TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1344
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....tion to one K. Narayana Raju and in respect of residential premises of the petitioner at No. 24, Lakshmi Nivas, 4th cross Road, K.R. Layout, J.P. Nagar, 6th phase, Bangalore. In pursuance of the same, the respondents conducted a search in the aforesaid premises of the petitioner during the period from 14.09.2017 to 16.09.2017 and recorded the statement of the petitioner, pursuant to which, the respondents prepared a satisfaction note recording reasons for initiating action against the petitioner under Section 153C of the I.T. Act, in pursuance of which, the 1st respondent issued the impugned notices under Section 153C of the I.T. Act to the petitioner which were followed by subsequent notices under Sections 142(1) and 143(2) of the I.T. Act to the petitioner, who is before this Court by way of the present petition. 4. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner submits that Section 153C of the I.T. Act would not be applicable to the petitioner, inasmuch as the respondents conducted a search of the petitioner at his residential premises in his presence and had recorded ....
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....ismissed. In support of his submissions, learned counsel placed reliance upon the following judgments :- (i) Pr. Commissioner of Income Tax vs. Naveen Kumar Gupta; [2024] 1658 taxmann.com 574 (Delhi) (ii) Siksha "O" Anusandhan vs. Commissioner of Income Tax; [2011] 336 ITR 112 (Orissa) (iii) Sunny Jacob Jewelers and Wedding Centre vs. Deputy Commissioner of Income Tax; [2014] 362 ITR 664 (Kerala) (iv) Commissioner of Income Tax vs. RRJ Securities Ltd .; [2016] 380 ITR 612 (Delhi) (v) SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax; [2012] 346 ITR 177 (Delhi) (vi) MDLR Resorts Pvt. Ltd. vs. Commissioner of Income Tax; [2014] 361 ITR 407 (Delhi) (vii) Principal Commissioner of Income Tax vs. Associated Mining Co .; [2019] 417 ITR 420 (Kar.) (viii) Associated Mining Co. vs. Principal Commissioner of Income Tax; SLP Nos. 711-716/2020 dated 17.01.2020. 6. I have given my anxious consideration to the rival submissions and perused the material on record. 7. Before adverting to the rival submissions, it would be apposite to extract the satisfaction note prepared by the 1st respondent for initiating action against ....
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....s per Annexure A (iii) Address of premises/place from where such material was seized No 24, Lakshmi Niwas, 4th Cross Road, KR Layout, JP Nagar, 6^th phase, Bangalore (iv) Date of seizure of such material 16.09.2017 (v) Particulars of the relevant Panchnama Panchnama dated 16.09.2017 (vi) Annexure/S.No. Page number etc (particulars to be specified) As per Annexure A 6. Relationship of the person referred in S.No. 4 with the person referred to in S.Nc.2 Business Transactions 7. Satisfaction of the Assessing Officer of the person referred to in section 153A that the seized material referred to in S.No. 5 belongs to the person referred to in S.No. 4 I have examined the documents given in Annexure A and I am satisfied that the said documents pertain to and the information contained therein relates to Shri C R Rammohan Raju and it has a bearing on the determination of total income of Shri C R Rammohan Raju. 8. Assessment Years involved 2012-13 to 2017-18 Sd/- (PRAVEEN SINHA) Assistant Commissioner of Income Tax Central Circle 1(2), Bengaluru ANNEXURE A Bundle No. Page No. Description of ....
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....h sides, the following points arise for determination in these petitions: (1) Whether the petitioners have made out the case for interference under Article 226 of the Constitution of India? (2) Whether the impugned notice under section 153C and Order of Assessment Notice under section 156 of the Act requires to be set aside? (3) What Order? 13. Perusal of the writ papers would indicate that the respondent-Revenue made a search at the premises of one Sri Rajendran at New Delhi and recovered certain diaries/loose sheets, which is purportedly consisting of certain entries relating to the affairs/transactions of the petitioner. Based on the statement of the said Sri Rajendran (Petitioner in Writ petition No. 9946 of 2022) recorded during the investigation, respondent-Revenue initiated action against the petitioner-Sunil Kumar. In this regard, the respondent-Revenue, by exercising power under section 127 of the Act, transferred the case to the respondent No. 1. Section 127 of the Act provides for power to transfer cases. Relevant provision is Section 127(1) of the Act and same is extracted below: "Section 127(1): The Principal Direct....
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....ity, however, the ratio laid down by the Hon'ble Apex Court in the said judgment is aptly applicable to the facts of the case on hand. At paragraphs 74 to 81 of the judgment, it is observed thus: "74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. 75. In Chief Constable of the North Wales Police v. Evans23 Lord Brightman said: "Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made. Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power." In the same case Lord Hailsham commented on the purpose of the remedy by way of judicial review under RSC, Ord. 53 in the following terms: "This remedy, vastly increased in extent, and rendered, over a long period in recent years, of infinitely more convenient access than that provided by ....
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....particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality: This means the decision- maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii)Irrationality, namely, Wednesday un-reasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R.V. Secretary Of State for the Home Department, ex Brind28, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, "consider whether something has gone wrong of a nature and degree which requires its intervention". 78. What is this charming principle of Wednesday unreasonableness? Is it a magical formula?....
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....rally in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. This case was concerned with a complaint by the owners of a cinema in Wednesbury that it was unreasonable of the local authority to licence performances on Sunday only subject to a condition that 'no children under the age of 15 years shall be admitted to any entertainment whether accompanied by an adult or not'. In an extempore judgment, Lord Greene, M.R. drew attention to the fact that the word 'unreasonable' had often been used in a sense which comprehended different grounds of review. (At p. 229, where it was said that the dismissal of a teacher for having red hair (cited by Warrington, L.J. in Short v. Poole Corpn. 32, as an example of a 'frivolous and foolish reason') was, in another sense, taking into consideration extraneous matters, and might be so unreasonable that it could almost be described as being done in bad faith; see also R. v. Tower Hamlets London Borough Council, ex p Chetnik Developments Ltd.33 (Chapter 4, p. 73, supra). He summarised the principles as follows: "The Court is entitled to investigate the action of the local authority with a view to seeing whet....
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....ointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment 34, the Secretary of State referred to a number of factors which led him to the conclusion that a non- resident's bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion. (2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Bernet London Borough Council, ex p Johnson the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority's parks was struck down." 16. In view of the aforementioned aspects, I have carefully examined the law declared by the Hon'ble Apex Court with regard to acceptance of....
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....rial, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram v. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed :- "In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book ... I think the term "book" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in ....
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....rsons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debts and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. Admittedly the said diaries were not being maintained on day-to day basis in he course of business. There is no mention of the dates on which the alleged payment were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." ** 20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those boo....
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.... that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts.". 282. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court." (Underlining by me) 18. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maint....
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....ule cannot be said to be of universal application. Despite existence of an alternative remedy, a writ court may exercise its discretionary jurisdiction of judicial review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. In the aforementioned circumstances, the alternative remedy has been held not to operate as a bar. [See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others, (1998) 1 SCC 1, Sanjana M. Wig (Ms.) v. Hindustan Petroleum Corpn. Ltd., (2005) 8 SCC 242, State of H.P. and Others v. Gujarat Ambuja Cement Ltd. and Another." 19. It is well settled principle in law that administrative or judicial orders must be supported by reasons. It is the duty of the respondent-Revenue being an instrumentality of state under Article 12 of the Constitution of India to give reasons for its conclusion. Recording of reason is the hallmark of a valid Order, while exercising administrative action or judicial review to disclose reasons and recording reasons, has always been insisted upon as o....
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....esentation of an Election Petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an Election Petition in the case of Chandra Kishor Jha v. Mahavir Prasad and Ors. (1999) 8 SCC 266 and in the course of consideration observed as hereunder: "It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner". Therefore, if the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect rela....
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....for which the power is entrusted, goaded by extraneous considerations, good or bad, but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested the court calls it a colourable exercise and is undeceived by illusion. In a broad, blurred sense, Benjamin Disraeli was not off the mark even in Law when he stated: "I repeat-that all power is a trust-that we are accountable for its exercise-that, from the people, and for the people. all springs, and all must exist." After analysing the factual matrix, it was concluded that the land was not needed for a Mandi which was the ostensible purpose for which the land was sought to be acquired but in truth and reality, the Mandi need was hijacked to reach the private destination of depriving an enemy of his land through back-seat driving of the statutory engine. The notification was declared invalid on the ground that it suffers from legal mala fides. The case before us is much stronger, far more disturbing and unparalelled in influencing official decision by sheer weight of personal clout. The District Magistrate was chagrined to swallow th....
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....tion in the sense that it could not have seisin of the case because the subject matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject matter of the suit or over the parties to it". 23. I have also considered the arguments advanced by the learned Additional Solicitor General with regard to the dismissal of the Appeal by the Appellate Authority dated 03rd May, 2022 in Appeal No: CIT(A)-11/BNG/10701 of 2019-20 (Annexure-A) in Writ Petition No. 9945 of 2022. On careful consideration of the grounds urged in the said writ petition and having regard to the conclusion arrived at that the impugned notices are without jurisdiction, I am of the view that the impugned notices are liable to be set aside which are arising out of wrong interpretation of Section 153C of the Act, and the entire case be remanded to the competent authority/respondent-Revenue for fresh consideration and to pass appropriate orders in accordance with law, after affording reasonable opportunity to ....
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....ition and granting relief on the ground of alternative remedy would not apply, vide State of Bombay v. United Motors Ltd. [AIR 1953 SC 252] and Himmat Lal v. State of M.P. [AIR 1954 SC 403]. (d) The rule of alternate remedy being a bar to entertain a writ petition is a rule of practice and not of jurisdiction. In appropriate cases, High Court may entertain a petition even if the aggrieved party has not exhausted the remedies available under a statute before the departmental authorities, vide State of West Bengal v. North Adjai Cool Company [1971 (1) SCC 309]. (e) Further, alternative remedy must be effective. An appeal in all cases cannot be said to have provided in all situations, where an appeal would be ineffective and writ petition in such a case is maintainable, vide Ram and Shyam Company v. State of Harayana [AIR 1985 SC 1147]. (f) Where an authority has acted without jurisdiction, High Court should not refuse to exercise its jurisdiction under Article 226 on the ground of existence of alternative remedy vide Dr. Smt. Kuntesh Gupta v. Management H.K. Mahavidyaya [AIR 1987 SC 2186]. Thus, an alternative remedy is not an absolute bar to the maintainab....
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....he field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation." In the said case (Whirlpool Corporation), it was also observed that the High Court was not justified in dismissing the writ petition at the initial stage without examining the contention that the show cause notice issued to the appellant was wholly without jurisdiction. In the said case, the Registrar of Trade Marks issued to the appellant therein a notice under section 56(4) of the Trade and Merchandise Marks Act, 1958 to show cause against the proposed cancellation of appellants' Certificate of renewal. It was held that the issuance of such a notice by the Registrar was without authority and it was quashed by the High Court. (b) In State of H.P. and others v. Gujarat Ambuja Cement Limited and Another, [(2005) 6SCC 499], (Gujarat Ambuja Cement Limited), a detailed disc....
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.... root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. But, if the High Court had entertained a petition despite availability of an alternative remedy, it would not be justifiable for the High Court to dismiss the same on the ground of non-exhaustion of statutory remedies, unless the High Court finds that factual disputes are involved and it would not be desirable to deal with them in a writ petition. In the said case, the question was liability to pay purchase tax on the royalty paid by the respondents, i.e., the holder of mining lease, where there was a price for removal of minerals and thus, attracted liability to pay purchase tax. The Hon'ble Supreme Court in the said decision rejected the plea that the High Court should not have entertained the writ petition. Thereafter, the question relating to liability to pay purchase tax on royalty paid was taken up for consideration by discussing on the meaning of the words "royalty", "dead rent", "mining lease". It was observed that royalty paid by the holder of a mining lease under s....
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.... 24, it was observed as follows: "Therefore, insofar as the question of exercise of the power conferred by Article 226 of the Constitution, despite the availability of a statutory alternative remedy, is concerned, Anisminic cannot be relied upon." The distinction between the lack of jurisdiction and the wrongful exercise of the available jurisdiction should certainly be taken into account by High Courts, when Article 226 of the Constitution is sought to be invoked bypassing a statutory, alternative remedy provided by a special statute. In the said case, the question was, as to, whether, the NCLT lacked the jurisdiction to issue a direction in relation to a matter covered by Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Statutory Rules issued thereunder; or, there was mere wrongful exercise of a recognised jurisdiction, for instance, asking a wrong question or applying a wrong test or granting a wrong relief. On a detailed discussion, it was held that the NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute Supplemental Lease Deeds for the extension of the mining lease. Since....
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....issioner of Income-tax and Others v. Chhabil Dass Agarwal, [(2014) 1 SCC603], (Chhabil Dass Agarwal). In the latter decision, it has been held that the exceptions to the rule of non-interference when efficacious, alternative remedy is available are as under which are illustrative and non-exhaustive: (i)where remedy available under statute is not effective but only mere formality with no substantial relief; (ii)where statutory authority not acted in accordance with provisions of enactment in question, or; (iii)where statutory authority acted in defiance of fundamental principles of judicial procedure, or; (iv)where statutory authority resorted to invoke provisions which are repealed, or; (v)where statutory authority passed an order in total violation of principles of natural justice. (e) In United Bank of India v. Satyawati Tondon and others, [(2010) 8 SCC 110], (Satyawati Tondon) it was observed that it is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the C....
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.... ORDER (1) Writ Petitions No. 9937, 9938 and 9939 of 2022 are allowed and impugned Notices dated 21st August, 2019 and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above; (2) Writ petition No. 9945 of 2022 is allowed and Order dated 03rd May, 2022 passed in Appeal No. CIT (A)-11/BNG- 10701/2019-20 is quashed. The Respondent No. 1 shall reconsider the Appeal filed by the petitioner referred to above and to dispose of the same in accordance with law after providing an opportunity of hearing to both the sides, considering the observation made above; (3) Writ Petition No. 9946 of 2022 is allowed and proceedings initiated under section 153C of the Act culminating in issuance of Notice dated 22nd August, 2019 are quashed and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above. 10. The aforesaid judgment of the co-ordinate Bench of this Court was confirmed by the Division Bench of this Court in Deputy Commissioner of Income Tax vs. Sunil Kumar Sha....
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....n the second proviso to sub-section (1) of section 153A shall 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. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search ....
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....re is a compliance of the provisions of section 153C of the Act by the Assessing Officer and all the conditions which are required to be fulfilled before initiating the proceedings Under section 153C of the Act have been satisfied or not? 6. This Court had an occasion to consider the scheme of section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice Under section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd. (supra). As held, before issuing notice Under section 153C of the Act, the Assessing Officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the searched person. That thereafter, after recording such satisfaction by the Assessing Officer of the searched person, he may transmit etc. the records/documents/things/papers to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue a notice....
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....red by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person." 32. Be that as it may, it is relevant to once again refer to the facts in these appeals relating to challenging the impugned order passed by the learned Single Judge W.P.No.9937/2022 and connected matters dated 12-8-2022. The question of law in the petitions pertained to the challenge made to the impugned notices issued by the Income-tax Authority under section 153C of the IT Act and further action thereof. In writ petitions No. 9937, 9938, 9939 and 9945 of 2022, Petitioner had questioned the Notice dated 21st August, 2019; Order of Assessment dated 31st December, 2019; and also sought for quashing the Notice of Demand dated 31st December, 2019 issued by respondent No. 1. In writ petition No. 9945 of 2022, the petitioner had also challenged the order dated 03rd May, 2022 passed in Appeal No. CIT(A)-11/BNG/10701/2019-20, dismissing the appeal. In Writ Petition No. 9946 of 2022, the petitioner had challenged the Notice issued under section 153C of the Income-tax Act, 1961, for Assessment Years 2012-13, 2013- 14, 2014-15, 2015-16, 20....
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....t for dismissal of Writ Petitions. It was further clarified that Section 132(1) of the Act, provides for "person specific and not premises specific" and therefore, the determinative factor is the person against whom the warrant of search is issued under section 132 of the Act. It was further contended by the Revenue that Section 34 of the Evidence Act, 1872 is applicable to the proceedings under Income-tax Act, as the Income-tax Act, is itself a Code and accordingly, sought for dismissal of writ petitions. 35. Contrary to his submissions, Sri Kiran S. Javali, learned Senior Counsel invited the attention of the court to the impugned Order of Assessment and notice passed under section 153C of the Act for the Assessment Year 2015-2016 and argued that the conclusion arrived at by the respondent- Revenue initiating action against the petitioners based on the diaries and loose sheets, is contrary to law. He further contended that the petitioner, being a "searched person", issuance of the notice under section 153C of the Act is not maintainable. In this regard, learned Senior Counsel placed reliance on the judgment of this court in Writ Petition No. 36004 of 2018 connected with W....
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....rary to the law declared by the Hon'ble Apex Court and same cannot be touched upon while conducting de novo enquiry afresh. 49. It is further relevant to refer to a Co-ordinate Bench decision of this Court rendered in the case of Pr. CIT v. Smt. G. Lakshmi Aruna [2023] 150 taxmann.com 107 31-3-2023, in which judgment, this Court has extensively addressed the scope of sections 153C read with section 153A of the Income-tax Act, 1961. The headnote of the said judgment reads thus: "Section 153C, read with section 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Satisfaction note) - Assessment year 2011-12 Whether assessment year relevant to financial year in which satisfaction note is recorded under section 153C, will be taken as year of search for purposes of clauses (a) and (b) of section 153A(1) by making reference to first proviso to section 153C(1) - Held, yes - Whether period of 6 years stipulated in section 153C has to be construed with reference to date of handing over of documents to Assessing Officer of assessee and not year of search - Held, yes - Whether recording of satisfaction note is pre-requisite and same mu....
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....B5/201, Safdarjang Enclave, New Delhi during search, as per Section 292C of the IT Act, the presumption in law is that the cash seized belongs to the owner of the house from where it was seized. However, as regards the said cash which was found, the respondent/assessee had filed his Income-tax Return including the said cash as advance tax, and the same was also accepted by the Income-tax Department. Even the cross-examination of all the parties involved also proves that clearly the cash found belonged to Shri Sunil Kumar Sharma. 53. Further, satisfaction note is required to be recorded under section 153C of the IT Act for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant/Revenue. 56. In the light of the above said Apex court Decisions and the Panchanama provided herein, it is deemed appropriate to conclude that the notice provided under section 153C is bad in law. We are theref....
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....008 were incriminating in nature and prima facie represented undisclosed income? (c) Whether the Tribunal was justified in rejecting the contention of the appellant that proceedings under Section 153C ought to be initiated only for assessment years in respect of which the documents were found during the search? (d) Whether the Tribunal was correct in upholding the validity of the order under Section 153C of the Act for the assessment year 2005-06 despite there being no pending assessment as on the date of search and the documents not revealing any undisclosed income? 4. The appeals filed by the Revenue raise the following substantial questions of law and were admitted on 28/5/2010 and 3/8/2015: '(i) Whether the Appellate Authorities were correct in holding that separate depreciation is allowable in respect of 'Electrical installations, elevators, DG set' installed in building which has been let-out and the assessee is receiving rental income on the buildings? (ii) Whether the Appellate Authorities were correct in holding that a sum of Rs.72 lakhs interest on borrowed capital is an allowable business expenditure, when the asse....
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....nts found did not lead to disclosure of undisclosed income of the assessee nor were they incriminating in nature. That the fundamental purpose of the search is to unearth undisclosed income. unless the documents seized prima facie showed undisclosed income, Section 153C of the Act could not be invoked. That before any satisfaction under Section 153C of the Act was recorded, the Assessing Officer must make enquiries and find out prima facie that the documents represented undisclosed income. It was also contended that the assessment under Section 153A read with Section 153C could be made only in respect of those assessment years relating to the documents detected. 41. The Tribunal while considering the aforesaid contentions held that the assessee shared common business premises with the person searched. But the fact that it ipso facto could not face proceedings under Section 153C of the Act, unless there was undisclosed income on the part of the assessee detected in the search operation, was not correct. Also, it was not necessary that satisfaction should be recorded regarding the seized articles found in the course of search which lead to undisclosed income at the stage of ....
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....unt, other documents, or valuable assets are kept or search any person, break open the lock of any door etc., seize any books of account, other documents, or other valuable assets found as a result of such search and do all other things necessary as prescribed under Section 132 of the Act. 45. Sections 153A, 153B and 153C were inserted by the Finance Act, 2003, with effect from 1/6/2003. They have replaced the post-search block assessment scheme in respect of any search or requisition made after 31/5/2003. Sub-section (1) of Section 153A inter alia deals with assessment in case of search or requisition. It begins with a non-obstante clause and states that notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated under Section 132 or books of account, other documents or any valuable assets are requisitioned under Section 132A, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of Section 153(1) in the pres....
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....d by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under Section 132 or requisition is made under Section 132A and in respect of such assessment year - (a) no return of income has been furnished by such other person and no notice under sub- section (1) of Section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of Section 143 has been served and limitation of serving the notice under sub-section (2) of Section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or valuable assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue notice and assess or reassess total income of such other person of such assessment year in the manner provided in Section 153A. 47. Chapter XIV-B consists of Section 158B to 158BH, inserted with effect from 01/07/1995, deals with special procedure for as....
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....provides for the role of the Assessing Officer having jurisdiction over the person searched/requisitioned as regards third party liability. The said section covers assessments which have become necessary, because of books of account, documents or valuable assets of third parties indicating their undisclosed income found during the search or requisition under Section 132/132A leading to a prima facie tax liability. A special procedure is contemplated in such cases. Such books of account, documents or valuable assets are required to be handed over by the Assessing Officer having jurisdiction over the persons searched requisitioned to the Assessing Officer of a third party on his satisfaction that they belong to a third party before handing over. 49. On a conjoint reading of the aforesaid provisions, it becomes clear that a search can take place only when a concerned officer has information and reason to believe that any person is in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the pos....
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....on other than the persons searched, then the Assessing Officer, on recording satisfaction, can also assess and reassess the income of any other person. Thus, what emerges is that the sine qua non for the purpose of assessment or reassessment pursuant to a search operation is detection of undisclosed income. In fact, the initiation of search proceeding is also based on possession of information and reason to believe that a person is in possession of certain valuable assets, which has not been or would not be disclosed under the Act. The same is nothing but 'undisclosed income' as defined in Clause (b) of Section 158B(b) of the Act. This becomes even more clear on a comparison of section 132(1)(c) with Section 158B(b) of the Act. It is for the above reason that Sections 153A and 153C begin with a non-obstante clause in order to make these provisions exclusive of Sections 139, 147, 148, 149, 151 and 153 of the Act. If a search operation does not lead to detection of undisclosed income as defined in Chapter XIV-B of the Act, then no purpose would be served in reopening the assessment already completed. Also, if there is no detection of any undisclosed income, then there would b....
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....bserved as under: "Condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefor are : (i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in r....
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....sing Authority, who concluded the assessment proceedings under Section 158BD of the Act. It was also held that notice could be issued even after completion of the proceedings of the searched person under Section 158BC of the Act. Aggrieved by the order of the Assessing Officer, the assessee therein had filed an appeal before the Appellate Authority, who had partly allowed the appeal. The Revenue had carried the matter further by filing an appeal before the Tribunal and the assessee therein filed cross-objection. The Tribunal rejected Revenue's appeal, which filed an appeal before the High Court, which also rejected the Revenue's appeal and confirmed the order of the Tribunal. The Revenue, then approached the Hon'ble Supreme Court. While dealing with various provisions of Chapter XIV-B of the Act pertaining to assessment in the case of search operation, the Hon'ble Supreme Court held that Section 158BD of the Act deals with undisclosed income of any other person. On the question of recording satisfaction that there is an undisclosed income, which had been traced where a person was searched under Section 132 of the Act or books of account, other documents or valuable ....
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....the other person. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings re completed under Section 158BC of the Act of the searched person." In that case, the Hon'ble Supreme Court remanded the matters to the concerned High Court for consideration of the individual cases in light of observations made above on the scope and interpretation of Section 158BD of the Act. (b) In CIT v. Lancy Constructions [2016] 237 Taxman 728/66 taxmann.com 264 (Kar.), it was held that there were no incriminating documents during the course of search on the basis of which additions could have been made by the Assessing Officer. That the accounts whic....
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....nducted requiring him to file returns for six assessment years immediately proceeding the previous year relevant to the assessment year in which the search takes place. (ii) Assessment and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years in which both the disclosed and the undisclosed income would be brought to tax. (iv) Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made with....
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....account seized or documents seized or requisitioned should belong to a person other than a person referred in Section 153A of the Act. (b) In Filatex India Ltd. v. CIT [2015] 49 Taxman 465/[2014] 49 taxmann.com 465 (Delhi), the court rejected the argument that during assessment under Section 153A additions had to be restricted or limited to incriminating material only, found during course of search. (c) In Savesh Kumar Agarwal v. Union of India [2013] 35 taxmann.com 85/216 Taxman 109 (Mag.)/353 ITR 26 (All.), the question considered was whether on receipt of satisfaction note, the Assessing Officer had not found anything adverse against the assessee and seized goods having been released in favour of the assessee, notice could be issued under Section 153C of the Act to file returns for six years. The stand of the Revenue therein was that the Assessing Officer could still proceed under Section 153A of the Act in order to find out the source of income. In that case the writ petition filed under Article 226 of the Constitution of India challenging the notice was dismissed on the premises that the power under Section 153C exists in the Assessing Officer, if he is satis....
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.... income. (g) In SSP Aviation Ltd. v. Dy. CIT [2012] 20 taxmann.com 214/207 Taxman 260 (Delhi), the observations of the court were in light of the fact that incriminating material had been found. (h) In CIT v. Anil Kumar Bhatia [2012] 211 Taxman 453/24 taxmann.com 98 (Delhi), the court did not express any opinion as to whether Section 153 A can be invoked in a case where no incriminating material was found during the search as it was in fact dealing with a case where incriminating material had been found. 54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so w....
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....ove, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 4. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.' As per the aforesaid circular, at the time of or along with initiation of the proceedings, against the searched person or third party under Section 153C or in the course of assessment proceedings under Section 153C of the Act or immediately after the assessment proceedings are completed under Section 153C of the Act, recording of satisfaction is required. 55. If the observations made by the Tribunal are considered in this regard, it is noted by the Tribunal that it is not necessa....