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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI AMARJIT SINGH, AM
, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the Revenue and the assessee, as well as the cross objection of the assessee, against the action of the Ld. CIT (A)-49, Mumbai [in short ‘Ld. CIT(A)’] dated 28.09.2021 passed for Assessment Years [in short ‘AY’] 2016-17 & 2017-18.
The assessee in the appeal preferred for AY 2017-18 and in the Cross Objection for AY 2016-17 has challenged the validity of the impugned assessment orders both dated 27-12-2018. It is the contentions of the assessee inter alia that, the impugned assessments were framed without issuance of the mandatory notice u/s 153C of the Act, which is sine qua non to assume jurisdiction for these AYs. It has therefore been urged that impugned orders passed by the AO ought to be held ab inito void and bad in law. Since these grounds raised
are purely legal in nature and goes to the root of the matter, we take up these legal issues which are framed as under; - 1) Whether the action of AO not to have acted in accordance to section 153C of the Act, when he has recorded satisfaction that assessee is a person against whom he has initiated action u/s 153C of the Act pursuant to a search u/s 132 of the Act conducted on 29.07.2016 at Dr. D. Y. Patil Education Society Medical College, Kolhapur, vitiates the proceedings. 2) And whether the action of AO not to have issued notice u/s 153C of the Act to both AY 2016-17 and AY 2017-18 as contemplated u/s 153C of the Act is bad in law, since the date of search for purpose of section 153C of the Act need to be construed as the date on which 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017
18. Dr. D.Y. Patil Education Society books/documents are received by AO on 07.07.2017/satisfaction note is prepared by AO i.e., 18.09.2018. For AY 2017-18, the specific legal ground raised by assessee in their appeal on this issue is as under:
1. That on the facts and in the circumstances of the case of the appellant and in law. The AO has erred in passing the impugned order which is illegal and bad in law overlooking the fact that search conducted on 27.07.2016 on DYP Group Kolhapur (search person), thereby the AY 2017-18 ought to be assessed as per the provisions of section 153C r.w.s. 153A of the Act once notice u/s 153C issued to the appellant on 19.09.2018 for past assessment years and no notice u/s 153C of the Act issued to the appellant for relevant AY 2017-18. Therefore, order passed u/s 143(3) of the Act is bad in law and in valid.
Since the facts involved in both the years are same, with the consent of both parties, we take up both the cases of AYs 2016-17 & 2017-18 together. Brief facts of the case for deciding the legal issue raised by the Revenue as well as assessee is ‘whether assessment framed by AO for the AY 2016-17 and AY 2017-18 are bad in law for non-issuance of notice u/s 153C of the Act and therefore, the same are non-est in the eyes of law’. [For AY 2016-17, the Ld. CIT(A) has found that action of AO to be bad in law for non-issuance of notice u/s 153C of the Act, so the Revenue is challenging the impugned action of Ld. CIT(A); whereas for AY 2017-18, the Ld. CIT(A) has dismissed this legal ground raised
by assessee, so assessee is in appeal]. , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society
4. Brief facts of the case are that, search u/s 132 of the Act was conducted on 29.07.2016 in the case of “Dr. DY Patil Education Society Medical College”, Kolhapur which was a constituent of Dr. DY Patil Education Society, i.e. the assessee trust. It was noted by the AO that, no search warrant was executed in the name of the assessee and therefore the assessee was not the ‘searched person’ for the purposes of Section 153A of the Act. The AO of the searched person accordingly handed over the documents, books of accounts, evidences, etc. which pertained to the assessee, to the AO of the assessee. And pursuant thereto, the AO of the assessee recorded his satisfaction on 18.09.2018 and initiated proceedings u/s 153C of the Act albeit for AYs 2011-12 to 2015-16 by issue of notice u/s 153C of the Act dated 19.09.2018. It was brought to our notice that, in the meanwhile, the assessee had filed returns of income for AYs 2016-17 & 2017-18 on 17.10.2016 & 11.09.2017 respectively. The assessee is noted to have been in receipt of notice u/s 143(2) of the Act dated 1.09.2017 in relation to AY 2016-17 and notice u/s 143(2) dated 10.08.2018 for AY 2017-18. Pursuant thereto, the AO completed the income-tax assessments for AYs 2016-17 & 2017-18 u/s 143(3) of the Act both vide orders dated 27-12-2018, at a total income of Rs.10,49,79,390/- & Rs.3,25,38,270/- respectively.
5. Before the Ld. CIT(A), the assessee had inter alia objected to the validity of the impugned orders for AYs 2016-17 & 2017-18 having been passed sans notice u/s 153C of the Act. According to the ITA Nos. 2298, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society assessee, in terms of the proviso to Section 153C of the Act, the reference to the date of search u/s 132 of the Act was to be construed as the date of receiving the books of accounts/documents/assets/ material pertaining to the other person i.e., the assessee, by the AO of such other person. It was the case of the assessee that, the date on which the satisfaction note was recorded by the AO, i.e., 18.09.2018 [AY 2019-20] was the relevant date for the purposes of proviso to Section 153C of the Act. Referring to the aforesaid date, the assessee had contended that the period of six (6) assessment years preceeding the year/date of search, was to be reckoned from AY 2019-20 for the initiation of assessments u/s 153C of the Act. It was the case of the assessee that, the AO was therefore duty bound to first issue notices u/s 153C of the Act for the six (6) assessment years preceding the year of search i.e., AY 2019-20, in the present case. The relevant AY 2017-18 being the second (2nd) assessment year preceding the deemed date of search i.e., 18.09.2018, the AO was duty bound to first issue notice u/s 153C of the Act in order to assume jurisdiction to frame the assessment for this AY. Since the AO did not issue notice u/s 153C of the Act for this year, but completed the assessments without issuing the notice for these AYs, the assessee claimed that the assessment orders stood vitiated in law.
It is noted that, though the Ld. CIT(A) in principle accepted the plea of the assessee that, the assessment framed in relation to the six (6) assessment years preceding the date of search, without issuance of 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society notice u/s 153C of the Act stood vitiated in law, he however did not agree with the assessee that the date of search was to be reckoned in terms of proviso to Section 153C of the Act. According to Ld. CIT(A), the date of search was 29.07.2016 [AY 2017-18] and therefore only AY 2016-17 fell within the six (6) assessment years preceding the date of search. Consequently, for AY 2017-18, the Ld. CIT(A) upheld the validity of the assessment framed u/s 143(3) of the Act.
For the sake of clarity, the relevant findings recorded by the Ld. CIT(A) while adjudicating the appeal for AY 2016-17 is set out below:
“8.1. I have considered the submissions of the appellant, the provisions of the Act and judicial decisions relied upon by the appellant and other judicial pronouncements as applicable to the issue at hand. 8.2. The assessment year for which the impugned assessment order has been passed u/s 143(3) of the Act is AY 2016-17. A search and seizure operation u/s. 132 of the Act was conducted by the Investigation Wing in the case of M/s. D.Y. Patil Group of Kolhapur on 27.07.2016, which was concluded on 29.07.2016. Shri Sanjay D. Patil, D.Y. Patil Education Society (Deemed University) Kolhapur, D.Y. Patil Education Society Medical College Kolhapur were also covered in the same search operation and assessments in their cases were accordingly conducted as per provisions of Section 153A of the Act, except 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society in the case of D.Y. Patil Education Society Medical College Kolhapur, which is a constituent of the assessee (searched persons) and no assessment was made in that case separately. The case of the assessee was also centralized with same Assessing Officer for a coordinated enquiry.
8.3. After receiving the relevant documents/evidences in this case, the AO recorded a satisfaction note and he issued notice under section 153C of the Act for AY 2011-12 to 2015-16 on 19.09.2018 and served the same on the assessee on 25.09.2018. This fact is noted in the assessment orders for AY 2011-12 to 2015-16. The observations of the AO in this regard as appearing in Para 3.5 of the assessment order for AY 2011-12, are reproduced below.
“3.5. In connection to the above proceedings, a satisfaction Note u/s 153C were issued on 19.09.2018 with relevant evidence, statements and Panchnama from the Assessing Officer [DCIT-CC-7(1), Mumbai] in the case of Shri Sanjay D. Patil, D Y Patil Education Society (Deemed university) Kolhapur, D Y Patil Education Society Medical College Kolhapur, Kolhapur.
In view of the above, after recording of the Satisfaction Note as Assessing Officer of the assessee Trust, the notice u/s 153C were issued on 19.09.2018, and served to the assessee Trust on 25.09.2018 for AYs 2011-12 to 2015- 16, as per relevant provisions of the Act. The (A.Y.s 2016- 17 and 2017-18 are already selected under regular scrutiny". (emphasis added) , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 8.4. The Id. AO, thereafter, proceeded to complete the assessment for AY 2016-17 under section 143(3) of the Act. However, as per provisions of section 153C of the Act, it was mandatory on the part of the AO to issue notice u/s 153C for six assessment years, which are AY 2011-12 to 2016-17 in the given facts of the case, as it has already been held, while adjudicating the appeal of the assessee for AY 2017-18 vide and order dated 28.09.2021, that the six assessment years, for which the notice was required to be issued in this case are AYs 2011- 12 to 2016-17. As such, the year under consideration also falls within the period of six assessment years, when counted from the date of search.
8.5. At the very outset, it is pertinent to note that the Id. AO has passed an assessment order in another case of the D.Y. Patil Group of cases, naming "Dr. D. Y. Patil Sports Academy" for AY 2016-17 in similar manner u/s 143(3) of the Act, wherein also notices u/s 153C were issued for AY 2011-12 to 2015-16 in respect of the search operation conducted on 27.07.2016. In that case, the matter was remanded back to the Id. AO and after considering the remand report and all relevant facts it was held that the Id. AO did not have jurisdiction to pass the assessment order for AY 2016-17 u/s 143(3) of the Act. My findings in this regard as appearing in the Appeal Order dated 08.04.2021, In Appeal No. CIT(A),49 Mumbai/10248/2018-19, in the case of "Dr. D. Y. Patil Sports Academy" are as below:
…….. , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 8.6. Material facts remain the same in the present case as well. The assessment for AY 2016-17, in this case too, was required to be made u/s 153C read with Section 153A of the Act after recording a proper satisfaction for assumption of jurisdiction for AY 2016-17 and issue of notice under section 153C/153A of the Act. However, as noted previously, the AO had neither recorded any 'satisfaction' nor did he issue notice under section 153C/153A of the Act for AY 2016-17. Moreover, he proceeded with completing the assessment u/s 143(3) of the Act, which has abated. In the given facts of the case and in the light of detailed discussions made in the appeal order as referred to and reproduced above, the assessment order in this case for AY 2016-17 is held as not sustainable. Consequently, the assessment completed in this case u/s 143(3) of the Act for AY 2016-17 is held as Invalid and bad in law as the above findings applies mutatis mutandis to the facts of this case as well. Ground No. 1 of the Appeal is accordingly ALLOWED.” [Emphasis given by us]
Also, the relevant findings of the Ld. CIT(A) dismissing the very same legal issue raised in AY 2017-18 reads as under: - “7.2.3 … On perusal of sub-section (1)(b) of Section 153A, it is apparent that the period of six assessment years referred to in the said section are six assessment years immediately preceding the assessment year relevant to previous year in which search was conducted. Hence, in order to make assessment in case of searched person as well as ‘other person’ based on documents seized in the very same search, it is evident from the language of the Section that 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society the period of relevant six assessment years for the purposes of Section 153C(1) would be the same as provided in Section 153A of the Act.
7.2.4 It is also apparent from perusal of first proviso to Section 153C(1) of the Act that the substitution of date of handing over of seized material in place of date of initiation of search, as mentioned therein, was only for the purpose to determine the years of abatement of assessment proceedings as provided in Second Proviso to Section 153A and the same is not for the purpose of determination of the six assessment years for which the assessments were to be made under Section 153C. This in fact has separately and unambiguously been provided under Section 153C(1) itself by using the phrase for the relevant assessment year or years referred to in Sub-section (1) of Section 153A'. In this regard, it is pertinent to note that even after the amendment brought under Section 153C(1) w.e.f. 01.04.2017 by inserting the expression six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted... the First Proviso continue intact and unmodified. This further reinforces the view that First Proviso to Section 153C is not there for determining the six assessment years for the purpose of making assessment under Section 153C(1) of the Act. In fact the deployment of the phrase in section 153C(1), viz.....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...” leaves no room for doubt as section 153A(1)(b) mandates that the period of six assessment years would be those immediately preceding the assessment year in which search is conducted. In this light, there was no requirement to specify the same thing again in as many words in 153C(1) of the Act. This cements the proposition that the amendment 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society made via the Finance Act, 2017, therein is attributable entirely to the IDS-2016. In fact, it would be absurd to state that till the Finance Act, 2017, the Legislature was silent about which assessment years would comprise the block period apropos the 'other person' -something which would be absolutely central to any scheme of assessment.
…… 7.2.17. The assessee has placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2016] 62 taxmann.com 391 (Delhi) wherein it was held that in case of 'other person' date of search will be 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 and that in the case of other person, the question of pendency and abatement of proceedings of assessment or reassessment to the six assessment years would have to be examined with reference to such date.
7.2.18. The Hon'ble Delhi High Court in in the case of Pr. CIT v. Raj Buildworth (P.) Ltd. [2020] 113 taxmann.com 600 (Delhi), has followed the decision in the case of CIT v. RRJ Securities Ltd. (supra) giving same proposition. The orders of the Hon'ble ITAT relied upon by the assessee is also based on the above decisions of the Hon'ble Delhi High Court. The Department had filed SLP in the case of Raj Buildworth Pvt. Ltd.(supra) on similar issue, which was not considered on merits but was dismissed solely on account of delay as reported in [2020] 113 taxmann.com 601, but the Hon'ble Supreme Court has kept the Question of Law open. Another germane factor is that the decision in the lead case of RRJ Securities (supra) was rendered on October 30, 2015. As a result, the benefit of analysing the relevant amendment made in the Finance Act, 2017 (as discussed above), and looking into the provisions in the light of perspective as 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society available from analysis of the amended provision was not then available.
7.2.19 I find that subsequent to the decision of Hon’ble Delhi High Court in the case of CIT Vs RRJ Securities Ltd (supra) this issue was considered by the Hon’ble Gujarat High Court in the case of Anil Kumar Gopikishan Agrawal vs ACIT, Circle 3(2), Ahmedabad [2019] 106 taxmann.com 137, wherein the findings were as below:
….
7.2.20.The above findings were reiterated by the Hon'ble Gujarat High Court in a recent decision in the case of Mukesh Manekchand Sheth vs. ACIT, Central Circle-2 (2020) 116 taxmann.com 618 (Gujarat). Referring to the decision in the case of Anil Kumar Gopikishan Agrawal vs ACIT, Circle 3(2), Ahmedabad (supra) the Hon'ble High Court held as below:
“With regard to the first question, the coordinate bench took the view that the writ applications were maintainable. With regard to the second question, the Court took the view that the Legislature has specifically made the amended provisions of Section 153C of the Act applicable with prospective effect from 01.06.2015. The Court held that if such amended provisions are (sic) made applicable to the searches carried out prior to 01.06.2015, they would affect the substantive rights of the persons who are brought within the ambit of Section 153C of the Act by virtue of such amendment. So far as the third question is concerned with regard to the limitation, the Court took the view that when the statute itself provides for an alternative period of limitation, merely because the period of limitation is provided under the first part has elapsed; it cannot be said that the notices were barred by the 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society limitation on such ground. While answering the last question, the Court held as under:
"21.2 On a plain reading of section 153A of the Act, it is evident that the trigger point for issuance of notice under that section is a search under section 132 or a requisition under section 132A of the Act. Notice is required to be issued to the searched person calling upon him to file return of income for six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, insofar as computation of the six assessment years in respect of which notice is required to be issued is concerned, the relevant date is the immediately preceding assessment year relevant to the previous year in which such search is conducted or requisition is made.
21….. Therefore, in case any notices under section 153C of the Act which have been issued for assessment years beyond the six assessment years referred to herein above, such notices would be beyond jurisdiction as the same do not fall within the six assessment years as contemplated under section 153A of the Act."
7.2.21. In the light of the detailed discussion made as foregoing and the decisions which were referred in support of the aforesaid views in this matter, I do not find any infirmity in assumption of jurisdiction u/s 143(3) of the Act in the impugned assessment year, as the Ld.AO was required to issue notice u/s 153C for AYs 2011-12 to 2016- 17. The completion of assessment u/s 143(3) of the Act for AY 2017-18 is, therefore, held as lawful and squarely within the ambit of the provisions of the Act and the assessment order under references is accordingly held as valid.” [Emphasis given by us] 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 9. Aggrieved by the aforesaid impugned actions of the Ld. CIT(A), the Revenue is in appeal before us for AY 2016-17 and the assessee has preferred appeal for AY 2017-18.
We have heard both the parties and perused the records. The Ld. AR brought to our notice that, the search in this case, took place on 29.07.2016 [AY 2017-18] in the case of M/s. D.Y.Patil Education Medical College. Admittedly, the assessee was not the ‘searched person’. Further, it is noted from Para 3.3 of the impugned order that, the case of the assessee was centralized with the AO, i.e., Dy. CIT, Central Circle-7(1), Mumbai, only on 18.09.2018. The relevant portion of the assessment order is as follows:-
3.3 Consequent to search action, the case of the assessee was also centralized with DCIT Central Circle-7(1), Mumbai on 18.09.2018, for coordinated investigation, assessment and for having a uniform view on the common issues pertaining to various DY. Patil Groups located at Navi Mumbai, Pune and Kolhapur, as per discussion held in the upcoming paras. In consequent to transfer of jurisdiction of assessee to this charge, notice u/s 142(1) r.w.s. 129 of the Act dated 28.09.2018 & 02.11.2018 was issued to the assessee and served.
It is therefore evident from the above that, the AO assumed jurisdiction over the case of the assessee only on 18.09.2018; and the material placed before us (refer page 35-40 PB) shows that on the same date, the AO recorded his ‘Satisfaction Note’ dated 18.09.2018, in respect of assessee i.e. M/s D. Y. Patil Education Society, PAN No. AAATD8919M albeit for AY 2011-12 to AY 2015-16. According to 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society Ld. CIT DR [and vide letter dated 19.01.2023 (No CIT (DR) ITAT/D Bench/2022-23] even though the satisfaction note of AO (DCIT-CC- 7(1), Mumbai was recorded on 18.09.2018, the relevant seized material was received on 07.07.2017 itself by the office of AO (DCIT-CC-7(1), Mumbai. Therefore, the date of receipt of documents/books of account is taken note on 07.07.2017.
So, the issue first of all in dispute before us is whether the relevant AYs 2016-17 & 2017-18 fell within the six (6) assessment years preceding the date of search u/s 153C of the Act and, if so, then whether non-issuance of notice u/s 153C of the Act vitiates the entire assessment proceedings for AYs 2016-17 & 2017-18 rendering the assessment orders passed u/s 143(3) of the Act to be ab initio void and resultantly, non-est in the eyes of law. For this, let us first take a look at the relevant provisions of Section 153C of the Act, which reads as under: - “Assessment in case of any other persons “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,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 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 six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub- section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.”
It is noted that the Finance Act, 2003 w.e.f. 01-06-2003, introduced the provisions of Section 153A/153C of the Act. It replaced the provisions relating to block assessment contained in Chapter XIVB and introduced the new procedure for making assessment u/s 153A/153C of the Act, which formed part of Chapter XIV of the Act – “Procedure for Assessment”. Section 153A of the Act deals with "Assessment in case of Search or requisition". It is a special provision for framing assessment in case of an assessee against whom search action has been carried out by the Department. Section 153B of the Act prescribes the time limit for completion of assessment under section 153A and 153C of the Act. Section 153C of the Act which bears the title "Assessment of income of any other person" is a self-contained code for framing assessment of income of "any other person" (third party) against whom there was no search u/s 132 or requisition u/s 132A of the Act. It begins with a non-obstante clause and contains conditions precedent based on which the AO shall 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society assume jurisdiction under this special provision. Section 153C of the Act empowers the AO to assess income of 'any other person' who was not searched by the department in the manner set out u/s 153A of the Act, provided the AO is satisfied that: - (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to a person other than the person referred to in Section 153A of the Act; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in Section 153A of the Act.
Firstly, therefore, the AO of the searched person shall issue notices u/s 153A of the Act to the searched person requiring him to furnish return of income within such period as may be specified in the notice, in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Where the during the search u/s 132 or requisition u/s 132A of the Act, it is found that any seized material /asset belongs to/ pertains to any person other than the person searched u/s 153A of the Act, then the AO of the searched person shall first segregate the seized material/ asset of the other person (third party - the assessee in this case) from that of the searched person, and record his satisfaction that such seized material/ asset belongs to/ pertains to such other person (third party - ITA Nos. 2298, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society the assessee in this case). The AO of the searched person, thereafter hands over the seized materials, which belongs/ pertains/ relates to the third party, to the AO having jurisdiction over such other person (Dy. CIT, CC-7(1), Mumbai in this case). It is only when the aforesaid exercise is conducted by the AO of the searched person that, the AO of such other person (third party - the assessee in this case) can assume jurisdiction u/s 153C of the Act to assess the income of other person (third party) in the manner as laid down in Section 153A of the Act. This exercise is sine qua non before the AO of the other person (third party) gets jurisdiction u/s. 153C of the Act.
The next part of Section 153C of the Act states that, the AO of the other person (third party) shall proceed against such other person (third party) and issue notice and assess/reassess the income of such other person in accordance with Section 153A of the Act.
16. It is noted that under Section 153A of the Act, the AO gets jurisdiction to assess six (6) assessment years prior to the assessment year relevant to the previous year in which search is conducted. Any proceedings pertaining to the assessment years prior to the previous year in which search is conducted, which is pending on the date of search, shall stand abated and the AO shall issue notice u/s 153A of the Act in relation to such abated AY. Like the provisions of Section 153A of the Act, when it comes to the assessment of third-party u/s 153C of the Act [like assessee in this case], the concept of 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society unabated/abated assessment are applicable mutatis mutandis. However, by virtue of the first proviso to section 153C, the date of initiation of the search u/s 132 of the Act shall be considered as to be the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person or the date on which the satisfaction note is prepared by AO of assessee. For this, we gainfully refer to the decision of the Hon'ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391 (Delhi), wherein the Hon'ble Delhi High Court held as under:
As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/ reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year.
[emphasis given by us] , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 17. It is noted that, the Revenue had required the Hon’ble Delhi High Court to reconsider its view in RRJ Securities (supra) in the case of Pr.CIT Vs Sanwar Agency Pvt Ltd (397 ITR 400). However, the Hon’ble High Court is noted to have declined to do so for the reason that the Revenue had not challenged the decision of that Court in RRJ Securities (supra) before the Hon’ble Supreme Court. The Hon’ble High Court further noted that the Legislature has prospectively amended Section 153C(1) of the Act by the Finance Act, 2017 w.e.f. 01.04.2017 to provide that, for both the searched person and the other person, the period of reassessment would be six AYs preceding the year of search. It was therefore held by the Hon’ble High Court that, the position of law expounded in the case of RRJ Securities Ltd (supra) would indeed apply to all search’s u/s 132 of the Act, conducted prior to 01.-04.2017 [In the present case search took place on 29.07.2016]. Therefore, reliance placed by the Ld. CIT(A) on the decision of the Hon’ble Gujarat High Court in the case of Mukesh M Sheth (supra) & Anil K. Agarwal (supra) are found to be factually distinguishable.
In our considered view therefore, since the date of search in the present case was 29.07.2016, the provisions of Section 153C of the Act, as it stood then, is to be examined. Accordingly, having regard the provisions of the Income-tax Act, 1961 as it stood then (prior to the amendment brought in by Finance Act 2017), the date of receiving the books of account/documents/assets from the AO of the assessee ITA Nos. 2298, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society was to be construed as the date of search, in terms of the first proviso to Section 153C of the Act. Hence, in the present case, irrespective of whether the date of receipt of books of accounts/ documents/ assets is taken as 18.09.2018 (date of satisfaction note) or on 07.07.2017 (date of receipt of books of accounts, as claimed by the AO, i,e, AY 2018-19), the relevant AYs 2016-17 & 2017-18 preceded the date of search and fell within the six (6) assessment years preceding the year of search. Accordingly, the AO was required to issue notice u/s 153C of the Act in relation to AYs 2016- 17 & 2017-18.
As far as the argument of Ld. DR is concerned viz., issuance of notice by AO having jurisdiction of other person (assessee), to assess total income of such AYs, is not mandatory, we are afraid we cannot countenance such a contention because sub-section (2) of section 153C mandates that AO of the other person (assessee in this case) after receiving the books of account or documents or assets seized (of the other person/assessee), shall issue notice and assess or re-assess total income of such other person (assessee) in the manner provided under section 153A of the Act. And sub-section (1) of section 153A of the Act, mandates issue of notice for six (6) assessment years preceding the searched assessment year. Therefore, the AO of the assessee was duty bound to follow the mandate of law and ought to have issued notice under section 153C of the Act and the omission to do so, vitiates the consequent actions/assessment order framed for 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society both AY 2016-17 and AY 2017-18, because the AO’s action tantamount to arbitrariness which offends Article 14 of the Constitution of India and the basic feature of Constitution, the ‘Rule of Law’. And so, we hold that in the facts and circumstances noted (supra), the framing of assessment order by AO u/s 143(3) of the Act, without issuance of notice under section 153C of the Act for AY 2016-17 and AY 2017-18, is ab-initio void. Further, we find that, this view of ours gets support of Tribunal decision in the case of M/s Pavitra Realcon Pvt Ltd Vs ACIT (87 taxmann.com 142) wherein the Delhi Bench of this Tribunal held as follows:
“15.3 Since the satisfaction was recorded on 27th July, 2012, therefore, deemed date of search in the case of other person for computing the period of six years is 27th July, 2012 and the six assessment years immediately preceding the assessment year relevant to previous year in which such search is conducted is assessment years 2006-07 to 2012-13. However, it is an admitted fact that no such notice u/s 153C was issued by the Assessing Officer in the above two cases for the impugned assessment years and the ld. DR also fairly admitted the same. It is a fact that the Assessing Officer mentioned in the body of the assessment order that the same has been passed u/s 153C/143(3). However, the Assessing Officer has not assumed jurisdiction u/s 153C as per the copies of order sheet entries filed during the course of hearing and the ld. DR also confirmed that no notice u/s 153C has been issued by the Assessing Officer in the above two cases. As per the requirement of the proceedings under Income Tax Act, the assessment proceedings has to be done as per Section 153C of the Act in case of the searched party. But the Assessing Officer choose to follow procedure u/s. 143(3) of the Act, yet while conducting the proceedings under the said , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society Section chooses to use the material which was found during search with the third party without confronting the same to the present assessees. This is not permissible as per the provisions of the Income Tax Act, 1961. The contention of the Ld. DR that Principle of natural justice is a flexible concept is not permissible. The statute has to be strictly followed and the Revenue cannot ignore the procedure given under Section 143(2) or Section 153A/153C of the Act. If we admit the submissions made by the Ld. DR that the Assessing Officer has rightly issued notice u/s 143(2) dated 13/9/2012 then how the Assessing Officer has used the material which was found during the search in this particular Assessment Year 2011-12. Section 143(2) and Section 153C are not only governing the procedure to be followed by the Assessing Officer but there is an obligation upon the Assessing Officer to properly fulfill the provisions of the Income-tax Act. Section 143(2) notice is given when the returns are furnished u/s 139 or in response to notice under sub section 1 of Section 142 when the assessee has not stated the income properly. Section 153C begins with non obstante clause that notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 & Section 153, the Assessing Officer will issue notice as per provisions of 153A. The intention of the parliament for separate Sections for issuing notice u/s 143(2) and Section 153A is specifically different and falls in particular circumstances mentioned in those particular Sections. It cannot be interlocated or inter related. Clearly, here the Assessing Officer was prima facie of the opinion that there was a search in the premises of BPTP Group. But instead of the searched material whether belong to the assessee or not which is in doubt cannot be simply taken in proceedings u/s 143(2) by the Assessing Officer. The Assessing Officer cannot take the benefit of both the Sections. It has to be specifically mentioned in the assessment order why he is invoking that particular Section because each Section has its own procedure and if there is a procedure which has to be followed the same cannot be ignored by the Assessing Officer. All the Sections to Income tax Act has given its own formats and , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society whenever necessary they have given specific Sections in that particular Section and why the other Section has to be taken in cognizance while interpreting that particular Section. Thus, the legal ground of the assessee that Assessing Officer as well as the CIT(A) has not carried out proper proceedings against the assessee by invoking Section 143(2) in case of Pavitra and Dedicate sustains to the test of legal scrutiny. The Ld. DR relied upon the various Hon'ble Supreme Court and Hon'ble High Court judgments. The legal principle in all these judgments does not give the right to the Revenue to overlook the Sections or misinterpret the Section as per the convenience of the Department. In-fact, all the Hon'ble Supreme Court as well as the Hon'ble High Court judgments have rather reiterated each and every factual aspect of each case and after that have come to the conclusion whether that particular Section in the particular case has been properly followed or not. The decision is not only based on the legal principle but how the legal principle has to be applied to the factual aspect of each case has been taken care of by the Apex Court and the Hon'ble High Court.
We find the year for which the impugned assessment order has been passed u/s 143(3) is for assessment year 2011-12. This year falls within the period of six years when counted from the date of recording of satisfaction note u/s 153/153C of the I.T. Act which is deemed date of search. The Act has been amended recently by the Finance Act, 2017 with prospective effect i.e. from assessment year 2018-19. Thus, the period is same now only for the searched parties as well as the other person as per the amended provisions of the said section. In view of the above, we hold that the assessment completed u/s 143(3) is invalid.
So far as the argument of the ld. DR that although no notice u/s 153C has been issued but the assessment has been completed u/s 153C/143(3) and therefore, the error is curable u/s 292B is concerned, the same in our opinion cannot be read to confer the jurisdiction on the Assessing Officer where none exists. The said section, in our opinion, only protects return of income, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings provided the same are in-substance and in-effect are in conformity with the intent or purposes of the Act, i.e., 292B cannot save an order not passed in accordance with the provisions of the Act. We have also gone through the order-sheet entries, copies of which were filed during the course of hearing and find that no notice u/s 153C has been issued for the period under consideration. Since the assessment order has not been passed in conformity with the provisions of the law, the same is liable to be quashed since such assessment is palpably and patently illegal. 20. Similar view is noted to have been rendered by the Delhi, B- Bench of this Tribunal in the case of BNB Investment & Properties Ltd. v. Dy. CIT (68 ITR 567 (Trib)). In the decided case, Krissh Group was searched on 09.11.2011. The impounded documents belonging to the assessee was received by the AO on 29.08.2013 and the satisfaction note was recorded on 03.10.2013. Therefore, in terms of first proviso to Section 153C of the Act, the date of search was construed to be 29.08.2013 and therefore six preceding AYs to the date of search was AYs 2008-09 to 2013-14. The AO, however, framed the assessment for AY 2012-13 u/s 143(3) of the Act without issuing notice u/s 153C of the Act. This action of the AO was held to be invalid and the assessment order was quashed by this Tribunal, by holding as under:
"8. It is not in dispute that search was conducted on Krrish Group of cases on 09.11.2011. The impounded documents have been received by the A.O. on 29.08.2013. The satisfaction under section 153C have been recorded on 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 03.10.2013. The A.O. passed the assessment order under section 153B(1)(b) of the I.T. Act, considering the assessment year under appeal i.e., A.Y. 2012-2013 to be the year of search. However, the First Proviso to Section 153C of the I.T. Act provides that the 06 assessment years for which assessments or re-assessments could be made under section 153C of the I.T. Act, would also have to be construed with reference to the date of handing- over of the assets or documents to the A.O. of the assessee. Therefore, the 06 assessment years under section 153C of I.T. Act in the case of assessee would be A.Y. 2008-2009 to 2013-2014. The A.O, therefore, shall have to pass the assessment order under section 153C of the I.T. Act. However, A.O. has not issued any notice under section 153C of the I.T. Act before initiating the proceedings against the assessee which is also admitted by the A.O. in reply to the assessee under RTI Act. The Amendment in Section 153C of the I.T. Act by the Finance Act, 2017, w.e.f. 01.04.2017 to the effect that block period for the person in respect of whom the search was conducted as well as the "other person" would be the same six assessment year immediately preceding the year of search is prospective in nature. The issue have been dealt in detail by the Hon'ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Sarwar Agency P. Ltd., (supra) and by ITAT, Delhi, B-Bench, in the case of Empire Casting Pvt. Ltd., New Delhi vs. ACIT, C.C.2, New Delhi and Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT, C.C.32, New Delhi (supra). The A.O, therefore, should have framed the assessment under section 153C of the I.T. Act in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice under section 153C of the I.T. Act which have not been done in this case. The issue of notice under section 153C is mandatory and a condition precedent for taking action against the assessee under section 153C of the I.T. Act. The assessment order, therefore, vitiate, void, illegal and bad in law and cannot be sustained. The contention of the Ld. D.R. have already taken care in the above judgments. , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 9. Considering the totality of the facts and circumstances of the case, we set aside the orders of the authorities below and quash the same and allow the additional grounds of appeals. Resultantly, all additions stands deleted. Since the assessment order is set aside on legal grounds, therefore, there is no need to decide the addition on merit which has been left with academic discussion only.”
We may also gainfully refer to the decision of the Delhi Bench of this Tribunal in the case of Bina Fashions N Foods (P.) Ltd. v. Dy. CIT (77 ITR (Trib.) 68) rendered on similar facts and circumstances, wherein also the assessment order was quashed by this Tribunal, by holding as under: - “4. We have heard the Learned Representatives of both the parties. Learned Counsel for the Assessee submitted that A.O. should have passed the assessment order under section 153C since satisfaction note was prepared by the A.O. on 29.01.2014 which became the substitute date of search under section 153C and A.Y. 2012-2013 under appeal fell within six preceding assessment years i.e., from A.Y. 2008-2009 to 2013-2014 for the purpose of assessment under section 153A of the I.T. Act, 1961. Thus, the assessment framed under section 143(3) is not valid and should be annulled…..
…..
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that A.O. has correctly passed the order under section 143(3) of the I.T. Act, 1961.
…..
6.1. Considering the facts of the case in the light of above decisions, it is clear that the impounded documents have been received by A.O. on 29.01.2014 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society when satisfaction under section 153C have been recorded. The First Proviso to Section 153C of the I.T. Act provides that six assessment years in which assessment or re-assessments could be made under section 153C of the I.T. Act would also have to be considered with reference to the date of handing over of the assets or documents to the A.O. of the assessee. Therefore, the six assessment years under section 153C of the I.T. Act in the case of assessee would be A.Ys. 2008- 2009 to 2013-2014. The A.O, therefore, shall have to pass the assessment order under section 153C of the I.T. Act. Further, the A.O. has not issued any notice under section 153C of the I.T. Act, therefore, the issue is covered by the above decision in favour of the assessee. The A.O. in the satisfaction note initiated the proceedings under section 153C only for A.Ys. 2006-2007 to 2011-2012 instead of A.Ys. 2008-2009 to 2013-2014. In view of the above, we are of the view that assessment order is illegal and bad in law and cannot be sustained in Law.”
Following the above judgments (supra), we note that this Tribunal has expressed identical view on similar facts & circumstances, in the decision rendered in the case of assessee’s sister entity, DCIT Vs Dr. D. Y. Patil Sports Academy in ITA No. 1295/Mum/2021 dated 28-09-2022. In the decided case also, the AY 2016-17 in question fell within the six (6) assessment years preceding the date of search (date of satisfaction note) in terms of proviso to Section 153C of the Act. The AO had completed the assessment u/s 143(3) of the Act, which was challenged by the assessee for want of issue of notice u/s 153C of the Act. On appeal, this Tribunal upheld the order of the Ld. CIT(A) holding that the non-issuance of notice u/s 153C of the Act vitiated the entire assessment proceedings for AY ITA Nos. 2298, 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 2016-17 rendering the assessment order passed u/s 143(3) of the Act to be ab initio void.
Before us, the Ld. DR for the Revenue laid heavy emphasis upon the provisions of Section 292B to suggest that the procedure contemplated under Section 292B would cure the irregularities committed by the authorities concerned (non-issuance of notice u/s 153C of the Act, in this case) and therefore, the order passed by the AO cannot be quashed. We however are unable to countenance this contention of the Revenue. According to us, Section 292B of the Act cannot be read to cure jurisdictional errors on the part of Assessing Officer. The said section only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment, notices, summons or other proceedings, provided the same are in substance and in effect, in conformity with the intent of the Act. Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. The non-issuance of notice u/s 153C of the Act, according to us, does not constitute a curable mistake committed in the assessment or the order but it constitutes a jurisdictional defect and arbitrary action of AO in scant regard to follow the special law u/s153C of the Act. In our considered view, the lapse on the AO’s part of not issuing notice u/s 153C of the Act was not a mere procedural irregularity, but a jurisdictional illegality, which is incurable, as the mistake in not following the 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society mandate contemplated u/s 153C hits at the substratum of the assessee's rights [which will be discussed infra]
To elucidate the above, we gainfully refer to the decision of Hon’ble jurisdictional Bombay High Court in the case of CIT Vs B.G. Shirke Construction Technology (P) Ltd (395 ITR 271). In the instant case, it was held that in case of an abated assessment year, the return originally filed u/s 139 of the Act stands replaced by the return of income u/s 153A of the Act. The AO is therefore required to conduct the assessment for such abated AY taking into account the return as filed u/s 153A of the Act. The Hon'ble High Court held that, pursuant to a notice u/s 153A of the Act for an abated assessment year, an assessee can raise a new claim which he omitted to claim in original return u/s 139 of the Act. Taking note of the judgment which was rendered in the case of CIT Vs Sun Engineering Works Pvt Ltd (198 ITR 297) in the context of Section 147/148 of the Act, the Hon’ble High Court found the same to be distinguishable and it accordingly held as under:
“..Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the respondent-assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore, the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act and the case laws on the provision of the Act would equally apply.” , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 25. In the present case also, the income-tax assessments for the relevant AYs 2016-17 & 2017-18 were pending as on the deemed date of search viz., by virtue of the proviso to Section 153C of the Act. Accordingly, in terms of the second proviso to Section 153A of the Act, these pending proceedings for AYs 2016-17 & 2017-18 stood abated. We therefore find that, non-issuance of notice u/s 153C of the Act for the abated AYs 2016-17 & 2017-18 deprived the assessee of the opportunity to file fresh return of income u/s 153C of the Act. The assessee was thus divested of the opportunity to raise any new/fresh claims in the return of income u/s 153C of the Act. As rightly pointed out by the Ld. AR, the assessee is otherwise prevented from making any new claim in the course of assessment before the AO other than by way of revised return of income [Goetze (India) Ltd Vs CIT (284 ITR 323)]. This shows that a vested right of the assessee was taken away by the inaction/omission on the part of AO, by not issuing notice u/s 153C of the Act, and hence it cannot be said to be a merely a procedural irregularity and we find the same to be an illegality/incurable defect.
Similarly, we note that, the issuance of notice u/s 153C of the Act for an abated AY also gives an opportunity to the other person (third party) to come clean and offer any additional income, if so desired, in the fresh return of income filed u/s 153C of the Act. By doing so, the assessee may get saved from penal and prosecution consequences under the Act. We find that the Hon'ble Bombay High , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society Court in the case of PCIT Vs Rajkumar Gulab Badgujar (111 Taxmann.com 256) has held that where no addition is made by the AO to the income voluntarily declared by the person in the return filed u/s 153C of the Act, then no penalty is leviable. The Hon’ble High Court held that Explanation 5A to Section 271(1)(c) of the Act applies only in case of the searched person and not the persons covered u/s 153C of the Act. It was therefore held that, only in case of a searched person, it may be open for the Revenue to levy penalty in a case where income is surrendered in the return filed u/s 153A of the Act, pursuant to search.
In view of the above discussion, we find that the provisions contained in Section 153C of the Act is not only a self-contained code dealing with the manner in which assessment is to be framed, but any non-compliance thereto viz., non-issuance of notice u/s 153C of the Act affects the substantive right of the assessee. We are therefore unable to agree with the Revenue that it is a mere procedural violation, not affecting the rights of the assessee. If the contention of the Revenue is accepted, then it would literally render all the provisions of the Income Tax Act subservient to Section 292B and in effect, any error or omission or mistake committed by the Revenue at any stage of a proceeding would be sought to be cured by taking shelter under Section 292B of the Act. Allowing such a contention would be misreading the intention of the Parliament in enacting Section 292B of the Act. , 2299 & 1957/Mum/2021 CO. No. 63/Mum/2022 A.Ys.2016-17 & 2017-18 Dr. D.Y. Patil Education Society 28. Hence, for the reasons as set out above, we therefore hold that the non-issuance of notice u/s 153C of the Act vitiated the assessment proceedings for both the AYs 2016-17 & 2017-18 rendering the impugned orders passed u/s 143(3) of the Act to be ab initio void. We accordingly quash the assessment orders dated 27-12-2018 for AYs 2017-18 and 2016-17, respectively, impugned before us and the addition/s made therein are consequently directed to be deleted.
Since we have already held the orders u/s 143(3) of the Act for AYs 2016-17 & 2017-18 to be unsustainable in law for the reasons set above, all other issues raised in the appeals & cross objections have now become academic in nature and are left open.
In the result, the appeal filed by the revenue is dismissed and appeal filed by the assessee as well as CO are allowed. Order pronounced in the open court on 29/03/2023.