AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 204
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....nder the Act, more so when even the alleged seized material based upon which action u/s 153C was initiated, were not supplied despite specific requests made. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in framing the impugned assessment order u/s 153C/143(3), is bad in law and against the facts and circumstances of the case, more so when no incriminating material was found as a result of search. 3. That in any case and in any view of the matter, the jurisdictional conditions for initiating proceedings u/s 153C and for passing the impugned assessment order were not complied with and hence the assessment order is bad, more so when there was no books of account and documents relating/pertaining to the assessee were found in search and that too for the year under consideration. 3. Apropos above grounds 1 & 3, the ld. counsel submitted that having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in framing the impugned assessment order u/s 153C/143(3) for A.Y. 2011-12 without assuming jurisdiction as per law and without recor....
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....d jurisdiction to issue notice and frame assessment u/s 153C of the Act for AY 2011-12 which is out of the block of six assessment years. It was, therefore, submitted that in view of the orders of the ITAT 'D' Bench in the case of Karina Airlines (supra), the entire proceedings including the assessment order and first appellate order for AY 2011-12 may kindly be quashed as the Assessing Officer had no valid jurisdiction to issue notice u/s. 153C of the Act for said assessment year which was not falling within the ambit of six block assessment years. 5. Replying to the above, the ld.CIT-DR vehemently supported the assessment order as well as the first appellate order passed u/s 143(3) r.w.s. 153C and submitted that in view of the subsequent amendment with effect from 01.04.2017, the year of search and block of six assessment years would be same for the person searched as well as for the other person, therefore, the contentions of the ld. Counsel of the assessee are not plausible and sustainable thus same may kindly be dismissed. 6. Placing rejoinder to the above, the ld. Counsel again drew our attention towards the order of the ITAT 'D' Bench in the case of Karina Airlines for....
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....d seizure was conducted. However, section 153C of the Act, which lays down the procedure of assessment in case of a person other than the searched person, contemplates that the date of search for a case falling under this provision would be reckoned from the date of recording of satisfaction by the Assessing Officer of the searched person and handing over of the seized material. 10. By Finance Act, 2017, amendment was made to section 153A as well as 153C of the Act, simultaneously, empowering the Assessing Officer to make assessment not only for six preceding assessment years but for the relevant assessment year or years. Thus, effectively, the aforesaid amendment to sections 153A and 153C of the Act allows the Assessing Officer to make assessment for the same set of assessment years, both in case of searched person as well as the person other than the searched person. The crucial issue which arises for consideration is, whether the aforesaid amendment made to sections 153A and 153C of the Act would apply prospectively or retrospectively and, if prospectively, whether it will cover the present assessee. Now, it is fairly well settled through a number of judicial precedents....
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....ment year or years as referred to in section 153A of the Income- tax Act. 80.7 Applicability: These amendments take effect from 1^st April, 2017." 12. In the aforesaid Explanatory Notes, the CBDT has not only clarified that such amendment would be effective from 1^st April, 2017 but also made it clear that amended provisions would apply where search under section 132 of the Act is initiated or requisition under section 132A of Act was made on or after 1^st April, 2017. Thus, the crucial date that has to be borne in mind is the date of search. Admittedly, in the facts of the present case, the date of search is 07.04.2016, which is prior to the date of amendment made to section 153A and 153C vide Finance Act, 2017. Thus, as per CBDT circular mentioned above, the amended provisions would not be applicable to the present case. Taking note of the aforesaid CBDT circular, the Hon'ble Gujarat High Court, in case of Anil Kumar Gopikishan Arawal Vs. CIT, (418 ITR 25), has held that the amended provisions of section 153C of the Act would apply where search and seizure is made after the amendment......" 8. Therefore, keeping in view the facts of the case that the date of ....
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....of other person u/s 153C of the Act, the starting point for computation of the block period would be the date from on which based on the seized documents, notice is issued to the other person. It was further held by the Hon'ble court that the amendment made in section 153C by Finance Act 2017 w.e.f. 1^st April 2017 which states that block period for the "searched person" as well as the "other person" would be same six AYs immediately preceding the year of search is only prospective. It makes the things clear that the search that took place on 7/4/2016 in this case is prior to amendment unaffected by the amendment made by way of Finance Act 2017. 12. In CIT v RRJ Securities Ltd. (supra) the Hon'ble High Court held as under: 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be i....
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....e provisions of Section 153A of the Act. We, therefore, accent the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. 13. Further, in the case of ARN Infrastructure India Ltd v ACIT (supra) the Hon'ble High Court held that,- 12. The decision in RRJ Securities Ltd. {supra) is categorical that under Section 153C of the Act, the period of six years as regards the person other than the searched person would commence only from the year in which the satisfaction not is prepared by the AO of the searched person and a notice is issued pursuant thereto. The date of the Satisfaction Note is 21^st July. 2014 and the notice under Section 153C of the Act was issued on 23^rd July 2014. The previous six AYs would therefore be from AY 2009-10 to AY 2014-15. This would therefore not include AYs 2007-08 and 2008-09.The decision in RRJ Securities Ltd. (supra) is also an authority for the proposition that for the proceedings under Section 153C to be valid, there had to be a satisfaction note recorded by the....
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....eas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C (1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which....
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....the searched person covered u/s 153A. In other words, in case of 'the other person' (i.e. person covered u/s 153C), six preceding assessment years has to be reckoned from the year of search. This amendment has been held to be prospective by the Hon'ble Jurisdictional High Court in the case of CIT vs. Sarwar Agency P Ltd. as reported in 397 ITR 400, wherein the Hon'ble Court observed and held as under: "10. Mr. Salil Aggarwal, learned counsel for the Assessee, has drawn the attention of the Court to the recent amendment made in Section 153 C of the Act by the Finance Act, 2017 with effect from 1^st April 2017. This amendment in effect states that the block period for the searched person as well as the 'other person' would be the same six AYs immediately preceding the year of search. This amendment is prospective. 11. Mr. Ashok Manchanda, learned Senior Standing counsel for the Appellant, sought to pursue this Court to reconsider its view in RRJ Securities (supra). The Court declines to do so for more than one reason. First, for reasons best known to it, the Revenue has not challenged the decision of this Court in RRJ Securities (supra) in the Supreme Court.....
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....in various judgments, some of which are as under: i. 399 ITR 202 (Del) Canyon Financial Services Ltd. vs. ITO 5. The search in the Dalmia Group of Companies took place on 20^th January, 2012 and the satisfaction note by the AO of the searched person was dated 13th March, 2014. Therefore, Section 153C as it stood prior to the amendment with effect from 1^st June, 2015 applied to the case on hand. In terms of the said provision ie., 153C(1), the AO of the searched person had to be satisfied that the documents seized 'belongs or belong to a person other than the person referred to in Section 153 A' in order that the AO of the searched person could to hand over such documents to the AO "having jurisdiction over such other person". The change brought about by the prospective amendment, with effect from 1^st June 2015, is that for initiating proceedings under Section 153C arising from searches after that date it is enough for the Department to show that a particular seized document 'pertains to' the other person. However, in the present case, since the proceedings under Section 153C (1) of the Act against the Assessee commenced prior to 1st June 2015, the Department ....
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.... assuming valid jurisdiction and bad in law. The ld. CIT(DR) submits that in view of amendment to section 153C of the Act w.e.f 01.04.2017 the year of search and six block assessment years would be the same as was for the persons search after said amendment. This controversy was placed for adjudication before jurisdictional High Court of Delhi in the case of PCIT vs. Server Agency (supra) wherein it was held that the said amendment being prospective would be applicable to the search and seizure operation conducted on or after 01.04.2017 and not before that. Therefore contention of ld. CIT(DR) has no legs to stand. 11. In view of the above, the facts being identical, the above noted order of the coordinate Bench of the ITAT Delhi in the case of M/s Karina Airlines International Limited vs. ACIT for AY 2012-13 (supra) would squarely apply to the present appeal having identical factual position therefore the same supports the legal contention of assessee that the present AY 2011-12 does not fall within the block of six assessment years therefore the Assessing Officer had no valid jurisdiction to issue notice u/s. 153C of the Act and to frame assessment order for AY 2011-12. Thus, r....
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.... case, more so when no incriminating material was found as a result of search. 3. That in any case and in any view of the matter, the jurisdictional conditions for initiating proceedings u/s 153C and for passing the impugned assessment order were not complied with and hence the assessment order is bad, more so when there was no books of account and documents relating/pertaining to the assessee were found in search and that too for the year under consideration. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in making addition of Rs. 32,54,400/- on account of alleged commission income, more so when no incriminating material has been found as a result of search at the third party's place and impugned addition has been made by recording incorrect facts and findings and without providing the entire adverse material on record and without observing the principles of natural justice. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in making disallowance of Rs. 1,64,940/....
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....A) who supplied the seized material. v. Show cause notice dated 28.12.2018 fixing the hearing for 29.12.2018 by 11 AM was served on 29.12.2018 at 10.02PM vi. Order sheet dated 12.12.2018 gave only one day's time and requirement have nothing to do with the satisfaction note. vii. Statement reproduced in the assessment order we never supplied to the assessee nor referred. 16. Drawing our attention towards pages 87 & 88 of assessee paper book the ld. counsel submitted that in the satisfaction note the Assessing Officer of assessee has referred three documents A-7, A-14 & A-15 and brief description of said document shows that the Assessing Officer gathered that there was a receipt under the signature of Shri Sudhir as Director of assessee company confirming the sale of 37500 shares of Mysore Finlease Pvt. Ltd. held by assessee leaving blank the particulars of shares sold, date of sale, amount of sale consideration and name of buyer but confirming the receipt of entire amount against the sale of shares. The ld. counsel submitted that the said allegation is baseless as the year of transaction intended buyer from whom the amount was received is not clear. Fur....
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....oned in the satisfaction note were found & seized relating to the present assessee therefore the Assessing Officer of searches person rightly handed over the same to the Assessing Officer of present assessee for invoking proceedings u/s. 153C of the Act. The ld. CIT(DR) also pointed out that the Assessing Officer has given ample opportunity to the assessee therefore baseless contention of assessee may kindly be dismissed. 19. On careful consideration of above submissions, first of all, we find it appropriate to reproduce the satisfaction note recorded by the Assessing Officer of present assessee on 23.03.2018 (paper book pages no. 87 & 88) as follows:- 20. On careful and vigilant reading of said satisfaction note and assessment orders passed by the Assessing Officer u/s. 143(3) r.w.s. 153A of the Act, we clearly note that the Assessing Officer has not made any addition on the strength of documentary evidence noted by the Assessing Officer in the satisfaction note. At the cost of repetition we note that the Assessing Officer in all five assessment years has made two additions viz. (i) on account of commission income accrued to the assessee and (ii) disallowance of bogus expens....
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....ut confronting the same to the assessee is not valid and justified rendering the entire proceeding and orders invalid and bad in law. 23. It was also a contention of ld. counsel of assessee that the details mentioned by the Assessing Officer in the satisfaction note does not reveal that the alleged transaction was under taken on which date with whom and the same pertains to which assessment year therefore the details noted by the assessee based on alleged documentary evidence are bald having no meaning and relation to the any transaction undertaken by the assessee. He further submitted that the Assessing Officer did not find any fault with the assessee on the strength of alleged documentary evidence taken as basis by the Assessing Officer for issuing notice u/s. 153C of the Act, therefore in view of judgment of Hon'ble Supreme Court in the case of PCIT vs. Singhad Technical Education Society (supra) as per provisions of Section 153C of the Act, incriminating material which was seized had to pertain to Assessment Years in question and documents which were seized did not establish any co-relation, document-wise, with assessment years under consideration then order passed for initi....