TaxTMI 
TaxTMI 
2025 (6) TMI 2043
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....9 erred in upholding the order of assessment which is based only on suspicion and surmise and not on the basis of any material evidence. 3. The learned CIT(A) ought to have seen that the assessment order is hopelessly barred by limitation. 4. The Ld. Commissioner of Income Tax ought to have seen that apart from the Diary which was seized from the premises of the appellants son there is no other documentary evidence such as pronotes, books of account or mortgage document were seized which could lead to a conclusion that the appellant was engaged in money lending activity. The ld. Commissioner failed to see that due to frailing health which ultimately leads to the appellant's death, the appellant was not actively engaged in any business more so the alleged money lending activity. 5. The learned CIT(A) ought to have seen that the addition cannot be made purely on the basis of statement which was ultimately retracted. The learned CIT(A) ought to have seen that proceedings under section 153C can be initiated only after objective satisfaction is reached by the assessing officer of the searched person and connected person on the basis of seized material. In the ....
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....he very money lending activity itself has no basis and therefore the consequential alleged interest income has no basis. 12. The learned CIT(A) erred in confirming the addition of Rs. 6,44,841/- and Rs. 6,536/- being the debtors realization as unexplained credit in appellants bank account. 13. The learned CIT(A) ought to have seen that the assessing officer erred in not computed interest as per the provisions of section 243(B). For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the appellants appeal and thus render justice. 3. The brief facts of the case are that the assessee is assessed to income tax in the status of an individual. The assessee was engaged in the business of selling lottery tickets in Chennai and had been a regular assessee under the Income Tax Act for several years. Upon the prohibition of lottery sales by the State of Tamil Nadu in the year 2008, the assessee ceased his business operations, primarily due to deteriorating health. His health progressively declined from 2008 onward, and after prolonged illness, he passed away on 28.06.20....
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.... return of income furnished in compliance with the notice issued u/s.153C of the Act. Pursuant thereto, the assessment proceedings were initiated, and assessments were completed u/s.143(3) r.w.s. 153C of the Act vide order dated 31.03.2015 for the Assessment Years 2008-09 to 2012-13, making the following additions: Details of addition AY: 2008-09 in Rs. AY: 2009-10 in Rs. AY: 2010-11 in Rs. AY: 2011-12 in Rs. AY: 2012-13 in Rs. Unexplained investment in money lending 2,08,27,225 1,67,81,164 3,05,74,269 18,10,000 Interest income estimated on above 20,73,052 25,47,712 48,83,545 2,94,085 17,53,469 Undisclosed interest from investment in 2008-09 31,54,509 31,54,509 31,54,509 Undisclosed interest from investment in 2009-10 19,65,220 19,65,220 Undisclosed interest from investment in 2010-11 16,45,330 Unexplained investment in pawn loan 1,08,07,000 70,28,600 Undisclosed interest on pawn loan 8,46,139 8,78,903 Undisclosed interest on p....
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....ts substitution by the Finance Act, 2017. The provision is reproduced below: "Section 153C. Assessment of income of any other person (Pre-2017 version) 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, or (b) any books of account or documents, seized or requisitioned belongs to or pertains to, or any information contained therein relates to, a person other than the person referred to in section 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: Provided that no notice shall be issued under this section unless --- (i) the Assessing Officer has recorded his satisfaction that the books of account or documents or asset....
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.... issue: 19. The ld.AR further submitted that other jurisdiction issue which effects the assessment passed for the AY: 2008-09 to 2012-13 is lack of proper recording of satisfaction. 20. The ld.AR submitted that it is a settled proposition of law that if the jurisdictional foundation is lacking, the entire assessment collapses. As held by the Hon'ble Supreme Court in Calcutta Knitwears (para 41 and 44 of the order) and reaffirmed in Jasjit Singh (458 ITR 437), the absence of valid satisfaction strikes at the root of the jurisdiction u/s.153C of the Act. Consequently, any order passed in such a scenario is non-est, void ab initio, and liable to be quashed. 1. Section 153C of the Act (as applicable at the time of search in 2012), provides for initiation of assessment proceedings against a person other than the person searched if and only if the following jurisdictional conditions are met: a. Books of account or documents or assets must be seized during a search u/s.132 or requisition u/s.132A of the Act. b. Such seized material must belong to the other person. c. The AO of the searched person must record a satisfaction that such material belon....
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....the Act. However, the invocation of Section 153C is not automatic. It is a jurisdictional provision, and its valid invocation is subject to strict conditions precedent, which have been repeatedly emphasized by the Hon'ble Supreme Court and various High Courts. The relevant portion of Section 153C (post-amendment by Finance Act, 2015, with effect from 01.06.2015) reads as below: "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, belongs 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 the person referred to in section 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..." 26. This provision requires the AO of the searched person to be "satisfied" that the seized material belongs to or pertains to or relates to the o....
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....equired u/s.153C of the Act. In particular: a. There is no contemporaneous recording of satisfaction by the AO of the person searched linking the seized material to the assessee. b. There is no recording of satisfaction by the AO of the assessee (the "other person"), independently examining and determining that the seized material belongs to or pertains to the assessee. c. The assessment orders are silent on the nature of seized documents or materials and do not demonstrate any live nexus between the seized material and the alleged undisclosed income of the assessee. d. The same satisfaction note appears to have been used in a mechanical and templated manner for multiple years, which is contrary to the principles laid down by the Supreme Court. Thus, the jurisdictional trigger for initiating assessment u/s.153C is wholly absent in the impugned case. 31. The ld.AR submitted that a cursory reading of the satisfaction note would reveal the following: a. The note merely records a statement made by third parties (Shanthilal and Prema Devi) that the seized diary belongs to Mr.Dharmichand jain (deceased). b. It does not establish....
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....012 u/s.132 of the Act, which was conducted at the business premises of Shri Shanthilal, son of Shri Dharmichand Jain. Smt.Prema Devi, w/o. Shri Dharmichand Jain continued to reside alone on the first floor of the residential premises. In the course of this search operation, the officials also visited the residential premises on the first floor, where Smt.Prema Devi was residing and a diary was seized from her residence with a printed title "Numeric" pertaining to the calendar year 2007 and is alleged by the department to contain records of moneylending transactions pertaining to the late Shri Dharmichand Jain. The said document was seized vide reference ANN/DR/B&D/S. 36. We note that the AO of the searched person recorded the satisfaction on 23.09.2014 and issued notice to the assessee to file the return of income for the A.Y. 2007-08 to 2013-14. 37. The first objection raised by the assessee in the grounds of appeal in respect of jurisdiction of the AO in initiating proceedings u/s.153C of the Act for the A.Y. 2008-09, in light of second proviso to section 153A(1) of the Act, and proviso to section 153C(1) of the Act. 38. As per second proviso to section 153A(1) of the A....
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....r person. Unless, the AO records satisfaction having regard to material found during the course of search, he cannot hand over books of accounts or other documents to the AO of any other person. Thereafter, AO of the other person should record satisfaction u/s.153C of the Act for initiation of proceedings u/s.153C of the Act, having regard to books of accounts and other documents received from the Assessing Officer of the searched person before issuing notice u/s.153C of the Act. In the present case, the AO of the searched person and any other person is one and the same and has recorded satisfaction note for proceeding u/s.153C of the Act on 23.09.2014 with reference to books of accounts seized during the course of search proceedings, in the case of Mr.Shanthilal and satisfied that the documents and books of accounts seized during the course of search proceedings in the case of Mr.Shanthilal has information relating to the assessee and has bearing on its total income. From the satisfaction note recorded by the AO of the searched person and any other person, it is undoubtedly clear that he has handed over books of accounts and other documents to the AO having jurisdiction over the a....
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....jit Singh (Supra), we are of the considered view that for the purpose of proviso to section 153C(1) of the Act, in case of such other person, the reference to the date of initiation of search u/s. 132 of the Act in the second proviso to section 153A(1) of the Act, shall be construed as reference to the date of receiving the books of accounts or other documents by the Assessing Officer having jurisdiction over such other person and said date is considered in the present case i.e. on 31.12.2021. The assessment year before us is beyond stipulated six assessment years and four relevant assessment years and thus, notice issued by the Assessing Officer u/s. 153C of the Act, dated 31.12.2021 and consequent assessment order passed u/s. 143(3) r.w.s. 153 of the Act, dated 31.03.2022 is barred by limitation and liable to be quashed. Thus, we quash assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 153C of the Act, dated 31.03.2022. 42. In light of the foregoing discussion and with due respect to the binding precedent laid down by the Hon'ble Supreme Court in CIT v. Jasjit Singh (supra), we are of the considered opinion that the Assessing Officer has committed an error in ....
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....ovisions of Section 159 r.w.s. 2(29) of the Income Tax Act, 1961. The notice u/s.153C issued to Mr.Prema Devi L/R." 45. On perusal of the Section 153C of the Act provides for assessment of 'income of a person other than the person searched' where certain seized or requisitioned material belonging to or relating to such other person is found during the course of a search u/s.132 or a requisition u/s.132A of the Act. However, the invocation of Section 153C is not automatic. It is a jurisdictional provision and its valid invocation is subject to strict conditions precedent, which have been repeatedly emphasized by the Hon'ble Supreme Court and various High Courts. The relevant portion of Section 153C (post-amendment by Finance Act, 2015, with effect from 01.06.2015) reads as below: "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (c) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (d) any books of account or documents, seized or requisitioned, pertains or pertain to, or any informa....
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....erial should relate to the other person. In the case of Pepsi Foods Pvt. Ltd. v. ACIT [(2014) 367 ITR 112 (Delhi HC)] the Delhi High Court held that unless the seized documents "belong to" the other person and are incriminating in nature, mere mention of the other person's name or loose references do not justify invoking Section 153C. The satisfaction note must expressly indicate this and in the case of RRJ Securities Ltd. v. CIT [(2016) 380 ITR 612 (Delhi HC)] the Hon'ble Delhi High Court reiterated that satisfaction cannot be vague or mechanical, and must be substantiated with reference to specific material showing that it belongs to the other person and reveals undisclosed income. 52. We note that the Section 153C of the Act (as applicable at the time of search in 2012), provides for initiation of assessment proceedings against a person other than the person searched if and only if the following jurisdictional conditions are met: a. Books of account or documents or assets must be seized during a search u/s.132 or requisition u/s.132A of the Act. b. Such seized material must belong to the other person. c. The AO of the searched person must record a s....
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....e recording of satisfaction is a jurisdictional requirement and must be clear, specific, and refer to seized material that belongs to and is incriminating against the other person. 58. In light of the above, in the present case on hand * the satisfaction note is completely silent on whether the diary contains any incriminating entries. * There is no mention of how the contents of the diary lead to the discovery of undisclosed income in the hands of Late Shri Dharmi Chand or his legal heir. * The satisfaction note is based solely on post-search correspondence and statements, not on independent analysis of the seized material. There is no evidence that the AO examined the diary to verify that it belonged to and incriminated the other person. This fails the standard of "objective satisfaction based on material" required under Calcutta Knitwears (SC). * The satisfaction note is not provided any evidence as an incriminating material relating to the assessee and also does not contain any whisper of the undisclosed income to be assessed on the assessee. 59. Therefore, we are of the view that the jurisdiction u/s.153C cannot be invoked in the absen....