown Limited made in the books of account of petitioner. It is not in dispute that the entries in both sets of books were in agreement. Although not relevant for the purpose of this petition, during the course of various proceedings taken in the case of Hubtown Limited it has been clarified that Hubto....
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....ent Years 2012-2013 to 2019-2020 and annexed acknowledgment for filing the same. In the said letter, petitioner pointed out that for the Assessment Year 2011-2012, there was some difficulty in filing such a return on the portal and accordingly, requested respondent to consider its original return as a return filed pursuant to notice under Section 153C(1) of the Act. Petitioner also requested respondent no. 1 to provide materials in support of his claim to being clothed with jurisdiction to issue the aforementioned notice including copies of the authorization for search on Hubtown Limited, the satisfaction recorded by the Assessing Officer of Hubtown Limited and petitioner, the date on which, it is alleged that any material was handed over to petitioner's Assessing Officer and the material based upon which the satisfaction was recorded. 9. On 9th September 2021, respondent no. 1 replied to petitioner's letter dated 31st August 2021 and provided only a copy of the aforementioned satisfaction note dated 13th July 2021. Petitioner says that a perusal of respondent's reply will show that the covering letter along with which the satisfaction note was provided has a DIN and is digitall....
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....to take proceedings under Section 153C of the Act in the case of petitioner. 11. It is petitioner's case that it is well settled that such claim of having jurisdiction has to be established/defended by respondent no. 1 only with reference to the satisfaction note which does not refer to Shah Coal Pvt. Ltd. Further, according to petitioner, in this regard the show cause notice claims that a notice dated 11th September 2021 under Section 142(1) of the Act was issued to petitioner but not yet replied to. Petitioner says that the said notice dated 11th September 2021 (a Saturday) required petitioner to reply by 13th September 2021 (a Monday), i.e., giving less than one working day time, and was issued along with a series of other such notices for various years. Hence by its reply dated 13th September 2023 petitioner had sought time to file a reply. Nevertheless, the very same question was comprehensively replied to in petitioner's reply to the show cause notice as detailed hereinafter. Similar notices were issued and replies were filed for other assessment years. 12. Petitioner filed its reply to the show cause notice dated 22nd September 2021 dealing with all the items required ....
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....st judgment assessment. This is because an assessment is usually required to be made under Section 143(3) of the Act after considering such evidence the assessee may produce and after hearing the assessee. To invoke Section 144 of the Act, the conditions specified in Section 144 (1) (a), (b) or (c) have to be satisfied. In the instant case, the impugned assessment order shows respondent has erroneously proceeded on the basis that no return has been filed by petitioner pursuant to notice under Section 153C of the Act since no return was available in the ITBA portal. This is factually incorrect as return was filed on 15th August 2021 and an acknowledgment is also on record, Therefore, respondent no. 1 could not have passed an order exercising power under Section 144 of the Act relying upon the provisions of Section 144(1)(a) of the Act. As recorded in the impugned assessment order, no notice under Section 143(2) of the Act was issued and, therefore, Section 144(1)(c) is not applicable. Even Section 144(1)(b) of the Act is not applicable because petitioner has not failed to comply with the terms of any notice issued under Section 142(1) of the Act. In any event, even before passing an....
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....Bom.). The satisfaction note does not show anything incriminating because it only records that petitioner's account was found in the books of Hubtown Limited. Importantly, it tallied with the account of Hubtown Limited in the books of petitioner. Therefore, there can be nothing incriminating in that. The satisfaction note also says that petitioner had entered into transactions of purchase and sale of shares of Hubtown Limited which has been recorded in petitioner's books of accounts and tax has been paid on the capital gain. Therefore, there can be nothing incriminating in that. Reference has also been made in the satisfaction note to an alleged re-cast of loan from petitioner to Hubtown Limited into an advance against property during year ended 31st March 2019 and, therefore, there can be nothing incriminating in that. Since no incriminating material relating to petitioner has been found during the proceedings under Section 132 of the Act in the case of Hubtown Limited and proceedings of petitioner having not abated, respondent cannot assume jurisdiction to assess/re-assess petitioner's income under Section 153A/153C of the Act. (d) In any event....
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....al assessment proceedings and hence, the same cannot be said to be income which has escaped assessment. Secondly, the satisfaction note refers to trading in shares of Hubtown Limited which has been undertaken on the stock exchange, recorded in the books of account of petitioner and the resulting capital gain has been offered for tax and the amount has been taxed in the hands of petitioner. Since the write- off of a bad debt cannot be held to be an asset, clause - (a) of the 4th proviso to Section 153A(1) of the Act would bar any assessment that is proposed to be made for the relevant assessment year/years, i.e., Assessment Year 2011- 2012, 2012-2013 and 2013-2014. 16. Mr. Suresh Kumar submitted as under : (a) The order dated 28th September 2021 and notice of demand dated 28th September 2021 was communicated to assessee vide letter dated 30th September 2021 having computer generated DIN. Thus, communication of the assessment order and notice of demand has been done vide letter dated 30th September 2021 having DIN No. ITBA/COM/F/ 17/2021-22/1036046315(1). Thus, the communication of assessment order and notice of demand is done only after creation of DIN Number, being lett....
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....ment assessment? (a) Under the scheme of the Act, an assessment is usually required to be made under Section 143(3) of the Act, after hearing such evidence as the assessee may produce, after taking into account all relevant material gathered and after hearing the assessee. The provisions of Section 144 of the Act are special and exceptional which can only be invoked if any of the conditions specified in Section 144 (1) (a), (b) or (c) are satisfied. Section 144 of the Act reads as under : Section 144 (1) If any person - (a) fails to make the return required [under sub-section (1) of section 139] and has not made a return or a revised return under sub-section (4) or sub-section (5) [or an updated return under sub-section (8A)] of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 [or fails to comply with a direction issued under sub- section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the [Assessing] Officer, after taking into account all relevant material which the [Assessing] Officer ....
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....ovisions of Section 144(1)(c) of the Act being applicable; (c) Insofar as, the provisions of Section 144(1)(b) of the Act are concerned, as explained hereinabove, there has been no failure to comply with the terms of any notice issued under Section 142(1) of the Act. Therefore, the purported exercise of powers under Section 144 of the Act cannot be sustained; (d) Even if one assumes that one of the jurisdictional preconditions set out in Section 144(1)(a), (b) or (c) of the Act is satisfied then, Section 144(1) of the Act read with the 1st proviso requires that an Assessing Officer shall give an assessee an opportunity of being heard as to why the proposed assessment of income to the best of his judgment should not be made. A perusal of the show cause notice dated 22nd September 2021 shows that this has not been done in the instant case. Further, the provisions of the 2nd proviso to Section 144(1) of the Act cannot apply since petitioner has not failed to comply with any notice under Section 142(1) of the Act; (e) Therefore, the impugned assessment order dated 28th September 2021 could, if at all, have been passed under Section 153C read with Section 143(3) of the Act. ....
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....rocedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when....
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....sub-sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. In the instant case, paragraph 4 of the impugned assessment order records that no notice under Section 143(2) of the Act has been issued. The Revenue has erroneously proceeded on the basis that the said notices are not required since no return of income had been filed by petitioner which was factually incorrect; (f) For all the reasons set out above, the impugned order dated 28th September 2021, whether treated as having been passed under Section 153C read with Section 144 or Section 143(3) of the Act cannot be sustained and is bad in law, of no legal effect and ought to be quashed and set aside; (g) On this ground alone, rule ought to be made absolute in terms ....
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.... after the 1st day of October, 2019 unless a computer- generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication. 3. In exceptional circumstances such as,- (i) when there are technical difficulties in generating/allotting/ quoting the DIN and issuance of communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties: or (iii) when due to delay in PAN migration. PAN is lying with non-jurisdictional Assessing Officer; or (iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) when the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner/ Director General of income-tax. In cases where manual communication is required to be issued due t....
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....ct in a specific format set out in paragraph 3 of the Circular. Paragraph 4 of the Circular provides that any order/ communication which is not in conformity with paragraphs 2 and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued. The contents of the Circular have been re-iterated in a Press Release dated 14th August 2019; (b) It is indisputable that the impugned assessment order dated 28th September 2021 does not bear a DIN and further that the said order issued without a DIN does not bear the required format set out in paragraph 3 of the Circular and, therefore, the impugned assessment orders for Assessment Year 2011-2012 to 2019-2020 ought to be treated as invalid and deemed never to have been issued. We find support for this view in Brandix Mauritius Holdings Ltd. (Supra) where the Hon'ble Delhi High Court has held that an order passed in contravention of the said Circular is void, bad in law and of no legal effect. Paragraphs 16 to 17.1, 18 and 19 read as under : 16. The final assessment order was passed by the Assessing Officer (AO) on 15.10.2019, under Section 147/144(C) (13/143(3) of the Act. Concededly, the final ....
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....e will fall within the scope of paragraph 2 of the Circular as a communication of the specified type issued to any person. In the case of the satisfaction note no regularization dated 13th October 2021 has been issued; (e) In view of the binding nature of Circular issued under Section 119 of the Act, and the peculiar facts and circumstances of the case, the consequences of contravention of the Circular set out above, therefore, ought to be given full effect to. The object of the said Circular is clear and laudatory and intended to ensure that proper trail of all assessment and other orders are maintained and further that any deviation therefrom can only be undertaken after prior written approval of the higher authorities under the Act. Therefore, the satisfaction note dated 13th July 2021 and the impugned order of assessment dated 28th September 2021 ought to be treated as invalid and deemed never to have been issued; (f) On this ground, rule ought to be made absolute in the following petitions : A.Y. 2011-2012 - WP No.2593 of 2021 A.Y. 2012-2013 - WP No. 2598 of 2021 A.Y. 2013-2014 - WP No. 2847 of 2021 A.Y. 2014-2015 - WP No. 2597 of 2021 A.Y. 2015-2016 - WP ....
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....ding 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] : [Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless - (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1 - For the purposes of this sub-section, the expression "relevant assessment year shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment year....
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....unt or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [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]:] [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 [subsection (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:] [Provided further that the Central Government may by rules 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 required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year i....
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....nts/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132A or not, i.e., whether any addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under Section 132 A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under Section 132 or requisition under Section 132A, the assessment has to be done under Section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to pass assessment orders and to assess the 'total income' taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments. 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/una....
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....y an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 8. For the reasons stated hereinbelow, we ....
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.... declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under t....
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....ssessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." (emphasis supplied) Therefore, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act; (b) In Continental Warehousing Corporation (Supra), the Court held that the notice under Section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under....
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.... paid on the resulting gain. (iii) reference is made to an alleged re-cast of loan from petitioner to Hubtown Limited into an advance against property during year ended 31st March 2019 and the same is not relevant to Assessment Year 2017-2018. (f) Accordingly, it is irrefutable that no incriminating material relating to petitioner has been found during proceedings under Section 132 of the Act in the case of Hubtown Limited; (g) The assessment of petitioner has clearly not abated in terms of the 2nd Proviso to Section 153A(1) of the Act. Although the 1st proviso to Section 153C(1) of the Act says "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 subsection (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", the same cannot be applied in the instant case. This is because : (i) in cases such as the present case where the Assessing Officer of the person searched and th....
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.... of the searched person and as observed hereinabove that thereafter the Assessing Officer of the searched person is required to transmit the documents so seized to the Assessing Officer of the other person. The Assessing Officer of the searched person simultaneously while transmitting the documents shall forward his satisfaction note to the Assessing Officer of the other person and is also required to make a note in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in the case of Ganpati Fincap (supra), the same is for the administrative convenience and the failure by the Assessing Officer of the searched person, after preparing and dispatching the satisfaction note and the documents to the Assessing Officer of the other person, to make a note in the file of a searched person, will not vitiate the entire proceedings under Section 153C of the Act against the other person. At the same time, the satisfaction note by the Assessing Officer of the searched person that the documents etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the Assessing....
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....tents of Para No.4(g) of the Writ Petition, I say that under this para, the petitioner has claimed that the assessment order was made beyond the time limit prescribed in section 153B of the Act. In this regard, reference is invited to section 153B, the relevant proviso to the same is reproduced hereunder - "Provided also that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on or after the 1st day of April, 2019,- (i) the provisions of clause (a) or clause (b) of this sub- section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twelve months 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 or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over unde....
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....atisfaction note? (a) Insofar as Assessment Year 2017-2018 is concerned, respondent no. 1, in the satisfaction note, has recorded that he seeks to re-assess petitioner's income in respect of two items - (i) the loan account recording the loan granted by petitioner to Hubtown Limited and (ii) transactions of purchase and sale of shares of Hubtown Limited by petitioner; (b) During the course of the original assessment proceedings, a specific query was raised by respondent as to the allowability of write off of part of the loan granted by petitioner to Hubtown Limited. In response, full and comprehensive details of the amount written-off was provided as well as the reasons therefore and the same were accepted by the Assessing Officer when completing petitioner's assessment on 29th June 2019. Therefore, there can be no question of the allowability of this write-off now being reviewed and a different view being taken in these proceedings. Ex-facie, there has been no failure to disclose truly and fully all material facts. Further, no new tangible material having a bearing on petitioner's income in this regard has come to the notice of respondent. Disallowing the v....