TaxTMI 
TaxTMI 
2025 (6) TMI 1529
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings u/s.153C of the IT Act without having any material on record. 3. The Hon'ble CIT(A) ought to have observed that the assessing officer erred in arriving at the conclusion that income chargeable to tax has escaped assessment within the meaning of section 153C of the IT Act without any material on record and therefore the assessment order u/s 153C ought to have been held as invalid. 4. The Hon'ble CIT(A) ought to have observed that as the assessing officer accepted that there was no scope for invoking the provisions of section 2(47)(v) of the IT Act which was the ground for initiation of action u/s.153C of the IT Act), ought to have dropped the proceedings initiated u/s.153C of the IT Act. 5. The Hon'ble CIT(A) ought not to have upheld the action of the assessing officer by sustaining the disallowance to the extent of 50% in respect of interest expenditure of Rs. 3,21,67,2 76/- as the disallowance made was illegal and improper. 6. The Hon'ble CIT(A) ought to have observed that the assessing officer erred in disallowing interest of Rs. 2,95,510/- by invoking provision of section 37(1) of the IT Act and therefore ought not to have upheld the addition to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Hon'ble CIT(A) ought not to have upheld the disallowance made by the assessing officer with regard to work-in-progress, interest payment etc. to the extent of 50% as there was no supporting material on record for upholding the disallowance. 9. Any other ground will be raised at the time of hearing." ITA 1104/Hyd/2018 - Revenue i) Whether on the facts and circumstances of the case and in law, the learned CIT(A) is justifying in holding that there is no benefit accruing to the assessee in terms of section 28(iv)? ii) Whether on the facts and circumstances of the case and in law, the learned CIT(A) is justified in holding that the entitlement on signing the JDA cannot be said to "benefit" arising to the assessee? iii) Whether on the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate in order that income may accrue to a person, it is necessary that a right to receive the same is vested, though its valuation is postponed or its materialization depends on contingency. iv) Whether on the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate that the right to receive the entitlement of JDA bec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l unpaid is nothing but the benefit within the meaning section 28(iv)? vi) Whether in facts and circumstances, the CIT(A) failed to appreciate that whether a receipt of money is taxable or not or whether certain deductions from that receipts are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. vii) Whether on the facts and circumstances and in law, the learned CIT(A) justified in restricting disallowance of interest attributable to diversion of interest bearing fund to so without going it merits of the case or without giving any cogent reasons for the same? viii) Whether on the facts and circumstances and in law, the learned CIT(A) failed to appreciate that the A0 has quantified the interest as per the information available on record leaving no scope for disallowance @ 50% as suggested by the ld. CIT(A). ix) The appellant craves leave to amend or alter any ground or add any other grounds which be necessary." ITA Nos 929 932 1104 and 1107 of 2018 Page 6 of 22 3. As identical grounds have been raised by both the assessee as well as the Revenue, and therefore, for recording the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment of a particular A.Y. or more than one particular A.Y. Whatever documents found during the course of search & seizure action are already part of the books of account of the assessee and therefore, the JDA and supplementary agreements entered into between the assessee and other co-developers cannot be held as incriminating material. The learned AR has submitted that the only document which is referred by the Assessing Officer in the assessment for the year under consideration is the JDA dated 19th April, 2008 which cannot be considered as incriminating material as the assessee has already recorded the transaction pertaining to the land to be developed under the JDA in the books of account as stock-in-trade and work-in-progress. The Assessing Officer has not disputed that under the JDA, refundable security was received by the assessee and the other co-developer which cannot be treated as income of the assessee until and unless the stock in- trade reported by the assessee is sold. The amount received under the development agreement as refundable security was duly recorded in the books of account and the same is evident from the balance sheet of the assessee. This fact is also....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. The expenditure booked towards the work-in-progress is also mainly in the nature of professional fee and therefore, the assessee failed to show that any development activity was undertaken during the year or any normal business activity was carried out by the assessee. Therefore, the amount received by the assessee to the tune of Rs. 20 crore as refundable deposit from M/s. Pacifica Hyderabad Projects Developers (P) Ltd is nothing but a business income of the assessee towards transfer of stock-in-trade under the JDA. Thus, he has supported the findings of the learned CIT (A) on this issue. 7. We have considered the rival submission as well as relevant material available on record. There is no dispute that the assessee filed the original return of income for the year under consideration on 9/2/2010 declaring nil income. The Assessing Officer has noted in the assessment order that the assessee has capitalized all the expenditure and added to the work in progress. Thus, it is clear that at the time of recording the satisfaction by the Assessing Officer as on 4th August, 2015, the assessment for the year under consideration i.e. A.Y 2009-10 was not pending and consequently the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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. Therefore, the relevant date for considering the status of particular assessment as pending or completed for initiation of proceedings u/s 153C shall be the date on which the Assessing Officer having the jurisdiction over the person other than such person receives the seized document or material pertaining to such other person. Once the assessment for the A.Y 2009-10 was not pending at the time of recording the satisfaction by the Assessing Officer as on 4/8/2015, then in the absence of any incriminating material, the Assessing Officer cannot make any addition. Further, for initiation of proceedings u/s 153C of the Act, there should be some incriminating material found during the course of search and seizure action....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001- 02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 10. Thus, it is clear that the incriminating material which was seized had to pertain to the A.Y in question for which the Assessing Officer has issued notice u/s 153C and in the absence of the document which were seized have any co-relation document wise and A.Y-wise, with the income assessable to tax has escaped assessment the requirement u/s 153C of the Act is not satisfied. 11. The Hon'ble Delhi High Court in the case of Saksham Commodities Ltd vs. Income Tax Officer (Supra) has held in Paras 47, 50 to 68 as under: "47. This too speaks of "relevancy" as one of the meanings one may gather where that particular expression is used. This leads us to the inevitable conclusion that the initiati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 plausible nexus. The aforesaid position also comes to the fore when one reads para 17 of ARN Infrastructure and which annulled an action aimed at reopening assessments for years to which the incriminating document which was found did not relate. 53. Sinhgad Technical Education Society also constitutes a binding precedent in respect of the aforesaid proposition as would be evident from the Supreme Court noticing that the material disclosed pertained only to AY 2004-05 or thereafter and that consequently the Section 153C action initiated for AYs' 2000-01 to 2003-04 would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities. 54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that absent incriminating material, the AO would not be justified in seeking to assess or reassess completed assessments. Tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs which could be then subjected to action under Section 153C would have to necessarily be those in respect of which the assessment is likely to be influenced or impacted by the material discovered. Section 153C neither mandates nor envisages a mechanical or an en blanc exercise of power, or to put it differently, one which is uninformed by a consideration of the factors indicated above. 56. We also bear in mind the pertinent observations made in RRJ Securities when the Court held that merely because an article or thing may have been recovered in the course of a search would not mean that concluded assessments have to "necessarily" be reopened under Section 153C and that those assessments are not liable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect was again emphasized in para 38 of RRJ Securities with the Court laying stress on the existence of material that may be reflective of undisclosed income being of vital importance. All the aforenoted judgments thus reinforce the requirement of incriminating material having an ineradicable link to the estimation of income for a particular AY. 57. It becomes pertinent t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of total income for a particular year, there would exist no justification to invoke the powers conferred by Section 153C. 60. Before concluding, we also deem it imperative to briefly notice certain aspects which emerge from a reading of the Satisfaction Notes themselves. As is manifest from a reading of the Satisfaction Note drawn by the jurisdictional AO of the assessee in W.P. (C) 1459/2024, after noticing the material which was recovered during the search and related to FYs' 2009-10, 2010-11 and 2011-12 [corresponding AYs' thus being AYs' 2010-11, 2011-12 and 2012-13], it has proceeded to observe that the assessments which were liable to abate or be reopened would be AYs' 2010-11 to 2020-21. A similar note appears in W.P. (C)1117/2024. Here again, after referring to the material pertaining to FY 2009-10 [and thus relating to AY 2010-11], the AO proceeded to seek approval for initiating action under Section 153C in respect of AYs' 2010-11 up to 2020-21. 61. A reading of the aforesaid Satisfaction Notes would establish that jurisdictional AOs' appear to have proceeded on the premise that the moment incriminating material is unearthed in respect of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r AYs' that may form part of the 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r is likely to influence. Absent 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. 12. Therefore, it is a mandatory condition for initiation of proceedings u/s 153C of the Act that the Assessing Officer is satisfied that the seized document is an incriminating material and also having a bearing on determination of total income for a particular A.Y or for all the A.Ys. In the case in hand, what is referred by the Assessing Officer is JDA which is otherwise duly recorded in the books of account as the amount received by the assessee as refundable security is reported in the balance sheet of the assessee as well as in the cash book and bank account of the assessee. Therefore, at the first stage, the JDA would not constitute an incriminating material as the amount received on account of refundable security would not be held as income even in case ....