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Facts
A search conducted on C. Girish and others on 20.04.2019 led to the seizure of cash amounting to Rs. 2,31,00,000/- from a vehicle. Investigations revealed that this cash and other seized amounts belonged to the deceased assessee, Appaji Gowda. Notices under Section 153C were subsequently issued to his legal heirs.
Held
The Tribunal held that the satisfaction note recorded by the AO for issuing notices under Section 153C was not correct as it was a joint note for multiple legal heirs, contrary to High Court judgments. The assessment made in the hands of the assessee was not sustainable.
Key Issues
Whether the assessment proceedings initiated under Section 153C against the legal heirs were valid and within the limitation period, particularly concerning the satisfaction note recorded by the AO.
Sections Cited
132, 142(1), 153C, 131, 69A, 153B, 153A, 153D, 143(3), 143(2), 139, 147, 148, 149, 151
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This appeal is filed by the assessee against the ex-parte Order passed by the CIT(A) on the following grounds :
2. Assessee has raised additional grounds vide applicated dated 03.12.2024 :
3. Briefly stated, the facts of the case are that, a search under section 132of the Act was conducted in the case of Shri. C. Girish and others on 20.04.2019. On 20.04.2019, the Income Tax Department got some credible information that cash was going to be taken to Bhadravathi taluk by hiding the money in the stepneytyre of Mahindra Scorpio car bearing registration No.KA07N5599. The team searched the car at the Nelamangala Toll Plaza at Bangalore and recovered amount of Rs.2,31,00,000/- from it. The person who was driving the car was identified as Mr. C.Girish. He has been working for Mr. Appaji Gowda since 10 years and he is one of the close and trustworthy person of Mr. Appaji Gowda. Mr. Girish is also assisting Mr. Appaji Gowda and his wife in their day to day activities. In his statement under section 132(4) of the Act, Mr. C. Girish revealed that he went to Bangalore two times to collect the cash prior to this occasion. He paid the cash amount of Rs.50 lakhs and Rs.1 Crore for the first time and second time respectively. Out of the amount of Rs.1.5 Crore, some of cash was distributed to various village level and taluk level parties head and karyakarthas by Mr. Appaji Gowda and his wife. He told that remaining amount was kept at the house of Mr. Radhakrishna, Mr. Natraj and his own house at Bhadravathi. Accordingly, a search under section 132 of the Act was conducted at the residence of Mr. Radhakrishna, Mr. Natraj and Mr. C. Girish total amount of Rs.86.92 lakh was found and seized from all these 3 persons’ premises. Pursuant to search conducted, the case was centralized. Accordingly, a notice under section 142(1) of the Act was issued on 04.06.2021 in the name of Appaji Gowda. Then wife of Appaji Gowda Smt. Sharada filed letter on 06.08.2021 stating that assessee is no more. Thereafter notice under section 153C of the Act was issued on 09.09.2021 for filing return of income for Assessment Year 2020-21 within 15 days. However there was no compliance. Various details were called for vide notice under section 142(1) of the Act dated 20.12.2022 but there was no response. Subsequently, several notices and opportunities were given to the assessee to file the return as per para 3.31 of the Assessment Order but there was no response till the date of Assessment Order. Accordingly, the AO completed assessment on the basis of seized as per letter dated 08.09.2020 placed at P.B. Page No. 40-43 found from C. Girish who was carrying cash of Rs.2,31,00,000/- in the Mahindra Scorpio car on 20.04.2019 which was seized. Further, statement under section 131 of the Act was recorded on 22.04.2019 in which C. Girish accepted. In this regard, question and answer No.12 is important which is reproduced in the Assessment Order. The AO has also collected other statements. The statement of shri C. Girish was confronted to Appaji Gowda and he confirmed the statements recorded of C. Girish. During the course of assessment proceedings, assessee furnished reply dated 03.03.2022 stating that the notice issued under section 153C of the Act is barred by limitation. In this regard the AO noted that on 09.03.2022 seized materials in the group cases were received only on 09.09.2020 and that the proceedings were not barred by limitation and assessee was requested for contesting the issue on merits. Once again the assessee raised issue that proceedings were barred by limitation stating that in the case of the assessee there was no seized material other than cash. The cash was deposited in the FD account of the assessee. Assessee has further stated that appraisal report was supposedly received by this office in June 2019 since there was no material to be handed over and the AO of searched person and other person are one and the same. The said proceedings are time barred. Assessee did not make any submissions with respect to the merits of the matter. The AO’s observation on the submission of the assessee is that search under section 132 of the Act was conducted at C. Girish and Radhakrishna residence on 20.04.2019. The seized material in the case of C. Girish and others were received by the Office of the AO only on 09.09.2020. The case of C. Girish and others were centralized on 01.10.2020 and thereafter he stated that jurisdiction can be assumed by the AO only on passing of Order by PCIT. Therefore, AO assumed jurisdiction over the material seized from the person in the case of C. Girish only on 01.10.2020. Notice under section 153A of the Act was issued to the search person on 03.03.2021 and Orders under section 153Ar.w.s. 144 r.w.s. 153D of the Act were passed on 26.09.2021 in the case of Radhakrishna. Orders under section 153Ar.w.s. 144 r.w.s. 153D of the Act were passed on 28.09.2021 in the case of C. Girish.
4. It was found that cash of Rs.2.31 Crores was seized from the stepnytyre of the vehicle drove by C. Girish, the employee of Appaji Gowda. C. Girish stated that cash was transported by him on the direction of Appaji Gowda and Smt. Sharada. Cash of Rs.87 lakhs was also seized from the residence of C. Girish, Radhakrishna and Nataraj. In the statement recorded they stated that the cash was given to them by late Appaji Gowda, Smt. Sharada has also confirmed the same. Therefore, after recoding satisfaction on 28.05.2021 by the assessee in office of the searched person on 02.06.2021 by AO of other person late Shri. Appaji Gowda. For issue of notice under section153C of the Act, notice was issued on 04.06.2021. Thereafter after intimating by Smt. Sharada (legal heir) vide her letter dated 02.08.2021 intimating about the death of Appaji Gowda thereafter a fresh notice under section 153C of the Act was issued to the assessee on 09.09.2021 after recording satisfaction. The AO referred to the provision of section 153C of the Act. The AO issued notice under section 153C of the Act on 19.09.2021 before completion of assessment proceedings in the case of searched person. Accordingly the contention raised by the assessee was rejected. As per the statement recorded under section 131 of the Act on 18.07.2019, late Appaji Gowda confirmed handing over of the cash to C. Girish. The cash was seized from C. Girish while ascertaining the cash and source of the same was established that the cash belongs to Appaji Gowda. Late Appaji Gowda and Smt. Sharada (legal heir) could not explain the source and they did not offer it as income. Therefore, protective addition was made in the hands of the assessee as unexplained money under section 69A of the Act. In the case of search conducted at the residence of C. Giridhar, Radhakrishna and N. K. Nataraj, the cash of Rs.86.92 lakhs was found but they could not explain and the same was added in their hands as substantive addition and stated that these amounts were from late Appaji Gowda. Accordingly, protective addition was made in the hands of assessee of Rs.86.92 lakhs. Further, as per para No.12, a sum of Rs.63.08 lakhs were added under section 69A of the Act which was received in earlier occasion of Rs.1.5 Crores out of this Rs.86.92 lakhs was seized which has been protectively assessed in the hands of the assessee as above. Therefore, difference of Rs.63.08 lakhs was added in the hands of the assessee under section 69A of the Act income assessed at Rs.3,83,50,000/- and completed the assessment on 31.03.2022.
5. Aggrieved from the above Order, assessee filed appeal before the CIT(A). Assessee raised legal ground. The learned CIT(A) dealt the issue and rejected the legal grounds raised by the assessee after considering the remand report submitted by the AO and dismissed appeal of the assessee.
Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the lower authorities and the assessee has filed submissions dated 25.06.2025 which is as under:
Page 8 of 23 Page 9 of 23
In addition to the above written synopsis, assessee has filed following case laws which is placed at Paper Book Page Nos.1 to 154. Commissioner of Income - Tax – III V/s. Sinhgad Technical Education Society, in Civil Appeal Nos. 11080 to 11083 of 2017. [2017] 84 taxmann.com 290. Dt: 29.08.2017. The Income Tax Office V/s. SMT. Preethi V, in Writ Appeal No: 1407 of 2024 (T-IT) Dt: 22.01.2025. The Deputy Commissioner of Income Tax Circle - 1(4) V/s. Sunil Kumar Sharma, in Writ Appeal No: 830 of 2022 (T-IT). Dt: 22.01.2024.
Commissioner of Income Tax (Appeals) V/s. Sunil Kumar Sharma in SLP (Civil) Diary No(s).21528 of 2024. [2024] 165 taxmann.com 846. Dt: 20.08.2024. Saksham Commodities Ltd V/s. Income Tax Officer in W P No: 1459 of 2024. [2024] 161taxamnn.com 485. Dt: 09.04.2024. Principal Commissioner of Income Tax V/s. Allied Perfumers Pvt. Ltd. [2021] 431 ITR 237(Delhi). Dt: 14.12.2020.
On the other hand, learned DR relied on the Order of the lower authorities and he has filed written synopsis also supporting his arguments which is as under:
Page 12 of 23 Page 13 of 23
Considering the rival submissions and on perusal of the entire material available on record and Orders of authorities below, we noted from the grounds of appeal raised by the assessee and written submissions in support of the arguments of the learned Counsel we noted that he has contested on 3 issues (i) Order passed by the AO is barred by limitation (ii) Proceedings in the case of assessee is wrong (iii) no separate satisfaction has been recorded by the jurisdictional AO in the case of assessee.
The issue raised in respect of limitation for passing of Order, we are in agreement with the arguments of the learned DR that the limitation period will start from the date of documents received by the AO of the other person. During the course of hearing, the learned Counsel also stated that no notice has been issued to the assessee under section 143(2) of the Act. Therefore, AO had no jurisdiction to pass the Order. In this regard, we noted that the AO has observed that assessee has not filed valid return. In the notice issued u/s 153C the 30 days time was allowed to file return but the assessee did not file return in respose to notice within specified time mrntioned in the said notice.
Once there is no valid return filed by the assessee there is no need to issue notice under section 143(2) of the Act. Even in case of return filed under section 153A/153C of the Act, Hon’ble Delhi High Court in the case of Ashok chaddha vs ITO reported in (2012) 20 taxmann.com 38 (delhi) has held in the case of Ashok Chadda that no notice is required to be issued under section 143(2) of the Act. Therefore this argument of the assessee is rejected. For the sake of convenience, we are reproducing section 153C of the Act as under:
153C. Assessment of income of any other person. (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 six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules30 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2)Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a)no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b)a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c)assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. [(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.]
As per the first proviso it is clear that jurisdiction will start of the AO of the other person when the documents were received by him. Here in the case, the document was received on 15.09.2021. Therefore, the AO passed Order as per provision of Rs.153C of the Act. Accordingly, we reject this ground of the assessee. During the course of hearing, learned Counsel has also relied on the judgment of the jurisdictional High Court in the case of ITO Vs. Smt. Preethy in Order dated 22.01.2025, will also not support the case of the assessee. In this case Assessment Order, computation, notice of demand and notice of penalty was issued in the name of death person. But in the case on hand, the AO has passed Order in the name of legal heir. So the case law relied on the by the learned Counsel on this will not support the case of the assessee. Accordingly, this ground is rejected. The learned Counsel has raised that notice issued under section 153C of the Act is also wrong. On going through the entire Assessment Order and remand proceedings submitted by the AO to the CIT(A), we noticed that notice under section 153C of the Act was issued first to the assessee on 04.06.2021. Later the legal heir intimated to the Department that late Appaji Gowda is no more. Thereafter the AO complied with the provision of section 153C of the Act issued fresh notice to the legal heir Smt. Sharada on 19.09.2021. Therefore, there is no illegality on the part of the AO for issuing of notice under section 153C of the Act. Accordingly, this issue is also rejected.
The learned Counsel has also raised issue regarding satisfaction note stating that no seperate satisfaction note has been recorded by the AO before initiating proceeding under section 153C of the Act. The AO of the other person has recorded a joint satisfaction note During the course of hearing, the learned Counsel referred to page Nos.71 to 77 and he strongly contested that the AO recorded satisfaction note jointly which is not in the light of the judgment of the jurisdictional High Court in the case of Sunil Kumar Sharma decided by the jurisdictional High Court in WP No.830/2022 (Karnataka High Court) and the SLP filed by the Revenue has been dismissed by the Hon’ble Apex Court reported in (2024) 165 taxmann.com 846 (SC). For the sake of convenience we are reproducing satisfaction note recorded by the AO of the other person ( assessee) for issue of notice under section 153C of the Act which is as under:
Page 18 of 23 Page 19 of 23 Page 20 of 23 Page 21 of 23 Page 22 of 23
On going through the above satisfaction note, we noted that AO has recorded satisfaction in the case of Smt. Sharada, Smt. MA Ajit and Ms. Aparna MA all legal heirs of late Appaji Gowda jointly. Relying on the above judgment of Hon’ble Apex Court noted supra in the case of Sunil Kumar Sharma cited supra, we hold that satisfaction note recorded by the AO for issue of notice under section 153C of the Act is not correct. Accordingly, we accept this ground raised by the assessee and hold that the assessment made in the hands of the assessee is not sustainable.
In the result, appeal filed by the assessee is partly allowed.