VINOD GOVINDRAM AGRAWAL,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD- 4(2)(5), AHMEDABAD

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ITSSA 143/AHD/2023Status: DisposedITAT Ahmedabad17 January 2025AY 2011-127 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal by quashing the assessment order passed under Section 153C read with Section 143(3) of the Income Tax Act, 1961. The primary issue addressed was the validity of the Section 153C proceedings for AY 2011-12. The Tribunal noted that the AO recorded the satisfaction note for initiating proceedings under Section 153C on 28.03.2018. As per the first proviso to Section 153C and the Supreme Court's ruling in CIT vs. Jasjit Singh, the period for initiating proceedings is to be computed from the date of receipt of books of accounts or documents by the jurisdictional AO, not the date of search. In this case, the seized documents were received by the AO in FY 2017-18 (AY 2018-19). Therefore, proceedings under Section 153C could only be initiated for the six assessment years preceding AY 2018-19, i.e., AY 2017-18 to AY 2012-13. The Tribunal also considered the amended provision of Section 153A (which applies to Section 153C proceedings) allowing initiation for up to ten assessment years if escaped income is Rs. 50 lakhs or more. However, the addition made for AY 2011-12 was only Rs. 6,42,500, which did not meet the Rs. 50 lakh threshold. Consequently, the AO lacked jurisdiction to initiate proceedings under Section 153C for AY 2011-12. The Tribunal deemed it unnecessary to adjudicate other grounds as the assessment order was quashed on this legal ground.

What were the facts?

The assessee, Vinod Govindram Agrawal, filed an appeal against the order of the CIT(A)-11, Ahmedabad, for Assessment Year (AY) 2011-12. The assessee's original return declared an income of Rs. 15,95,410. During scrutiny, the Assessing Officer (AO) assessed the total income at Rs. 27,19,900. Subsequently, a notice under Section 153C of the Income Tax Act, 1961, was issued, leading to an addition of Rs. 6,42,500 based on an Excel sheet seized from a group concern during a search. The CIT(A) confirmed this addition. The assessee's appeal before the ITAT challenges the CIT(A)'s order, including the condonation of delay, validity of the Section 153C notice and consequential order, the addition of Rs. 6,42,500, and a violation of natural justice.

What were the issues?

1. Whether the issuance of notice under Section 153C of the Income Tax Act, 1961, for AY 2011-12 was barred by limitation, considering the date of recording the satisfaction note by the Assessing Officer. - Assessee's contention: Proceedings under Section 153C were initiated on 28.03.2018 (AY 2018-19). Relying on CIT vs. Jasjit Singh (SC), the AO could only issue notices up to AY 2012-13, which are six assessment years preceding the AY of recording satisfaction. Since the satisfaction was recorded in AY 2018-19, notices could only be issued for AY 2017-18 to AY 2012-13. Therefore, the notice for AY 2011-12 is time-barred. 2. Whether the addition of Rs. 6,42,500/- being alleged unaccounted investment was valid. - Assessee's contention: Not explicitly argued as a separate point, but implied in the challenge to the Section 153C proceedings and the CIT(A)'s order. 3. Whether the CIT(A) erred in not condoning the delay of 47 days in filing the appeal. - Assessee's contention: Ground of appeal taken. 4. Whether the CIT(A) erred in passing the appellate order in violation of the principle of natural justice. - Assessee's contention: Ground of appeal taken. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 153C,Section 143(3),Section 246A,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Jimi Patel, A.R
For Respondent: Shri B.P. Srivastava, Sr. DR
Pronounced: 17.01.2025

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T(SS).A. No.143/Ahd/2023 (Assessment Year: 2011-12) Vinod Govindram Agrawal, Vs. Income Tax Officer, 12, Giriraj Colony, Ward-4(2)(5), Panchvati Second Lane, Ahmedabad Ambawadi, Ahmedabad-380006 [PAN No.AAQPA0530R] (Appellant) .. (Respondent) Appellant by : Shri Jimi Patel, A.R. Respondent by: Shri B.P. Srivastava, Sr. DR 26.11.2024 Date of Hearing Date of Pronouncement 17.01.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 10.10.2023 passed for A.Y. 2011-12.

The assessee has taken the following grounds of appeal:- 2.

“1. The CIT(A) erred in law and on facts in not condoning delay of 47 days in filing an appeal u/s 246A of the Income Tax Act, 1961. 2. Ld. CIT(A) erred in law and on facts in confirming the validity of Notice issued u/s 153C and consequential order passed u/s 153C r.w.s. 143(3) of the Income Tax Act, 1961. 3. Ld. CIT(A) erred in law and on facts in confirming addition of Rs. 6,42,500/- being alleged unaccounted investment without appreciating facts and law of the case properly. 4. Ld. CIT(A) erred in law and on facts in passing appellant order u/s 250 in clear violation of principle of natural justice.

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 2– 5. The appellant craves leave to add, amend or later the grounds of appeal at the time of hearing, if need arise.” 3. The brief facts of the case are that assessee had filed return of income on 07.10.2011 declaring total income of Rs. 15,95,410/-. The case of the assessee was taken for scrutiny and assessment order was passed, assessing total income at Rs. 27,19,900/-. Tthereafter, notice under Section 153C of the Act was served on the assessee and addition of Rs. 6,42,500/- was made to the returned income of the assessee, on the basis of Excel sheet seized from the premises of the group concern of HN Safal Group, during the course of search carried out at their premises. The addition was confirmed by Ld. CIT(A).

4.

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A).

5.

Before us, at the outset the Counsel for the assessee has taken a legal plea that issuance of notice under Section 153C of the Act was barred by limitation in view of judgment of Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh 155 taxmann.com 155 (SC). The Counsel for the assessee submitted that in the case of the assessee, proceedings under Section153C of the Act for assessment year 2011-12 were initiated by issuing notices under Section153C of the Act on 28.03.2018 and for issuance of said notices, the Assessing Officer had recorded satisfaction of 28.03.2018 i.e. in A.Y. 2018- 19. The Counsel for the assessee submitted that in view of the judgment of the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh (supra), the Assessing Officer could have only issued notices up to A.Y. 2012-13 i.e. six assessment years preceding the assessment year, from the date of recording

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 3– the satisfaction note by the Assessing Officer. The Counsel for the assessee submitted that the date of recording satisfaction notes and receiving documents as stated in the satisfaction note was 28.03.2018 i.e. A.Y. 2018- 19. Therefore, as per Jasjit Singh ruling referred to above, notices could have issued for only six assessment years starting from A.Y. 2017-18 i.e. six assessment years preceding assessment year from recording satisfaction note by the Assessing Officer.

6.

On going through the records of the case, we observe that there is no dispute to the fact that the proceedings under Section 153C of the Act was initiated by the AO on 28.03.2018 by way of recording “satisfaction note” of the same date. A copy of the Satisfaction Note to initiate proceedings under Section 153C of the Act has been brought on record, as per which the AO had initiated proceedings under Section 153C of the Act for A.Y. 2011-12 in the case of the assessee. As per provision of Section 153C of the Act, if the AO of the searched person is satisfied that the seized books of accounts or documents or any information contained therein relates or pertains to person other than the searched person, then the books of accounts or documents shall be handed over to the AO having jurisdiction over such other person. Thereafter, the AO having jurisdiction of such other person shall initiate proceedings under Section 153C of the Act, if he is satisfied that such books of accounts or documents have a bearing on the determination of the total income of such other person. The proceedings under Section 153C of the Act can be initiated for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. The first proviso of Section 153C of the Act further

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 4– explains the date of initiation of search for the proceedings under Section 153C of the Act as under:

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 : 7. The above proviso makes it clear that the date of initiation of search as referred in 2nd Proviso of Section 153A of the Act shall be construed as reference to the date of receiving the books of accounts or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. Thus, the date of receiving of the books of accounts by the AO of the other person shall be treated / deemed as date of search and six years preceding to that year will be construed as the relevant years for which proceedings under Section 153C of the Act can be initiated in respect of such other person. In this regard, it is relevant to consider the observation of the Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd. (supra):

“The First Proviso to Section 153C introduces a legal fiction based on which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the "relevant assessment year" is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non- searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted.”

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 5– 8. The Hon’ble Court held that in case of a search assessment undertaken under Section 153C of the Act, the previous year of search would stand substituted by the date or the year in which the books of accounts / documents and assets seized are handed over to the jurisdictional AO of the other person as opposed to the year of search which constitutes the basis for an assessment under Section 153A of the Act. Thus, the block period for the proceedings under Section 153C of the Act has to be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person. This principle has been upheld by the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh (supra), wherein Hon’ble Court held as under:

“10. 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.” 9. The Apex Court had held in that case that in case of other person the period for which they were required to file returns, commenced only from date when materials were forwarded to their jurisdictional Assessing Officers. The Apex Court categorically held that the proviso to section 153C(1) catered not merely to question of abatement but also with regard to date from which six year period was to be reckoned, in respect of which returns were to be filed by third party whose premises were not searched and in respect of whom specific provision of section 153C was enacted.

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 6– 10. In view of the above legal position, there is no ambiguity that for the proceedings under Section 153C of the Act, the year of search shall be substituted by the year of receipt of books or documents by the AO of the other person and thereafter the period of six years has to be counted backwards from that year. In the instant case, seized documents were received by the AO of the assessee in F.Y. 2017-18 relevant to A.Y. 2018-19 and Satisfaction Note was also recorded on 28.03.2018. Therefore, the proceeding u/s 153C could have been initiated in the case of the assessee for the six years preceding the A.Y. 2018-19 i.e. for the A.Y.2017-18 to A.Y.2012-13 only.

11.

As per amended provision of section 153A w.e.f. 01.04.2017, proceedings can be started for the assessment year beyond preceding six assessment years from the date of search or from the date of handing over the documents pertaining to other person but not later than ten assessment years, if the income that has escaped assessment is rupees fifty lakhs or more in aggregate. Thus, the proceeding could have been initiated in this case for the A.Y.2011-12 only if the escaped income for this year or for the preceding 7th to 10th year was Rs.50 Lacs or more. From the satisfaction as recorded by the AO for initiating proceeding u/s 153C of the Act, no such fact is evident. In fact, the addition made by the AO in the A.Y. 2011-12 was to the extent of Rs.6,42,500/- Lakhs only. Therefore, the condition of escapement of income of Rs.50 Lacs or more was also not satisfied in this year. Therefore, no proceeding u/s 153C could have been initiated in this case for the A.Y.2011-12.

IT(SS)A No. 143/Ahd/2023 Vinod Govindram Agrawal vs. ITO Asst.Year –2011-12 - 7–

12.

In view of the above facts, we are of the considered opinion, that the AO had no jurisdiction to initiate proceedings under Section 153C of the Act for the A.Y. 2011-12. Therefore, the additional ground taken by the assessee is allowed and the order of the AO passed under Section 153C r.w.s. 143(3) of the Act, being beyond jurisdiction, is quashed.

13.

Since, the assessment order is quashed on the basis of legal ground taken by the assessee, we do not deem it necessary to adjudicate the other grounds taken by the assessee.

14.

In the result, appeal preferred by the assessee is allowed. This Order is pronounced in the Open Court on 17/01/2025

Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 17/01/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 15.01.2025 2. Date on which the typed draft is placed before the Dictating Member 16.01.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 17.01.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 17.01.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 17.01.2025 7. Date on which the file goes to the Bench Clerk 17.01.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………………………………

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