TaxTMI 
TaxTMI 
2024 (7) TMI 716
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....be issued when AO is satisfied that seized material has a bearing on the assessment of income of other person. 2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in law while holding that there was no incriminating material for the issuance of notice u/s 153C, without appreciating that in the satisfaction note the AO had brought out the facts and circumstances, which indicated that the Assessee company has entered into transactions which remained unexplained hence such documents constituted "incriminating material" for the purpose "of the issue of notice u/s 153C in the context of assessee. 3. Whether on facts and circumstances of the case and in law, the Ld CIT(A) erred in not appreciating that after 01.4.2005 the test of issue of notice u/s 153C is availability of seized material Which has bearing on assessment of income which has to be only in nature of prima facie belief having live nexus & not in nature of absolute evidence based on detailed investigation. 4. That the appellant craves leave to add or amend any other more ground of appeal as state above as and when needs for doing so may arise. 5. The order of the Ld CIT(A) is erroneous i....
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....u/s 153C of the Act has been recorded by the assessing officer of the searched person. iii. That the notice issued u/s 153C is bad-in-law and without jurisdiction as no document(s) belonging to the assesses was found and seized during the course of search. iv. That the proceedings initiated u/s 153C and the consequent assessment order passed are liable to be quashed as no incriminating documents material has been found and there is no co-relation of year wise incriminating documents mentioned in the assessment order. v. The additions made by the A.O. are beyond the scope of jurisdiction of section 153C of Income Tax Act, 1961. The Ld. A.R. of the appellant has also submitted that after the decision of Hon'ble Supreme Court in the case of PCIT-III, Pune Vs. Sinhgad Technical Education Society, the law is crystal clear, that issue of notice u/s 153C without incriminating material for the' relevant assessment year is legally not sustainable. 5.2 Upon the legal challenge of Id. A.R., the AO, vide this office letter F. No. CIT (A)-IV/KNP/Remand Report/2018-19/171 dated 09.10.2018 was specifically requested to comment on the legal contention of the appellant. The letter of th....
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....quent assessment order passed are liable to be quashed as no incriminating documents material has been found and there is no co-relation of year wise incriminating documents mentioned in the assessment order. 5. The additions made by the A. O. are beyond the scope of jurisdiction of section 153C of Income Tax Act, 1961. In the remand report, the A.O. has not rebutted the appellant's submission. The A.O. has only made vague remarks without bringing on record any incriminating material or evidence. In our submission we have referred to provisions of law and various judicial pronouncements including those of Hon'ble Apex Court. The assessing officer has not made any rebuttal. As a matter of fact, in the remand report the A.O. has realized that on legal issues the order passed by him is not sustainable and therefore as per para 8 of the remand report the A. O. has mentioned that Quote on the legal issues raised by the appellant your goodself may take appropriate decision in accordance with law Unquote. In view of the above, the orders passed by the Assessing Officer are liable to be quashed on legal issues itself. In view of the above, it is submitted that the additions made by....
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....is submitted that (here is nothing incriminating in the aforesaid seized-material. The page wise description / contents of the aforesaid seized material is given separately and it is self-evident that there is nothing incriminating in these documents. As a matter of fact, the assessing officer has not made any addition in the assessment order based on these documents. 4. In para 5 of satisfaction Note the A.O. has referred to annexure LP-I and LP-2 page No. 23 to 33 stating them to be transactions with offshore units in Hongkong & Malasiya. In this regard it is submitted that in the satisfaction Note, the A.O. has nowhere recorded that these documents belong to the assessee company. Without prejudice to the above, it is submitted that the observation made by the assessing officer are factually erroneous. Page No. 23 to 33 of LP-1 contains draught survey report relating to coal, ' outgoing message report. These are not even pertaining to the assessee leave alone the question of belonging to the assessee. There is nothing incriminating in these documents. The assessing officer has also not made any addition on the basis of these documents. Similarly Page No. 23 to 33 of LP-2 are ....
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....efully gone through the assessment order, written submission, remand report by Assessing Officer and rejoinder filed as well as verbal arguments of the Ld. A.R. For the sake of brevity satisfaction note recorded by the A,0, is scanned and reproduced here-in-under: 5.7 Detailed perusal and scanning of the satisfaction note recorded by the AO reveals the following facts: i. AO has not mentioned the assessment years for which, it belongs to. There appears to be only one satisfaction note recorded by AO in relation to appellant company. Thus it is presumed that, satisfaction note is common for all the A.Y. 2009-10 to A.Y. 2014-15 (6 Years). ii. AO has not mentioned the specific Seized documents, which belongs to the appellant company. Thus, no satisfaction is recorded by the AO of searched person to establish the fact that specific seized document indeed belongs to the appellant company. iii. AO has mentioned in para 4 of the satisfaction note LP-21, LP-22 and LP-1 to LP-18. Further, AO has noted seized document page 23 to 33 of LP-2 in para - 5 of the satisfaction note. AO has also recorded pages 8 & 9 of IP-3 in para 5.1 of the satisfaction note. However, AO has not recorded ....
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.... loss account, for which, no incriminating document was found and seized during search action. Hence, it is concluded that there exist no incriminating seized material for these relevant assessment year to justify issue of notice u/s 153C of the Act. The AO has not made any addition on the basis of any incriminating document found and also, additions made by AO does not co-relate with satisfaction noted by him. In absence of incriminating seized material relating to assessment year under consideration, action u/s 153C of the Act cannot be treated as valid in the eye of law. 5.8 The proceedings u/s 153C of the Act are very specific and clearly explained in the Act. For the sake of clarity, relevant previsions of Act is as under; "153C. [(1)] [Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, 69belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to," a person other than ....
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.... "money, bullion, jewellery or other valuable article or thing" or any "books of account or document must be seized or requisitioned for the relevant assessment year for issue of notice u/s 153C of the Act." The observation of the Supreme Court in para 18 of the order mentioned here in above is reproduced below: "The ITAT permitted this additional ground by giving a reason that it jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was di....
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.... 5.11 In view of the detailed discussion mentioned here in above end respectfully following the judgement of the Supreme Court in the case of Sinhgad Technical Educational Society, it is concluded that notice u/s 153C issued by the AO need to be treated as ab-initio invalid and legally not sustainable, therefore, assessment framed on the basis of legally unsustainable notice is hereby quashed and annulled. Thus, these legal grounds of appeals i.e. for A.Y. 2009- 10 to A.Y. 2014-15 are decided in favour of the appellant." 6. It could be observed from the above, it is the finding of the Ld.CIT(A) that there is no seized materials impounded in the course of search belong to the assessee. After analyzing the satisfaction note of the DCIT (Central Circle) the Ld.CIT(A) held that the three conditions enumerated in Section 153C of the Act are not satisfied cumulatively and simultaneously. It is the finding of the Ld.CIT(A) that in the case of the assessee admittedly additions are not based on any incriminating document found as a result of search and AO has not recorded the satisfaction for the relevant assessment years as envisaged u/s 153C of the Act. It is also the observation of the....
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....2.2016, therefore, at the earliest, it is the date of 2.12.2016, when the AO can be presumed to have got the documents in his capacity as AO of the assessee, on the basis of which proceedings u/s. 153C have been initiated. This date of 2.12.2016 falls in the previous year 2016-17 releavnt to AY 2017-18. The immediately preceding six years are AY 2011-12 to AY 2016-17. Thus, the AY 2009-10 and AY 2010-11 are clearly out of block of 6 years. Hence, he requested to quash the assessment. In support of his contention, he relied upon the following decisions:- i) CIT vs. Jasjit Singh 2023 (10) TMI 572 (SC). ii) CIT vs. RRK Securities Ltd. [2015] 62 taxmann.com 391 (Delhi) (Delhi High Court.) iii) ARN Infrastructure India Ltd. Vs. ACIT [2017] 81 Taxmann.com 260 (Delhi) (Delhi High Court). iv) CIT vs. Sarwar Agency P Ltd. 397 ITR 400 v) Apple Sponge and Power Ltd. Vs. DCIT (ITA No. 7638/Del/2018 AY 2015-16) - ITAT, Delhi decision dated 25.5.2022. 8.1 The Ld. CIT(DR) strongly supported the findings of the Assessing Officer. 9. We have heard the rival contentions and perused the orders of the authorities below. We find that in this case date of search was 11.11.2014 and the Date o....
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....r as it concerns abatement. The revenue relied upon the ruling of a Division Bench of the Delhi High Court, reported as "SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax" reported in (2012) 346 ITR 177. 7. Sections 153A and Section 153C of the Income Tax Act, 1961 to the extent they are relevant are extracted below:- "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 61[but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordi....
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....hall 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 in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated." 8. In SSP Aviation (supra) the High Court inter alia reasoned as follows:- "14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 1....
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....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 6 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." 9.2 Hon'ble Delhi High Court has dealt exactly the similar iss....
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....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 the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept 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." 9.3 Further, Hon'ble Delhi High Court in the case of ARN Infrastructure India Ltd. Vs. ACIT (2017) 81 taxmann.com 260 (Delhi) has held as under:- "12. The decision in CIT-7 v. RRJ Securities Ltd. (supra) is categorical that under Section 153 C of the Act, the period of six years as regards the person other than the searched person ....
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....r than a "Searched Person", provisions of section 153C of the Act are applicable and in such a case, the date of search or date of requisition, as referred to in Section 153A of the Act is substituted by the date of handing over of documents by the Assessing Officer of the "Searched Person" to the Assessing Officer of the "Other Person". 9. Since the date of recording satisfaction is 02.12.2016 which falls in the previous F.Y. 2016-17 relevant to Assessment Year 2017-18, the immediately preceding six years are Assessment Years 2011-12 to 2016-17. Thus, the year under appeal clearly falls in the block of six years covered by section 153C of the Act. Thus, the assessment for Assessment Year 2015-16 could have been made only u/s 153C of the Act after compliance of provisions of that section. 10. We draw support from the decisions of the Hon'ble High Court of Delhi in the case of RRJ Securities Ltd 62 Taxmann.com 391 and ARN Infrastructure India Ltd 81 Taxmann.com 260. 11. Assessment order dated 31.12.2016 is framed u/s 143(3) of the Act for the impugned Assessment Year 2015- 16. In our considered view, this year falls within the period of six years when counted from the date....