TaxTMI 
TaxTMI 
2024 (12) TMI 384
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....nitiated under section 132 of the Income-tax Act, 1961 (for short 'the Act') was carried out at the residence of Shri Ramesh Hemrajani and Shri Munish Hemrajani situated at 38/19, East Patel Nagar, New Delhi-110 008 on 02.01.2020. During the course of search proceedings, various documents including digital data were seized from the residential premises of assessee's Directors, which were compiled in annexures, namely, Annexure A-1 to A-27, apart from the cash and jewellery which were also found and seized from the abovesaid premises. 4. Further a survey action u/s 133A of the Act was also carried out in the case of assessee situated at 13-D, Gopala Tower, Rajendra Place, New Delhi-110 008 on 03.01.2020. During survey proceedings, various documents including digital data were impounded from the residential premises of assessee which were compiled in five annexures, namely, Annexure A-1 to A-5. Further statements u/s 132(4)/131(1A) of the Act were recorded on oath from many persons including directors of the assessee. 5. The Assessing Officer observed that on perusal of said incriminating documents, satisfaction was duly recorded for initiating proceedings u/s 153C of the Act i....
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....II hate mentioned certain transactions relating to forex and event management which was alleged to be not recorded in our books of accounts, we would like to submit that the transactions referred by you are just the quotes / proposal given to various clients, however, the actual transactions has not taken place, most of the additional income mentioned the transactions referred in the how cause notice are just quotation / proposals given to the client / customers, without prejudice to the above you have mentioned the basis on which income is earned by the assessee company on foreign currency transaction. I would like to submit that the assessee company is engaged in the business of the Travel agency, providing travel related and other ancillary services. The Company is recognized by the Ministry of Tourism, Government of India, as a Tour Operator and Travel Agent. Apart from this Company, is a member of :- o International Air Transport Authority (IATA) o Indian Association of Tour Operators (IATO) o Travel Agent Association of India (TAAI) o Travel Agent Federation of India (TAFI) The revenue streams of the Company are as follows....
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.... .25 036% 3 8 Mrs. Madhu 2500 EURO 75.60 75.60 .10 013% 4 12 Sanjay Sen Gupta 1000 EURO 78.10 78.30 .20 025% 5 12 Mrs. Ritu Kumar 1800 EURO 75.30 75.50 .20 026% 6 32 Anubhav Arora 700 EURO 69.90 70.10 .20 029% 7.1.8 From the perusal of above chart, it can be observed that the average profit margin rate (referral fees) on fore transactions varies from 0.13% to 0.36% which can be safely taken at 0.30% for calculating referral/ facilitation fees/ income of the assessee in respect of total value of forex transactions arranged by it. 7.1.9 Accordingly, by considering the rate @.3% on total forex transaction of Rs.34,97,000/ - as per Annexure A-11, referral income of Rs.10491/- was not offered for tax by the Assessee Company during the year and the same is added to its taxable income of the relevant year as business income. Further, as per annexure A-3, there was income of Rs.1,850/- on facilitation of forex transaction and assessee has calculated this amount in its submissions but not declared in its ITR, the same is also added back to total Income. (Addition ....
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.... events management/facilitation fees 6. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the AO of Rs.2,516/- as alleged income on account of hotel booking, ticketing and other ancillary services, 7. On the facts and circumstances of the case and in law, the CIT(A) erred in passing ex-parte order without providing proper opportunity of being heard. 8. On the facts and circumstances of the case and in law, the CIT (A) erred in not adjudicating the grounds of appeal on merit and is also against the principles of natural justice. 9. On the facts and circumstances of the case and in law, the notice u/s 153 C issued by the AO is bad-in-law, barred by limitation and without jurisdiction and, therefore, the said notice along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so. 10. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the AO is illegal and without jurisdiction. The AO has not complied with the provisions of section 153C and other allied provisions for issuance of such ....
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....ld. DR submitted that during the course of assessment proceedings, assessee admitted certain commission income, therefore, the issue has to be decided on merits of the case. She prayed that the findings of the Assessing Officer may be sustained considering the various documents and material found during the search. 14. In the rejoinder, ld. AR for the assessee submitted as under :- "The proceedings-initiated u/s 153C of the Act is bad-in-law and without jurisdiction for the following reasons:- 1. In this satisfaction note there is reference to statements recorded u/s 131 during Survey. There is no reference to any statement u/s 132(4) during search. The statement u/s 131 recorded during survey cannot be said to be material found and seized during search and therefore, such statement cannot be a basis for initiation of proceedings u/s 153C of the Act. 2. The satisfaction recorded u/s 153C is vague as there is no reference to any seized material which may have bearing on the determination of total income. There is no year wise analysis of any seized material and how they have bearing on the determination of total income. The statutory requirement is that....
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....he material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs' that could possibly form part of the block of ten years. 52. The decisions which hold that an assessment is liable to be revised only if incriminating material be found, even if rendered in the context of Section 153A, would clearly govern the question that stands posited even in the context of Section 153C. It would be relevant to recall that the Division Bench in Kabul Chawla had observed that in the absence of any incriminating material, a completed assessment may be reiterated and the abated assessment or reassessment be concluded. The importance of incriminating material was further underlined in Kabul Chawla with the Court observing that completed assessments could be interfered with, only if some incriminating material were unearthed. This aspect came to be reiterated in RRJ Securities when the Court held that it would be impermissible to either reopen or reassess a completed assessment which may not be impacted by the material gathered in the course of the search and which may have no plausib....
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.... block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case ....
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.... any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments. 69. When tested in light of the aforesaid principles, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs' for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to "have a bearing on the determination of the total income" for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowe....
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....e findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant/ Revenue In the present case of the appellant company before your honour the appellant is challenging the validity of notice u/s 153C which is based upon consolidated satisfaction note. Therefore, the decision of Hon'ble Karnataka High Court (SLP dismissed by Apex Court) will squarely apply to the present cases of the appellant companies." 15. Both the parties confirmed that the issues involved in these appeals are exactly similar. 16. Considered the rival submissions and material placed on record. We observed that the search proceedings were initiated in the case of Sushen Mohan Gupta and others u/s 131 of the Act on 02.01.2020 and subsequently a survey action u/s 133A was initiated in the case of the assessee. Based on various informations available on record, the case of the assessee was initiated u/s 153C of the Act relying on various documents found in the case of Sushen Mohan Gupta and others. Based on the date of search initiated in the case of Sushen Mohan Gupta and others, the proceedings were initiated in the case of the assessee. Howeve....
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.... The above proviso refers to second proviso to subsection (1) of section 153A. That section 153(1) and its first and second provisions read as under:- "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 u/s 132 or books of account, section 132A after the 31st day of May, 2003, the AO 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 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 accordingly as if such return were a return required to be furnished u/s 139; (b) Assess or reassess the total income or 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 AO shall assess or reassess the t....
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....year in which search is conducted (for the purpose of Section 1530 the document is handed over) and six assessment years preceding such assessment year. Now, in this case, the previous year in which the document is handed over is 1st April, 2010 to 31st March, 2011. The assessment year would be A.Y. 2011-12. Six preceding previous years and relevant assessment year would be as under: Previous Year Assessment Year 1.4.2009 to 31.03.2010 2010- 11 1.4.2008 to 31.03.2009 2009-10 1.4.2007 to 31.03.2008 2008-09 1.4.2006 to 31.03.2007 2007-08 1.4.2005 to 31.03.2006 2006-07 1.4.2004 to 31.03.2005 2005-06 22. The Assessing Officer has issued notice u/s 153C for A.Y. 2004-05 which is clearly barred by limitation. Therefore, issue of notice u/s 153C issued by the Revenue cannot be sustained on both the above counts, i.e., it is legally not valid as conditions laid down u/s 153C has not been fulfilled and it is barred by limitation. In view of the above, we quash the notice issued u/s 153C and consequently, the assessment completed in pursuance to such notice, is also quashed. 23. Since we have quashed the assessment order itself, the additions challenged by the asse....
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....pendency and abatement of the proceedings of assessment or 18 reassessment to the six assessment years will be examined with reference to such date." 18. In view of the above finding, the assessment framed u/s 143(3) of the Act for the A.Y. 2009-10 in the present case is not valid. Respectfully following the above cited decisions on an identical issue, the additional ground no. 4 in the present case is decided in favour of the assessee and in the result the assessment order is quashed as void. 19. Since in the above finding on the issue raised in additional ground no. 4 we have quashed the assessment order itself, the additions questioned by the assessee by way of other grounds of the appeal do not survive and, therefore, do not require any adjudication. 20. In the result, the appeal of the assessee is allowed." 13. From the above discussion the date of recording of the satisfaction will be the deemed date for the possession of the seized documents which is 03-10-2022 and six years would be reckoned from this date. The submission made by Ld AR is tenable that the assessment year relevant for previous year in which search was conducted in the case....
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....ount of sale during the year and the amount which the company had received during the year against the same, this is due to the debtors as opening debtors were received during the year and closing balance of debtors would have been received in next financial year. The balance of debtors is also reflecting in the books of the company. 12. Also, during post search investigation, the assessee was asked to give details of the topmost 5 clients to whom various services were provided by BOTPL as per its books of accounts and as per the details found in the seized material (Annexure A1- A23) so that a comparison could be drawn with respect to the transactions which were unaccounted and accounted for with the same clients. In response to the same, the assessee vide its submissions gave details of clients from whom it had received cash from FY 2013-14 onwards. The details are tabulated as under: S. No. Name of the client 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Total sum of the Rows 1 Chaurasia 26778595 34913829 48477321 42074199 27093853 26837299 206175096 2 Makhija 0 0 0 0 0 1496969 1496969 ....
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....tisfaction having bearing on the other person as well as relating to relevant assessment year for the purpose of revision of income of the relevant assessment years. 19. Hon'ble Supreme Court in the case of CIT-III vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 held as under :- "62. Hypothetically speaking, it may be possible for the material recovered in the course of a search having the potential or the probability of constituting incriminating material for more than one assessment year. However, even if such a situation were assumed to arise, it would be incumbent upon the AO to duly record reasons in support of such a conclusion. The Satisfaction Notes would thus have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and thus warranting the drawl of Section 153C proceedings for years in addition to those to which the material may be directly relatable. 63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determina....
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....entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached. 67. On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to ha....