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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 25/08/2020, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–53, Mumbai, [“learned CIT(A)”], for the assessment year 2011-12.
In this appeal, the assessee has raised the following grounds:-
“ON NATURAL JUSTICE: 1.1 In the facts and circumstances of the case and in low the order passed by the Learned Commissioner of Income Tax (Appeals))-5. Mumbai [“the Ld. CIT(A)" for short] is bad in law and void since the same is used an extraneous
Ramesh S. Shah ITA no.1845/Mum./2020 and totally irrelevant considerations, ignoring the relevant and considerations and is also contrary to various judicial precedents and the extant law. ON MERITS: 1.1 In the facts and circumstances of the case and in low the Ld CIT(A) erred in confirming the action of the Learned Deputy Commissioner of Income Tax Central Circle-5(3), Mumbai [“the Ld AO" for short] in framing the assessment under section 143(3) r.w.s. 153C of the Income Tax Act 1961 [“the Act” for short] in the case of the Appellant for the relevant assessment year. 1.2 While doing so, the LA CIT(A) failed to appreciate that: (i) The necessary pre-conditions for the imitation as well as completion of an assessment under section 153C of the Act were not fulfilled in the present case; (ii) The relevant assessment year ie. AY 2001-02 falls beyond a period of six years as contemplated under section 153C r.w.s. 153 of the Act; (iii) The document on the basis of which the proceedings under section 153C of the Act were initiated did not belong to the Appellant and therefore the entire proceedings are invalid; (iv) The satisfaction as contemplated under section 153C of the Act to be recorded by the AO of the searched person is not proper, objective and judicious and is based on mere assumptions and presumptions: and (v) The provisions relating to sanction as contemplated under section 153D of the Act are not complied with in the present case and therefore also the impugned assessment order is void. 2.1 In the facts and circumstances of the case the Ld. CIT(A) erred in confirming the action of the Ld. AO in treating the amount of Rs 1,00,00,000/- as cash loan allegedly given by the searched person, one Mr. Suresh Gandhi, to the Appellant without any substantial and corroborative evidence whatsoever. 2.2 While so affirming, the Ld. CIT(A) totally failed to appreciate that: (i) There is no real, substantial, effective and corroborative evidence before the Ld. AO to hold that the Appellant had taken cash loan from the searched person, Mr. Suresh Gandhi; (ii) The only document on the basis of which the said observation is made by the Ld. AO does not belong to the Appellant and is nothing but a mere dumb document, the ownership whereof has neither been established by the Ld. AO nor by the AO of the searched person; (iii) Nowhere in his statement or even at the time of search has Mr. Suresh Gandhi, the searched person, ever stated or admitted that he had personally handed over the cash to the Appellant and hence his admission could not be used against the Appellant; and Ramesh S. Shah ITA no.1845/Mum./2020 (iv) In any case, the entire statement of Mr. Suresh Gandhi, recorded during search and even subsequently was not handed over to the Appellant despite specific requests and without the said statement, it was neither possible to seek effective cross-examination of the said person nor effectively respond to the queries raised by the Ld. AO based on the said statement of Mr. Suresh Gandhi. 3.1 In the facts and circumstances of the case the Ld. CIT(A) erred in confirming the action of the Ld. AO whereby the Ld. AO made an addition of Rs.12,36,986/- under section 69C of the Act in respect of alleged interest on the alleged cash loan. 3.2 While doing so, the Ld. CIT(A) completely failed to appreciate that: (i) No such interest has ever been paid by the Appellant since the existence of the transaction of loan itself is disputed; and: (ii) The addition is not based on any corroborative evidence but a mere dumb document. 3.3 In any case and without prejudice to the above assuming without accepting that the said document and the entries made therein are correct as stated by the Ld. AO, still, no addition under section 69C of the Act could be made in the hands of the Appellant since from that very document it is evident that the amount of alleged interest is added to the amount of alleged loan on 1" April of next year and hence there is no actual payment / outgo of the said interest and hence no such expenditure is incurred in the year under appeal so as to trigger section 69C of the Act.
4. All the above-mentioned grounds are without prejudice to each other. The Appellant craves leave to add, alter, delete or modify all or any the above grounds of appeal.”
During the hearing, the learned Authorised Representative (“learned AR”) at the outset submitted that since the satisfaction under section 153C of the Act was recorded on 18/12/2017, no action under the aforesaid section can be taken for the assessment years prior to the assessment year 2012-13 and thus the relevant assessment year, i.e. 2011-12 is beyond a period of 6 years as contemplated under section 153C read with section 153A of the Act.
We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is an individual and for the year under consideration filed his return of income
Ramesh S. Shah ITA no.1845/Mum./2020 on 28/09/2012, declaring a total income of Rs.86,68,284. The return filed by the assessee was selected for scrutiny and vide order dated 28/03/2013, passed under section 143(3) of the Act the assessment was concluded by assessing the total income of the assessee at Rs.96,84,540. Subsequently, information was received from DCIT, Central Circle-1(2), Mumbai vide letter dated 18/12/2017, that the search and seizure action under section 132 of the Act was carried out on 17/06/2015 in the case of Ess Gee group of companies and its directors/promoters, etc. and during the course of proceedings under section 132 of the Act certain incrementing material containing information relating to the assessee was found and seized. Accordingly, vide aforesaid letter dated 18/12/2017, DCIT, Central Circle-1(2), Mumbai forwarded the relevant incrementing material and the satisfaction note drawn by him for correct determination of income of the assessee under section 153C of the Act. The aforesaid satisfaction note dated 18/12/2017 is reproduced by the Assessing Officer (“AO”) on page 2 of the assessment order dated 29/12/2018, passed under section 143(3) read with section 153C of the Act.
We find that as per the first proviso to section 153C(1) of the Act, the reference to the date of search under section 132 or making of requisition under section 132A, in the second proviso to section 153A(1), has to be construed as reference to the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. Thus, in the present case, since the satisfaction note under section 153C of the Act was recorded on 18/12/2017, therefore, the assessment year in which the search is conducted for the Ramesh S. Shah ITA no.1845/Mum./2020 purpose of section 153C is the assessment year 2018-19 and the six assessment years for which the income can be assessed or reassessed under section 153C(1) of the Act are assessment years 2012-13 to 2017-18. Therefore, as per the assessee, since the year under consideration does not fall within the 6 years prior to the relevant assessment year, no proceedings under section 153C of the Act can be initiated in the year under consideration.
We find that recently the Hon’ble Supreme Court in CIT v/s Jasjit Singh, [2023] 155 taxmann.com 155 (SC) held that the intent of the legislature to enact the proviso to section 153C(1) of the Act is also to compute the six-year period, in respect of which the returns are required to be filed by the third- party under section 153C of the Act. The relevant observations of the Hon’ble Supreme Court in the aforesaid decision, are reproduced as under:-
“9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.
This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials – of the search party, under Section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.”
Ramesh S. Shah ITA no.1845/Mum./2020
Therefore, in view of the above-settled position, we are of the considered view that the relevant assessment year, i.e. 2011-12 is outside the scope of proceedings under section 153C of the Act in the present case and the AO had no jurisdiction to make an assessment/reassessment of assessee’s income for the year under consideration under section 153C of the Act. Accordingly, the assessment order dated 29/12/2018, passed under section 143(3) read with section 153C of the Act is set aside. Since the relief is granted to the assessee on this short issue, the other grounds raised in the present appeal on merits are rendered academic and thus are kept open.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 19/10/2023