RAJU RACHAMALLA DHARMA,HYDERABAD vs. ACIT, CENTRAL CIRCLE-1(2), HYDERABAD

For the assessment year 2020-2021, the Assessee has raised the following grounds of appeal:

The assessee has also raised the additional

For the assessment year 2021-2022 the assessee

The assessee has filed a petition for admission of additional grounds. The learned Authorised Representative for the Assessee has submitted that the assessee has raised the additional grounds for the assessment year 2020-2021 is common to the issues raised by the assessee in grounds of appeal nos.2 and 3 for the assessment year 2021-2022. Therefore, this issue which is common for both the years has already been raised by the assessee before the learned CIT(A). Accordingly, the learned Authorised Representative of the Assessee has submitted that the additional grounds raised by the assessee for the assessment year 2020-2021 be admitted for adjudication. The learned Authorised Representative of the Assessee has submitted that the assessee has raised legal issue of validity of notice issued by the Assessing Officer u/sec.153C of the Income Tax Act [in short "the Act"], 1961 dated 21.12.2021 after lapse of reasonable period from the date of search/requisition. The learned Authorised Representative of the Assessee has further contended that the Assessing Officer has passed assessment order u/sec.143(3) r.w.s.153A of the Act while the proceedings were initiated by issuing notice u/sec.153C of the Act. He submitted that the additional grounds raised by the assessee are purely legal issues and goes to the root of the matter. He has further contended that for adjudication of the additional grounds raised by the assessee no fresh investigation or material is required but the same can be adjudicated on the basis of the facts and material available on record. Thus, the learned Authorised Representative for the Assessee has pleaded that the additional grounds raised by the assessee be admitted for adjudication. He has relied upon the Judgment of Hon'ble Supreme Court in the case of in the case of National Thermal Power Co. vs. CIT [1998[ 229 ITR 383 (SC).

On the other hand, the learned DR has objected to the admission of the additional grounds and submitted that the Assessing Officer has initiated the proceedings u/sec.153C of the Act after recording the satisfaction and therefore, the additional grounds raised by the assessee has no merit and pleaded that the same cannot be entertained and admitted for adjudication.

We have heard the learned Authorised Representative of the Assessee as well as learned DR. We note that the issue raised in the additional grounds for the assessment year 2020-2021 is common to the issue raised by the assessee in grounds of appeal nos.2 and 3 for the assessment year 2021-2022. Therefore, this issue which is common for both the years has already been raised by the assessee before the learned CIT(A). Further for adjudication of the additional grounds raised by the assessee no fresh investigation or material is required but the same can be adjudicated on the basis of the facts and material available on record. Therefore, in view of the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. vs. CIT (supra), the additional grounds raised by the assessee for the assessment year 2020-2021 are admitted for adjudication. The issue raised in the additional grounds for the assessment year 2020-2021 and grounds of appeal nos.2 and 3 for the assessment year 2021-2022 is common issue and purely legal in nature therefore, we propose to take-up first this issue for hearing and adjudication.

The learned Authorised Representative of the Assessee has submitted that during the parliamentary elections 2019, the police intercepted and checked a vehicle of Sri Nimmaluri Srihari and Sri Avuti Pandari who carried two bags containing cash of Rs.2 crores. These two persons in their statements recorded u/sec.131 of the Income Tax Act [in short "the Act"], 1961 claimed that the seized cash belongs to Sri Rachamalla Dharmaraju-the assessee and thereafter, the statement of the assessee was also recorded u/sec.131 of the Act on 29.04.2019 wherein the assessee owned up the cash and claimed that he had earned it by way of real estate commission. The learned Authorised Representative of the Assessee has further submitted that that the department seized the cash through the requisition u/sec.132A of the Act on 10.06.2020 through the Court of Additional Metropolitan Magistrate, Cyberabad. Thereafter, the Assessing Officer has issued notice u/sec.153C of the Act dated 21.12.2021 to initiate the assessment proceedings for these two years u/sec.153C of the Act. The learned Authorised Representative of the Assessee has submitted that the proceedings initiated by the Assessing Officer u/sec.153C are invalid as there is no proceedings u/sec.153A against any person and even the requisition u/sec.132A is made after the assessee owned up the cash seized by the police and thereafter requisitioned by the department. Thus, the learned Authorised Representative of the Assessee has submitted that the assessment order passed by the Assessing Officer on 23.03.2022 for these two assessment years i.e., 2020-2021 and 2021-2022 u/sec.143(3) r.w.s.153A are invalid and liable to be quashed. The learned Authorised Representative of the Assessee has submitted that even otherwise these orders passed by the Assessing Officer are barred by limitation and therefore, these are invalid and otherwise liable to be dismissed as passed beyond the period of limitation. He has pointed out that the cash was initially seized and statement of the assessee was recorded in the month of April, 2019 whereas the orders have been passed on 23.03.2022 which are beyond the period of limitation. Thus, the learned Authorised Representative of the Assessee has submitted that the impugned assessment orders are not sustainable in law and liable to be dismissed. In support of his contention, he has relied upon the Judgment of Hon’ble Bombay High Court in the case of Clear Channel India Pvt. Ltd., vs. DCIT [2026] 184 taxmann.com 434 (Bom.). Alternatively, the learned Authorised Representative of the Assessee has submitted that the assessment orders were ultimately passed by the Assessing Officer u/sec.153A of the Act which is not valid when the seized cash was not found from the possession of the assessee but it was found from the possession of the third parties and even otherwise the order passed u/sec.153A is barred by limitation.

On the other hand, the learned DR has submitted that the Assessing Officer has initiated the proceedings after recording the satisfaction on 21.12.2021. He has filed copy of the satisfaction note recorded u/sec.153C of the Act. Thus, the learned DR has submitted that the Assessing Officer has initiated the proceedings u/sec.153C which is valid. The Section mentioned in the ‘caption’ of the assessment order is a mistake as the Assessing Officer has mentioned sec.153A instead of sec.153C of the Act. As regards the limitation, the learned DR has submitted that due to covid pandemic period there was a delay in passing the assessment order. Therefore, the limitation was extended under TOLA as well as by the Hon'ble Supreme Court. He has relied upon the Orders of the authorities below.

We have considered the rival submissions as well as relevant material on record. The Assessing Officer has recorded in the assessment order that notice u/sec.153C dated 21.12.2021 was issued to the assessee in Para no.4 as

Thus, there is no dispute about the fact that the Assessing Officer initiated the proceedings u/sec.153C of the Act for assessing/re-assessing the income of the assessee for six years from assessment year 2015-2016 to 2021-2022. However, the Assessing Officer finally passed the assessment order u/sec.143(3) r.w.s.153A of the Act on 23.03.2022 for both the assessment years 2020-2021 and 2021-2022. Therefore, when the proceedings were initiated u/sec.153C then the Order u/sec.153A of the Act cannot be passed. We further note that even the proceedings u/sec.153C cannot be initiated independently without having the proceedings u/sec.153A in the case of searched person. Accordingly, the initiation of the proceedings u/sec.153C itself are invalid when the requisition was made for the cash belonging to the assessee u/sec.132A of the Act then the proceedings u/sec.153A ought to have initiated either in the case of the assessee or in the case of the searched person. In the absence of any proceedings and assessment framed u/sec.153A of the Act which is mandatory, the proceedings u/sec.153C of the Act are not valid. Further, it is also matter of record that there is no satisfaction recorded by the Assessing Officer of the searched person as required u/sec.153C of the Act and therefore, the initiation of the proceedings u/sec.153C in the absence of any proceedings u/sec.153A are not valid and liable to be quashed.

As regards the submission of the learned DR that limitation get extended due to covid pandemic and Notification of TOLA, it is pertinent to note that the TOLA does not extend the limitation for passing the assessment order and even otherwise it extends the limitation up-to 30.06.2021 whereas the assessment orders in the case of the assessee are passed on 23.03.2022. However, without going into the controversy of limitation, the initiation of proceedings u/sec.153C itself is not valid and thereafter the assessment orders passed u/sec.153A are also invalid and the same are liable to be quashed. Since we have quashed the initiation of proceedings u/sec.153C of the Act vide notice dated 21.12.2021 which also vitiates the assessment orders passed by the Assessing Officer for both the assessment years 2020- 2021 and 2021-2022 and therefore, we do not propose to adjudicate the other grounds raised by the assessee in both the assessment years. We Order accordingly.

In the result, both the appeals of the assessee are allowed.