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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH
Per : Kuldip Singh, Judicial Member:
The appellant, Shri Ashish Arunkumar Saboo (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 23.03.2022 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2008-09 on the grounds inter-alia that :- “1. On facts and circumstances of the case, the assessment order passed u/s 143(3) r.w.s. 147 of the Act is void ab initio, invalid, bad in law and grossly in violation of principles of natural justice.
(a) The Ld. CIT (A) erred in facts and law in confirming the addition amount of Rs.25,00,000/- borrowed, as unexplained cash credit u/s 68 without appreciating the explanations provided and the evidences placed on record on his own surmises and conjectures. (b) The Ld. CIT (A) erred in facts and law in not appreciating that assessee has fully discharged its onus casted u/s 68 of the Act and nothing adverse was brought on record against the appellant. (c) The Id. CIT (A) also failed to appreciate that the statements of third parties relied upon ought to have been confronted to the assessee, cross examination of those parties too should have been provided in light of natural justice.
Each of the above Grounds of Appeal
s an independent and without prejudice to one another.
4. Your appellant craves leave to add, amend, alter or drop all or any of the above grounds of appeal.”
2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: assessee’s return of income declaring income of Rs.24,96,924/- was processed under section 143(1) of the Income Tax Act,1961 (for short ‘the Act’). Subsequently, on receipt of information from the Directorate General of Income Tax(Investigation) (DGIT) (inv.), Mumbai,it has come on record that the assessee has taken bogus accommodation entries during the year under consideration i.e. 2008-09. From the information received from the DGIT (Inv.) it was noticed in a search action carried out in the group cases of Praveen Kumar Jain, that accommodation entries have been provided by the said group to assessee in the nature of bogus unsecured loans and advances and bogus purchases to the tune of Rs.25,00,000/- during A.Y. 2008-09. Consequently, being satisfied the AO initiated the reopening proceedings under section 147/148 of the Act. Necessary notices under section 143(2) & 142(1) along with questionnaires were issued and reply thereto was filed by the assessee. From the search action it was noticed that the assessee has taken accommodation entries from M/s. Mohit International which are bogus companies controlled by Praveen Kumar Jain group and have provided accommodation loan entries to the tune of Rs.25,00,000/- to the assessee. Notice under section 133(6) was issued to M/s. Mohit International from whom incomplete reply was stated to have been received by the AO. Declining the contentions raised by the assessee the AO proceeded to conclude that the assessee has taken accommodation loan entries from M/s. Mohit International which remained unexplained and consequently made addition of Rs.25,00,000/- to the total income of the assessee.
3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly original return of income filed by the assessee at the total income of Rs.24,96,924/- was processed under section 143(1) of the Act. It is also not in dispute that on the basis of search and seizure action carried out in the group cases of Praveen Kumar Jain on 01.10.2013, wherein information as to taking accommodation entry by the assessee qua bogus unsecured loan from M/s. Mohit International, a bogus company controlled by Praveen Kumar Jain have come on record on the basis of which proceedings under section 147/148 of the Act were initiated against the assessee.
First of all the assessee by filing present appeal challenged the assessment order passed under section 143(3) read with section 147 of the Act being invalid and bad in law on the ground that in view of the provisions contained under section 147 of the Act when reopening is on the basis of information collected on the basis of search action on third party proceedings under section 153C are required to be initiated and not under section 147 as has been done in this case.
When we refer to para 2.2 & 3.4 of the assessment order it is categorically mentioned that the reopening in this case under section 147/148 of the Act were initiated on the basis of information collected during the search action carried out in the group cases of Praveen Kumar Jain on 01.10.2013 by DGIT (Inv.), Mumbai, wherein it has come on record that during the course of search and seizure action evidences have been collected in respect of accommodation entries provided by the aforesaid group to the assessee in the nature of bogus unsecured loan and advances and bogus purchases to the tune of Rs.25,00,000/-.
First of all, evidence collected by the DGIT(Inv.) during the search and seizure action and relied upon by the AO for recording reasons has not been discussed in the assessment order. When the AO has stuck to a particular amount of Rs.25,00,000/- being the bogus unsecured loan and advances by the assessee from M/s. Mohit International it is not disputed on record that the AO must have been provided with some documents/incriminating materials.
It is settled principle of law that whenever the AO has specifically relied upon any material/documents collected during the search operation from the premises of Praveen Kumar Jain as alleged in this case, assessment is to be framed under section 153C and not under section 147 of the Act. Because provisions contained under section 153C are non obstentee provisions which specifically exclude the operation of section 147 of the Act.
Identical issue has been decided by the co-ordinate Bench of the Tribunal in case of Shri Meer Hassan vs. ITO & ors. in ITA No.1571/Del./2015 & ors. vide order dated 28.02.2019 by holding that provisions contained under section 153C of the Act are applicable to initiate the assessment proceedings on the basis of seized material, seized in case of some third person, initiation of assessment proceedings under section 147 of the Act is void ab- initio by returning following findings: “12. In the backdrop of the aforesaid facts and circumstances of the case, the first question for determination in this case is :- “as to whether on the basis of alleged incriminating material seized during search at the premises of M/s. R.B. Enterprises on 04.03.2009, AO as well as CIT (A) have erred in initiating the proceedings u/s 147 of the Act.” 13. The ld. AR for the assessee challenging the impugned order contended that when the AO has specifically relied upon material/ documents LP-103 A-1 pages 30 seized during the search operation conducted at the premises of M/s. R.B. Enterprises, he had the authority to assess that person u/s 153C of the Act as the provisions contained u/s 153C are non-obstante provisions which specifically exclude the operation of section 147 of the Act and as such, assessment framed in this case u/s 147 is not sustainable in the eyes of law.
However, on the other hand, ld. DR for the Revenue relied upon the order passed by the ld. CIT (A).
For facility of reference, provisions contained u/s 153C are extracted for ready perusal as under :-
“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 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 17[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 subsection (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 rules18 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 19[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 (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.”
Bare perusal of the provisions contained u/s 153C which is a non- obstante provision shows that when the assessment order shows that the assessment proceedings were to be initiated on the basis of incriminating material found in search of a third party, as in the present case, the provisions contained u/s 153C are applicable which specifically excludes application of sections 147 & 148 of the Act.
In the instant case, undisputedly, originally assessment proceedings were initiated against the present assessees u/s 153C read with section 153A of the Act which was completed vide order dated 30.12.2011 but the same were annulled by ld. CIT (A) vide order dated 28.08.2012 on the ground that proper course in this case was to initiate proceedings u/s 147 of the Act and make assessment accordingly. The said assessment u/s 153C read with section 153A was completed on the basis of some seized material/document LP-103 A-1 pages 30, which is a memorandum of understanding alleged to have been entered into between the assessees and M/s. R.B. Enterprises.
So, we are of the considered view that when provisions contained u/s 153C are applicable in this case to initiate assessment proceedings on the basis of seized material seized in case of some third party, notice issued u/s 148 of the Act and subsequent assessment framed u/s 147 of the Act is void ab initio and as such, assessment framed u/s 147/143(3) of the Act is liable to be quashed.”
So I am of the considered view that when very initiation of the proceedings under section 147 of the Act are barred by non- obstentee provisions contained under section 153C as the entire case of the Revenue is based upon the evidence and material collected on the basis of search and seizure action carried out in the group cases of Praveen Kumar Jain on 01.10.2013 by DGIT(Inv.), Mumbai the assessment was required to be framed under section 153C of the Act. So the assessment order framed under section 143(3) read with section 147 of the Act is void, invalid and bad in law, hence liable to be set aside. So the very initiation of the proceedings under section 147/148 of the Act are held to be non sustainable in the eyes of law and consequent order passed by the AO as well as the Ld. CIT(A) are also not sustainable in the eyes of law. Since reopening of assessment was itself found to be bad in law and not sustainable rest of the grounds raised by the assessee on merits have become academic.
Resultantly, appeal filed by the assessee is allowed.
Order pronounced in the open court on 19.01.2023.