ACIT, CC-30, NEW DELHI vs. AMARJYOTI VANIJYA PVT. LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” NEW DELHI (Through Video Conferencing)

BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER

I.T.As. No. 4046, 4047, 4048/DEL/2017 Assessment Years: 2007-08, 2009-10, 2010-11 & 2011-12

ACIT, Vs. Amarjyoti Vanijya Pvt. Ltd., Central Circle-30, 203, Puja House, New Delhi. Karampura, Commerical House, New Delhi. TAN/PAN: AAGCA4362A (Appellant) (Respondent)

Appellant by: Shri Ajay Wadhwa, Adv. Respondent by: Shri Sushma Singh, CIT-D.R. Date of hearing: 24 03 2021 Date of pronouncement: 18 06 2021

O R D E R PER AMIT SHUKLA, JM

The aforesaid appeals have been filed by the Department against the orders passed by Ld. Commissioner of Income Tax (Appeal) – XXX, New Delhi, for the quantum of assessment passed u/s.153C for the Assessment Years 2009-10 to 2011-12. The issues involved in the appeals are common, therefore, they were heard together and are being disposed of by way of this consolidated order. The grounds of appeal filed by the Department are reproduced as under:-

2 I.T.As. No. 4046, 4047 & 4048/DEL/2017

ITA No. 4046/D/2017 – AY 2009-10 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O. to delete the addition made u/s 68 of the I.T. Act on account of unexplained cash credits of Rs. 22,82,10,000/- on substantive basis and Rs. 77,85,000/- on protective basis.

3 I.T.As. No. 4046, 4047 & 4048/DEL/2017

ITA No. 4047/D/2017 – AY 2010-11

4 I.T.As. No. 4046, 4047 & 4048/DEL/2017

ITA No. 4048/D/2017 – AY 2011-12

5 I.T.As. No. 4046, 4047 & 4048/DEL/2017

6 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Assessing Officerof PIL and by the Assessing Officer of the appellant were supplied to the appellant. The appellant filed detailed objections against the satisfaction recorded by the Assessing Officer which was disposed of by the Assessing Officer.

7 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Satisfaction note recorded by the Assessing Officer of PIL

8 I.T.As. No. 4046, 4047 & 4048/DEL/2017

9 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Satisfaction note recorded by the Assessing Officer of the appellant

10 I.T.As. No. 4046, 4047 & 4048/DEL/2017

11 I.T.As. No. 4046, 4047 & 4048/DEL/2017

also. During the year under consideration, the assessee has increased its authorized share capital from 13,00,000 shares to 2,00,00,000 shares for expansion of its activities and for its working capital requirements. It has issued 12,66,230 shares @ 410/- per share and received share application money of Rs.8,53,47,000/-.

12 I.T.As. No. 4046, 4047 & 4048/DEL/2017

ii. The statement recorded under search on the basis of which additions were made is not a documents as per the decision of Hon’ble Jurisdictional High Court in the case of Raj Pal Bhatia.

13 I.T.As. No. 4046, 4047 & 4048/DEL/2017

searched person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. Therefore, if Assessing Officer of the searched person is satisfied that the documents found during the search belongs to the assessee, he is required to transfer the assets or documents, which he believes belong to the other person, to the Assessing Officer having jurisdiction over the assessee. The Assessing Officer of the assessee on receipt of such asset or document seized would have jurisdiction to commence proceedings under section 153C. The Assessing Officer of assessee after receiving the documents/assets has, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of section 153A. It is also a settled law that the satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person.

14 I.T.As. No. 4046, 4047 & 4048/DEL/2017

founded on reasonableness. It cannot be capricious satisfaction. Though it is a subjective satisfaction, it must be capable of being tested on objective parameters. The opinion, though tentative, however, cannot be a product of imagination or speculation. It cannot be spacious or mercurial. It should not be a mere pretence and should be made in good faith rather than suspicion. Reliability, credibility or for that matter what weight has to be attached to the material, depends upon the subjective satisfaction of the Assessing Officer, but definitely it is subject to scrutiny whether the satisfaction has a rational nexus or a relevant bearing to the formation of satisfaction and is not extraneous or irrelevant. The satisfaction must reflect rational connection with or relevant bearing between the material available and undisclosed income of the third person. The rational connection postulates and requires satisfaction of the Assessing Officer that a third person has 'undisclosed income' on the basis of evidence or material before him. The material itself should not be vague, indefinite, distinct or remote. If there is no rational or intangible nexus between the material and the satisfaction that a third person has 'undisclosed income', the conclusion would not deserve acceptance. Then the satisfaction is vitiated. It is to this limited extent that the satisfaction can be gone into and examined. The satisfaction, though subjective, must meet the aforesaid criteria. [Para 21]”

a. First, Assessing Officer of the person searched is to record satisfaction that seized material/documents etc. belong to /belongs to the person other than the searched person. b. Such satisfaction note along with seized material belonging to the person other than searched person

15 I.T.As. No. 4046, 4047 & 4048/DEL/2017

must be handed over to the file of assessing officer having jurisdiction over such other person. c. Then, Jurisdictional assessing officer of the person other than searched person has to satisfy himself that documents received must have a bearing on the determination of total income of such other person and after recording such satisfaction, he will issue notice u/s 153C. d. The satisfaction note must disclose the reasons or basis of satisfaction recorded. Mere use of words “satisfaction” and “I am satisfied” are not sufficient.

Satisfaction recorded by the Assessing Officer of searched person

i. Satisfaction is recorded by the Assistant Commissioner of Income Tax, Central Circle – 30, New Delhi on 22.12.2014.

iii. In the satisfaction note recorded by the AO of searched person attached at page no. 21A-21B of the paper book, it apparent that apart from saying that the documents belonged to M/s AmarjyotiVanijyaPvt. Ltd. there is nothing which would indicate as to how the presumptions which are to be normally raised under section 132(4A), have been rebutted by the Assessing Officer.

Satisfaction recorded by the Assessing Officer of the assessee:

16 I.T.As. No. 4046, 4047 & 4048/DEL/2017

i. Satisfaction is recorded by the Assistant Commissioner of Income Tax, Central Circle – 30, New Delhi. Date of recording satisfaction is 22.12.2014.

ii. The Ld. AO no-where in the satisfaction note recorded his satisfaction that how the seized documents suggest any escapement of income by the assessee and have any bearing on the total income of the assessee.

“Hon’ble Supreme Court in the case of Super Malls Pvt. Ltd. Vs. PCIT (423 ITR 281) has held that: In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person.

17 I.T.As. No. 4046, 4047 & 4048/DEL/2017

It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person.We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act. This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed.

18 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Even otherwise the documents seized from the premises of searched party do not belong to the assessee

Annexure Page Assessee’s Whether Whether Whether the No. no. explanation the pertains to seized document the documents are can be said assessment incriminating or to be year in suggest any belonging question escapement of to the income assessee 1. This is the trial A 2 47 NO NO NO balance of the assessee company for the period

19 I.T.As. No. 4046, 4047 & 4048/DEL/2017

01.04.2012 to Copy of trial This The transactions 08.10.2012. balance document in the seized cannot be pertains to document have said to A.Y. 2013-14 already been belonging to recorded in the the books of the assessee. assessee 2. Documents Supreme company. already recorded in Court - the books of the Singhad assessee. However Technical the copy of trial Education The Ld. AO failed balance cannot be Society to link these said to be seized documents incriminating. Documents with the must relate to additions. the A.Y. whose 3. It pertains to the assessments A.Y. 2013-14 and High Court of are sought to does not pertain to Delhi – Sunny be reopened. the assessment year Infraprojects in question and has Ltd: seized no co-relation with material must the addition made have some nexus by the Ld. AO and or relevance to the cannot be said to be additions sought incriminating to be made material.

A 4 1-20 1. These are the NO NO NO computer print-outs of cash-book, bank book, journals and These Pertain to The seized trial balance of the cannot be A.Y. 2012-13 document has no assessee company said to relevance with the for the period belonging to additions made 01.04.2011 to the assessee and cannot be 31.03.2012. Supreme said to be Court - incriminating Singhad documents. Technical Education High Court of Society Delhi – Sunny Infraprojects Documents Ltd: seized must relate to material must the A.Y. have some nexus whose or relevance to the assessments additions sought are sought to to be made be reopened.

20 I.T.As. No. 4046, 4047 & 4048/DEL/2017

A 6 11-35, 1. ITR, computation, NO YES NO 37, 39, Balance sheet, 49-50, certificate of 53-78, incorporation, ITR, balance Except for the The transactions 81-87, intimation, sheets etc. page no.’s in the seized 95-96, assessment order, statutory 54-68 which documents have 105, bank statements, documents are ITRs and been duly 106, dividend advice from are already computation recorded in the 111- Prakash, computer available in of the books of the 117, print of ledger the public assessee assessee and 120, account. domain company there is nothing 122 cannot be none of the incriminating said to be document which suggest belonging to pertains to any escapement the the of income by the 2. These documents assessee. assessment assessee. are also available in year in public domain. High Court of question. These statutory Delhi – Sunny documents cannot Supreme InfraprojectsLtd: be said to belong to Court - seized material the assessee. Singhad must have some Technical nexus or Education relevance to the Society additions sought 3. The statutory to be made documents already Documents available with the must relate to department cannot the A.Y. be said to be whose incriminating and assessments have no relevance are sought to with the additions be reopened. made by the Ld. AO. 1. Trial balance and A 8 10-12 NO NO NO accounting policies for the period 01.04.2011 to Documents The transactions 10.02.2012. pertain to in the seized documents have A.Y. 2012-13 already been Supreme recorded in the Court - books of the Singhad assessee Technical company. Education Society Documents The Ld. AO failed must relate to to link these the A.Y. seized documents whose with the assessments additions. are sought to

21 I.T.As. No. 4046, 4047 & 4048/DEL/2017

be reopened. High Court of Delhi – Sunny Infraprojects Ltd: seized material must have some nexus or relevance to the additions sought to be made

A 12 28, 58- 1. Certified copy of YES NO NO 64, 81- board resolution, 88 statement of holding and pledge master report The transactions A.Y. 2012-13 in the documents have been duly recorded in the Supreme books of the Court - assessee. These Singhad documents are not Technical incriminating in Education nature. Even Society otherwise the Ld. AO did not take Documents any cognizance of must relate to the documents the A.Y. while making whose additions. assessments are sought to High Court of be reopened. Delhi – Sunny Infraprojects Ltd: seized material must have some nexus or relevance to the additions sought to be made

A 21 51-97 1.This is the YES NO NO Undated unsigned blank cheque book Undated, of assessee unsigned cheque NOT company. books cannot be PERTAINING said to be TO ANY 2. This cannot be incriminating. YEAR relate to any A.Y. High Court of and hence cannot be Delhi – Sunny

22 I.T.As. No. 4046, 4047 & 4048/DEL/2017

used for initiating Supreme Infraprojects assessment for any Court - Ltd: seized A.Y. Singhad material must Technical have some nexus Education or relevance to the Society additions sought to be made Documents must relate to the A.Y. whose assessments are sought to be reopened.

23 I.T.As. No. 4046, 4047 & 4048/DEL/2017

a. Hon’ble High Court of Delhi in the case of Nikki Drugs and Chemicals Pvt. Ltd –(64 taxmann.com 309) It is apparent from the above that the first step for initiation of proceedings under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, he is required to transfer the assets or documents, which he believes belongs to the assessee, to the assessing officer having jurisdiction over that assessee. The assessing officer of the assessee on receipt of such asset or document seized would have jurisdiction to commence proceedings under Section 153C of the Act. The assessing officer has, thereafter, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the Assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act. Section 153A of the Act requires that a notice be issued to the person sought to be assessed, calling upon the said assessee to file his return of income in respect of each year falling within the specified six AYs.

24 I.T.As. No. 4046, 4047 & 4048/DEL/2017

…..in the present case, although the photocopies of the documents handed over to SVP Builders India Ltd. may be copies of the original documents that belong to the assessee, the said photocopies would belong to SVP Builders India Ltd. as the same were handed over to it in connection with the investment made by the Assessee. Similarly, a certified copy of the Assessee's resolution signed by its Directors, would also belong to the SVP Builders India Ltd. even though the minutes of the Board meeting form a part of the record of the Assessee. We find no infirmity with the view taken by the ITAT in this regard.

b. Hon’ble High Court of Delhi in the case of Canyon Financial Services Ltd –(64 taxmann.com 309)

Turning to the case at hand, the first document referred to in the satisfaction note of the AO of the searched person is an application made by the Assessee for subscription to the shares of DEPL. Being an application for subscription of equity shares, it is a document filled up by the Assessee and submitted to DEPL. The said application having being found in the possession of the searched person should safely be presumed to belong to the searched person by virtue of Section 132 (4A) read with Section 292 C of the Act. DEPL, there is also presumption that it in fact belongs to DEPL. This is a rebuttable presumption. But rebuttable at the instance of the searched person. The presumption operates in favour of the Department by relieving it of the burden of having to demonstrate that the aforementioned document belongs to the DEPL. But here the Department seeks to be relieved of the burden of demonstrating that the said document in fact does not belong to DEPL but to the Assessee. That is not possible on a collective reading of Section 132 (4A) and Section 292 C of the

25 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Act. These provisions do not dilute the obligation on the Department and in particular the AO of the searched person, under Section 153 C (1) of the Act as it stood prior to 1st April 2015 of showing that the seized document belongs to the other person (here, the Assessee) and not the searched person from whom it was seized. The other documents are copies of Form-32 of the Assessee, copies of the return of income of the Assessee, copy of its director's report, copy of certificate of incorporation and memorandum of association. These were documents furnished by the Assessee to DEPL and found in the possession of DEPL. Here, again, it cannot be presumed that such documents having being found in the possession of the DEPL did not belong to DEPL but to the Assessee. Here again, while the documents may 'pertain to' the Assessee, but in the context explained above, they cannot be presumed to be documents that 'belonged to' the searched person. Consequently, even with regard to these documents, the jurisdictional requirement under Section 153 C (1) of the Act, of the AO of the searched person having to be satisfied that the said documents do not belong to searched person but to the Assessee, has not been fulfilled.”

III. Seized document must pertain to the assessment year for which the Ld. AO had initiated the proceedings under section 153C of the Act.

26 I.T.As. No. 4046, 4047 & 4048/DEL/2017

record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact.We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed thereinwas culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter.

27 I.T.As. No. 4046, 4047 & 4048/DEL/2017

available with the department and not in the nature of incriminating document.

a. Hon’ble High Court of Delhi in the case of RRJ Securities (380 ITR 612) wherein a record slip of cheque book was seized which formed part of the cheque book containing entries relating to A.Y. 2009-10 has held that: Insofar as the documents referred to as pages 126 to 179 of Annexure A-34 is concerned, admittedly, the same only consisted of a single page of the record slip of a cheque book and other pages were blank. The record slip only contained three entries reflecting issue of three cheques on 11th August, 2008, 27th August, 2008 and 10th December, 2008 respectively. Thus, it is apparent that the said document had no relevance for the assessment years in

28 I.T.As. No. 4046, 4047 & 4048/DEL/2017

question i.e. AYs 2003-04 to 2008-09. In the circumstances, the issue to be addressed is whether proceedings under Section 153C of the Act could be initiated on the basis of this document. The record slip belongs to the Assessee and, therefore, the action of the AO of the searched persons recording that the same belongs to the Assessee cannot be faulted. However, the question then arises is whether the AO of the Assessee was justified in taking further steps for reassessing the income of the Assessee in respect of the assessment years for which the assessments were concluded and in respect of which the seized document had no bearing. In our view, the same would be clearly impermissible as the seized material now available with the AO, admittedly, had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the Assessee for the years in question. Merely because a valuable article or document belonging to an Assessee is seized from the possession of a person searched under Section 132 of the Act, does not mean that the concluded assessments of the Assessee are necessarily to be re-opened under Section 153C of the Act. In our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the Assessee, which has no bearing on the assessments of the Assessee for the years preceding the search, was seized from the possession of the searched persons. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act.

29 I.T.As. No. 4046, 4047 & 4048/DEL/2017

b. Hon’ble Delhi High Court in the case of ARN Infrastructure India Ltd. (81 taxmann.com 260) has held that: As regards the other document seized, and mentioned in the Satisfaction Note viz., the extract of the ledger account maintained by the Petitioner concerning the payments of commission made by it to RGEPL, even if it is held to 'belong' to the Petitioner, it could hardly be said to be an 'incriminating' document. This was a document relevant only for the AY 2010-11. It could not have been used for re-opening the assessments of the earlier years i.e. AYs 2007-08 to AY 2009-10, 2011-12 and 2012-13. This position again stands settled by the decision in RRJ Securities Ltd (supra). The fact that the Revenue's SLP against the said decision is pending in the Supreme Court does not make a difference sine the operation of the said decision has not been stayed.

c. Hon’ble High Court of Delhi in the case of Refam Management Services Pvt. Ltd. (80 taxmann.com 281) has held that: It is apparent from the above that the only document seized during the search in question was a cheque book pertaining to the Assessee which reflected issue of cheques during the period August 2008 to October 2008, relevant to the AY 2009-10. The facts and the questions of law that arise in these appeals are similar to the facts and the controversy involved in RRJ Securities Ltd. (supra). Thus, for the reasons stated in RRJ Securities Ltd. (supra), the third question framed, whether the proceedings under Section 153C of the Act could be initiated against the Assessee, is answered in favour of the Assessee and against the Revenue.

IV. Where the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years, the AO

30 I.T.As. No. 4046, 4047 & 4048/DEL/2017

has no jurisdiction to make reassessment of that year under section 153C of the Act in absence of any incriminating document

31 I.T.As. No. 4046, 4047 & 4048/DEL/2017

has been held by the Hon’ble High Court of Delhi in the case of RRJ Securities Ltd.(380 ITR 612) that “As expressly indicated under Section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.” Merely because a valuable article or document belonging to an Assessee is seized from the possession of a person searched under Section 132 of the Act, does not mean that the concluded assessments of the Assessee are necessarily to be re-opened under Section 153C of the Act. In our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the Assessee, which has no bearing on the assessments of the Assessee for the years preceding the search, was seized from the possession of the searched persons. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act.

32 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Assessment Date of filing of Notice u/s 143(2) Assessment Year return issued before order under section 143(3) passed on 2009-10 29.09.2009 30.09.2010 12.12.2011 assessment order attached at page no. 56- 57 of the paper book

33 I.T.As. No. 4046, 4047 & 4048/DEL/2017

consideration is completed assessment year on the date of handing over of material.

a. Hon’ble High Court of Delhi in the case of Sunny Infraprojects Ltd. – ITA No. 502 of 2016 on the similar facts has held that: In that view of the matter, the Court is not answering the other aspects concerning the validity of the initiation of the proceedings under Section

34 I.T.As. No. 4046, 4047 & 4048/DEL/2017

153C of the Act and, in particular, whether the material which may be relevant to the year of the search could justify the re-opening of the assessment for the assessments of the earlier years as was done in the present case. The copy of the Satisfaction Note prepared by the AO of the Assessee refers to the „incriminating‟ documents/papers which were seized during the search and seizure action in the case of the Minda Group. These documents are copies of the balance sheet abstracts and company‟s general profile, balance sheet, profit and loss account, auditor‟s account, copies of income tax returns and copy of trial balances. Apart from the above, there was no other material referred to that could give rise to the belief about income having escaped assessment. Each of the above documents was already available with the AO when the initial assessments were finalised under Section 143(3) of the Act. The Court enquired from Mr. Shivpuri whether, in fact, there was any new or fresh material which could form the basis for the AO for re-opening the assessments. Mr. Shivpuri submitted that the trial balances were not available earlier. However, he could not deny that it is these very trial balances that led to the preparation of the balance sheet, which were already available with the AO and that there was no new information contained in the trial balance which justified the additions. Consequently, the Court is of the view that the above documents could not constitute incriminating material which could justify the making of the additions in exercise of the powers under Section 153C of the Act. It has been repeatedly stressed by this Court in several judgments including CIT v. Anil Kumar Bhatia 352 ITRA 493 (Del.); CIT v. Kabul Chawla 380 ITR 573 (Del.); Dayawanti through Legal Heir Sunita Gupta v. CIT (2016) 390 ITR 496 (Del.) and CIT-VII v. RRJ Securities Limited (2016) 380 ITR 612 that the seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment. As far as the present cases are concerned, the documents and material seized are only the balance sheet, audit reports etc., which did not reflect

35 I.T.As. No. 4046, 4047 & 4048/DEL/2017

any income that was not already disclosed when the assessments were finalised initially under Section 143(3) of the Act. This by itself is sufficient to delete the additions sustained by the CIT (A). Consequently, the ITAT was not in error in ordering such deletion.

b. Hon’ble High Court of Delhi in the case of SSP Aviation Ltd. (20 taxmann.com 214) has held that: The decision in SSP Aviation Ltd. (supra) cannot be understood to mean that the AO has the jurisdiction to make a re-assement in every case, where seized assets or documents are handed over to the AO. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years.

c. Hon’ble High Court of Delhi in the case of RRJ Securities Ltd. 62 taxmann.com 391 has held that: the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act.

36 I.T.As. No. 4046, 4047 & 4048/DEL/2017

d. Hon’ble High Court of Delhi in the case of Index Securities Pvt. Ltd. (86 taxmann.com 84) In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees.

e. Hon’ble High Court of Delhi in the case of ARN Infrastructure India Ltd. (81 taxmann.com 260)While examining the documents has held that: the ledger account extract may be relevant for assessment year 2010-11, it cannot be said to be incriminating material warranting re-opening of the assessment. The return originally filed by the petitioner for the said assessment year 2010-11 was picked up for scrutiny and finalised by an assessment order under section 143(3). The payments of commission to RGEPL as reflected in the ledger account was already disclosed in the Petitioner's accounts which were examined while finalising the regular assessment. Therefore, the ledger account could not have led the Assessing Officer to be satisfied that any income had escaped assessment for the assessment year 2010-11. [Para 18]

f. Hon’ble High Court of Delhi in the case of Rajeev Behl (99 taxmann.com 425) has held that:

37 I.T.As. No. 4046, 4047 & 4048/DEL/2017

the Assessing Officer virtually reappreciated the materials and documents that were part of the record filed by the assessee. A plain reading of the assessment order would show that no attempt was made by the Assessing Officer to connect the fresh material and how it pointed out to any concealed income or led to any concealed income. The entire reliance upon the existing documents that were disclosed only reinforced that Kabul Chawla (supra) and its reasoning was appropriately applied. For these reasons, the court is of the opinion that the Income-tax Appellate Tribunal's reasons are sound on the question of applicability of Kabul Chawla (supra) and the additions made in these circumstances could not have been sustained.

g. Hon’ble High Court of Delhi in the case of PCIT Vs. DreamcityBuildwellPvt. Ltd. (417 ITR 617) has held that: In the present case, the Revenue is seeking to rely on three documents to justify the assumption of jurisdiction under Section 153 C of the Act against the Assessee. Two of them, viz., the licence issued to the Assessee by the DTCP and the letter issued by the DTCP permitting it to transfer such licence, have no relevance for the purposes of determining escapement of income of the Assessee for the AYs in question. Consequently, even if those two documents can be said to 'belong' to the Assessee they are not documents on the basis of which jurisdiction can be assumed by the AO under Section 153C of the Act.

38 I.T.As. No. 4046, 4047 & 4048/DEL/2017

MAY IT PLEASE YOUR HONOUR’S Sub: Written Submission in the above cases - reg.

i) In support of the claim of the Revenue that Assessment u/s 153A/153C need not necessarily be based on incriminating material on the basis of various decisions of Hon’ble Jurisdictional High Court of Delhi/ other High Courts and Hon’ble ITAT Delhi

Highlights of the case of Anil Kumar Bhatia 24 Taxmann.com 98 dated 07.08.2012 of Hon’ble Delhi High Court (Page No. 23 to 26 of Paper Book no. 2)

• Discussion of amendment in the Act with effect from 01.06.2003 and introduction of new section 153A and circular No. 7/2003 of CBDT in Para 17 of the order. • Jurisdiction of Assessing Officer u/s 153A and procedure thereon

“A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV- B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as 'block assessment' because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as 'block period'. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single

39 I.T.As. No. 4046, 4047 & 4048/DEL/2017

assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place.” (Para 18)

• Assessing Officer is bound to issue notices to the assessee to furnish returns for 6 Assessment years. Assessing Officer is empowered to assess or re-assess the total income including undisclosed income of the assessee “Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has

40 I.T.As. No. 4046, 4047 & 4048/DEL/2017

been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.”(Para 19)

• Assessing Officer is empowered to reopen the proceedings u/s 143(1)(a) or u/s 143(3) to re-assess the total income, taking note of the undisclosed income , if any. The assessing officer is entrusted with the duty of brining to tax the total income of an assessee whose case is covered by Section 153A, by even making re-assessments

“A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee

41 I.T.As. No. 4046, 4047 & 4048/DEL/2017

whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.”(Para 20)

• The Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the ‘Total Income’ of the assessee in whose case a search or requisition has been initiated

“NOW THERE CAN BE CASES WHERE AT THE TIME WHEN THE SEARCH IS INITIATED OR REQUISITION IS MADE, THE ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF THE SIX ASSESSMENT YEARS MENTIONED ABOVE, MAY BE PENDING. IN SUCH A CASE, THE SECOND PROVISO TO SUB SECTION (1) OF SECTION 153A SAYS THAT SUCH PROCEEDINGS "SHALL ABATE". THE REASON IS NOT FAR TO SEEK. UNDER SECTION 153A, THERE IS NO ROOM FOR MULTIPLE ASSESSMENT ORDERS IN RESPECT OF ANY OF THE SIX ASSESSMENT YEARS UNDER CONSIDERATION. THAT IS BECAUSE THE ASSESSING OFFICER HAS TO DETERMINE NOT MERELY THE UNDISCLOSED INCOME OF THE ASSESSEE, BUT ALSO THE 'TOTAL INCOME' OF THE ASSESSEE IN WHOSE CASE A SEARCH OR REQUISITION HAS BEEN INITIATED. OBVIOUSLY THERE CANNOT BE SEVERAL ORDERS FOR THE SAME ASSESSMENT YEAR DETERMINING THE TOTAL INCOME OF THE ASSESSEE. IN ORDER TO ENSURE THIS STATE OF AFFAIRS NAMELY, THAT IN RESPECT OF THE SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH THE SEARCH TOOK PLACE THERE IS ONLY ONE DETERMINATION OF THE TOTAL INCOME, IT HAS BEEN PROVIDED IN THE SECOND PROVISO OF SUB SECTION (1) OF SECTION 153A THAT ANY PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF THE ASSESSEE WHICH ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING REQUISITION "SHALL ABATE". ONCE THOSE PROCEEDINGS ABATE, THE DECKS ARE CLEARED, FOR THE ASSESSING OFFICER TO PASS ASSESSMENT ORDERS FOR EACH OF THOSE SIX YEARS DETERMINING

42 I.T.As. No. 4046, 4047 & 4048/DEL/2017

THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD INCLUDE BOTH THE INCOME DECLARED IN THE RETURNS, IF ANY, FURNISHED BY THE ASSESSEE AS WELL AS THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH OR REQUISITION. THE POSITION THUS EMERGING IS THAT WHERE ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHEN THE SEARCH IS INITIATED OR REQUISITION IS MADE, THEY WILL ABATE MAKING WAY FOR THE ASSESSING OFFICER TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE IN WHICH THE UNDISCLOSED INCOME WOULD ALSO BE INCLUDED, BUT IN CASES WHERE THE ASSESSMENT OR REASSESSMENT PROCEEDINGS HAVE ALREADY BEEN COMPLETED AND ASSESSMENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEE'S TOTAL INCOME AND SUCH ORDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN THIS LATTER SITUATION, THE ASSESSING OFFICER WILL REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE (WITHOUT HAVING THE NEED TO FOLLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT CONDITIONS OF SECTIONS 147, 148 AND 151) AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. SUCH DETERMINATION IN THE ORDERS PASSED UNDER SECTION 153A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSESSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME. IN SUCH A CASE, TO REITERATE, THERE IS NO QUESTION OF ANY ABATEMENT OF THE EARLIER PROCEEDINGS FOR THE SIMPLE REASON THAT NO PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT WERE PENDING SINCE THEY HAD ALREADY CULMINATED IN ASSESSMENT OR REASSESSMENT ORDERS WHEN THE SEARCH WAS INITIATED OR THE REQUISITION WAS MADE.”(PARA 21) “In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of

43 I.T.As. No. 4046, 4047 & 4048/DEL/2017

income filed by the assessee for all the six years under consideration before the search took place were processed under Section 143(1)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(1) (a).”(Para 22)

Highlights of the case of Filatex India Ltd., ITA No. 269/2014 and CM No. 10077/2014 dated 14.07.2014 of Hon’ble Delhi High Court (page 19 to 29 of paper book no. 1)

The decision of Hon’ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Filatex India Ltd. (269/2014 and CM No. 10077/2014) by Hon’ble Delhi High Court vide order dated 14-07-2014. The Question of law referred before Hon’ble Delhi High Court in this case is as under :-

“Whether the Tribunal erred on facts and in law in not holding that re- computation of book profit, de-hors any material found during the course of search, in the order passed under section 153A of the Act was without jurisdiction, being outside the scope of proceedings under that Section” The Hon’ble Delhi High Court has decided in para 2 that “The contention raised by the appellant-assessee is that the addition, which is the subject matter of questions No.(ii) and (iii), was/is not justified in the assessment order under Section 153A, as no incriminating material was found concerning the addition under Section 115 JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the additions need not be restricted or limited to the incriminating material, which was found during the course of search. There cannot be multiple assessments, once Section 153A of the Act is

44 I.T.As. No. 4046, 4047 & 4048/DEL/2017

applicable. Section 153A(1) postulates one assessment, computing the total income of six assessment year. Immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed n the order under Section 153A of the Act and the Section applies notwithstanding Sections 139, 147, 148, 149, 151 and 153 of the Act.” Further Hon’ble Delhi High Court has clarified the decision of Chetan Dass, LaxmanDass decided earlier by observing in para 3 that “Learned counsel for the appellant assessee has relied on the decision of this Court in CIT Vs. Chetan Dasslaxmandass, (2012) 254 CTR (Del) 392. The said decision notices insertion of Section 153A by Finance Act, 2003, its purpose and object, had the earlier proceedings for block assessment under Chapter XIVB, the difficulties and the legal issues which had arisen on the difference between regular assessment and block assessment. It is in this context that in the case of Chetan DassLaxmanDass (supra), the Division Bench, [to which one of us (Sanjiv Khanna, J) was a party], has observed that Section 153A(1)(b) provides for assessment or re-assessment of the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. It was emphasized that there is no condition in this Section that the additions should be strictly made on the basis of evidence found during the course of the search or other post search material or information available with the Assessing Officer, related to the evidence found. Subsequent observation to the effect that the assessment under Section 153A should not be arbitrary or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under section 153A emanates and starts on the foundation of the search, which is the jurisdictional precondition.”

After that Hon’ble Delhi High Court has discussed the case of Anil Kumar Bhatia decided by Hon’ble Delhi High Court earlier and quoted from para

45 I.T.As. No. 4046, 4047 & 4048/DEL/2017

18 & 22 of this order (mentioned supra) and finely decided in para 4 of this order that after examination of section 153A the submission/contention of the appellant has no merit.

Highlights of the case of Raj Kumar Arora, ITA No. 56/2011 dated 11.07.2014 of Hon’ble Allahabad High Court (Page No. 1 to 7 of Paper Book No. 2) The decision of Hon’ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Raj Kumar Arora, ITA No. 56/2011 by Hon’ble Allahabad High Court vide order dated 11-07-2014.

The Question of law referred before Hon’ble Allahabad High Court in this case is as under :-

“Whether ITAT has erred in law in dismissing the appeal of the department and holding that no addition can be made for gift in assessment completed under section 153A unless some incriminating material was found during the course of search, thus ignoring the provisions of law as contained in section 153A which required the Assessing Officer to assessee or reassess the total income as defined n section 2(45) of the income Tax Act, 1961. Whether the order of the ITAT is perverse in as much as it has ignored the provisions of law as contained in proviso (c) of sub-sec(1) 153A which required the Assessing Officer to assessee or reassess the total income.”

Hon’ble Allahabad High Court has decided at the end in favour of revenue which is reproduced as under:-

“Consequently we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the

46 I.T.As. No. 4046, 4047 & 4048/DEL/2017

search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The assessing officer, while exercising the power under section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under section 143(1)(a) of the Act. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a Coordinate Bench of the Tribunal in the case of Anil Kumar Bhatia Vs. ACIT (2010) 1 ITR (Trib.) 484 (Delhi). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in Commissioner of Income Tax Vs. Anil Kumar Bhatia (2012) 24 taxmann.com 98(Delhi). We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits. For the reasons stated aforesaid, the Tribunal has committed an error in dismissing the appeal of the Revenue. We, accordingly, set aside the order of the Tribunal and remit the matter back to the Tribunal to reconsider the appeal of the Department afresh on merit. The question of law is answered accordingly.”

Highlights of the case of Canara Housing Development Company, ITA No. 38/2014 dated 25.07.2014 of Hon’ble Karnataka High Court(page 1 to 18 of paper book no. 1) –

47 I.T.As. No. 4046, 4047 & 4048/DEL/2017

ii) The decision of Hon’ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Canara Housing Development Company, ITA No. 38/2014 by Hon’ble Karnataka High Court vide order dated 25-07-2014. In this case the Hon’ble Court has also observed that the decision of Hon’ble special bench in the case of All Cargo Global Logistic Ltd. dated 06/07/2012 is not correct. The Question of law referred before Hon’ble Karnataka High Court in this case is as under:-

“When once the proceedings under Section 153A of the Act is initiated, whether the Commissioner of Income Tax can invoke the power under Section 263 of the Act to review the order of assessment passed by the Assessing Authority?”

At the end the Hon’ble Court has decided in para 11 that “the Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the

Mumbai, the scope of enquiry under Section 153A is to be confirmed only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under section 153A of the Act the Assessing Officer shall assessee or reassess the “total Income” of six assessment years which means they said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the

48 I.T.As. No. 4046, 4047 & 4048/DEL/2017

assessing authority and that assessing authority shall take note of the sad income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings.”

Recently same view is also expressed by Hon’ble Delhi Bench in the case of Apoorva Extrusion Pvt. Ltd., ITA No. 3308/Del/2010 for the A.Y. 2002-03, vide order dated 09.10.2014. The relevant portion is mentioned as below:-

“5. In order to answer whether the quashing of the initiation of assessment for the year under consideration on the given count is valid or not, we need to consider the mandate of the relevant part of sub- section (1) of section 153C, which reads as under:- “ Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or valuable article or thing or books of account or documents seized or requisitioned belongs or belong 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 such other person in accordance with the provisions of section 153A……………” 6. A bare perusal of the above provision indicates that where the AO is satisfied that any “ books of account or document “ apart from money, bullion or jewellery etc., seized from the person searched belong to a person other than the person searched u/s 153A, then such books of account or documents etc. shall be handed over to the AO having jurisdiction over such other person and the AO of such other person shall proceed to “ assess or reassess income of such other person in accordance with the provisions of section 153A. thus, the effect of sub- section (1) of section 153C is that where all the necessary ingredients of

49 I.T.As. No. 4046, 4047 & 4048/DEL/2017

this sub-section are satisfied, the matter of making assessment or re- assessment goes back to section 153A. Since the assessment or reassessment of such other person has to be done in accordance with the provisions of section 153A, let us examine the prescription of the relevant parts of section 153A(1), which is as under :- “Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:” 7. On circumspection of the clause (a) of the above provision, it is amply clear that the AO shall issue notice to such person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years as referred to in clause (b) and, the latter clause, provides that the Assessing Officer shall ‘assesss or reassess the total income of six assessment year immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made.’ When we read section 153C in conjunction with section 153A of the Act, the position which follows is that if the books of account or document etc., belonging to the other person are found during the course of the person searched, then the assessment or re-assessment of such other person is required t o be made of ‘six assessment years immediately preceding assessment years

50 I.T.As. No. 4046, 4047 & 4048/DEL/2017

relevant to previous year’ in which such search is conducted or requisition is made. Section 153C is a jurisdictional provision, which on the fulfillment of the stipulated conditions, enables the making of assessment or reassessment of such other person in accordance with the provisions of section 153A. There is naturally no separate provision under the Act nor there do any for making the assessment of such other person for the reason of the bodily lifting of the provisions of section 153A in section 153C of the Act for this purpose. Since section 153A specially provides for assessment or re-assessment of six- assessment years preceding the year of search, and in view of section 153C adopting the provisions of section 153A, there can be no question of restricting the jurisdiction of the AO to any lesser number of years for which the incriminating material is found. When we read section 153C in a holistic manner, it becomes evident that the triggering point for assuming jurisdiction on the person other than the person searched u/s 153C is the finding of any money, bullion, jewellery or books of account or document from the person searched. Once any money, bullion, jewllery or books of account or document seized or requisitioned from the person searched are found to be belonging to the other person, then, the assessment or reassessment of such other person is to be necessarily completed in terms of section 153A, which in no uncertain terms refers to six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Further, the use of the word ‘shall’ in section 153A immediately before clause (a) has left nothing to doubt that the assessment is required to be made for all the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. As the legislature has not made the making of such assessment or reassessment for all the six assessment years subject to any condition of finding of any incriminating material or otherwise, we are unable to accept such contention

51 I.T.As. No. 4046, 4047 & 4048/DEL/2017

of the Ld. AR which, if accepted, would lead to legislating a proposition which is obviously not tenable. 8. We can reject the contention of the assessee from another angle as well. It is relevant to note that the expression “books of account or documents’ employed in section 153C (1) is accompanied by the works “money, bullion, jewellery or other valuable articles or things’. It is axiomatic that ‘money or jewellery’ etc. belonging to the other person found from the premises of the person searched cannot per se be related to a particular assessment year. If we test the contention of the Ld. AR on the touchstone of ‘money or jewellery’ etc., belonging to the assessee found from the person searched, then it will be very difficult at the stage of initiation of assessment or reassessment of the other person to relate it to a particular year, there by jeopardizing the whole scheme of assessment pursuant to search or requisition. To a specific query it was candidly accepted by the Ld. AR that in items of section 153A, the initiation of assessment or reassessment foe all the six assessment years in the case of person searched is not dependent on the findings of any incriminating material. It is beyond our comprehension that when such a course of action is permissible u/s 153A in the case of person searched, then how can there be any bar on the initiating or making of assessment or reassessment for some of the years of other person, more so, when section 153C(1) has been expressly made to accord with the provisions of section 153A. We, therefore, jettison the contention urged on behalf of the assessee as sans merit. 9. In order to support the impugned order, the ld. AR also took support of sub-section (2) of section 153C to contend that the assessment of the other person can be made only for such assessment years for which the money, bullion, jewellery or books of account or other documents are found and for no other years. This was countered by the ld. DR. 10. To appreciate this contention raised on behalf of the assessee, it would be apt to note the prescription of sub-section (2) of section 153C, which runs as under:-

52 I.T.As. No. 4046, 4047 & 4048/DEL/2017

“(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 sub0section (2) section 143 has expired, or (c) Assessment or re-assessment, 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 provide in section 153A”. 11. On going through the plain language of sub-section (2) of section 153C, it becomes manifest that this deals with the assessment for the assessment year relevant to the previous year in which is conducted under section 132 or requisition is made under section 132A. this sub- section simply provided that where books of account or documents, etc., have been received by the AO 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 u/s 13, etc., then the AO shall issue notice and assess or reassess total income of the other person’ of such assessment year in the manner provided in section 153A.’ the expression ‘ such assessment year’ used in sub- section (2) of section 153C refers to ‘ the assessment year relevant to the previous year in which search is conducted u/s 132 or requisition is made u/s 132A.’ Thus, it is amply clear that whereas sub-section (2) of section

53 I.T.As. No. 4046, 4047 & 4048/DEL/2017

153C deals with the assessment for the assessment year relevant to the previous year in which search is conducted, sub-section (1) of section 153C read with section 153A refers to ‘six assessment years immediately preceding assessment year relevant to the previous year in which such search is conducted or requisition is made.’ As we are presently concerned with one of the six assessment years immediately preceding the assessment year relevant to the previous year in which such search was conducted, it is the mandate of sub-section (1) of section 153C read with section 153A which shall apply. 12. Reverting to the facts of the instant case, it is noticed that the documents found from the persons searched, placed at pages 26- 36 of the Departmental paper book, do belong to the assessee. As such, there can be no question of lack of jurisdiction of the AO to initiate assessment of the assessee u/s 153C read with section 153A of the Act for the instant year, which is one of the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. In view of the foregoing discussion, we are of the considered opinion that the Ld. CIT (A) was not justified in annulling the proceedings due to the absence of any books of account or documents for the current year found from the persons searched, belonging to the assessee for the assessment year under consideration. The Revenue succeeds.”

Recently same view is also expressed by Hon’ble ITAT Banglore Bench in the case of NandiniDelux vs ACIT, 54 Taxmann.com 162 vide order dated 05.12.2014. The relevant portion of para 6.3.9 of the order is mentioned as below:-

“Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Canara Housing Development Co. (supra), we hold that once the assessment is reopened, the Assessing Officer can take note of the income disclosed in the earlier return, any undisclosed income found during the course of search and also any other income

54 I.T.As. No. 4046, 4047 & 4048/DEL/2017

which is not disclosed in the earlier return of income OR which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. The grounds of appeal raised by the assessee at S.Nos. 2 to 5 are accordingly dismissed for all four assessment years 2005-06 to 2008-09.”

iii) Also recently SLP filed by Revenue in the case of PCIT Vs Gahoi Foods (P) Ltd (117 taxmann.com 118(SC)) was granted by the Honb’le Apex court against the decision of High Court upholding decision of ITAT that assessment under section 153A of the Income Tax Act, addition only on basis of some incriminating material unearthed during search or requisition of documents . SLP filed by Revenue in case of PCIT vs Dhananjay Intl. Ltd., and PCIT vs Devi Dass Garg has been granted by Hon’ble SC in similar Situations.

iv) Further reliance is also placed on the decision of Honb’le Supreme Court in the case of B Kishore Kumar Vs DCIT 62 taxmann.com215(SC) where statement on oath recorded under section 132(4) was held to constitute incriminating material for the purpose of making assessment under section 153A. SmtDayawanti Gupta Vs CIT (Delhi HC) where Honb’le court after considering the decision of Kabul Chawla has held that statement recorded under section 132(4) during search proceedings in absence of any other material would in itself constitute incriminating material giving leeway to AO to make additions in search assessment.”

55 I.T.As. No. 4046, 4047 & 4048/DEL/2017

proceedings u/s.153C wherein the ld. CIT(A) had decided the issue in favour of the holding that satisfaction note recorded was not valid and the document found does not lead to any escapement of income and did not pertain to Assessment Year in question. The relevant observations are as under:

“In view of the above submission, it is also submitted by the appellant that decision of the Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs. Kabul Chawla [2015] 61 Taxmann.com 412 (Del), is squarely applicable to the facts of the appellant. From the above, following facts emerged:  The assessment proceedings was not pending at the time of initiation of action u/s 332 of the Act, 30.10.2012.  Reference made by the A.O. in the assessment order, is in respect of Annexure A-2, A-4.A-6, A-8, A-12, A-2S and A-21, which contains, the trial balance, resolution, auditor reports, income tax retruns, cheque books and certified copy of resolutions pertaitig to the assessce. of certain companies, and,  No incriminating documents were found during the course of search action u's 132 of the Act, carried out at the premises of the appellant. From the above facts, it is clear that the addition made in assessment order u/s. 153C/153A of the Act dated 31.3.2015, are not based on any incriminating document. As such, facts of the appellant are- squarely covered by the ratio laid down by Hon’blc Jurisdictional High Court of Delhi, in the case of C1T Vs. Kabul Chawla (supra). Similarly, the statement recorded u/s 132(4) of the Act, is not a document, as has been held by the Hon'ble Jurisdictional High Court of Delhi in the case oi C.IT Vs. Raj Pal Bhatia [2011], 333 ITR 315 (Delhi).

56 I.T.As. No. 4046, 4047 & 4048/DEL/2017

In view of the above, I agree with the arguments of the appellant and therefore, no addition can be made, in absence of any incriminating document. Accordingly, ground No. 3, is hereby allowed. As, I have already field (supra), while deciding in ground No. 3 that in absence of any incriminating documents found during search action u/s 132 and also assessment was not abated at the time of intiation of action u/s 132 of the Act, on 30.10.2012, no addition can be made, in the assessment order passed u/s 153C of the Act. The facts of the appellant are, squarly covered by the ratios laid down in the above 2 decisions of the Hotfble Jurisdictional High Court of Delhi. In view of these facts and circumstances, in my considered opinion, now it is not required to adjudicate the grounds No. 5 to 8 and therefore, same are considered, as deemed to have been allowed. Accordingly, ground No. 5 to 8 are hereby allowed.”

57 I.T.As. No. 4046, 4047 & 4048/DEL/2017

statutory records filed with the tax authorities, ROC or are audited accounts and books of the appellant.

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 for the relevant assessment year or years referred to in sub-section (1) of section 153A]

58 I.T.As. No. 4046, 4047 & 4048/DEL/2017

[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 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,

59 I.T.As. No. 4046, 4047 & 4048/DEL/2017

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.]

60 I.T.As. No. 4046, 4047 & 4048/DEL/2017

under the determination of the total income of the appellant for six assessment years. The documents must be indicative of escapement of income of the total income declared by the assessee in its return of income must necessarily be affect from the findings in the seized documents. Now it is a well settled law in view of the various judgments cited above that the documents seized must be indicative of undisclosed income and must also pertains to the relevant assessment year. This principle has been upheld by the Hon’ble Supreme Court in the case of CIT vs. Singhad Technical Education Society, 84 taxman.com 90, wherein it was observed and held as under: “The Tribunal permitted this additional ground by giving a reason that it was a jurisdictional issue taken up onthe basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by theTribunal that as per the provisions of section 153C, incriminating material which was seized had to pertain tothe assessment years in question and it is an undisputed fact that the documents which were seized did notestablish any co-relation, document-wise, with these four assessment years. Since this requirement undersection 153C is essential for assessment under that provision, it becomes a jurisdictional fact. This reasoningappears to be logical and valid, having regard to the provisions of section 153C. Order of the Tribunal revealsthat the Tribunal had scanned through the Satisfaction Note and the material which was disclosed therein wasculled out and it showed that the same belongs to assessment year 2004-05 or thereafter. After taking note ofthe material and discussing it, it was specifically recorded that the Department could not point out to thecontrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of theTribunal. That apart, the respondent, argued that notice in respect of assessment years 2000- 01 and 2001-02 was even time barred.[Para 18]”

61 I.T.As. No. 4046, 4047 & 4048/DEL/2017

Kabul Chawla (2012) (61 taxmann.com 412)(Delhi HC), Sunny Infraprojects Ltd. – ITA No. 502 of 2016(Delhi HC), Index Securities Pvt. Ltd. (86 taxmann.com 84) (Delhi HC), RRJ Securities (380 ITR 612) (Delhi HC), ARN Infrastructure India Ltd. (81 taxmann.com 260) (Delhi HC), Rajeev Behl (99 taxmann.com 425)(Delhi HC), PCIT Vs. DreamcityBuildwell Pvt. Ltd. (417 ITR 617) (Delhi HC), Refam Management Services Pvt. Ltd. (80 taxmann.com

62 I.T.As. No. 4046, 4047 & 4048/DEL/2017

281) (Delhi HC), SSP Aviation Ltd. (20 taxmann.com 214) (Delhi HC).

Order pronounced in the Open Court on 18th June, 2021

Sd/- Sd/- [B.R.R. KUMAR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 18/06/2021 PKK: