TaxTMI 
TaxTMI 
2024 (3) TMI 1260
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.... The petitioner had filed a regular return of income under Section 139 of the IT Act, 1961 on 28.11.2015 for the assessment year 2015-2016. 5. In the returns filed by the petitioner, the petitioner had declared a gross income of Rs. 165,86,34,375/- and claimed a deduction under Chapter VI-A of Rs. 2,44,62,403/-. Thus, the net taxable income declared by the petitioner for the purpose of payment of tax was arrived at Rs. 163,41,71,970/-. On the aforesaid amount the petitioner offered a total tax of Rs. 56,66,92,704/-. 6. The assessment was completed under Section 143(3) of the IT Act, 1961 on 28.12.2017. The assessment was sought to be reopened by issuance of notice under Section 148 of the IT Act, 1961 on 30.03.2021. 7. Meanwhile, a search proceedings had been initiated against M/s.Mohanlal Jewellers (P) Ltd (hereinafter referred to as searched person) under Section 132 of the IT Act, 1961 on 10.11.2020 in their secret office located at No.16/5, 3rd Floor, Swami Thiru Nilagandanayanar Street near Jain Temple, Kondithope, Chennai - 600 001. 8. Search proceedings lead to recording of statement of one Shri.Rajendra Kothari, the Accountant of "searched person" and Shri.Suresh Khatri....
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....o the transactions of Shri. G. Rajendran (Chairman of GRT group) and M/s. GRT Jewellers (P) Ltd. Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020 from Shri. Rajendra Kothari is reproduced as under:- "4. Please explain the list of parties mentioned under the head "TTT" in the list provided by you (taken from J-Pack). Ans. Sir.AYYA (Rajendran) and Anand (Ornaments account) refers to GRT Jewellers......" Further Shri. Rajendra Kothari, vide his sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020 has stated that ledger named "Anand" refers to GRT Jewellery. Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020 from Shri. Rajendra Kothari is reproduced as under: "5. Please provide the details of "Anand" ledger. Please identify the person. Ans. Sir. Anand refers to GRT Jewellers. It is an ornament transaction account. I'm providing summary of complete transactions of both Anand and Ayya for your reference. Ayya account is for bullion transactions. Added as Annexure -8." On confronting the same, Shri. Suresh Khatri, vide his sworn statement recorded u/s....
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....ger named "MC Khata" in the said J.Pack software for recording receipts and payments made in respect of making charges. In this regard, during the course of post search proceedings, Shri.Rajendra Kothari was asked to explain the ledger maintained under the name "MC Khata". Shri. Rajendra Kothari, vide sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 26.11.2020 stated that MC khata account is maintained for recording charges paid to various parties. These charges are made through banking channel and booked as expense in the books of accounts. However, these making charges are received back in cash. Further, Shri. Rajendra Kothari has stated that M/s. Mohanlal Jewellers accommodate the making charges expense for other partles. GRT is the majorparty who was booking bogus making charges with M/s. Mohanlal Jewellers Pvt. Ltd. Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 26.11.2020 from Shri. Rajendra Kothari is reproduced as under: "3. Please provide the details of "MC Khata" ledger grouped under "Others". Ans. Sir. MC Khata account is maintained for recording making charges paid to various parties. These charges are made t....
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.... by the Department were only for the financial year 2015-2016 to 2020-2021 and not for the financial year 2014-2015 / assessment year 2015-2016. Relevant Portion of the Satisfaction reads as under:- "Certain Pen drives were found and seized vide annexure ANN/PV/RK/ED/S from the residential premises of Shri. Rajendra Kothari located at No. 18/2, 2nd Floor, Lawyer Chinnathambi Street, Kondithope, Chennai- 600 001. Further Shri. Rajendra Kothari in his statement recorded u/s 132(4) of Income Tax Act, 1961 dated 10.11.2020, stated that the "J pack" software tool in the Pen drives contain accounts data for the FYs. 2016-17 to 2019-20. Further the accounts data for FY 2020-21 is available in the red Sandisk Pendrive inside a black laptop bag which was handed over to Shri. Kishore Khatri through Sarvan (an employee in M/s. MJPL)." 18. There are no documents to show any transaction between the petitioner and the "searched person" during the previous year 2014-2015 (assessment year 2015-2016). Therefore, on this count invocation of Section 153C of the IT Act, 1961 against the petitioner for the assessment year 2015- 2016 cannot be countenanced. 19. There are also no records available wi....
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....early provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158- BC. Further, the interpretation placed by the courts below by reading into the plain language of Section 158- BE(2)(b) such as to extend the period of limitation to recording of satisfaction note would run counter to the avowed object of introduction of the Chapter to provide for cost-effective, efficient and expeditious completion of search assessments and avoiding or reducing long-drawn proceedings. 41. In the result, we hold that for the purpose of Section 158-BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages:- 1. at the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act; 2. along with the assessment proceedings under Section 158-BC of the Act; and 3. immediately after the assessment proceedings are compl....
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....income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this subsection pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section(1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set as....
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....ssessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case 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. 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 r....
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....or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals). 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. These amendments will take effect from June 1, 2003." 19. Prior to, the introduction of these three sections, Chapter XIV-B of the Act took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as "block assessment" because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also....
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....ears, in which both the disclosed and the undisclosed income would be brought to tax. 21. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) of theAct. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of section 153A opens. The time-limit within which the notice under section 148 can be issued, as provided in section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under section 148 has also been excluded in a case....
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.... which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders wh....
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.... of the Tribunal. We are unable to appreciate how the Tribunal can say in paragraph 9.6 that no material was found during the search and at the same time in paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee. 24. The Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd, [2023] 454 ITR 212, held that in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, 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 req....
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....3B and 153C of the IT Act, 1961 and deleted the special procedure for assessment of search cases under Chapter XIV-B of the IT Act, 1961. 29. As far as the 'other person' like the petitioner who was issued a notice under Section 153C of the IT Act, 1961 is concerned, there is no specific provision that would abate pending proceedings. However, as per Sub-clause (2) to Section 153C of the IT Act, 1961, the Assessing Officer has to issue notice and reassess the total income in the manner proceeded in Section 153A of the IT Act, 1961. 30. As per Section 153(C)(1) of the IT Act, 1961, wherever the Assessing Officer of the "searched person" and the "other person" (like the petitioner herein) 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 the other person like the petitioner, the Assessing Officer can proceed to issue notices for six assessment years immediately preceding the assessment year relating to the previous year in which the search was conducted or requisition was made for the relevant Assessment Year or years referred to Section 153(A) of IT Act, 1961. However, an exception is pr....
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....receipt of Books of Account, documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over the other person like the petitioner herein, in which case the proceeding under Section 153(C) of the IT Act, 1962 can be initiated only up to the assessment year 2015-2016. 35. Such Assessment proceeding has to be completed in accordance with the 3rd proviso of Section 153B of the IT Act, 1961. Provided also that in the case where the last of the authorisations for search under Section 132 or for requisition under Section 132-A 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 153-C, 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 132-A was executed or twelve months from the end of the financial year ....
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....erit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts. 11. For the foregoing reasons, the Court finds no merit in these appeals, they are accordingly dismissed, without order on costs." 40. Therefore, the Impugned Order pa....