TaxTMI 
TaxTMI 
2023 (10) TMI 1383
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....facts and circumstances of the above appeals, the assessment orders passed by the A.O. under section 143 (3) is invalid and bad in law and is liable to be quashed? 3. Whether in the facts and circumstances of the above appeals and evidences on record, the authorities below are justified in making and confirming the addition under section 68 of the I.T. Act, 1961, particularly, when no enquiry or investigation have been carried out on the documentary evidences filed by the assessee before the A.O.? 4. Whether the decisions of Hon'ble jurisdictional Madhya Pradesh High Court as is referred in the proposed order of the judicial member are binding on the ITAT, Jabalpur bench?" 3. Of the above four questions, question Nos. 1 & 2 relate to the issue of jurisdiction for making a regular assessment u/s 143(3) of the Act in view of the special provisions concerning assessments of search cases, as prescribed u/s 153A and 153C of the Act. Question Nos. 3 & 4, on the other hand relate to the merits, i.e., the additions made u/s 68 of the Act. 4. The ld. Accountant Member has, by his separate order, framed separate questions as follows : A. Jurisdictional Is....
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.... (b) prove the nature and source of the same in terms of section 68 of the Act as per the settled law? (c) be a proper, reasonable, and acceptable explanation, discharging the onus cast, on it u/s. 68 of the Act, i.e., as explained by the higher courts of law? (iii) Whether the entirety of the facts and circumstances of the case, considered as whole, actually disprove the assessee's explanation qua the genuineness of the impugned credits, or is the mere furnishing of the particulars, and the transactions being through the banking channel, sufficient to justify the same? (iv) Whether or not there has been, in deciding the issue of the applicability or otherwise of section 68 of the Act, in the facts and circumstances of the case and the law in the matter, any disregard of the binding judicial precedents? C. Common (i) Does the assessee's case on quantum, i.e., the absence of any adverse material on record impugning the credits under reference, rather, contradicts its' case of the assessment in the instant case/s being liable to be made u/s. 153C r/w s. 153A(1). 5. Both the appeals in question having arisen out of re....
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....rtment; that the assessee had submitted a copy of the confirmation sent to the Investigation Wing, a copy of the Balance Sheet as on 31.03.2014, and a copy of the Income Tax Return and bank statement. Thus, evidently, the AO took due notice of the material collected by the Investigation Wing. 7. Vide order dated 13.02.2018, the ld. CIT(A) dismissed the appeal filed by the assessee against assessment order. Therein, it was observed, inter-alia, that as per the provisions of the Companies Act, 2013, the assessee cannot take any unsecured loan from M/s Little Star Section securities Pvt. Ltd. and Shri Kal Yanika Arun Bansal, since as per the provisions of the Companies Act, 2013 and the rules framed thereunder, a Private Ltd. Company can take loan only from its Director and shareholders; that transferring funds on banking channels cannot by itself justify the transactions as genuine transactions; that the mere fact that the identity of the lenders stands established and the payment are made by cheques does not mean that they are genuine; that if the lenders do not have the financial strength to lend such huge sums and if there is no explanation as to their relationship with the ass....
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....ided in the Section. 10.8 The ld. Counsel for the assessee has contended that the second proviso to Section 153A lays down that proceedings binding for assessment or re-assessment in relation to any assessment year falling within the period of six assessment years, for which assessment is contemplated u/s 153A, shall abate. 10.9 The ld. Counsel for the assessee has contended that by employing the word 'shall', the second proviso to Section 153A makes the provisions thereof mandatory, once the conditions prescribed thereunder are satisfied. 10.10 The ld. Counsel for the assessee contends that the second proviso to Section 153A stands, by reference, incorporated in the proviso to Section 153C(1), in relation to cases falling under Section 153C, with necessary amendments. 10.11 The ld. Counsel for the assessee contends that similarly Section 153C also incorporates, by reference, the procedure laid down u/s 153A, for cases falling u/s 153C of the Act. 10.12 The ld. Counsel for the assessee contends that as per Section 153A(2), abated assessment or re-assessment proceedings, which proceedings have abated as a consequence of the coming into play of the second proviso, can ....
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....hidambaram" (supra), it has been held that "this is exactly the reason why the non obstante clause has been provided u/s 153A(1) and an abatement clause is also contemplated under the second proviso to Section 153A of the Act". 10.24 The ld. Counsel for the assessee has contended that that in "Karti Chidambaram" (supra), it has been held that the assessment/re-assessment u/s 153A or 153C is to be done, if any search & seizure is made u/s 132 of the Act. 10.25 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that thus, the scope of Section 153A or 153C cannot be compared with the re-opening of proceedings u/s 147/148 of the Act. 10.26 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that therefore, initiation of action u/s 153C of the Act would arise only if the seized materials are handed over to the AO of such other person, having jurisdiction over the other person. 10.27 The ld. Counsel for the assessee has contended that in "Karti Chidambaram" (supra), it has been held that in that case, it was only after the material of the searched person was handed over to the A....
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....ct. 12. The ld. Counsel for the assessee has contended that thus, where process u/s 132 or 132A is initiated, in respect of the person searched, a notice u/s 153A(1)(a) is required to be issued. 13. It was contended that thereafter, the returns are required to be filed for the six assessment years immediately preceding the previous year in which the search is conducted or the requisition is made. 14. The ld. Counsel for the assessee has contended that the first provision to the Section mandates for the AO to assess or re-assess the total income in respect of each assessment year falling within said six assessment years. 15. The ld. Counsel for the assessee has contended that the second proviso to Section 153A abates all existing pending assessments or re-assessment proceedings for the period falling within the period contemplated for the purposes of Section 153A. 16. The ld. Counsel for the assessee has contended that section 153C is in three parts, i.e., satisfaction of the AO of the searched person and handing over of the books of account or documents or assets seized or requisitioned, to the AO having jurisdiction over a person other than the person referred to in....
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....parent that pending cases abate as a result of the second proviso to Section 153A and the AO would assume jurisdiction in respect of such abated assessments and would assess the total income. 21.5 The ld. Counsel for the assessee has contended that however, in "Abhisar Buildwell P. Ltd." (supra), it has also been held agreeing with "Kabul Chawla", (2015) 61 taxmann.com 412 (Delhi) and "Saumya Construction", (2016) 387 ITR 529 (Guj), that even in respect of the unabated proceedings, fresh proceedings u/s 153A can be initiated only if incriminating material is found during search and that where, however, no incriminating material is found, recourse to Section 153A would not be available and that in respect of completed assessment, in absence of any incriminating material, no addition can be made. 21.6 The ld. Counsel for the assessee has contended that as such, in "Abhisar Buildwell P. Ltd." (supra), it was concluded that in the case of search u/s 132 or requisition u/s 132A, the AO assumes the jurisdiction for block assessment u/s 153A. 21.7 The ld. Counsel for the assessee has contended that in "Abhisar Buildwell P. Ltd." (supra), it was also concluded that all pending ass....
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.... incriminating. 23.1 The ld. Counsel for the assessee has contended that the Section further empowers the officer to assess or reassess the income of the other person in accordance with the provisions of Section 153A, after that AO 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 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 Section 153A(1). 23.4 The ld. Counsel for the assessee has contended that once the AO assumes jurisdiction in case of abated proceedings, he would take into consideration all material available with him including the material unearthed during the search and handed over to him. 23.5 The ld. Counsel for the assessee has contended that the said unearthed material would be taken into consideration at the time of assessment if such documents have a bearing on the determination of total income. 23.6 The ld. Counsel for the assessee has contended that the relevancy of the material wo....
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....d that abatement under the proviso to Section 153C is triggered on the date of handing over of documents and it is not dependant on any satisfaction to be recorded by the receiving AO and this, hence, in its effect, is tied-up directly with the issuance of notice to the other person. 23.15 The ld. Counsel for the assessee has contended that in any case, since total income is to be determined, both u/s 143(3) and u/s 153C, and since Section 153C contemplate abatement of the regular proceedings, Section 153C would override the normal proceedings and Section 153C will have to be inexorably invoked, since assessment of total income is to be made including on the basis of material found in the search which may have a bearing on the determination of the total income. 23.16 The ld. Counsel for the assessee has contended that where assessments have been completed, initiation of proceedings u/s 153A would not automatically annul such assessments. 23.17 The ld. Counsel for the assessee has contended that since u/s 153C, power to initiate action can be for a period shorter than the period contemplated u/s 153A, u/s 153C, the concluded assessments are not to be reopened unless the mat....
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....see has contended that evidently, the proviso to Section 153C(1) contains reference to the second proviso to Section 153A with regard to cases falling u/s 153C, mutatis-mutandis, with necessary amendments, and that likewise, Section 153C also refers to the procedure u/s 153A, so far as regards cases which fall u/s 153C. 23.19.3 It has been stated by the ld. Counsel for the assessee that as per Section 153A(2), assessment proceedings which have abated as a result of the application of the second proviso to Section 153A, can get revived only if proceedings u/s 153A(1) are annulled on appeal, or other legal proceedings. 23.19.4 It has further been contended by the ld. Counsel for the assessee that the process gets initiated, in accordance with the provisions of Section 153A(1)(a), by issuance of a notice requiring filing of a return of income with regard to each assessment year falling within the period of six assessment years; that since assessment u/s 153A is not a block assessment, it would be six separate assessments for six assessment years; that however, the procedure and mechanism for the assessment would be exactly like that of a regular assessment for that assessment ye....
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....hat abatement under the said Section is not dependant on any satisfaction required to be recorded by the receiving AO. 24.3 The ld. Counsel for the assessee has contended that that as soon as the AO records satisfaction u/s 153A, that the articles seized or requisitioned belong to or books of account or documents pertain to or any information relates to another person, and the same is/are thereafter handed over the AO having jurisdiction over the person to whom such material relates, and the articles, books of account or documents or any information relates to any assessment year for which an assessment or re-assessment is pending, then, such proceedings would abate irrespective of the requirement of recording of any satisfaction by the receiving AO who is, even otherwise, under a statutory duty to act in the manner provided under the Statute. 25. So far as regards a situation where the AO of the searched person and the other person is the same, the ld. Counsel for the assessee has contended that in such a situation, the necessary requirements of Section 153C have been examined by the Hon'ble Supreme Court in the case of 'Super Malls Pvt. Ltd. Vs Pr. Commissioner of Incom....
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....ear legislative intent of express and automatic abatement of pending proceedings which can be revived only in situations contemplated u/s 153A(2) and hence, the AO cannot, on his own, revive such abated proceedings and pass a final order therein. 25.6 The ld. Counsel for the assessee has contended that any other interpretation would render the second proviso to Section 153A and the proviso to Section 153C to be nugatory and redundant. 25.7 The ld. Counsel for the assessee has contended that Section 153C further provides an inbuilt protection against arbitrary assessment in view of Section 153D, which mandates approval of such an order by a higher authority, with due application of mind. 26. Apropos the facts of the case, the ld. Counsel for the assessee has contended that concerning assessment year 2014-15, the Department had issued notice u/s 143(2) of the Act on 03.09.2015, to initiate regular assessment proceedings, due to which, the said proceedings were pending. 26.1 The ld. Counsel for the assessee has contended that a search was conducted on the premises of Shri Tarachand Khatri, the Managing Director of the assessee companies, on 17.11.2015, u/s 132 of the Incom....
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....Tarachand Khatri. 26.13 that thus, the AO of both the assessees and the searched persons was the same. 26.14 The ld. Counsel for the assessee has contended that the material seized during the search has, in fact, been used by the AO for the purposes of completing assessment u/s 143(3) of the Act. 26.15 The ld. Counsel for the assessee has contended that hence, it cannot be said that the seized material is not relevant, nor can it be said that the material seized is not incriminating. 26.16 The ld. Counsel for the assessee has contended that on 01.06.2021 and 16.06.2021, a direction had been issued by this Bench to the Department to file a copy of the appraisal report of the case before the Bench. 26.17 The ld. Counsel for the assessee has contended that however, treating the same as confidential, the said appraisal report has not been submitted before the Bench. 26.18 that the addition made is regarding the loan received by the assessee from M/s Little Star Securities Pvt. Ltd. 26.19 The ld. Counsel for the assessee has contended that hence, it is an addition u/s 68 of the Income Tax Act. 26.20 The ld. Counsel for the assessee has contended that once the sea....
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....has contended that by taking such adverse inference, it cannot be assumed that the issue of the loan transaction with M/s Little Star Securities Pvt. Ltd. was unearthed during search and was investigated by the Investigation Wing; that it has been recommended by the Investigation Wing to treat the said loan as a bogus transaction; and that material in relation to such loan transaction has been handed over by the Investigation Wing to the AO, which material would have been incriminating material. 29.1 The ld. Counsel for the assessee has contended that the Department has not claimed privilege against the disclosure of the appraisal report. 29.2 The ld. Counsel for the assessee has contended that in any case, the appraisal report does not fall within the class of documents in relation to which a privilege can be claimed. 29.3 In this regard, the ld. Counsel for the assessee has placed reliance on "Yashwant Sinha Vs CBI", (2019) 6 SCC 1, paras 22 to 28 and 38 to 42. 29.4 The ld. Counsel for the assessee has contended that though the Department states that the appraisal report is a confidential document, no statutory provision has been indicated as to under which such confi....
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....e such declared income, would amount to nothing other than undisclosed income. 30. Per contra, the ld. Counsel for the Department has contended that a pending assessment abates only where the AO proceeds u/s 153C of the Act. 30.1 The ld. Counsel for the Department has contended that in the present case, there was no basis for the AO to proceed u/s 153C, since no incriminating material in relation to the assessee was found during the search conducted. 30.2 The ld. Counsel for the Department has contended that in the assessment order, there is no mention of any of the documents comprising the seized material, i.e., Articles and Memorandum of Association of the company, Certificate of Incorporation, Bank Statements, TDS Challans and Ledger Accounts of parties. 30.3 The ld. Counsel for the Department has contended that none of the documents seized has any bearing on the determination of income of the assessees and the AO proceeded de hors the same. 30.4 The ld. Counsel for the Department has contended that the return of income furnished u/s 139, or called for u/s 142(1) may be proceeded with by the AO, for verification and examination, by issuing a notice u/s 143(2) of t....
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...., if the AO is satisfied that the same have a bearing on the determination of the income of such other person. 30.17 The ld. Counsel for the Department has contended that this assessment is to be in accordance with the provisions of Section 153A. 30.18 The ld. Counsel for the Department has contended that similarly, the assessment proceedings pending on the date of receipt of the assessed or requisitioned asset, books of account or documents, etc., shall abate. 30.19 that the assessment or re-assessment u/s 153A shall be subject to the limitation provided in Section 153B. 30.20 The ld. Counsel for the Department has contended that the provisions of Section 153A shall be applicable notwithstanding the provisions of Sections 139, 147 to 149, 151 and 153. 30.21 The ld. Counsel for the Department has contended that thus, a person, on being served with a notice u/s 153A(1), prior to his furnishing a return of income u/s 139, is, rather, required to furnish a return u/s 153A(1) of the Act. 30.22 The ld. Counsel for the Department has contended that it is likewise for a return in response to a notice u/s 148(1). 30.23 The ld. Counsel for the Department has contended t....
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.... Revenue of having assumed jurisdiction thereunder without the condition precedent having been satisfied, i.e., that the books of account, documents, etc., seized or requisitioned ought to have a bearing on the determination of the income and that the mere handing over of the seized material to the AO was not sufficient. 30.35 The ld. Counsel for the Department has contended that therefore, the absence of the jurisdictional fact of incriminating material having been found, would fail an assessment u/s 153C read with Section 153A, in case the same had been made by the AO. 30.36 The ld. Counsel for the Department has contended that no separate procedure has been specified for an assessment or re-assessment u/s 153A(1) and u/s 153C(1) read with Section 153A(1), since other than the provisions of Section 153A to Section 153C, all the provisions of the Act are to apply to such an assessment and the return furnished in response to a notice u/s 153A(1) is to be regarded as one furnished u/s 139 and the assessment is to be made as per the procedure given in Section 143 or Section 144. 30.37 The ld. Counsel for the Department has contended that whereas Section 143(3) provides for m....
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....rds, the non-recording of the satisfaction by the AO is to be taken as conclusive of his being not satisfied in the matter and, therefore, the question of abatement of the pending assessment in such a case does not arise. 30.47 The ld. Counsel for the Department has contended that it does not lie for the assessee to say that though the Department has material against him and valid assessment proceedings are on, yet it cannot rely on the same for the purpose of assessment in as much as another procedure becomes applicable. 30.48 The ld. Counsel for the Department has contended that the assessment u/s 143(3) is to be of the total income and an instance of search does not annul or dilute the same. 30.49 The ld. Counsel for the Department has contended that this is also evident by the automatic revival of the abated proceedings if the proceedings u/s 153A fail. 30.50 The ld. Counsel for the Department has contended that the abatement of the proceedings is to ensure that only one proceeding for the assessment of the total income of the assessee for a particular year, is on at a particular time and, at best, it is a case of duplication of power. 30.51 The ld. Counsel for t....
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....te of tax, as against at any special rate; that thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years; that search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961; that the very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in the ordinary course of regular assessment; that thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search; that on a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which suc....
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....ue 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; that 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; that 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 the law; that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act; that the object of Section 153A is to bring under tax the undisclosed income which is found during the cour....