DCIT CENTRAL CIRCLE-2(4) , MUMBAI vs. RONAK GEMS PRIVATE LIMITED, MUMBAI
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 09.02.2023 passed by the Ld. Commissioner of Income Tax (Appeals)-48, Mumbai (in short Ld. CIT(A)) for assessment year 2017-18, raising following ground:- 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in allowing the appeal filed by the assessee by relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing
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Corporation, ignoring the fact that appeal is pending before the Corporation, ignoring the fact that appeal is pending before the Corporation, ignoring the fact that appeal is pending before the Hon'ble Supreme Court of India on this issue of 'power conferred Hon'ble Supreme Court of India on this issue of 'power conferred Hon'ble Supreme Court of India on this issue of 'power conferred by section 153A of the Act' which has not been adjudicated tion 153A of the Act' which has not been adjudicated tion 153A of the Act' which has not been adjudicated upon. 2. Whether on the facts and circumstances of the case and in 2. Whether on the facts and circumstances of the case and in 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in narrowing the scope of law, the Ld. CIT(A) is correct in narrowing the scope of law, the Ld. CIT(A) is correct in narrowing the scope of assessment u/s 153A in respect of completed assessments by assessment u/s 153A in respect of completed assessments by assessment u/s 153A in respect of completed assessments by holding that only un holding that only undisclosed income and undisclosed assets disclosed income and undisclosed assets detected during the search could be brought to tax. detected during the search could be brought to tax. 3. Whether on the facts and circumstances of the case and in 3. Whether on the facts and circumstances of the case and in 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in holding that the scope of section law, the Ld. CIT(A) is correct in holding that the scope of section law, the Ld. CIT(A) is correct in holding that the scope of section 153A is limited to assessing only s 153A is limited to assessing only search related income, thereby earch related income, thereby denying Revenue, the opportunity of taxing other escaped income denying Revenue, the opportunity of taxing other escaped income denying Revenue, the opportunity of taxing other escaped income that comes to the notice of the Assessing Officer. that comes to the notice of the Assessing Officer. 4. Whether on the circumstances of the case and in law, the Ld. 4. Whether on the circumstances of the case and in law, the Ld. 4. Whether on the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete the CIT(A) erred in directing the AO to delete the addition without addition without adjudicating on the merits of the case. adjudicating on the merits of the case. 2. The Ld. DR also raised additional grounds, which are 2. The Ld. DR also raised additional grounds, which are 2. The Ld. DR also raised additional grounds, which are reproduced as under reproduced as under Additional Ground Additional Ground i. Whether on the facts and circumstances of the case and in law, i. Whether on the facts and circumstances of the case and in law, i. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the i the Ld. CIT(A) erred in deleting the impugned addition made in mpugned addition made in the assessment order without taking into consideration the fact the assessment order without taking into consideration the fact the assessment order without taking into consideration the fact that notice u/s 143(2) dated 13 that notice u/s 143(2) dated 13-08-2018 had been issued and 2018 had been issued and served upon the assessee and thus on the date of search i.e. served upon the assessee and thus on the date of search i.e. served upon the assessee and thus on the date of search i.e. 11.10.2019 the assessment proceedings had acco 11.10.2019 the assessment proceedings had accordingly stood rdingly stood abated. ii. Whether on the facts and circumstances of the case and in ii. Whether on the facts and circumstances of the case and in ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating on the merits of the law, the Ld. CIT(A) erred in not adjudicating on the merits of the law, the Ld. CIT(A) erred in not adjudicating on the merits of the case and simply allowed the assessee's appeal case and simply allowed the assessee's appeal 2.1 The additional ground The additional grounds raised being only of the legal n only of the legal nature and not requiring any investigation of the and not requiring any investigation of the fresh facts, facts, therefore after considering submission of the parties considering submission of the parties, the additional ground raised the additional ground raised by the Revenue is admitted for adjudication. is admitted for adjudication.
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Briefly stated facts of the case are that in the case of Briefly stated facts of the case are that in the case of Briefly stated facts of the case are that in the case of assessee company, a search action u/s 132 of the Incom search action u/s 132 of the Income Tax Act, 1961 (in e Tax Act, 1961 (in short ‘the Act’) was carried out on 11.10.2019. C was carried out on 11.10.2019. Consequently, a was carried out on 11.10.2019. C notice u/s 153A of the Act dated 29.09.2021 was issued and notice u/s 153A of the Act dated 29.09.2021 was issue notice u/s 153A of the Act dated 29.09.2021 was issue assessment was completed u/s 153A r.w.s. 144 of the Act on assessment was completed u/s 153A r.w.s. 144 of the Act on assessment was completed u/s 153A r.w.s. 144 of the Act on 29.09.2021 wherein total income was assessed at Rs. 3,22,40,000/- 29.09.2021 wherein total income was assessed at Rs. 3,22,40,000/ 29.09.2021 wherein total income was assessed at Rs. 3,22,40,000/ under the regular provisions of the Act under the regular provisions of the Act. On further appeal n further appeal, the assessee challenged validity of the assessment passed as well as validity of the assessment passed as well as merit of the addition. The Ld. CIT(A) merit of the addition. The Ld. CIT(A) while adjudicating while adjudicating grounds challenging validity of the challenging validity of the assessment on the ground that in assessment on the ground that in absence of any incriminating material found during the course of absence of any incriminating material found during the course of absence of any incriminating material found during the course of search, the assessment order was illegal and without jurisdiction, the assessment order was illegal and without jurisdiction, the assessment order was illegal and without jurisdiction, , following the various decisions following the various decisions cited in the impugned or ited in the impugned order, held that no addition could be made without aid of could be made without aid of could be made without aid of incriminating evidences. Accordingly, he did not deliberate upon evidences. Accordingly, he did not deliberate upon merit merit of addition. 4. In the grounds and additional ground In the grounds and additional ground raised raised before us, the Revenue has challenge challenged the action of the Ld. CIT(A) the action of the Ld. CIT(A) in deleting the addition on the ground that no incriminating material was found addition on the ground that no incriminating material was found addition on the ground that no incriminating material was found during course of search at the premises of the assessee. We find the during course of search at the premises of the assessee. We find the during course of search at the premises of the assessee. We find the Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of CIT vs Continental CIT vs Continental Warehousing Corporatio Warehousing Corporation 374 ITR 609 (Bom) has held that in the has held that in the case of unabated assessments assessments, no addition could have been made no addition could have been made without the aid of any incriminating material found during the of any incriminating material found during the of any incriminating material found during the course of search. The finding of the Hon’ble Bombay High Court has he finding of the Hon’ble Bombay High Court has he finding of the Hon’ble Bombay High Court has been further upheld by the Hon’ble been further upheld by the Hon’ble Supreme Court in the case of Court in the case of PCIT Vs Abhisar Buildwell P Ltd in Civil appeal no. 6580 of PCIT Vs Abhisar Buildwell P Ltd in Civil appeal no. 6580 of PCIT Vs Abhisar Buildwell P Ltd in Civil appeal no. 6580 of 2021. For invoking the ratio in the case of Continental or invoking the ratio in the case of Continental or invoking the ratio in the case of Continental Warehousing Corporation Warehousing Corporation (supra), two conditions are require are required to be fulfilled. Firstly, the assessment should be unaba the assessment should be unabated, which means ted, which means no proceedings were pending in respect of those assessment years pending in respect of those assessment years as on the date of the search. Secondly, no incriminating material as on the date of the search. no incriminating material has been found from the premises of the assessee has been found from the premises of the assessee in the course of in the course of
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the search qua the addition in dispute the addition in dispute. So if the assessment if the assessment is abated or the assessment proceedings abated or the assessment proceedings were pending as on the date g as on the date of the search, the Assessing O he Assessing Officer has the authority of making the fficer has the authority of making the addition u/s 153A proceedings , u/s 153A proceedings , not only on the on the basis of the incriminating material found but also incriminating material found but also on the basis of basis of enquires made during the course of the assessment proceedings based on financial during the course of the assessment proceedings based on financial during the course of the assessment proceedings based on financial statement of the assessee or any other statement of the assessee or any other material or material or information available with him. In the case of the assessee available with him. In the case of the assessee, the Ld. DR has the Ld. DR has submitted that the Ld. CIT(A) in submitted that the Ld. CIT(A) in para 6.4 has wrongly mention wrongly mentioned that proceeding for the assessment year 2017 that proceeding for the assessment year 2017-18 had not abated. 18 had not abated. She drawn our attention to copies of the notices u/s 143(2) attention to copies of the notices u/s 143(2) attention to copies of the notices u/s 143(2) of the Act dated 13.08.201 dated 13.08.2018 and 21.08.2018 issued by the Assessing 8 and 21.08.2018 issued by the Assessing Officer in relation to the retur in relation to the return of income filed u/s 139 of the Act. n of income filed u/s 139 of the Act. Therefore, according according to her as on the date of the search to her as on the date of the search i.e. 11.10.2019 the assessment proceedings for the assessment year 11.10.2019 the assessment proceedings for the assessment year 11.10.2019 the assessment proceedings for the assessment year 2017-18 was pending and therefore the assessment for assessment 18 was pending and therefore the assessment for assessment 18 was pending and therefore the assessment for assessment year 2017-18 got abated on acc 18 got abated on account of the search dated ount of the search dated 11.10.2019. In our opinion n our opinion, the Ld. CIT(A) has deleted the addition as deleted the addition only on the basis of finding that no of finding that no incriminating material incriminating material was found during course of search found during course of search , overlooking the fact that assessment was abated and the Assessing O sment was abated and the Assessing Officer was authorized fficer was authorized to make the additions otherwise make the additions otherwise than the incriminating material the incriminating material found during the course of search during the course of search. Thus, only one condition of the one condition of the decision of the Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (supra) of ‘incriminating Continental Warehousing Corporation (supra) of Continental Warehousing Corporation (supra) of material found in search ‘ found in search ‘ has been fulfilled and another condition has been fulfilled and another condition of ‘non-abated assessment abated assessment’ has not been fulfilled in the case of the has not been fulfilled in the case of the assessee. Accordingly, assessee. Accordingly, the finding of Ld. CIT(A) on validity of the A) on validity of the assessment is set aside. Since the Ld. CIT(A) has not decided the assessment is set aside. Since the Ld. CIT(A) has not decided the assessment is set aside. Since the Ld. CIT(A) has not decided the addition on merit and therefore addition on merit and therefore, we feel appropriate to restore the we feel appropriate to restore the issue of adjudication of the addition on merit back to the file of the issue of adjudication of the addition on merit back to the file issue of adjudication of the addition on merit back to the file Ld. CIT(A) for deciding Ld. CIT(A) for deciding afresh. The grounds of appeal including The grounds of appeal including
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additional additional additional ground ground ground challenging challenging challenging validity validity validity of of of assessment assessment assessment are are are accordingly allowed, whereas grounds including additional ground including additional ground challenging merit are allowed for statistical purposes. challenging merit are allowed for statistical purposes. challenging merit are allowed for statistical purposes. 5.1 Before us the Ld. Counsel Before us the Ld. Counsel for the assessee referred to th see referred to the finding of the Assessing O finding of the Assessing Officer in para 3 of the assessment order fficer in para 3 of the assessment order that no return of income was filed by the assessee for assessment that no return of income was filed by the assessee for assessment that no return of income was filed by the assessee for assessment year 2017-18 i.e. the year i.e. the year under consideration in response to notice in response to notice u/s 153A of the Act and therefore and therefore notice u/s 143(2) notice u/s 143(2) was not issued in proceedings u/s 153A of the Act in proceedings u/s 153A of the Act. The Ld. Counsel submitted that . The Ld. Counsel submitted that the assessee had filed th the assessee had filed the return of income on 30.09.2021 in e return of income on 30.09.2021 in response to the notice u/s 153A of the Act issued on 03.11.2020,. response to the notice u/s 153A of the Act issued on 03.11.2020 response to the notice u/s 153A of the Act issued on 03.11.2020 Therefore, action of assessin action of assessing Officer completing the g Officer completing the assessment u/s 153A without issue u/s 153A without issue of notice u/s 143(2) of the Act is bad in law notice u/s 143(2) of the Act is bad in law and the assessment completed u/s 153A read with section 144 of and the assessment completed u/s 153A read with section 144 of and the assessment completed u/s 153A read with section 144 of the Act is liable to be quashed to be quashed. The ld DR on the other hand The ld DR on the other hand submitted in notice u/s 153 in notice u/s 153A dated 3/11/2020 , the assessee was A dated 3/11/2020 , the assessee was provided period of 15 days for filling of return of income, but the provided period of 15 days for filling of return of income, but provided period of 15 days for filling of return of income, but return of income in response was filed return of income in response was filed on 30/09/2021 is on 30/09/2021 is beyond the period provided in notice issued u/s 153A of the Act, therefore, the period provided in notice issued u/s 153A of the the period provided in notice issued u/s 153A of the the said return was non s non-est and thus the AO has correctly held that and thus the AO has correctly held that no valid return of income was filed by the assessee in response to no valid return of income was filed by the assessee in response to no valid return of income was filed by the assessee in response to notice u/s 153A issued. But the ld Counsel rejoined and submitted notice u/s 153A issued. But the ld Counsel rejoined notice u/s 153A issued. But the ld Counsel rejoined that the period of issue of notice was that the period of issue of notice was during Covid pandemic and Covid pandemic and thus, the period for filing the return of income automatically got thus, the period for filing the return of income automatically got thus, the period for filing the return of income automatically got extended in view of the decision of Hon’ble Supreme Court allowing extended in view of the decision of Hon’ble Supreme Court extended in view of the decision of Hon’ble Supreme Court extended period during Covid pandemic. od during Covid pandemic. The DR contradicted above The DR contradicted above argument and submitted that no any req argument and submitted that no any request was made by the uest was made by the assessee before the AO for regularization of the return of income assessee before the AO for regularization of the return of income assessee before the AO for regularization of the return of income filed beyond the period prescribed in the Notice u/s 153A of the Act filed beyond the period prescribed in the Notice u/s 153A of the Act filed beyond the period prescribed in the Notice u/s 153A of the Act and never intimated to the AO that the assessee filed any return of and never intimated to the AO that the assessee filed any return of and never intimated to the AO that the assessee filed any return of income just before expiry of sta income just before expiry of statutory limitation period for tutory limitation period for completing the assessment. completing the assessment.
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5.2 The Ld Counsel further relied on the decision dated 4 The Ld Counsel further relied on the decision dated 4 The Ld Counsel further relied on the decision dated 4th September, 2023 of Hon’ble Bombay High Court in the case of September, 2023 of Hon’ble Bombay High Court in the case of September, 2023 of Hon’ble Bombay High Court in the case of Ashok Commercial Enterprises Vs ACIT in writ petition No. 2595 of Ashok Commercial Enterprises Vs ACIT in writ petition No. 2595 of Ashok Commercial Enterprises Vs ACIT in writ petition No. 2595 of 2021 and others and submitted that assessment completed u/s rs and submitted that assessment completed u/s rs and submitted that assessment completed u/s 153A of the Act without issue of notice u/s 143(2) of the Act is void 153A of the Act without issue of notice u/s 143(2) of the Act is void 153A of the Act without issue of notice u/s 143(2) of the Act is void ab-intio and bad in law. and bad in law. The ld DR on the other hand submitted DR on the other hand submitted that Hon’ble High court in the case has relied on the decision of that Hon’ble High court in the case has relied on the decision of that Hon’ble High court in the case has relied on the decision of Hon’ble Supreme Court in the case of Hotel Bluemoon 188 preme Court in the case of Hotel Bluemoon 188 preme Court in the case of Hotel Bluemoon 188 Taxmann 113(SC), where in the assessment was competed under Taxmann 113(SC), where in the assessment was competed under Taxmann 113(SC), where in the assessment was competed under the provision of section 158BC of the Act. The said provision the provision of section 158BC of the Act. The said provision the provision of section 158BC of the Act. The said provision specifically provided for issue of notice u/s 143(2) of the Act but in specifically provided for issue of notice u/s 143(2) of the Act but in specifically provided for issue of notice u/s 143(2) of the Act but in assessment u/s 153A no such issue of notice is provided for 3A no such issue of notice is provided for 3A no such issue of notice is provided for completion of the assessment and completion of assessment completion of the assessment and completion of assessment completion of the assessment and completion of assessment following principle of natural justice is sufficient. He also relied on following principle of natural justice is sufficient. He also relied on following principle of natural justice is sufficient. He also relied on the decision of Hon’ble Delhi High Court in the case of Ashok the decision of Hon’ble Delhi High Court in the case of the decision of Hon’ble Delhi High Court in the case of Chaddha Vs ITO ((2011 Chaddha Vs ITO ((2011) 337 ITR399(Delhi) and submitted that in ) 337 ITR399(Delhi) and submitted that in said decision Hon’ble high court has pointed out distinction said decision Hon’ble high court has pointed out distinction said decision Hon’ble high court has pointed out distinction between the proceeding u/s 158BC & 153A of the Act and held between the proceeding u/s 158BC & 153A of the Act and held between the proceeding u/s 158BC & 153A of the Act and held that there is no requirement for issue of notice u/s 143(2) while that there is no requirement for issue of notice u/s 143(2) while that there is no requirement for issue of notice u/s 143(2) while completing assessment u/s completing assessment u/s 153A of the Act. 5.3 However we find that However we find that before us the appeal was fixed for before us the appeal was fixed for hearing 07.11.2023 07.11.2023 and on that day the assessee s assessee sought adjournment on the ground that assessee adjournment on the ground that assessee wished to wished to file cross objection against the appeal of the Revenue. However against the appeal of the Revenue. However no such cross against the appeal of the Revenue. However objection has been filed by the assessee challenging the assessment objection has been filed by the assessee challenging the assessment objection has been filed by the assessee challenging the assessment proceedings u/s 153A of the order proceedings u/s 153A of the order. We find in the case of Peter Vaz . We find in the case of Peter Vaz v/s CIT (2016) 436 ITR 616(Bombay) before the Hon’ble Bombay v/s CIT (2016) 436 ITR 616(Bombay) before the Hon’ble Bombay v/s CIT (2016) 436 ITR 616(Bombay) before the Hon’ble Bombay High Court question was raised whether ITAT was correct in High Court question was raised whether ITAT wa High Court question was raised whether ITAT wa rejecting the cross objection filed by the assessee solely on the rejecting the cross objection filed by the assessee solely on the rejecting the cross objection filed by the assessee solely on the ground of delay, when admittedly, the ITAT concluded that issue ground of delay, when admittedly, the ITAT concluded that issue ground of delay, when admittedly, the ITAT concluded that issue raised in the Cross objection are legal in nature. The Hon’ble High raised in the Cross objection are legal in nature. The Hon’ble High raised in the Cross objection are legal in nature. The Hon’ble High Court held that held that there was sufficien Court held that held that there was sufficient cause was made by t cause was made by
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the appellant to seek condonation of delay of 248 days in filing the appellant to seek condonation of delay of 248 days in filing the appellant to seek condonation of delay of 248 days in filing cross objection. The Hon’ble High Court The Hon’ble High Court referred to the decision of to the decision of Hon’ble Supreme Court in the case of N Balakrishnan Vs M Court in the case of N Balakrishnan Vs M Court in the case of N Balakrishnan Vs M Krishnamurthy (1998) 7 SCC 123 , where in it i Krishnamurthy (1998) 7 SCC 123 , where in it is held that Rules of s held that Rules of limitation are not meant to destroy the right of parties but they limitation are not meant to destroy the right of parties but they limitation are not meant to destroy the right of parties but they were meant to see parties do not resort to dilatory tactics. The were meant to see parties do not resort to dilatory tactics. The were meant to see parties do not resort to dilatory tactics. The Hon’ble High Court on the raising of issue otherwise than cross- Hon’ble High Court on the raising of issue otherwise than cro Hon’ble High Court on the raising of issue otherwise than cro objection held that same could have bee objection held that same could have been raised under rule 27 of n raised under rule 27 of ITAT Rules. The Relevant finding of the Hon’ble High Court is ITAT Rules. The Relevant finding of the Hon’ble High Court is ITAT Rules. The Relevant finding of the Hon’ble High Court is reproduced as under: reproduced as under: 26. To begin with therefore we propose to consider the issue as to 26. To begin with therefore we propose to consider the issue as to 26. To begin with therefore we propose to consider the issue as to whether there was any necessity for the Appellants/assessees to file whether there was any necessity for the Appellants/assessees to file whether there was any necessity for the Appellants/assessees to file cross-objections before the ITAT to raise the jurisdictional issue of tions before the ITAT to raise the jurisdictional issue of tions before the ITAT to raise the jurisdictional issue of compliance with jurisdictional parameters before any proceedings compliance with jurisdictional parameters before any proceedings compliance with jurisdictional parameters before any proceedings could be initiated under Section could be initiated under Section 153C of the IT Act. 27. In this case, admittedly, the CIT (Appeals) had decided the matters 27. In this case, admittedly, the CIT (Appeals) had decided the matters 27. In this case, admittedly, the CIT (Appeals) had decided the matters in favor of the assessees and even set aside the orders made by the r of the assessees and even set aside the orders made by the r of the assessees and even set aside the orders made by the Assessing Officers. Therefore, the assessees did not have to institute Assessing Officers. Therefore, the assessees did not have to institute Assessing Officers. Therefore, the assessees did not have to institute any further appeals to the ITAT. The Revenue in this case had any further appeals to the ITAT. The Revenue in this case had any further appeals to the ITAT. The Revenue in this case had appealed to the ITAT against the orders made by the CIT (Appea appealed to the ITAT against the orders made by the CIT (Appea appealed to the ITAT against the orders made by the CIT (Appeals). Therefore, the issue is, whether the assessees could have raised the Therefore, the issue is, whether the assessees could have raised the Therefore, the issue is, whether the assessees could have raised the issue of noncompliance with jurisdictional parameters set out under issue of noncompliance with jurisdictional parameters set out under issue of noncompliance with jurisdictional parameters set out under Section 153C of the IT Act, before the ITAT, even without filing any Section 153C of the IT Act, before the ITAT, even without filing any Section 153C of the IT Act, before the ITAT, even without filing any cross-objections before the ITAT. objections before the ITAT. 28. At least, prima facie, st, prima facie, non-compliance non compliance with with jurisdictional jurisdictional parameters set out under Section 153C of the IT Act, if established, parameters set out under Section 153C of the IT Act, if established, parameters set out under Section 153C of the IT Act, if established, will go to the root of the matter and even nullify the very action will go to the root of the matter and even nullify the very action will go to the root of the matter and even nullify the very action initiated under Section 153C of the IT Act. Based on the material initiated under Section 153C of the IT Act. Based on the material initiated under Section 153C of the IT Act. Based on the material furnished to the assessees, it was the case of the assessees that what rnished to the assessees, it was the case of the assessees that what rnished to the assessees, it was the case of the assessees that what was found in the course of search proceedings under Section 132 of was found in the course of search proceedings under Section 132 of was found in the course of search proceedings under Section 132 of the IT Act in the premises of the said firm and the said company, were the IT Act in the premises of the said firm and the said company, were the IT Act in the premises of the said firm and the said company, were the books of accounts belonging to the said firm the books of accounts belonging to the said firm and the said and the said company. It is the case of the assessees that no books of accounts company. It is the case of the assessees that no books of accounts company. It is the case of the assessees that no books of accounts belonging to the assessees i.e. Peter Vaz and Edgar Afonso were belonging to the assessees i.e. Peter Vaz and Edgar Afonso were belonging to the assessees i.e. Peter Vaz and Edgar Afonso were found in the search proceedings under Section 132 in the premises of found in the search proceedings under Section 132 in the premises of found in the search proceedings under Section 132 in the premises of the said firm and the said company. Therefo the said firm and the said company. Therefore, it was the case of the re, it was the case of the assessees that no proceedings under Section 153C of the IT Act could assessees that no proceedings under Section 153C of the IT Act could assessees that no proceedings under Section 153C of the IT Act could ever have been initiated against these assessees. ever have been initiated against these assessees. 29. Mr. Pardiwala stressed that the provisions of Section 153C as 29. Mr. Pardiwala stressed that the provisions of Section 153C as 29. Mr. Pardiwala stressed that the provisions of Section 153C as amended up to the year 2013 required the Ass amended up to the year 2013 required the Assessing Officer to be essing Officer to be satisfied that the books of the accounts belonging to the assessees satisfied that the books of the accounts belonging to the assessees satisfied that the books of the accounts belonging to the assessees who were proposed to be proceeded with under Section 153C ought to who were proposed to be proceeded with under Section 153C ought to who were proposed to be proceeded with under Section 153C ought to
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have been found, as a precondition for any action under Section 153C have been found, as a precondition for any action under Section 153C have been found, as a precondition for any action under Section 153C of the IT Act. For this purpose of the IT Act. For this purpose, he compared the provisions of Section , he compared the provisions of Section 153C as amended up to 2020, in which, there is a significant 153C as amended up to 2020, in which, there is a significant 153C as amended up to 2020, in which, there is a significant departure. Amended provisions, which did not apply to the present departure. Amended provisions, which did not apply to the present departure. Amended provisions, which did not apply to the present case, provided that the action under Section 153C was competent case, provided that the action under Section 153C was competent case, provided that the action under Section 153C was competent even if the books of acco even if the books of accounts "pertaining to" and not belonging to the unts "pertaining to" and not belonging to the assessee were found during the search under Section 132 upon a assessee were found during the search under Section 132 upon a assessee were found during the search under Section 132 upon a person not referred to in Section 153A of IT Act. He submitted that this person not referred to in Section 153A of IT Act. He submitted that this person not referred to in Section 153A of IT Act. He submitted that this was an issue of law and therefore, the ITAT should have permitted the was an issue of law and therefore, the ITAT should have permitted the was an issue of law and therefore, the ITAT should have permitted the assessees to raise this issue even without the necessity of filing any ssees to raise this issue even without the necessity of filing any ssees to raise this issue even without the necessity of filing any cross-objections. He referred to Rule 27 of the Appellate Tribunal objections. He referred to Rule 27 of the Appellate Tribunal objections. He referred to Rule 27 of the Appellate Tribunal Rules, 1963 to contend that this Rule gives a right to the Respondent Rules, 1963 to contend that this Rule gives a right to the Respondent Rules, 1963 to contend that this Rule gives a right to the Respondent in an appeal before the ITAT to support the order ap in an appeal before the ITAT to support the order appealed against on pealed against on any of the grounds decided against him, even though he may not have any of the grounds decided against him, even though he may not have any of the grounds decided against him, even though he may not have appealed against the order. appealed against the order. 30. Rule 27 of the Appellate Tribunal Rules, 1963 reads as follows: 30. Rule 27 of the Appellate Tribunal Rules, 1963 reads as follows: 30. Rule 27 of the Appellate Tribunal Rules, 1963 reads as follows:- "Respondent may support order on grounds decided against "Respondent may support order on grounds decided against "Respondent may support order on grounds decided against him. 27. The 27. The respondent, though he may not have appealed, may respondent, though he may not have appealed, may support the order appealed against on any of the grounds support the order appealed against on any of the grounds support the order appealed against on any of the grounds decided against him." decided against him." 31. In this case, the assessees merely wanted to support the order 31. In this case, the assessees merely wanted to support the order 31. In this case, the assessees merely wanted to support the order made by the CIT (Appeals), which was entirely in their favor made by the CIT (Appeals), which was entirely in their favor made by the CIT (Appeals), which was entirely in their favor. The assessees wished to raise an issue, that was at least prima facie assessees wished to raise an issue, that was at least prima facie assessees wished to raise an issue, that was at least prima facie going to the root of jurisdiction to initiate proceedings under Section going to the root of jurisdiction to initiate proceedings under Section going to the root of jurisdiction to initiate proceedings under Section 153C of the IT Act. Having regard to the provisions of Rule 27 referred 153C of the IT Act. Having regard to the provisions of Rule 27 referred 153C of the IT Act. Having regard to the provisions of Rule 27 referred to above, the ITAT in our opinion should to above, the ITAT in our opinion should have permitted the assessees have permitted the assessees who were Respondents before it, to support the orders of CIT (Appeals) who were Respondents before it, to support the orders of CIT (Appeals) who were Respondents before it, to support the orders of CIT (Appeals) on this ground, even without the necessity of filing any cross on this ground, even without the necessity of filing any cross on this ground, even without the necessity of filing any cross- objections. 32. In Dahod Sahakari Kharid Vechan Sangh Ltd. (supra), the Division 32. In Dahod Sahakari Kharid Vechan Sangh Ltd. (supra), the Division 32. In Dahod Sahakari Kharid Vechan Sangh Ltd. (supra), the Division Bench of Gujarat High Court was deciding whether, on the facts and jarat High Court was deciding whether, on the facts and jarat High Court was deciding whether, on the facts and in the circumstances of the case, the Tribunal was right in law in in the circumstances of the case, the Tribunal was right in law in in the circumstances of the case, the Tribunal was right in law in holding that the assessee needed to file cross holding that the assessee needed to file cross-objections despite fully objections despite fully succeeding in appeal and therefore, being unable to challenge succeeding in appeal and therefore, being unable to challenge succeeding in appeal and therefore, being unable to challenge the finding of the CIT (Appeals) that the assessee was guilty of finding of the CIT (Appeals) that the assessee was guilty of finding of the CIT (Appeals) that the assessee was guilty of concealment of income and/or furnishing inaccurate particulars. concealment of income and/or furnishing inaccurate particulars. concealment of income and/or furnishing inaccurate particulars. 33. In the above case, the CIT (Appeals) recorded a finding that the 33. In the above case, the CIT (Appeals) recorded a finding that the 33. In the above case, the CIT (Appeals) recorded a finding that the assessee had concealed particulars of his income or furni assessee had concealed particulars of his income or furni assessee had concealed particulars of his income or furnished inaccurate particulars of his income but for detailed reasons set out, inaccurate particulars of his income but for detailed reasons set out, inaccurate particulars of his income but for detailed reasons set out, the CIT (Appeals) quashed the penalty imposed upon the assessee the CIT (Appeals) quashed the penalty imposed upon the assessee the CIT (Appeals) quashed the penalty imposed upon the assessee under Section 271 of the IT Act. In the appeal filed by the Revenue under Section 271 of the IT Act. In the appeal filed by the Revenue under Section 271 of the IT Act. In the appeal filed by the Revenue before the ITAT, the assessee sought to assail t before the ITAT, the assessee sought to assail the finding of he finding of concealment but the ITAT did not permit the assessee to do so, on the concealment but the ITAT did not permit the assessee to do so, on the concealment but the ITAT did not permit the assessee to do so, on the ground that the assessee had failed to file any cross ground that the assessee had failed to file any cross-objections. objections.
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The Division Bench of Gujarat High Court however held that the 34. The Division Bench of Gujarat High Court however held that the 34. The Division Bench of Gujarat High Court however held that the ITAT committed an error in law in not p ITAT committed an error in law in not permitting the assessee to assail ermitting the assessee to assail the finding of the concealment without filing cross the finding of the concealment without filing cross-objections. The objections. The Court held that the ITAT apparently lost sight of the fact that the Court held that the ITAT apparently lost sight of the fact that the Court held that the ITAT apparently lost sight of the fact that the assessee had succeeded before the CIT (Appeals) that had allowed assessee had succeeded before the CIT (Appeals) that had allowed assessee had succeeded before the CIT (Appeals) that had allowed the assessee's appeal the assessee's appeal and even set aside the penalty in its entirety. and even set aside the penalty in its entirety. Therefore, the assessee did not have to appeal. The position in law is Therefore, the assessee did not have to appeal. The position in law is Therefore, the assessee did not have to appeal. The position in law is well settled that the cross well settled that the cross-objections, for all intents and purposes, objections, for all intents and purposes, would amount to an appeal and the cross objector would have the would amount to an appeal and the cross objector would have the would amount to an appeal and the cross objector would have the same rights which an appellant has before the Tribunal. Since the e rights which an appellant has before the Tribunal. Since the e rights which an appellant has before the Tribunal. Since the assessee did not have to appeal, the ITAT could not have insisted assessee did not have to appeal, the ITAT could not have insisted assessee did not have to appeal, the ITAT could not have insisted upon the filing of cross upon the filing of cross-objections as a precondition for permitting the objections as a precondition for permitting the assessee to assail the finding of concealment. assessee to assail the finding of concealment. 35. The Division Bench referred to the provisions of Section 253 of the Division Bench referred to the provisions of Section 253 of the Division Bench referred to the provisions of Section 253 of the IT Act and after analyzing the scheme held that on a plain reading of IT Act and after analyzing the scheme held that on a plain reading of IT Act and after analyzing the scheme held that on a plain reading of the provision, it transpires that the party had been granted an option the provision, it transpires that the party had been granted an option the provision, it transpires that the party had been granted an option or a discretion to file cross or a discretion to file cross-objections. In case a party having a party having succeeded before the CIT (Appeals) opts not to file cross succeeded before the CIT (Appeals) opts not to file cross-objection even objection even when an appeal is preferred by the other party, from that, it is not when an appeal is preferred by the other party, from that, it is not when an appeal is preferred by the other party, from that, it is not possible to infer that the said party had accepted the order or the part possible to infer that the said party had accepted the order or the part possible to infer that the said party had accepted the order or the part thereof which was against thereof which was against the respondent. Since the ITAT drew such the respondent. Since the ITAT drew such an inference that was not supported by the plain language of Section an inference that was not supported by the plain language of Section an inference that was not supported by the plain language of Section 253, the High Court held that the ITAT was clearly in error. 253, the High Court held that the ITAT was clearly in error. 36. The High Court then referred to Rule 27 quoted above and held 36. The High Court then referred to Rule 27 quoted above and held 36. The High Court then referred to Rule 27 quoted above and held that if the inferen that if the inference drawn by the ITAT is accepted as a correct ITAT is accepted as a correct proposition, then, it would render Rule 27 of the Appellate Tribunal proposition, then, it would render Rule 27 of the Appellate Tribunal proposition, then, it would render Rule 27 of the Appellate Tribunal Rules, 1963 redundant and nugatory. The High Court held that it is Rules, 1963 redundant and nugatory. The High Court held that it is Rules, 1963 redundant and nugatory. The High Court held that it is not possible to interpret the provision in such a manner. Any not possible to interpret the provision in such a manner. Any not possible to interpret the provision in such a manner. Any interpretation placed on a provision has to be in harmony with the on placed on a provision has to be in harmony with the on placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and other provisions under the Act or the connected Rules and other provisions under the Act or the connected Rules and interpretation which makes other connected provisions otiose has to interpretation which makes other connected provisions otiose has to interpretation which makes other connected provisions otiose has to be avoided. Rule 27 of the Appellate Tribunal Rules is clear and be avoided. Rule 27 of the Appellate Tribunal Rules is clear and be avoided. Rule 27 of the Appellate Tribunal Rules is clear and unambiguous. The right granted to the respondent by the said Rule s. The right granted to the respondent by the said Rule s. The right granted to the respondent by the said Rule cannot be taken away by the Tribunal by referring to the provisions of cannot be taken away by the Tribunal by referring to the provisions of cannot be taken away by the Tribunal by referring to the provisions of Section 253(4) of the IT Act. The ITAT was, therefore, in error in Section 253(4) of the IT Act. The ITAT was, therefore, in error in Section 253(4) of the IT Act. The ITAT was, therefore, in error in holding that the finding recorded by the CIT (Appeals) remaine holding that the finding recorded by the CIT (Appeals) remaine holding that the finding recorded by the CIT (Appeals) remained unchallenged since the assessee had not filed cross unchallenged since the assessee had not filed cross-objections. objections. 37. The reference in this regard can also be made to the provisions of 37. The reference in this regard can also be made to the provisions of 37. The reference in this regard can also be made to the provisions of Section 260A(7) of the IT Act which provides that save as otherwise Section 260A(7) of the IT Act which provides that save as otherwise Section 260A(7) of the IT Act which provides that save as otherwise provided in this Act, the provisions of the Code of provided in this Act, the provisions of the Code of Civil Procedure, Civil Procedure, 1908, relating to appeals to the High Court shall, as far as may apply 1908, relating to appeals to the High Court shall, as far as may apply 1908, relating to appeals to the High Court shall, as far as may apply in the case of appeals under this Section. Now in the context of the in the case of appeals under this Section. Now in the context of the in the case of appeals under this Section. Now in the context of the provisions of Order XLI Rule 22 of the CPC dealing with the cross provisions of Order XLI Rule 22 of the CPC dealing with the cross provisions of Order XLI Rule 22 of the CPC dealing with the cross- objections, the Hon'ble Supreme objections, the Hon'ble Supreme Court in the case of S. Nazeer Ahmed Court in the case of S. Nazeer Ahmed (supra) has held that the High Court was clearly in error in holding (supra) has held that the High Court was clearly in error in holding (supra) has held that the High Court was clearly in error in holding that the appellant not having filed a memorandum of cross that the appellant not having filed a memorandum of cross that the appellant not having filed a memorandum of cross-objections in terms of Order XLI Rule 22 of the Code, could not challenge the in terms of Order XLI Rule 22 of the Code, could not challenge the in terms of Order XLI Rule 22 of the Code, could not challenge the finding of the trial Court that the suit was not barred by Order l Rule 2 trial Court that the suit was not barred by Order l Rule 2 trial Court that the suit was not barred by Order l Rule 2 of the Code. The respondent in an appeal is entitled to support the of the Code. The respondent in an appeal is entitled to support the of the Code. The respondent in an appeal is entitled to support the
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decree of the trial Court even by challenging any of the findings that decree of the trial Court even by challenging any of the findings that decree of the trial Court even by challenging any of the findings that might have been rendered by the trial Court against himse might have been rendered by the trial Court against himse might have been rendered by the trial Court against himself. For supporting the decree passed by the trial Court, it is not necessary for supporting the decree passed by the trial Court, it is not necessary for supporting the decree passed by the trial Court, it is not necessary for the respondent in the appeal, to file a memorandum of cross the respondent in the appeal, to file a memorandum of cross the respondent in the appeal, to file a memorandum of cross-objections citenging a particular finding that is rendered by the trial Court citenging a particular finding that is rendered by the trial Court citenging a particular finding that is rendered by the trial Court against him when the ultimate dean it against him when the ultimate dean itself is in his favor. A self is in his favor. A memorandum of cross memorandum of cross-objections is needed only if the respondent objections is needed only if the respondent claims any relief which had been negatived to him by the trial Court claims any relief which had been negatived to him by the trial Court claims any relief which had been negatived to him by the trial Court and in addition to what he has already been given by the decree and in addition to what he has already been given by the decree and in addition to what he has already been given by the decree under challenge. The Hon'ble Suprem under challenge. The Hon'ble Supreme Court, therefore, held that the e Court, therefore, held that the respondent in the appeal had every right to canvas the correctness of respondent in the appeal had every right to canvas the correctness of respondent in the appeal had every right to canvas the correctness of the finding on the bar of Order Il Rule 2 rendered by the trial Court. the finding on the bar of Order Il Rule 2 rendered by the trial Court. the finding on the bar of Order Il Rule 2 rendered by the trial Court. 38. In the present case, it is not as if the issue of non 38. In the present case, it is not as if the issue of non-fulfillment of fulfillment of jurisdictional parameters of Section tional parameters of Section 153C was raised but rejected by 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT the CIT (Appeals). Such an issue was not raised before the CIT the CIT (Appeals). Such an issue was not raised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate (Appeals). Having regard to the provisions of Rule 27 of the Appellate (Appeals). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 as also the provisions of Section 260A(7 Tribunal Rules, 1963 as also the provisions of Section 260A(7 Tribunal Rules, 1963 as also the provisions of Section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not Court in S. Nazeer Ahmed (supra) we think that the ITAT should not Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals have precluded the assessees from raising the issue in the appeals have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the nec instituted by the Revenue, even without the necessity of filing any essity of filing any cross18 objections. Accordingly, the additional substantial question of cross18 objections. Accordingly, the additional substantial question of cross18 objections. Accordingly, the additional substantial question of law is required to be answered in favor of the Appellants/assessees law is required to be answered in favor of the Appellants/assessees law is required to be answered in favor of the Appellants/assessees and against the Revenue. and against the Revenue.” 5.4 Before us the Ld Counsel supported the order of ld CIT(A) for Before us the Ld Counsel supported the order of ld CIT(A) for Before us the Ld Counsel supported the order of ld CIT(A) for raising the issue of validity of the issue of validity of proceedings u/s 153A , though u/s 153A , though no specific application under Rule 29 of the ITAT Rule, 1963 application under Rule 29 of the ITAT Rule, 1963 application under Rule 29 of the ITAT Rule, 1963 was filed in writing. The revenue objected to the arguments made without . The revenue objected to the arguments made without . The revenue objected to the arguments made without either cross objection or either cross objection or mention of Rule 29 of ITAT Rules mention of Rule 29 of ITAT Rules, which being a surprise and a surprise and in violation of principle of natural justic in violation of principle of natural justice to the Revenue. 5.5 We have heard rival submission of the parties but in view of heard rival submission of the parties but in view of heard rival submission of the parties but in view of the binding precedent of Hon’ble the binding precedent of Hon’ble Bombay High Court in the case of High Court in the case of Peter Vaze (supra), we admit the o Peter Vaze (supra), we admit the objection raised by the assessee bjection raised by the assessee against the validity of gainst the validity of proceedings u/s 153A of the Act. But, we u/s 153A of the Act. But, we find that in case the AO has observed find that in case the AO has observed that no return of income was no return of income was filed by the assessee, however before us the assessee has shown filed by the assessee, however before us the assessee has shown filed by the assessee, however before us the assessee has shown that return u/s 153A of the that return u/s 153A of the Act was filed just before completion of Act was filed just before completion of assessment therefore, it need to be ascertained whether the AO was assessment therefore, it need to be ascertained whether the AO was assessment therefore, it need to be ascertained whether the AO was having access to such return of income filed electronically by the having access to such return of income filed electronically by the having access to such return of income filed electronically by the
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assessee. This issue needs verification from the Directorate of assessee. This issue needs verification from the Directorate of assessee. This issue needs verification from the Directorate of computer system. The The issue of condonation of delay in filing return issue of condonation of delay in filing return of income u/s 153A of the Act of income u/s 153A of the Act by the AO also needs to be examined. also needs to be examined. Since, we have already sent the issue of deciding the merit to the Since, we have already sent the issue of deciding the merit to the Since, we have already sent the issue of deciding the merit to the file of ld CIT(A), therefore, file of ld CIT(A), therefore, we feel it appropriate to restore appropriate to restore this issue also to the file of ld CIT(A) for adjudication after proper verification the file of ld CIT(A) for adjudication after proper verification the file of ld CIT(A) for adjudication after proper verification of facts and providing adequate opportunity and providing adequate opportunity of being heard of being heard to the assessee. 6. In the result, appeal of the Revenue is allowed for statistical In the result, appeal of the Revenue is allowed for statistical In the result, appeal of the Revenue is allowed for statistical purpose. Order pronounc Order pronounced in the open Court on 15/11 /11/2023. Sd/ Sd/- Sd/- (RAHUL CHAUDHARY RAHUL CHAUDHARY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 15/11/2023 Shubham P. Lohar Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
