TaxTMI 
TaxTMI 
2021 (10) TMI 1449
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....gs u/s 147. 2. That the Ld. CIT(A) failed to appreciate the reassessment was initiated pursuant to search and seizure operation carried out at the premises of third parties wherein certain documents were found which allegedly belonged to the present appellant and thus under such facts reassessment could have be done only u/s 153C and not u/s 147 and thus the impugned assessment order was liable to be gushed as being without jurisdiction. 3. That the Ld. CIT(A) failed to appreciate that section 153C overrides section 147/148 and thus proceedings which are initiated pursuant to document seized under search & seizure operations in third persons premises can only be under section 153C and not under section 147/148. 2. Facts, in brief, are that the Assessees are Private limited Companies engaged in the business of wind energy generation, earning income from house property, Sharing Trading, trading goods and Capital gain. A search and seizure operation under section 132 of the Income Tax Act, 1961 (the Act) was initiated at the premises of Shri Deepak Kalani and Shri Pankaj Kalani situated at 116-117, Milinda Manor, 2-RNT Marg, Indore. During the course of search, tw....
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....ere not adjudicated upon, therefore, assessee filed MAs and vide order dated 9.7.2021 passed in MA Nos.31 to 34/Ind/2020, these COs were recalled for deciding the legal grounds raised in the present COs. We find that admittedly, the Assessing Officer reopened the assessments u/s 148 of the Act on the basis of certain incriminating documents found during the course of search conducted in a third party case (Deepak kalani and Pankaj Kalani). The reasons recorded by the Assessing Officer for re-opening of the assessments and the formation of believe by the Assessing Officer that the income has escaped Assessment are only on the basis of documents seized (LPS 11 & 12) during the course of search operation in the premises of third party. We find that the ld. CIT(A) decided the issue as under: "Ground Nos. 1, 2 & 3: Though these grounds of appeal, the appellant has challenged the initiation of proceedings of u/s 148 of the Income Tax Act, 1961. The notice u/s 148 has been issued to the appellant on 27/03/2015. The notice u/s 148 has been issued after recording the reasons. The appellant has been provided the reasons recorded u/s 148 of the I.T. Act. As far as the adequacies of r....
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....of reason u/s 153C of the I.T. Act, 1961 for the A. Y. 2006-07 to AY 2011-12-Regarding. In your case following reason recorded by DCIT (Central), Indore: "Assessment proceedings u/s 143(3) r.w.s 153A in Signet Group of Indore are pending with this office On perusal of the Appraisal Report, it is revealed that during the search proceedings, some loose papers (LPS 11) were found and seized from the business premises 116-117, Milinda Manor-2, RNT Marg, Indore of Shri Pankaj and Shri Deepak Kalani from which it is clear that various transactions on various dates were made by Shri Deepak Kalani and Shri Pankaj Kalani with M/s Flexituff International India Ltd. Indere (PAN AAACK7074P) and concealment of Rs 7,64,83,000/-has been detected in the hands of M/s Flexituff International India Ltd. Accordingly, total addition of Rs.7,64,83,000/-has been proposed by the Investigation Wing in the Appraisal Report in the hands of the above named assessee i.e. M/s Flexituff International India Ltd in various assessment years. In view of the above, you are requested to take necessary action at your end as the jurisdiction over the assessee lies with you." Fur....
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....and prepared by Shri Mukesh Sangla. 12.2 On LPS 11, various transactions with the name "Flexituff", "KIL"." KIL(EWDPL)". "Sharmaji", Chousya", "Kalani T/I" "Matkawalaji" "Pawan Jain" are appearing. On specific query, regarding the details of the transactions with the name "Flexituff" and "KIL" in LPS 11, Shri Dipak Kalani in his statement dated 23/12/2011, recorded during the post search proceedings, submitted that above persons are related to the M/s Kalani Industries Ltd. / M/s Flexituff International Ltd (Shri Manish Kalani and Shri P. S. Kalani group). 12.3 After revocation of the prohibitory order i.e. on 09.12.2011, Shri Dipak Kalani was asked by the DDIT (Inv.)-1, Indore to explain the entries recorded on LPS-10 and LPS-11 but he could not explain any transaction. On 10.12.2011, Shri Dipak Kalani was again asked to explain such transactions but he could not explain anything. The assessee was also provided the photocopies of entire seized materials but no explanation in this regard was filed by the assessee. 12.4 However, on 19.12.2011, Shri Dipak Kalani in his statement recorded before the Investigation Wing, only submitted that the persons appeari....
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.... the IT Act 1961 for the A.Yrs 2006-07 to 2011-12. (Sachchidanand Dube) Dy. Commissioner Of Income Tax-1(1) Indore OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX-1 (1) Room No. 115, Ayakar Bhawan Annexe, Opp. White Church, Indore F.No. DCIT-1(1)/Scrutiny/AAACN5986H/Indore/2015-16/Dated 10.06.2015 To, M/S. FLEXITUFF INTERNATIONAL LIMITED C 41-50, Sec. No. III SEZ Industrial Area Pithampur, Distt. Dhar Dear Sir/Madam, Sub. :-Assessment Proceeding u/s 147/148 for the AY 2009-10-Regarding. Please refer to your request letter dated 26.05.2015 (received on 29.5.2015) in which you requested to supply the copy of reason and decision of commencement of proceeding u/s 148 of the IT Act for the AY 2009-10 and 2010-11. In this connection the reason recorded u/s 148 is being supplied to you this letter. 2. It is brought to your knowledge that your case reason u/s 148 has been recorded on 23.3.2015 and notice u/s 148 was issued on 27.03.2015. 3. You are further requested to make compliance of notice issued u/s 142(1) dated 20.5.2015 on or before 22.6.2015. You are reques....
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....ection 153A, then the books of account 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 each 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." 7. From perusal of the above, it is clear that provisions of section 153C of the Act supersede the applicability of provisions of sections 147 and 148 of the Act. We find that certain documents were seized during the search u/s 132 of the Act and the Revenue came to conclusion that such documents belongs to assessees. Thus, in our view, only the provisions in which any assessment could be made against the assessees in the Income tax Act were of section 153C read with section 153 of the Act. Hence, notices issued under section 148 of the Act and proceedings under section 147 of the Act by the Assessing Officer are illegal and void ab initio in view of the provisions of section 153C of the Act. Further, we find that vide CBDT Circular No.7 of 2003, provisions of Section 153C have been explained as under....
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....nt' and it provides that if the Assessing Officer has reason to believe that any income chargeable to the tax has escaped in any assessment year, he could reassess the income subject to fulfilling other conditions mentioned in that section. Thus, section 153C is applicable in cases where assessment is framed in lieu of search taking place, whereas u/s 147 assessments is reframed when the Assessing Officer has reason to believe that income has escaped assessment. Therefore, we are of the view that re-assessment pursuant to "material /document found" during search at third party where satisfaction recorded that material/document so found "belong to" to other person (other than the searched person) than assessments can only be done through recourse of Section 153C and not by invoking the Provision of Section 147/148 of the Act as the provisions of Section 153C are overriding in nature and contend non obstante Clause for Section 139, 147, 149,151 & 132 of the Act. Hence, once a search was conducted and notices under Section 153C were issued to assessees then the question of issuing notices thereafter under Section 148 of the Act on the strength of search did not arise. Our view is supp....
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....ssets, documents etc. of any other person found during search or requisition as per chapter XIVB. In such a case, books, documents etc. have to be handed over to the Assessing Officer having jurisdiction over such third person who will initiate and issue a notice to such a person u/s. 153C of the Act. In the case of Jindal Stainless Ltd. reported at 122 TTJ (Del) 902, it was held that where the procedure laid down u/s. 153C has not been followed, the assessment would not be valid and such defect was jurisdictional in nature and would not be cured by S.292B of Income tax Act. The Hon'ble Supreme Court in this case of Manish Maheshwari reported in (2007) 289 ITR 341, has held that if procedure laid own in Sec. 158BD is not followed, the Block Assessment proceedings would be illegal. The provisions of section 153C are exactly similar to the provisions of section 158BD under Block Assessment proceedings. As such the decision of the Supreme Court referred to above shall apply mutatis mutandis to the provisions of section 153C of the Act as well. Thus, keeping in view of the decisions of Supreme Court in the case of Manish Maheshwari and of ITAT Delhi Bench (supra) the assessment ord....