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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ �यायपीठ “ए” अहमदाबाद। �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (through web-based video conferencing platform) ] ] BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No.133/Ahd/2021 Assessment Years : 2010-11 Smt. Vanita Vaswani, The PCIT (Central), 2, Samprat Co-op. Housing Vs Ahmedabad Society Limited, Opp. Rivera, 11, Prahladnagar, Ahmedabad - 380015 PAN : AAKPV 7868 D अपीलाथ� अपीलाथ�/ (Appellant) अपीलाथ� अपीलाथ� �त् �त् यथ� �त् �त् यथ� यथ�/ (Respondent) यथ� Assessee by : Shri Tushar Hemani, Sr. Advocate Shri Parimalsinh B Parmar, AR & Shri Vijay Govani, AR Revenue by : Shri Virendra Ojha, CIT-DR सुनवाई क� तारीख/Date of Hearing : 28/07/2021 घोषणा क� तारीख /Date of Pronouncement: 17/09/2021 आदेश/O R D E R आदेश आदेश आदेश PER RAJPAL YADAV, VICE PRESIDENT : The present appeal is directed at the instance of the assessee against the order of the learned Principal Commissioner of Income Tax (Central), Ahmedabad dated 28.03.2021, passed under Section 263 of the Income Tax Act, 1961 (in short “the Act”), for Assessment Year 2010-2011. The assessee has taken 7 grounds of appeal which read as under:- “1. The Ld. PCIT (Central), Ahmedabad ("the PCIT") has erred on facts and in law in invoking jurisdiction u/s 263 of the Income Tax Act, 1961 ("the Act") and has further erred in directing the Ld. AO to pass fresh assessment order incorporating the market value of the property as per section 50C of the Act. 2. The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 in the case of the appellant in failing to take
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cognizance of the replies filed dated 03/03/2020 & 19/03/2020 and without considering & dealing with the objections raised in the aforesaid replies. 3. The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 ignoring the fact specifically brought to his attention that the assessment sought to be reviewed by him was already quashed by the Hon'ble Income Tax Appellate Tribunal, Ahmedabad. 4. The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 directing the AO to adopt sale value as per section 50C of Act ignoring the settled law that additions in an unabated assessment order passed under section 153C of the Act can be made only on the basis of incriminating documents found and seized during the course of search. 5. The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 without considering the factual position that land under consideration is of a farmhouse falling under agriculture zone and the stamp duty was charged adopting the circle rate of non-agriculture land on sale of farmhouse and that the appellant had objected to the valuation but agreed for sale because the stamp duty was to be borne by the buyer. 6. The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 without appreciating the fact that the farmhouse land was sold at fair market value which is much higher than the circle rate of agriculture land.
The Ld. PCIT has erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 in the case of the appellant without even considering various case laws submitted in support of appellant's contentions with regard to validity of jurisdiction u/s 153C of the Act, scope of assessment u/s 153C of the Act & non maintainability of action u/s 263 of the Act with respect to the facts and circumstances of the appellant’s case.”
The learned Counsel for the assessee, at the very outset, submitted in brief that the assessee has been challenging the action taken by the learned Commissioner under Section 263 of the Act. At the outset, he submitted that a search and seizure operation was carried out at the premises of Venus Group on 10.03.2015 and, in connection with the search and survey proceedings, a notice u/s. 153C of the Act was issued to the assessee on 14.07.2016. Assessment was subsequently completed u/s 143(3) r.ws. 153C
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r.ws. 153A(1)(b) of the Income Tax Act on 26.12.2017. The validity of the assessment order was challenged before the learned CIT(A) and ultimately the issue travelled up to the Hon’ble Tribunal and the Tribunal vide its order dated 12.11.2020 has quashed the assessment order on the ground that the order was not passed within the time period provided in the Act. Learned Counsel for the assessee further submitted that since the assessment order itself has been quashed, there cannot be any subsequent proceedings against the assessee even under Section 263 of the Act. He further submitted that this aspect was brought to the notice of the learned Commissioner who took cognizance of this fact; but, instead of dropping the proceedings, passed the impugned order by keeping in mind the Department wants to keep the issue alive. He placed on record copy of the order passed by the Tribunal in the case of the assessee on quantum.
On the other hand, learned Departmental Representative relied upon the impugned order and submitted that the learned Commissioner has rightly taken cognizance under Section 263 of the Act and has rightly decided the issue.
We have duly considered the rival contentions and gone through the record carefully. The learned Commissioner has initiated the proceedings under Section 263 of the Act in the year under consideration by issuance of notice under Section 263 of the Act on 11.02.2020. The show-cause notice issued by him reads as under:-
“Subject: Notice u/s. 263 of the I.T. Act in your case for A.Y. 2010-11 - Giving an opportunity of being heard - regarding Please refer to the subject mentioned above. 2. It is noticed that in your case assessment order u/s.. 143(3) r.w.s. 153C r.w.s. 153A(1)(b) of the Act was passed on 26/12/2017 wherein income was assessed at Rs.2.04,61,980/-.
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On perusal of the case records, it is noticed that you had sold land at Sargashan, vide sale deed No.10480 dated 24.09.2009 for a consideration of Rs.52,05,200/- and offered Short Term Capita! Gain amounting to Rs.42,51,445/- on the same. Further, it is noticed from copy of sale deed that stamp duty of Rs.6,55,900/- was levied thereon. As stamp duty in Gujarat is levied @4.9%, the value of property as per its details comes to Rs.1,33,85,714/-. Further, as per the report of SRO Gandhinagar stamp duty value of the property sold by you was Rs.1,33,84,800/-. Therefore, stamp duty value is required to be taken as value of property u/s 50C for computation of Capital Gain. While finalizing the assessment order the AO had not considered the value of property as per provision of section 50C of the Act for computation of Capital Gain.
In view of the above, the assessment order u/s.143(3) r.w.s 153C of the Act dated 28/12/2017 passed by the AO is prima facie both erroneous as also prejudicial to the interest of the revenue and therefore, I intend to revise the said order u/s.263 of the I.T. Act.
Vide this letter, you are, therefore, given an opportunity of being heard in this regard. You are requested to attend my office in person or through your authorized representative along with your submissions, if any, in this regard. The hearing for this purpose is fixed on 24/02/2020 at 4.00 pm at the above mentioned address. ….."
During the course of hearing before the learned Commissioner, the assessee brought to his notice that these proceedings has no legs to stand because proceedings under Section 263 of the Act can only be initiated if same validity proceedings are pending before the Assessing Officer. The assessment order, which has been based by the learned Commissioner to construe the error crept in the proceedings which has caused prejudice to the interest of the Revenue, has already been quashed by the Tribunal vide order dated 12.11.2020. The learned Commissioner took cognizance of this fact and recorded the following findings:- “5. I have carefully and thoroughly gone through the submission of the assessee. The contentions of the assessee stated in its reply are not acceptable as the order passed by the assessing officer is not in accordance with law. As per section 50C of the Act, where the consideration received or accruing as a
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result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purposes of section 48 of the Act be deemed to be full value of the consideration received or accruing as a result of such transfer.
5.1 The contention of the assessee that since the ITAT has quashed the assessment order therefore the proposed notice and assessment u/s 263 of the Act is bad in law is not correct. The basic features of sec. 263 are that the Pr. Commissioner may revise any order of assessment provided it. is erroneous and prejudicial to the interests, of the revenue, that the revision order can be passed within two years from the end of the financial year in which the order sought to be revised was passed and the assessee must be given an opportunity of being heard before any proceedings under the section are taken. The pre-conditions for assessment under section 263 have been satisfied. Moreover, the Department has not accepted the order of the ITAT and contemplating to file Miscellaneous Application before the Hon'ble ITAT in this regard. The order under revision is challenged on account of validity of order u/s 153C, whereas this order is for non-application of provisions of Section 50C on sale of immovable property. Therefore issues are different. Even though these issues are interlinked, but to keep the issue alive and in the interest of revenue, this proceedings are completed. Further, Hon'ble Apex Court in the case of Mahalaxmi Sugar Mills, 160 ITR 920(SC) has held that there is a duty cast on the I.T.O. to determine the true figures of assessee's taxable income and the consequential tax effect. Here it is pertinent to mention that this order u/s 153C is merged with the earlier order u/s 143(3) of the Act, where also no such income was offered by the assessee nor subjected to tax as this issue was not raised by the Assessing Officer and hence erroneous and prejudicial to the interest of Revenue.
5.2 On verification of assessment record it is seen that assessee had sold land and offered Short Term Capital Gain amounting to Rs. 42,51,445/- on the same. Further, it is seen from the copy of sale deed that stamp duty of Rs.6,55,900/- was levied through franking of Nutan Nagrik Sahkari Bank on 24.09.2009. The stamp duty in Gujarat is levied at the rate of 4.9%, accordingly the value of property was determined at Rs.1,33,85,714/-. In the course of assessment proceedings Rs.1,33,85,714/- ought to have been taken as sale consideration under section 50 C of the Act for computation of income of the assessee. Later on market value of the property was sought from SRO Gandhinagar and as per the report of the SRO the value of property was calculated at Rs.1,33,84,800/-. Therefore, the order u/s 143(3) r.w.s. 153C
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r.w.s. 153A(1)(b) of the Act dated 26/12/2017 passed by the AO is erroneous and prejudicial to the interest of the revenue.
In the light of facts and circumstances narrated above, I hold that the AO has erred in making a proper assessment in this case. The assessment order is, therefore, erroneous in as much as it is prejudicial to the interest of Revenue. Hence, in exercise of power conferred in me u/s.263 of the Act, I set aside the assessment order passed u/s. 143(3) r.w.s. 153C r.w.s. 153A(1)(b) of the Act n 26/12/2017 for the A.Y.2010-11 with the direction to the AO to pass a fresh assessment order in accordance with law and facts of the case after incorporating the market value of the property as per sec. 50C of the Act and after giving the assessee a reasonable opportunity of being heard. While giving effect to this order, the Assessing Officer should also consider the last income determined.”
With the assistance of the learned Representatives, we have gone through the record carefully. A perusal of Section 263 of the Act would reveal that it contemplates that the Principal Commissioner or learned Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after conducting an inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. It is pertinent to observe that for instituting a valid proceeding under Section 263 of the Act, there should be a valid legal proceeding before the Assessing Officer. Once the assessment order was quashed on the ground that it was passed after limitation provided in the Act for passing such order, then it is to be construed that no assessment order is available on which learned Commissioner could form an opinion as to whether any error is available in such order or not. Section 263 of the Act specifically contemplates that there should be an error either in the
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proceedings or in the assessment order which has caused prejudice to the interests of the Revenue. Now, in the present appeal, as the assessment order itself has already been quashed by the Tribunal vide order dated 12.11.2020, no subsequent further proceedings can be initiated. For the completeness of the facts, we take note of the operating part of the order of the Tribunal in ITA No. 124 to 129/Ahd/2019 for Assessment Years 2009-10 to 2014-15, wherein the Tribunal, after an elaborate discussion, has quashed the assessment orders. The operative part of the order reads as under:-
“14. We have duly considered rival contentions and gone through the record carefully. Before we embark upon an inquiry, whether the material found at the premises of the searched person, would indicate that these documents falls in the category of documents, which could be termed as document belong to or belongs to the assessee or entry embedded in them falls within the ambit of expression “pertains to” or “relates to”. We have to determine under which clause one has to construe the documents found during the course of search. Therefore, it is imperative upon us to take note of section 153C, which reads as under:
2.2.2 UPTO 01.06.2015: Assessment of income of any other person. - 153C. -[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned 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 notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A]:]
2.2.3 WITH EFFECT FROM 01.06.2015: Assessment of income of any other person. - — 153C. -[(1)] —[Notwithstanding anything contained in section 139. section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
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(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, or any information contained therein, 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 notice and assess or reassess the income of the other person in accordance -with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A] :] 15. A perusal of the above provisions would reveal that in the case of search action, carried out under section 132 of the Income Tax Act, prior to 1.6.2015, if any money, bullion, jewellery or other valuable article or thing, or books of accounts or documents, seized or requisitioned “belongs” or “belong” to a person other than the person referred to section 153A, then the AO of the searched person while passing assessment order under section 153A or prior to that, record his satisfaction about those documents, and if those documents disclosed undisclosed income of the person other than the searched person. He will transmit those documents along with his satisfaction note to the AO having jurisdiction over that other person. Jurisdiction under section 153C of the Act prior to 1.6.2015 could be invoked only if the material seized during the course of search in the case of third- person “belongs to” to some persons other than the searched person. However, after 1.6.2015, the Legislature has categorized two situations. As far as recovery of any money, bullion jewellery or other valuable article or thing seized or requisitioned belongs to person other than the searched person, then section 153C would be justified. However, with regard to the recovery of any books of accounts or documents, seized or requisitioned, then if they pertain to other person, or any information contained therein relates to person other than the searched person, then the action under section 153C could be there. The scope of section 153C after 1.6.2015 has been widened; viz. if a person at whose premises search was carried out maintaining certain details in his regular day-to-day business, and that contain certain information exhibiting the undisclosed income of the person other than the searched person, then the action under section 153C could be justified. But prior to 1.6.2015, the documents ought to be belonged to person other than the searched person. There is a clear distinction between both the conditions. Subsequent to 1.6.2015, the information embedded in the document is sufficient for taking action under section 153C, but prior to 1.6.2015 action under section 153C could be taken if documents belong to the person other than the searched person was found during the course of search. 16. Hon’ble Gujarat High Court in its decision rendered in the case of Anilk Kumar Gopikishna Agrawal Vs. ACIT (supra) considered an issue, whether post-
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amended section could be applicable on the pending assessments, meaning thereby, if search was conducted prior to 1.6.2015, but assessments were not concluded, whether post-amended section is to be applied in such cases or not; because that would change the very nature of the disputes. 17. Hon’ble Gujarat High Court has formulated the following question “whether section 153C of the Act as amended w.e.f. 1.6.2015 would be applicable to cases where search initiated prior to that date ?” After an elaborate discussion, Hon’ble court arrived at the conclusion that this section would be applicable prospectively only on the search conducted after 1.6.2015. We would like to take note of the relevant discussion made in the judgment, which reads as under:
“19.8 While it is true that section 153C of the Act is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by virtue of the amendment, there is merely a change in the procedural provisions affecting the assessees who were covered by the unamended provision. By the amendment, a new class of assessees are sought to be brought within the sweep of section 153C of the Act, which affects the substantive rights of the assessees and cannot be said to be a mere change in the procedure. Since the amendment expands the scope of section 153C of the Act by bringing in an assessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, inasmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendment has been brought into force and based on the amendment, the petitioners who were not included within the ambit of section 153C of the Act as on the date of the search, are now sought to be brought within its fold on the ground that the satisfaction note and notice under section 153C of the Act have been issued after the amendment came into force. Therefore, this case does not relate to the interpretation of the provisions of any of the sections, but relates to the stage at which the amended section 153C of the Act can be made applicable, as to whether it relates to the date of search; or the date of recording of satisfaction by the Assessing Officer of the searched person; or the date of recording of satisfaction by the Assessing Officer of the other person; or the date of issuance of notice under section 153C of the Act. 19.9 In the facts of the present case, the search was conducted in all the cases on a date prior to 1st June, 2015. Therefore, on the date of the search, the Assessing Officer of the person searched could only have recorded satisfaction to the effect that the seized material belongs or belong to the
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other person. In the present case, the hard-disc containing in the information relating to the petitioners admittedly did not belong to them, therefore, as on the date of the search, the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C of the Act in case of the petitioners, did not exist. It was only on 1st June, 2015 when the amended provisions came into force that the Assessing Officer of the searched person could have formed the requisite belief that the books of account or documents seized or requisitioned pertain to or the information contained therein relates to the petitioners. 19.10 In this backdrop, to test the stage of applicability of the amended provisions, a hypothetical example may be taken. The search is carried out in the case of HN Safal group on 4.9.2013. If the Assessing Officer of the searched person had recorded satisfaction that some of the seized/requisitioned material belongs to a person other than the searched person and forwarded the material to the Assessing Officer of the other person, had issued notice under section 153C of the Act prior to the coming into force of the amended provision. The notice under section 153C of the Act was challenged before the appropriate forum on the ground that the seized material does not belong to such other person and such issue was decided in favour of such person on a finding that the seized material does not belong to the other person. Thereafter, in view of the amendment in section 153C (1) of the Act, since the books of account or documents did not belong to the other person but did pertain to him or the information contained therein related to him, can the Assessing Officer of the searched person once again record satisfaction as contemplated under the amended provision and forward the material to the Assessing Officer of such other person. The answer would be an emphatic "no" as the Assessing Officer of the searched person after recording the earlier satisfaction would have already forwarded the material to the Assessing Officer having jurisdiction over the other person, therefore, there would be no question of his again forming a satisfaction as required under the amended provisions of section 153C of the Act. 19.11 In the opinion of this court, if a date other than the date of search is taken to be the relevant date for the purpose of recording satisfaction one way or the other, it would result in an anomalous situation wherein in some cases, because the notices under section 153C of the Act were issued prior to the amendment, they would be set aside on the ground that the books of account or documents seized or requisition did not belong to the other person though the same pertained to or the information contained therein related to such person, whereas in other cases arising out of the same search proceedings, merely because the notices are issued after the amendment, the same would be considered to be valid as the books of account or documents seized or requisitioned pertain to or the information contained therein relate to the other person. It could not have been the intention of the legislature to deal with two sets of identically situated persons differently, merely because in one case the Assessing Officer of the searched person records satisfaction
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as required under section 153C of the Act prior to the coming into force of the amended provisions and in any another case after the coming into force of the amended provisions. 19.12 In Pr. CIT v. Vinita Chaurasia, [2017] 394 ITR 758/248 Taxman 172/82 taxmann.com 153 (Delhi), the Delhi High Court has held that, at the outset, it requires to be noticed that the search in the present case took place on 19th June, 2009, i.e., prior to the amendment in section 153C(1) of the Act with effect from 1st June, 2015. Therefore, it is not open to the Revenue to seek to point out that the document in question 'pertains to' or 'relates to' the assessee. Against this decision the revenue filed a special leave petition before the Supreme Court being Pr. CIT v. Vinita Chaurasia [2018] 98 taxmann.com 414/259 Taxman 88 (SC) condoned the delay and dismissed the special leave petition. 19.13 In Pr. CIT v. Index Securities (P.) Ltd. , [2017] 86 taxmann.com 84 (Delhi), on which reliance had been placed on behalf of the petitioners, the Delhi High Court has held thus: "28.4 The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (supra) to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of account or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act." The Supreme Court observed: "This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well." 28.5 The above categorical pronouncement of the Supreme Court cannot, by any stretch of imagination, be termed as obiter as has been suggested by Mr. Manchanda. Even the obiter dicta of the Supreme Court is binding on this Court. 29. The search in the case before the Supreme Court was prior to 1st June 2015. Apart from the fact the Supreme Court approved the above decision of the Gujarat High Court holding that the seized documents should 'belong' to the other person, the legal position in this regard where the search has taken place prior to 1st June 2015 has been settled by the decision of this Court in Pepsico India Holdings (P.) Ltd. v. ACIT (supra). In Commissioner of Income Tax v. Vinita Chaurasia (supra), this Court reiterated the above legal position after discussing the decisions in Principal Commissioner of Income Tax v. Super Malls (P) Limited (supra) and Commissioner of Income Tax(Central)-2 v. Nau Nidh Overseas Pvt. Ltd. (supra). The essential jurisdictional requirement for assumption of jurisdiction under Section 153 C of the Act (as it stood prior to its amendment with effect from 1st June 2015) qua the 'other person' (in this case the assessees) is that the seized documents forming the basis of the
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satisfaction note must not merely 'pertain' to the other person but must belong to the 'other person'. 30. In the present case, the documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1st April to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees." 19.14 Thus, it is the date of search that has been considered to be the relevant date for the purpose of applying the amended provisions of section 153C(1) of the Act. 19.15 This court is of the considered view that the trigger for initiating action whether under section 153A or 153C of the Act is the search under section 132 or requisition under section 132A of the Act and the statutory provisions as existing on the date of the search would be applicable. The mere fact that there is no limitation for the Assessing Officer of the searched person to record satisfaction will not change the trigger point, namely, the date of the search. The satisfaction of the Assessing Officer of the searched person would be based on the material seized during the course of the search or requisition and not the assessment made in the case of the searched person, though he may notice such fact during the course of assessment proceedings. Therefore, whether the satisfaction is recorded immediately after the search, after initiation of proceedings under section 153A of the Act or after assessment is framed under section 153A of the Act in the case of the searched person, the trigger point remains the same, viz., the search and, therefore, the statutory provision as prevailing on that day would be applicable. While it is true that sections 153A and 153C of the Act are machinery provisions, but the same cannot be made applicable retrospectively, when the amendment has expressly been given prospective effect. Besides, though such provisions are machinery provisions, the amendment brings into its fold persons who are otherwise not covered by the said provisions and therefore, affects the substantive rights of such person. In the opinion of this court, the decision of the Supreme Court in M.A. Merchant (supra) would be squarely applicable to the facts of the present case wherein it was held thus:…” 18. This judgment has been followed by the Hon’ble Gujarat High Court in the cases of i) Mahendrabhai Kasturchand Son Vs. ITO, SCA No.11817 of 2019 (Guj); ii) Charmy Sanket Naik Vs. ACIT, SCA No.13374 of 2019 (Guj); iii) Nita Chaitanya Shah, SCA No.14059 of 2019 (Guj). 19. In the light of the above position of law, let us take note of the satisfaction recorded by the AO of the searched person as well as AO of the present assessees.
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Though, the AO is common, but while exercising his dual capacity, he has recorded first his satisfaction in the capacity of searched person’s AO, and thereafter he recorded his satisfaction in the capacity of the AO of the present assessees. For the facility of reference, we take note the satisfaction from the lead case of Shri Dilipkumar Lalwani placed at page no.456 to 483. Relevant part of the satisfaction while issuing notice under section 153C is available at page no.457 and we deem it appropriate to take note of this part, which reads as under:
Satisfaction of the As per Annexure – B Assessing Officer of the In view of above facts as mentioned in the Annexure - person referred to in B. I am satisfied that the documents seized from the section 153A that the premises (i) 801-802, Broadway Business Centre, Opp. seized material referred to Mayor’s Bungalows, Law Garden. Ellisbridge, in S.No.5 relates/pertains Ahmedabad and (ii) Terrace of Crystal Arcade, Nr. to the person referred to Navrangpura Telephone Exchange, C.G Road, in S.No.4 Ahmedabad - contains information,which relates to the assessee, Shri Dilip Kumar Lalwani. Further, I am also satisfied that documents seized have a bearing on the determination of the total income of the assessee, | Shree Dilip Kumar Lalwani for assessment years 2009-10 to 2014-15 The assessee being other than the person referred to in section 153A of the Act. I have satisfaction to proceed against the assessee Shri Dilip Kumar Lalwani as per the provisions of Section 153C of the Income Tax Act, 1961. Therefore, it is fit case for initiation of proceeding u/s 153C of the I.T.Act . 8. Assessment years A.Y. 2009-10 to A.Y.2014-15 involved
Thereafter, we find that the AO has annexed annexure-A which contained the details of documents considered by him. Annexure-B is the satisfaction in the capacity of the AO of the searched person. It is a very exhaustive note, and with the assistance of the ld.representativs, we have gone through all these pages. We would like to take note of relevant part of the satisfaction viz. para-7.3, which reads as under: 7.3 On the basis of discussion in the preceding paragraphs, it is noticed that XXX account mentioned in various documents seized during the course of search in the Venus Group refers to Shri Dilip Kumar Lalwani and the information contained therein relates to Shri Dilip Kumar Lalwani. There are various transaction recorded in the cash book and related cash vouchers.” ….. ….. ….. 10. In view of above facts as mentioned above, I am satisfied that the above mentioned documents seized from the from the premises (i)
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801-802, Broadway Business Centre, Opp. Mayor's Bungalows, Law Garden. Ellisbridge. Ahmedabad and (ii) Terrace of Crystal Arcade, Nr. Navrangpura Telephone Exchange, C. G. Road, Ahmedabad contains information which relates to the assessee, Shri Dilip Ku/riar Lalwani. Further, I am also satisfied that satisfied that documents seized have a bearing on the determination of the total income of the assessee, Shree Dilip Kumar Lalwani for assessment years 2009-10 to 2014-15. The assessee being other than the person referred to in section 153A of the Act. I have satisfaction to proceed against the assessee Shri Dilip Kumar Lalwani as per the provisions of Section 153C of the Income Tax Act, 1961. Therefore, it is fit case for initiation of proceeding u/s 153Cof the l.T. Act.
A perusal of both the satisfaction would indicate that the AO nowhere observed that these documents belonged to the assessee i.e. Shri Dilipkumar Lalwani. He only observed that these documents contained information which relate to the assessee. Thus, it could be construed that documents seized during the course of search; again carried out in the cases of concerned third person, were observed as “relates to” the assessee. They do not belong to the assessee. When the assessee took this objection before the ld.first appellate authority, the ld.CIT(A) was of the view that since law has been changed, and scope of section 153C w.e.f. 1.6.2015 would be applicable on these cases, because the assessments have not been concluded when the scope of section 153C was widened. The finding of the ld.CIT(A) is worth to note in this connection i.e. in the case of Shri Dilipkumar Lalwani, which reads as under: “4.3. I have carefully considered the facts of the case, assessment order and submission made by the appellant. The Assessing Officer [DCIT, Central Circle-1 (1), Ahmedabad] of M/s. Venus Infrastructure and Developer Pvt. Ltd., in whose case the search was conducted and documents relating to the appellant company was found and seized has recorded his satisfaction note for initiation of assessment proceedings in the case of appellant and forwarded to the ACIT, Circle-50(l), New Delhi, being the Assessing Officer of the appellant. The AO of appellant has recorded his satisfaction and issued notice u/s. 153C of the I. T. Act, 1961. The case of appellant was subsequently transferred to the ACIT, Central Circle -1(1), Ahmedabad. The appellant had raised objection before the new Assessing Officer against the earlier notice issued by DCIT, Circle - 50(1), New Delhi, u/s. 153C of the I. T. Act,1961. The AO who was also AO of M/s. Venus Infrastructure and Developer Pvt. Ltd. has withdrawn the earlier notice and issued fresh notice duly recording the satisfaction. The appellant has contended that the notice issued u/s. 153C of the Act was not valid as the seized material on the basis of which notice u/s. 153C was issued did not belong to the appellant. The appellant has also contended that there is no provision in the Income Tax Act either to drop the proceedings u/s. 153C or to issue
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second set of notices. The appellant has also relied upon the case laws in the case of Pepsico India Holding Pvt. Ltd. Vs. ACIT, RRJ Securities Ltd. [62 Taxmann.com 391] (2015) & Sinhgad Technical Education Society [84 Taxmann.com 290]. The AO has dealt with the argument raised by the appellant in Para 4.9, 4.10 & Para 5 of assessment order. The provision of Section 153C has been amended with effect from 01/06/2015 where if the Assessing Officer is satisfied that any books of account or documents seized pertains to, or any information contained therein relates to any person, other than the person referred to in Section 153A of the Income Tax Act, then books of account or document shall be handed over to the Assessing Officer having jurisdiction over such other person and the AO shall proceed against each such other person and issue notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Earlier scope of section 153C was in the cases where the documents seized belong to the assessee, but subsequently the provision of Act has been amended by adding the word 'relating to' in the section 153C. The AO in the present case has issued notice after first day of June, 2015, therefore, the amended provision is applicable in appellant's case. The AO in the satisfaction note has referred the material relating to the appellant found during the course of search in M/s. Venus Infrastructure and Developer Pvt. Ltd. The appellant has relied on the case laws which are on the 'belonging to' prior to the amended provisions of 153C w.e.f. 01/06/2015, therefore, not relevant to the facts of the case. Appellant's contention that there is no provision for issue of second notice u/s. 153C on the same set of facts is not tenable as the Assessing Officer has withdrawn the earlier notice and issued fresh notice after recording the satisfaction. The Honourable Gujarat High Court in the case of A.G. Group Corporation Vs. Harsh Prakash [2013] [35 Taxmann. com 48] has held that, if in the earlier notice a fatal error has been crept in AO will be free to issue another notice provided jurisdiction and limitation aspects are satisfied.” 22. This finding is not in the line of law laid down by the Hon’ble Gujarat High Court in the case of Anilk Kumar Gopikishna Agrawal Vs. ACIT, and further reiterated in other cases. At this stage, it is pertinent to note that, otherwise also, these 43 appeals are directly covered by the decision of Hon’ble jurisdictional High Court in the case of Anilk Kumar Gopikishna Agrawal Vs. ACIT (supra) because on the basis of entries embedded in the documents found at the premises of Venus Infrabuild and Shri Ashok Vaswani, notice under section 153C was issued in the case Ocean Valves Mfg. Co. Proprietor of that concern filed an SCA No.19647 of 2018. This was lead case, and notice issued under section 153C of the Act was quashed. The above facts are contained in paragraph-2.4 of the Hon’ble High Court’s decision. For ready reference, we take note of this fact from there. It reads as under:
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“2.4 By an order dated 23.7.2018, the Assessing Officer rejected the objections filed by the petitioner." Being aggrieved, the petitioner has approached this court by way of present petition challenging the impugned notice dated 8.2.2018 issued by the Assessing Officer under section 153C of the Act for assessment year 2012-13.” 2A In case of Venus Group, reference is made to the facts as appearing in Special Civil Application No. 19647 of 2018. 2A.1 The petitioner, who is an individual and proprietor of M/s. Ocean Valves Mfg. Co. filed his return of income for assessment year 2012-13 on 14.3.2013 declaring total income of Rs.7,27,700/-. A search came to be conducted on various premises of Shri Ashok Sundardas Vaswani, M/s. Venus Infrastructure and Developers P. Ltd. on 13.3.2015. During the course of search various documents were seized in which information about transactions relating to the petitioner was found. The seized incriminating documents related to unaccounted cash transactions which were analysed and correlated with other seized documents. Among the cash transactions as recorded in the seized unaccounted cash book which was found during the course of search, reference was also made to the petitioner. Based on such seized material, the Assessing Officer initiated proceedings under section 153C of the Act by issuing the impugned notices dated 22.3.2018 and 14.8.2018. Subsequently notices have been issued to the petitioner under section 142(1) of the Act to which the petitioner has responded.” 23. In the appeals of the present assessees, identical situation is there. A perusal of the satisfaction note would indicate that the AO nowhere held that documents belonged to the present appellants were found at the premises of searched person/entity. As far as case laws relied upon by the ld.CIT-DR are concerned they are not directly on the point. He put emphasis on the decision of Hon’ble Kerala High Court cited (supra) for buttressing his contentions that no incriminating material is required for proceedings under section 153A or 153C. This proposition is contrary to the decision of Hon’ble Gujarat High Court rendered in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (supra). Similarly, the order of the ITAT referred by the ld.CIT-DR is with respect to the presumption of truth of certain documents found during the course of search. It is not directly on the point. Other arguments raised by the ld.CIT-DR were raised by the ld.Senior standing counsel before the Hon’ble Gujarat High Court in the case of Anil Kumar Gopikishna Agrawal Vs. ACIT (supra) and those arguments have been considered. Though, section 153C is a procedural section, but the jurisdiction to assess an assessee under this section is being invoked with help of the section. The AO will be in a position to pass assessment order only if during the course of search, any money, bullion, jewellery and other valuable article or thing, or the documents found belong to other person prior to 1.6.2015, and the AO of the searched person was satisfied that such documents disclosed undisclosed income. The documents belonged to the appellants considered under this compartment of
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the arguments were not found, rather certain information relating to the assessees were found to be embedded in these documents, but prior to 1.6.2015, jurisdiction under section 153C cannot be invoked on the basis of such information. Therefore, we allow this preliminary ground of appeal raised by these 43 appellants (assessees) and quash all these assessment orders passed in the appeals mentioned at serial no.1 to 43 of the cause title of this order. Thus all the appeals of the assessee are partly allowed whereas the Revenue’s appeal are dismissed.”
In view of the above discussions, we are of the considered view that the learned Commissioner has committed an error in holding that “Even though these issues are interlinked, but to keep the issue alive and in the interest of revenue, this proceedings are completed”. Therefore, in view of the above discussions, the impugned order is not sustainable in the eyes of the law. Accordingly, we quash the order passed under Section 263 of the Act for the year under consideration and allow the appeal of the assessee.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 17th September 2021 at Ahmedabad.
Sd/- Sd/-
(WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT Ahmedabad, Dated 17/09/2021 *Bt आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु� ( ) / The CIT(A)- अपील 5. िवभागीय �ितिनिध , , राजोकट/DR,ITAT, Ahmedabad, अिधकरण अपीलीय आयकर 6. गाड� फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Ahmedabad