DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(4), BANGALORE vs. MR. D K SHIVAKUMAR, BANGALORE

Appellant Respondent Assessment Year 45, 46, 47, DCIT, Shri. D. K. Shivakumar, No.252, “Kenkkeri” 18th 48/Bang/2020 Central Circle – 1(4), 2007-08 to Bengaluru. Cross, 2010-11 Upper Palace Orchards, Sadashivanagar, Bengaluru – 560 080. PAN : AKKPS 1306 F 205/Bang/2022 Shri. D. K. Shivakumar, DCIT, 2006-07 Bengaluru – 560 080. Central Circle – 1(4), PAN : AKKPS 1306 F Bengaluru. Assessee by : Shri. Chandrasekhar, AR. Revenue by : Shri. Y. V. Raviraj, Sr. Standing Counsel. Date of hearing : 27.11.2024 Date of Pronouncement : 31.01.2025 O R D E R Per Laxmi Prasad Sahu, Accountant Member These four appeals are filed by the Revenue against separate Orders of CIT(A) dated 17.10.2019 for Assessment Years 2007-08 to 2010-11 and assessee against the Order of CIT(A) [DIN and Order No.ITBA/REC/M/154/2021-22/1039114500(1)] dated 27.01.2022 for Assessment Year 2006-07.

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Grounds of appeal for Assessment Year 2007-08: Grounds of appeal for Assessment Year 2008-09: , 46, 47, 48/Bang/2020 Page 3 of 77. Grounds of appeal for Assessment Year 2009-10: Grounds of appeal for Assessment Year 2010-11: , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022 Page 4 of 77

3. Since the Revenue has raised common issues for all the four Assessment Years, therefore, for the sake of convenience and brevity, we are taking the facts for Assessment Year 2007-08 and facts taken in for Assessment Year 2007-08 shall apply mutatis mutandis for appeals in 47 and 48/Bang/2020 for the Assessment Years 2008-09 to 2010-11.

Page 5 of 77 that assessee had undisclosed income for Assessment Year 2008-09 was found and seized and the same resulted in reopening of the Assessment for Assessment Year 2008-09. The observations made by the AO (Assessing Officer) for the AY 2007-08 are as under:-

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7. Aggrieved from the above Order, the assessee filed appeal and detailed written submissions were also submitted. The CIT(A), after considering the entire written submissions and documents available before him allowed the appeal of the assessee observing that the notice issued by the AO under section 148 of the Act for reopening the case is bad in the eyes of law and the assessment should have been completed , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 13 of 77 under section 153C instated of section 148 the Act. The observations of the CIT(A) are as under:

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Page 21 of 77 permitted to do under the Act, as it stood then, and hence, he was correct in initiating action under section 147 of the Act. He relied on the following judgments and gist of the judgements countering by the learned Authorised Representative (AR) are as under:-

(i). CIT Vs. Singhad Technical Education Society reported in 84 taxmann.com 290 (Supreme Court) -The learned Standing Council for the Revenue submitted that in this case the proposition dealt & approved by the Hon’ble Supreme Court is that initiation of proceeding under section 153C of the Act in respect of an assessment year can be done only if there was seized material, pertaining to such assessment year & not otherwise.

The learned AR contented that this case law is not relevant to the issue on hand in as much as the Supreme Court, in this cited case, has held that incriminating seized material pertaining to one year does not give jurisdiction to reopen an assessment under section 153C of another assessment year.

(ii). CIT vs Renu Constructions reported in 99 taxmann.com 426 (Delhi):- The learned Standing Council for the Revenue submitted that in this case the Delhi High Court, following the decision of its coordinate bench in the case of Pepsico India Holdings (P) ltd vs ACIT 370 ITR 295 held that the amendment to section 153C of the Act, , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 22 of 77 carried out w.e.f. 01/06/2015, was prospective in nature and the same cannot be applied to searches conducted prior to the amendment.

The learned AR contented that this decision of the Delhi High Court is no longer good law in view of the decision of the Hon’ble Supreme Court in the case of ITO vs Vikram Sujitkumar Bhatia reported 149 taxmann.com 123, which has been explained in detail in the later part of these submissions.

(iii). Kamaleshbhai Dharamshibhai Patel Vs. CIT (Gujarat High Court) – 31 taxmann.com 50 (Gujrat):- The learned Standing Council for the Revenue submitted that in this case the Gujarat High Court held that the Term ‘Belong to’, not being defined, the impugned document, relied upon to initiate proceedings under section 153C of the Act, pertained to or related to the person in whose case the proceeding under section 153C of the Act was initiated and the said proceeding was in order.

The learned AR contented that in this case the Gujarat High Court expanded the meaning of ‘Belong To’ to include “Have relation or reference to’ and held in favour of the Revenue. This case law actually supports the assessee in the present case.

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Page 23 of 77 (iv). Goodwill Housing Ltd Vs. ITO, 45 taxmann.com 144 (Kar). The learned Standing Council for the Revenue submitted that in this case the Jurisdictional Karnataka High Court held that the provisions of section 158BD does not preclude the AO from initiating action under section 147 to bring to tax material found in a search.

The learned AR contented that this case law cannot be applied in as much as the present section 153C starts with a non obstante clause which clearly prevails over section 147 unlike the erstwhile section 158BD which did not start with a non obstante clause. This decision does not help the cause of the Revenue in the present case of this assessee.

(v). Amar Jewellers Ltd vs ACIT, [2022] 137 taxmann.com 249 (Gujarat) :- The learned Standing Council for the Revenue submitted that in this case the Gujarat High Court held that an order which is passed under section 153A of the Act can be subjected to a reopening under section 147, if the preconditions for reopening under section 147 of the Act is satisfied.

The learned AR contended that this proposition was also upheld by the Jurisdictional Karnataka High Court in the case of CIT Vs. Rinku Chakraborty 242 CTR 425, which decision was reversed by the Full Bench of the Karnataka High Court in Dell India Pvt Ltd Vs. CIT in , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 24 of 77 432 ITR 212. In any case this proposition is not the subject matter for consideration in the present case of this appellant.

(vi). Shailesh S Patel Vs. ITO [2018] 97 taxmann.com 570 (Ahmedabad – Trib) The learned Standing Council for the Revenue submitted that in this case the Tribunal relied upon the decision of the Delhi High Court in Pepsico India Holdings (P) Ltd vs ACIT 370 ITR 295, held that in order to bring to tax the income arising out of an incriminating material found in a search proceeding, in the hands of person, other than the person searched, it is not necessary to invoke the provisions of section 153C of the Act, but recourse can be had to section 147 as well, to tax the same. In this case the Tribunal also gave a finding that the time limit to initiate proceeding under section 153C of the Act having expired also justified the initiation of proceedings under section 147 of the Act.

The learned AR Contended that the decision of the Delhi High Court in the case of Pepsico India Holdings (P) Ltd, referred to in this decision, is no longer good law in view of the decision of the Hon’ble Supreme Court in the case of ITO Vs. Vikram Sujitkumar Bhatia 149 taxmann.com 123.

(vii). Pr.CIT Vs. Abhisar Buildwell (P) Ltd [2023] 149 taxmann.com 399 (SC) The learned Standing Council for the Revenue submitted that , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 25 of 77 in a case where the Revenue has material indicating income having escaped taxation, which is not forming part of material found and seized in a search proceeding, the Revenue can take recourse to initiating proceeding under section 147 of the Act, to bring the same to tax, provided the preconditions for reopening under section 147 are satisfied.

The learned AR contented that this case does not help the Revenue in the present case of this appellant, in as much as the facts of the case reveals that the material relied upon to initiate proceedings under section 147 of the Act, was found and seized in searches conducted on 02/09/2010 & 10/10/2013. Consequently, the case of the assessee came to be centralized on 03/07/2012. The AO has issued a notice under section 148 after the date of centralization. The time limit to initiate proceedings under section 153C for each of the assessment years from Assessment Year 2006-07 to Assessment Year 2010-11 had not expired as on the date on which notice under section 148 of the Act was issued for these respective assessment years. Thus, the AO was not precluded from initiating proceedings under section 153C of the Act. This Proposition relied upon by the Revenue, in fact, supports the present case of this assessee.

(viii). CIT Vs. Abhyudhaya Builders (P) Ltd [2012] 20 taxmann.com 851(Allahabad) The learned Standing Council for the Revenue , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 26 of 77 submitted that in this case the Allahabad High Court upheld the action of the AO in resorting to reopening under section 147 of the Act as the time limit to initiate proceedings under section 158BD of the Act had expired.

The learned AR contented that this case law does not help the Revenue in the present case of this Assessee as it was noticed in an earlier case, Section 153C of the Act starts with a non obstante clause, whereas section 158 BD of the Act, did not.

(ix). Janaki Exports International vs Union of India [2005] 145 taxman.82 (Delhi). The learned Standing Council for the Revenue submitted that in this case the Delhi High Court upheld the action of the AO in resorting to reopening under section 147 of the Act as the time limit to initiate proceedings under section 158BD of the Act had expired.

The learned AR contended that this case law does not help the Revenue in the present case of this assessee as submitted supra (x). Anil Kumar Gopikishan Agrawal vs ACIT [2019] 106 taxmann. Com 137 (Gujarat) The learned Standing Council for the Revenue submitted that in this case the Gujarat High Court held that the amendment to section 153C of the Act, carried out w.e.f. 01.06.2015, , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 27 of 77 was prospective in nature & the same cannot be applied to searches conducted prior to the amendment.

The learned AR contended that this decision of the Gujarat High Court is no longer good law in view of the decision of the Hon’ble Supreme Court in the case of ITO vs Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123(SC).

(xi). ITO vs Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123 (SC) The Learned DR has placed reliance on para 10.3, 10.8 and other paras of this order where the Hon’ble Supreme Court observes that in the case of this particular assessee i.e. Vikram Sujithkumar Bhatia, the books of accounts or documents or assets were seized by the AO of the non searched person only on 25/04/2017, which is after the amendment to section 153C, which is w.e.f. 01/06/2015. It is to be noted that the case of Vikram Sujitkumar Bhatia was one among the many cases disposed off by the Hon’ble Supreme Court, by a common order and not the only case. The facts of these cases would certainly be different to one another. The learned DR further contends that this factual observation fortifies the proposition that the amendment is prospective & not retrospective and does not apply to searches conducted before 01/06/2015.

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Page 28 of 77 The learned AR of the assessee submited that this proposition canvassed by the learned DR is entirely wrong and is opposed to the decision of the Hon’ble Supreme Court. The learned AR draws the attention of the Bench to Paras 9, 10, 10.1, 10.4, 10.5, 10.6, 10.7, 10.8 and 11 of the said judgement. The learned AR further submitted that what is important is the fact that the Hon’ble Supreme Court did not end their judgement with this observation made in para 10.3, which is relied upon by the revenue. They proceeded further and following several earlier judgments rendered by it over a span of several years, and held that the amendment carried out to Section 153C w.e.f 01/06/2015, is by way of substitution & hence it is retrospective & not prospective. In Para 10.4 of the said Judgement the Hon’ble Supreme Court refers to its land mark decision in the case of Shamrao.V.Parulekar vs District Magistrate (1952) 2 SCC 1/1952 SCR 683, to hold that amendment by way of substitution wipes out the earlier provision from the statute as if it never existed on the statute & that the provision which is brought into the statute by way of substitution is deemed to have been on the statute ever since section 153C came into existence. The Hon’ble Supreme Court in Para 10.8 of this order states that the amendment to Section 153C by substituting the words ‘Belongs or Belong To’ with the words ‘Pertains or Pertain to’, was done to remedy the mischief that was noted pursuant to the decision of the Delhi Court in the Pepsico case cited supra. The Court goes on to observe that if the amendment provision is held to be , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 29 of 77 prospective, it would then frustrate the very object of substitution and the very object and purpose of section 153C shall be frustrated. In Para 11 of the order the Hon’ble Supreme Court holds that the amendment to section 153C would apply to searches conducted before 01/06/2015. One important aspect which is to be taken note of, is that this decision is rendered on the applicability of the amended provisions of Section 153C to searches conducted before 01/06/2015 also. The Proviso to section 153C clearly specifies that the date on which search is conducted on a person, other than the searched person, shall be the date on which the assessing officer of such other person receives the seized material that pertains to/relates to such other person. Thus, by virtue of this decision, the amended provision of section 153C would necessarily apply to all cases where the AO of such other person has received such material before 01/06/2015. There was no need for the Supreme Court to adjudicate in a case where such material is received after 01/06/2015, as the amended provision, if applied prospectively, would suffice to ensure applicability of Section 153C. It was only because there was a need to adjudicate cases whether the amended provision ought to be applied retrospectively, where such material is received before 01/06/2015, that the Hon’ble Supreme Court felt the need to adjudicate on the same. The Hon’ble Apex Court discussed the issue involved in depth and after considering several relevant judicial pronouncements held that the amendment is by way of substitution , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 30 of 77 which has the effect that the amendment introduced is deemed to have existed on the statute ever since section 153C came to be on the statute.

10. The learned AR during the course of hearing further submitted that the learned Standing Council for the Revenue has urged that the information about the seized material was received from the investigation department & not from the AO of the person searched & hence the AO of this assessee could not have initiated proceedings under section 153C of the Act, in absence of a satisfaction being recorded by the AO of the searched person which was a sine qua non to initiate proceeding under section 153C of the Act & thus, the AO was justified in initiating proceeding under section 147 of the Act.

10.1 In the above arguments of the learned Standing Council for the Revenue, the learned AR submitted that the Revenue needs to be trashed for the following reasons:

(a). The assessee who was regularly assessed to tax in the Salary Circle was brought under the jurisdiction of this AO after centralisation of his file on & from 03/07/2012. The centralisation has taken place after almost a period of two years from the date of search i.e., 02/09/2010 in the case of Davanam Group. The AO who has passed the impugned assessment orders for the Assessment Years 2006-07, 2007-08, 2009-10 & 2010- , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

11, is the same AO who has passed assessment orders in the case of the searched persons also. There was no requirement from the investigation authorities to separately notify this AO about the assessee having undisclosed income. The seized material was very well available with this AO itself. The notice under section 148 has been issued by this AO after centralisation of the assessee’s file.

(b). As regards A.Y. 2008-09, even though the assessment order is passed by ACIT Circle - (6)(3)(1) Bangalore, which is after decentralization of the assessee’s file, the notice under section 148 was issued on 27/03/2015, by the AO in the Central Circle, prior to decentralization. The Date of Search in the case of Sobha Group being conducted on 10/10/2013, and the notice under section 148 issued on 27/03/2015, after a gap of more than 17 months, indicates that the AO was in possession of the seized material when he issued notice under section 148 of the Act.

(c). That apart, the Investigation wing cannot act as a post office & distribute seized material to the different assessing officers who have jurisdiction over different persons who are in some way or other connected to the person searched. In all such cases, despite their being incriminating material found & seized in a search, no notice need be issued under section 153C of the Act , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

& all cases can be covered by section 147 of the Act. If this practice is encouraged & given a stamp of approval, the very object and purpose of introducing Section 153C on the statute would be frustrated & rendered otiose & any such action of the executive should not be countenanced.

(d). The Hon’ble Supreme Court in para 10.8 of its order in the case of Vikram Sujitkumar Bhatia have clearly held that it has always been the duty of the courts to ensure that the object & purpose of a statute should not be allowed to get frustrated. When such is the duty cast on courts, the executive has no business to frustrate the intent & purpose of a statute.

Page 33 of 77 no words so chosen by the Legislature can be said to have been frivolously chosen. It has been contended that the non obstante clause as it exists, contemplates a complete over-ride over the sections mentioned therein, from which, there is no escape. It has been stated that if the clause had been worded containing the words "to the contrary", there would have been only a partial over-ride, i.e., except to the extent specifically provided in the section, the specified provisions would have been operative.

13. The learned Standing Council for the Revenue also urged that the AO only had information from the Investigation authority & was not in possession of seized material & hence he was correct in initiating proceedings under section 147 as he only relied upon information.

13.1 In the above arguments of the learned Standing Council for the Revenue, the learned AR submitted that contention of the learned Standing Council for the Revenue is patently false. It is important to take notice of the fact that in the Assessment orders passed for all the assessment years from 2006-07 to 2010-11, the AO in each one of those assessment orders mentions that reopening under section 147 of , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 34 of 77 the Act, by issue of notice under section 148 of the Act is based on material seized in the search proceedings. In view of this averment by the AO in the assessment orders it is not correct on the part of the Revenue to take a stand that reopening under section 147 was based on information received & not on the basis of material seized in a search. The Reasons Recorded for the Issue of notice under section 148, for each of these impugned assessment years, also has reference to seized material. This defense of the Revenue is against the admitted facts of the case & needs to be rejected outright.

13.2 The assessee strongly relies upon the decision of the Hon’ble Supreme Court noted above in the case of Vikram Sujitkumar Bhatia which clearly has ruled that the amendment is retrospective in nature & applies to all cases right from the date on which section 153C was brought on the statute.

13.3 The learned AR also relies upon the following decisions and submitted that these are binding upon this Tribunal:

13.3.1 The decision of the coordinate ‘B” bench of this Income Tax Appellate Tribunal in the case of M/s Ickon Projects vs ITO in ITA No’s 771 & 772/Bang/2017, where the ITAT held that the decision of the Supreme Court in the case of Vikram Sujitkumar Bhatia clearly mandates that the amended Section 153C is deemed to have been on , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 35 of 77 the statute since the very inception of that section & thus, if any material which is seized in a search conducted u/ 132 is to be used to assess a person who is not searched, the AO would have to necessarily initiate proceedings under section 153C of the Act, in order to do the same & proceeding, if initiated under section 147, to assess the same is bad in law. The coordinate bench has relied upon para 10.8 of the Supreme Court order to come to its conclusion.

13.3.2 It is also important to take note of the fact that it was the stand of the Revenue in the case of Vikram Sujitkumar Bhatia that the amendments to section153C, by way of substitution was to be given effect retrospectively and that the same is to be treated as having been on the statute ever since the section was introduced on the statute. The Hon’ble Supreme Court agreed with this proposition of the Revenue and decided the case in favour of the Revenue, overturning several decisions of various High Courts, who had all held that the amendments were prospective.

13.4 The Revenue cannot now take a stand that the amendment is prospective in the case of this assessee.

13.5 Another important fact to be noticed is that all decisions which are cited by the Revenue in support of its case are all rendered prior to the decision of the Hon’ble Supreme Court in the case of Vikram , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 36 of 77 Sujitkumar Bhatia & hence need to be ignored as they stand overturned by this decision of the Apex Court. The learned AR has also relied upon the decision of a coordinate bench in the case of Ickon Projects cited supra which is after the decision of the Supreme Court in the case of Vikram Sujitkumar Bhatia and which follows the law laid down therein.

14. Considering the rival submissions, the to 48/Bang/2020 are appeals filed by the Income Tax Department on three common following grounds for all the years which are needs to be adjudication on the contention of the Revenue that the AO was correct in assuming jurisdiction under section 147 of the Act and issue notice under section 148 of the Act, for all the assessment years, which are before us, are as under:

(i) The Learned CIT A erred in not appreciating the fact that the prevailing law at the time of reopening, required the seized document to belong to the person other than, the searched person referred to in section 153A, for issue of notice under section 153C in the case of the other person, and it was not sufficient that it pertained to the other person.

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Page 37 of 77 (ii) The Learned CIT A erred in not appreciating that the seized material relied upon to reopen the assessments has not been found to be the material belonging to the assessee but pertaining to the assessee.

(iii) The Learned CIT A erred in not distinguishing between information in the possession of the assessing officer as against possession of material seized during the course of a search.

15. We find from the orders of the learned CIT(A) for all four Assessment Years i.e., 2007-08, 2008-09, 2009-10 & 2010-11, that the First appellate authority, allowed the appeals of the assessee that assessment proceeding had to be initiated under section 153C and not under section 147 of the Act, relying on decisions of two coordinate Bangalore benches of the ITAT in the case of N. Suryanarayana in in & 1799/Bang/2017, Assessment Years 2020-11 & 2011-12 dated 01/12/2017 and in the case of Shri Srinivas Rao in & 1155/Bang/2015, Order dated 27/02/2018. The learned Standing Council for the Revenue was unable to prove that both these orders travel to the Hon’ble High Court. Here it is necessary to examine the Provisions of Sub section (1) of Section 153C, before & after the amendment w.e.f. 01/06/2015.

Sub Section (1) of Section 153C as it was before the amendment: 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or any books of account or documents seized or requisitioned, belongs to; 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 notice and assess or reassess the income of the other person in accordance with the provisions of section 153A.

Sub Section (1) of Section 153C after the amendment: 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 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 :

From the above provisions of section 153C(1) in the light of 16. judgment relied upon by both the parties in the case of Vikram Sujit Kumar Bhatia cited supra, it is seen that if the AO of the searched , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 39 of 77 person is satisfied that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or 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 searched person 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 such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A. Hence it is seen that even in the case of proceedings initiated on a person other than the searched person also, notice has to be issued by the AO to the other person under section. 153A of IT Act although such AO gets the jurisdiction under section. 153C of IT Act. Now we also reproduce the provisions of section 153A of IT Act which are as under.— "153A. (1) 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 9[and for the relevant assessment year or 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; , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

(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 9[and for the relevant assessment year or years] : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years 9[and for the relevant assessment year or years] : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years 9[and for the relevant assessment year or years] referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules10 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases 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 11[and for the relevant assessment year or years]: 11[Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless— (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 41 of 77 than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.- For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.] (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."

16.1 From the above provisions of section 153A, it is seen that in this section, it is provided that 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 of IT Act then the AO shall 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 immediately preceding the Assessment Year relevant to the previous Assessment Year in which such search is conducted and addition is made. Hence it is seen that in section 153A, there is no such , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 42 of 77 requirement that anything else is required to be satisfied other than conducting of search in the case of the concerned assessee for issuing notice under section. 153A of IT Act whereas under section. 153C of IT Act, the requirements are different. In that section i.e. section 153C of the IT Act, it is seen that it is primary requirement that the AO of the search person should satisfy that any money, bullion, jewelry or other valuable article or thing, seized or requisitioned, belongs to; or 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 searched person and then only he has to hand over the assets or documents to the AO having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A of the Act if that AO 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. Hence it is seen that in the cases covered by section 153C of the Act notice has to be issued to other person under section. 153A of the Act but before issuing such notice, he has to satisfy 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 previous year in which search is conducted and requirement is made. Hence it is seen that for issuing , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 43 of 77 notice under section 153A of the Act in the case of a person other than the searched person, the AO issuing such notice has to record satisfaction that books of accounts or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. But in the case of searched person, there is no such requirement prescribed under section. 153A of the Act. Since even in the case of a person other than the searched person, notice has to be issued by AO to such other person under section. 153A of the Act.

16.2 In the case of the assesse was centralized on 03.07.2012, whereas search was conducted on 02.09.2010 and in case of search conducted on 10.10.2013 in case of Shobha Group the notice was issued on 27.03.2015 after of 17 months. The period for issue of notice under section 153C was not expired. In this case prima-facie appears that the revenue officers have not properly followed the Instruction No, 1927 dated 21.07.1995 specifically in this point (vi) The seized material shall be handed over to the Assessing Officer at the earliest. The AO was the same person for the searched person and the assesse, he could have issue notice under section 153C after following the procedure laid down therein. The AO has choosing to issue notice under section 148 instead of 153C since there were incriminating materials were found and seized. The very basis of reason for reopening the case is on the basis of Seized materials unearthed during , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 44 of 77 the course of searched person. On examination of the documents handed over by the Investigation Wing to the AO has a bearing for determination of total income of such other person for the relevant preceding years. In view of the above the case is covered under section 153C of the Act but not under section 147/148 of the Act.

Page 45 of 77 to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax, as against at any special rate; that thus, after introduction of section 153A and in case of search, there shall be block assessment for six years; that search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961; that the very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in the ordinary course of regular assessment; that thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search; that on a plain reading of section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same; that as per the provisions of section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years; , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 46 of 77 that however, it is required to be noted that as per the second proviso to section 153A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate; that as per sub-section (2) of section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner; that therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period; that the intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search; that therefore, on a true interpretation of section 153A of the Act, if in case of a search under section 132 of the Act or a requisition under section 132A of the Act, any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 47 of 77 assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, however, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/148 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148 of the Act, as in such a situation, the Revenue cannot be left with no remedy; that therefore, even in case of block assessment under section 153A of the Act and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy; that if the submission on behalf of the Revenue, that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material, is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law; that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act; that the object of section 153A of the Act is to bring under tax the undisclosed income which is found , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 48 of 77 during the course of search or pursuant to search or requisition; that therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years' block assessment period even in case of completed/unabated assessment; that as per the second proviso to section 153A of the Act, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessment; that it does not provide that all completed/unabated assessments shall abate; that if the submission on behalf of the Revenue is accepted, in that case, the second proviso to section 153A of the Act and sub-section (2) of section 153A of the Act would be redundant and/or it would amount to re-writing the said provisions, which is not permissible under the law.

17.1 While holding as above, their Lordships observed that they were in complete agreement with the view taken by the Hon'ble Delhi High Court in the case of "Kabul Chawla" and that in the case of "Saumya Construction" and the decisions of the other High Courts taking the view that no addition can be made in respect of completed assessments in absence of any incriminating material.

17.2 As such, their Lordships concluded : (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 49 of 77 assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under section 147 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under section 147/148 of the Act and those powers are saved.

It was in view of the conclusion so arrived at, that the appeals 17.2 and Review Petition filed by the Department were dismissed by the Hon'ble Supreme Court in "Abhisar Buildwell (P.) Ltd.".

18. Now coming to the case of the assessee the search was conducted on 02/09/2010 & 10/10/2013 in the case of Davanam , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 50 of 77 Jewellers and Sobha Developers and incriminating materials were found and seized and it was marked as A2/DJPL/4 Page No. 13 to 16 and AO has quantified totaling to Rs. 3,48,33,582/- which is clear from the AO’s order at Para No. 4.2 to 4.4. noted supra. During the search it was found and seized by the Investigation Wing in respect of transactions carried out for purchase of the Madiwala Commercial Plaza and noted that huge premium have been paid by the assesse and it was not recorded by the assessee . Consequently, the case of the assessee came to be centralized on 03/07/2012. The AO has received information and perused the seized documents thereafter the AO has issued a notice under section 148 after the date of centralisation. The time limit to initiate proceedings under section 153C for each of the assessment years from Assessment Year 2006-07 to Assessment Year 2010-11 had not expired as on the date on which notice under section 148 was issued for these respective assessment years. Thus, the AO was not precluded from initiating proceedings under section 153C of the Act, since, in the case of the assessee, there were incriminating materials unearthed during the course of search, therefore the AO has to follow the procedure as per sections 153A/153C of the Act. In the above judgment, the Hon’ble Apex Court has analyzed to the submissions of the assesse and observed the applicability of sections 143, 153A, 147 & 263 of the Act which are as under:-

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Page 51 of 77 “4.1 The submissions on behalf of the assessees in a tabulated form thus are as under: S. No.. Particulars Assessment under Reassessment under Unabated section 143(3) pending section 147 pending assessments and abated and abated i. No Incriminating found in AO entitled to assess Scope of assessment No assessment material search. entire income, a under section 153A under section pending regular must be restricted to 153A in absence assessment stood grounds of reopening of any abated. of assessment, which incriminating was pending on date material. of search and stood Originally abated as a result of concluded search. AO not assessment entitled to go beyond which has scope of pending attained finality assessment. cannot be disturbed more so when no material found in search. ii. No incriminating material AO entitled to assess Scope of assessment Assessment found in search. entire income, as under section 153A under section Information/document from pending regular must be restricted to: 153A in absence sources other than search assessment stood un (a) grounds on which of any available with AO abated. proceedings incriminating reopened; and material may be (b)additional specific dropped. Post information coming dropping of to knowledge AO proceedings through modes other under section than search. AO not 153A, Revenue entitled to reopen may, basis other entire assessment information, and undertake proceed under roving/fishing section 147 enquiries. and/or 263 subject to satisfaction of jurisdictional , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 52 of 77 conditions under the said provisions. iii. Incriminating material AO entitled to assess Scope of assessment Assessment found during search only entire income, as under section 153A under section on issue 'A'. No other pending regular must be restricted to: 153A to be information/material assessment stood (a) grounds on which restricted to available or found from abated. AO also entitled proceedings Issue A relating any external sources. to assess entire income reopened; and to which and not just issue A. (b) issue A detected incriminating during search. material is found AO not entitled to during search. reopen entire Original assessment and concluded undertake assessment roving/fishing which has enquiries. attained finality cannot be disturbed, in context of issues in relation to which no documents are found in search. iv. Incriminating material AO entitled to assess Scope of assessment Assessment found during search only entire income including under section 153A under section on Issue 'A' Other Issue A and/or Issue B. must be restricted to: 153A could only information/material (a) grounds on which be done in available or found from proceedings respect of issue any external sources (not reopened; and A relating to in search) in respect of (b) issue A detected which Issue 'B'. during search; and incriminating (c) issue B for which material is found information during search. available. On conclusion of AO not entitled to assessment reopen entire under section assessment and 153A, Revenue undertake may, basis other roving/fishing information, , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 53 of 77 enquiries. proceed under section 147 and/or 263.

From the above table it is also clear that the case of the assessee does not fall under section 147 of the Act, since the materials were unearthed and seized during the course of search. In view of this the arguments of the learned Standing Council for the Revenue are not acceptable.

19. During the course of hearing the learned Standing Council for the Revenue relied in the judgement of the Hon’ble Supreme Court, in the case of ITO vs Vikram Sujit Kumar Bhatia, order dated 06.04.2023, reported in 453 ITR 417, The relevant part of the judgment are as under:-

“9. In light of the aforesaid facts, the question of law, which arises for consideration of this Court is, "Whether amendment brought to section 153C of the Income-tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of amendment", is required to be considered.

Page 54 of 77 from the premises of the searched person, it cannot be said that it "belongs to" the vendor. Therefore, the High Court view gave a very narrow and restrictive meaning to the expression/word "belongs to" and held that the ingredients of section 153C have not been satisfied. To remove the basis of the observation made by the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. (supra), now, section 153C came to be amended w.e.f. 1- 6-2015 by substituting the words "belongs or belong to" with the words "pertains or pertain to" insofar as the books of account and documents are concerned. Thus, having found that the observation made by the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. (supra) led to a situation where, though incriminating material pertaining to third party was found during the search proceedings under section 132, the Revenue could not proceed against the third parties, it was observed that the said observation made by the Delhi High Court in the aforesaid decision was coming in the way of suppressing the very mischief which the legislature intended to suppress, which necessitated the amendment in section 153C. Thus, it is a case of substitution of the words by way of amendment. 10.2 . 10.3 . 10.4 As observed hereinabove, section 153C has been amended by way of substitution whereby the words "belongs or belong to" have been substituted by the words "pertains or pertain to". As observed and held by this Court in the case of Shamrao V. Parulekar (supra) that amendment by substitution has the effect of wiping the earlier provision from the statute book and replacing it with the amended provision as if the unamended provision never existed. In the subsequent decision in the case of Zile Singh (supra), it is observed in paras 24 and 25 as under:— "24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. "Substitution" has to be distinguished from "supersession" or a mere repeal of an existing provision.

25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p. 565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P. [(2002) 2 SCC 645] , State of Rajasthan v. Mangilal Pindwal [(1996) 5 SCC 60] , Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. [(1969) 1 SCC 255] and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael [AIR 1963 SC 933] . In West U.P. Sugar Mills , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 55 of 77 Assn. case [(2002) 2 SCC 645] a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case [(1996) 5 SCC 60] this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case [(1969) 1 SCC 255] a three-Judge Bench of this Court emphasised the distinction between "supersession" of a rule and "substitution" of a rule and held that the process of substitution consists of two steps: first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place." 10.5 In the said decision, in paragraphs 14, 15, 18 and 20 with respect to the presumption against retrospective operation, it is observed and held as under:— "14. The presumption against retrospective operation is not applicable to declaratory statutes…. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended…. An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69).

Page 56 of 77 legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. (p. 392) ** ** ** 18. In a recent decision of this Court in National Agricultural Coop. Marketing Federation of India Ltd. v. Union of India [(2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent. ** ** ** 20. In Bengal Immunity Co. Ltd. v. State of Bihar [(1955) 2 SCR 603 : AIR 1955 SC 661] , Heydon case [(1584) 3 Co Rep 7a : 76 ER 637] was cited with approval. Their Lordships have said: (SCR pp. 632-33) "It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon case [(1584) 3 Co Rep 7a : 76 ER 637] was decided that — '… for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered— 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide.

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3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.' " 10.6 It is the case on behalf of the Revenue that section 153C is a machinery provision, which has been inserted with the purpose of carrying out the assessment of persons other than the searched person under section 132 of the Act, 1961. Even, in the impugned judgment and order, the High Court has, at paragraph 19.4 recorded that section 153C of the Act is a machinery provision. As per the settled position of law, the Courts, while interpreting machinery provisions of a taxing statute, must give effect to its manifest purpose by construing it in such a manner so as to effectuate the object and purpose of the statute. In the case of Calcutta Knitwears (supra), while interpreting section 158BD (which has been replaced by section 153C), this Court has observed in paras 18, 32 and 34 as under:— "18. Sections 158-BC and 158-BD of the Act are machinery provisions. Section 158-BC of the Act provides the procedure for block assessment and section 158-BD of the Act provides for assessments in the case of an undisclosed income of any other person. The said sections are relevant for the purpose of this case and, therefore, they are extracted. They read as under: "158BC. Procedure for block assessment.—Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132-A, in the case of any person, then— (a) the assessing officer shall — (i) in respect of search initiated or books of accounts or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 58 of 77 notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158-BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply; (c) the assessing officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132-A shall be dealt with in accordance with the provisions of section 132-B. *** 158BD. Undisclosed income of any other person.—Where the assessing officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132-A, then, the books of account, other 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 under section 158-BC against such other person and the provisions of this Chapter shall apply accordingly." ** ** ** 32. It is also trite that while interpreting a machinery provision, the courts would interpret a provision in such a way that it would give meaning to the charging provisions and that the machinery provisions are liberally , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 59 of 77 construed by the courts. In Mahim Patram (P.) Ltd. v. Union of India [(2007) 3 SCC 668] this Court has observed that: (SCC p. 680, paras 25-26) "25. A taxing statute indisputably is to be strictly construed. (See J. Srinivasa Rao v. State of A.P. [(2006) 12 SCC 607]) It is, however, also well settled that the machinery provisions for calculating the tax or the procedure for its calculation are to be construed by ordinary rule of construction. Whereas a liability has been imposed on a dealer by the charging section, it is well settled that the court would construe the statute in such a manner so as to make the machinery workable.

26. In J. Srinivasa Rao [(2006) 12 SCC 607] this Court noticed the decisions of this Court in Gursahai Saigal v. CIT [(1963) 48 ITR 1 (SC)] and Ispat Industries Ltd. v. Commr. of Customs [(2006) 12 SCC 583]. '17. In Gursahai Saigal [(1963) 48 ITR 1 (SC)] the question which fell for consideration before this Court was construction of the machinery provisions vis-à-vis the charging provisions. The Schedule appended to the Motor Vehicles Act is not machinery provision. It is a part of the charging provision.

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Page 60 of 77 10.7 In the case of Girdhari Lal (supra), it is observed and held by this Court that once the primary intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation. It is further observed that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. It is further observed that the ascertainment of the legislative intent is a basic rule of statutory construction and that a rule of construction should be preferred which advances the purpose and object of a legislation and that though the construction, according to the plain language, should ordinarily be adopted, such a construction should not be adopted where it leads to anomalies, injustices or absurdities. On interpretation of the statute, it is observed in paras 17 to 21 in the case of Hindustan Bulk Carriers (supra) as under:— "17. If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result. (See Nokes v. Doncaster Amalgamated Collieries [(1940) 3 All ER 549 : 1940 AC 1014 : 109 LJKB 865 : 163 LT 343 (HL)] referred to in Pye v. Minister for Lands for NSW [(1954) 3 All ER 514 : (1954) 1 WLR 1410 (PC)] .) The principles indicated in the said cases were reiterated by this Court in Mohan Kumar Singhania v. Union of India [1992 Supp (1) SCC 594 : AIR 1992 SC 1].

18. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute.

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Page 62 of 77 and purpose of the Act/Statute shall be avoided by the Court. If the interpretation as canvassed on behalf of the respective respondents is accepted, in that case, even the object and purpose of section 153C namely, for assessment of income of any other person (other than the searched person) shall be frustrated.

11. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court is held to be unsustainable and the question, i.e., "Whether the amendment brought to section 153C of the Income-tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of amendment?", is answered in favour of the Revenue and against the assessees and is answered accordingly. Therefore, it is observed and held that the amendment brought to section 153C of the Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of the amendment. The impugned common judgment and order passed by the High Court, therefore, deserves to be quashed and set aside and is accordingly quashed and set aside. However, as before the High Court respective assessment orders were challenged mainly on the aforesaid issue, which is now answered in favour of the Revenue as above, we reserve the liberty in favour of the respective assessees to challenge the assessment orders before CIT (A) on any other grounds which may be available and it is observed that if said appeals are preferred within four weeks from today, the same be considered in accordance with law and on their own merits, on any other grounds.

19.1 In this case of Vikram Sujit Kumar Bhatia, being the lead case & other related cases, which were all disposed off by a common order, the Income Tax Department had initiated reassessment proceedings by issuing notice under section 153C of the Act against the respective assessees therein. The Assessees took the stand that reassessment proceedings under section 153C was bad in law in as much the seized material, relied upon to come to a satisfaction that income had escaped assessment, did not actually belong to the assessees. The contention of , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 63 of 77 the assessees was upheld by the respective High Courts, who held that in order to initiate proceedings under section 153C of the Act in the case of any person, the seized material relied upon to come to a satisfaction that income of such person has escaped assessment, must necessarily belong to such person and it is not enough that the material relates to or pertains to such person. The Department challenged the decision of the High Court taking the stand that it is not necessary that incriminating seized material must belong to such person on whom proceeding under section 153C of the Act is initiated & proceeding initiated under section 153C of the Act would be valid even if the material does not belong to such person but is relating or pertaining to such person & where material pertains to or relates to such person initiation of proceeding under section 153C of the Act is mandatory. The Hon’ble Supreme Court upheld the contention of the Revenue & overturned the decisions of the respective High Courts on the ground that the amendment was made by way of substitution & thus is deemed to have been on the statute, ever since the Section was brought on the Statute. In view of this the above judgment does not help to the Revenue but supports the arguments of the learned AR of the assesse.

19.2 The Judgment of the Jurisdictional Karnataka High Court in the case of Dinakar Suvarna vs DCIT Central Circle in of 2015 relied by the learned AR also supports the case of the assessee, where the Hon’ble High Court held that when material which is seized in a , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 64 of 77 search proceeding, is to be used to assess a person, other than the searched person, the AO has to necessarily initiate proceedings under section 153C of the Act & cannot initiate proceedings under section 147 of the Act, relying on such material. It is important to note that in this case the assessment had been completed before the amendment to section 153C of the Act was carried out and even before the Judgement in the case of Vikram Sujithkumar Bhatia was rendered.

19.3 The Judgment of the Jurisdictional Karnataka High Court in the case of PCIT Vs. VSL Mining Company (P) Ltd in of 2020, order dated 20/09/2024 relied by the learned AR, where the Hon’ble High Court, following the decision of its coordinate bench in the case of Dinakar Suvarna vs DCIT Central Circle in of 2015, held that when material, which is seized in a search proceeding, is to be used to assess a person, other than the searched person, the AO has to necessarily initiate proceedings under section 153C of the Act & not assess the same in a regular scrutiny assessment under section 143(3) of the Act, even for an assessment year which does not abate. It is to be noted that in this case also the assessment had been completed before the amendment to section 153C was carried out. The relevant assessment year is 2008-09 and AO issued notice under section 148 of the Act. The Hon’ble High Court has held as under:- 12. It is relevant to note that Chapter VI of the IT Act contemplates the procedure for assessment, wherein various stipulations are provided in terms of Sections 136 to 153 of the IT Act. Section 153A, 153B and 153C , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 65 of 77 have been inserted by the Finance Act, 2003 w.e.f., 1.6.2003, which specifically contemplates assessments in cases of search or requisition. Section 153A of the IT Act contains various stipulations with regard to the person searched and Section 153C of the IT Act contains various stipulations with regard to such other person, other than the person searched.

11. Further, the Assessing Officer has not recorded his satisfaction with regard to escapement of income. On the other hand, he has based Revenue's case entirely on the statement of assessee......." (emphasis supplied)

Page 66 of 77 bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A.

26. Special procedure is prescribed under Section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it differently the provisions of Section 153A to 153D have prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148.

27. Section 153A and 153C starts with non-obstante clause. The procedure for assessment/reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessment or reassessment under Sections 139, 147, 148, 149, 151 & 153.

32. The argument that Section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the 'total income'. It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to. " (emphasis supplied) 15. In view of the settled position of law as noticed above, once material pursuant to a search is relied upon, the AO is required to follow the procedure as contemplated under Section 153A, 153B and 153C of the IT Act and it is impermissible for the AO to continue the regular assessment.

The Judgment of the Rajasthan High Court in the case of Shyam 20. Sunder Khandelwal vs ACIT, 161 taxmann.com 255 (Rajasthan), order dated 19/03/2019 relied by learned AR, wherein the Rajasthan High Court concurring with the view taken by the Karnataka High Court in , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 67 of 77 the case of Dinakar Suvarna. This case is related to the assessment year 2014-15 prior to amendment in section 153C of the Act w.e.f. 01.06.2015. On the similar facts the AO issued notice under section 148 of the Act and completed the assessment under section 147 of the Act, there was incriminating materials were found during the search conducted under section 132 of the Act at the premises of ‘Manihar’ Group. During the course of search, certain documents including pen drives were seized. On writ filled by the assseee the Hon’ble High Court held as under:-, 23. The reasons supplied in case in hand for initiation of proceedings under section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group.

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28. The language of explanation 2 to new section 148 is akin to section 153A and section 153C. Corollary being that after seizing of operational period of section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted section 148. 29. The Department has not set up a case that for initiating proceedings under section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing 'total income' in case of incriminating material found during search or requisition. 30. The argument that by enactment of section 153A to 153D has not eclipsed section 148 does not enhance the case of respondent to initiate the proceedings under section 148. On fulfillment of two conditions for invoking section 153C the proceeding in accordance with section 153A are to be initiated. The operating field of and section 153A to 153D and section 148 are different. Applicability of section 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition. 31. The other aspect of the matter is that under section 153A and 153C, 'the total income' is to be assessed. The total income includes returned income (if any), undisclosed income unearthed during the search or requisitioning and information possessed from the other sources.

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Page 69 of 77 For Illustration:- An assessee had returned income of Rs.100, undisclosed income of Rs.200 is unearthed during search and there is information from annual information statement of non-disclosure of income of Rs.150/-. The AO under section 153A and 153C shall pass order dealing with income of Rs.100+Rs.200+Rs.150, the total income being Rs.450/-. In cases where there is no unearthing of undisclosed income of Rs.200/-, the department can resort to proceeding under section 147/148.

The decision of the coordinate ‘B” bench of this Income Tax 21. Appellate Tribunal in the case of M/s. Ickon Projects vs ITO in & 772/Bang/2017, where the ITAT held that the decision of the Supreme Court in the case of Vikram Sujitkumar Bhatia clearly mandates that the amended in Section 153C is deemed to have been on the statute since the very inception of that section & thus, if any material which is seized in a search conducted under section 132 of the Act is to be used to assess a person who is not searched, the AO would have to necessarily initiate proceedings under section 153C of the Act, in order to do the same & proceeding initiated under section 147 of the Act to assess the same is bad in law.

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To sum up, going through the arguments advanced by both the 22. sides and considering the case laws noted supra. we find that the learned CIT (A) has done good reasoned order and there is no any infirmity. The AO should not have issued notice under section 148 of the Act. In the result the appeals filed by the Revenue are dismissed in above terms.

This appeal filed by the Assessee pertains to the Assessment Year 2006-07. The assessee challenged the Assessment Order on the ground of jurisdiction stating that reopening under section 147 of the Act was bad in law and the correct way to do the same was by initiating proceeding under section 153C of the Act. The assessee succeeded before the CIT(A). The Revenue, did not file appeal on the order of the CIT(A) before the ITAT, filed an application under section 154 of the Act before the CIT(A) on the ground that CIT(A) had not considered certain important facts on record while passing the Appellate Order and requesting the CIT(A) to rectify the error and pass a fresh order after rectification. The CIT(A) after hearing both sides passed an order dated 30/07/2021, in 11/BNG/2014-15, dismissing the rectification application, by categorically holding that there was no mistake apparent on record and that all facts were duly considered before passing the order. The , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 71 of 77 CIT(A) also went on to hold that the issue raised by the revenue was debatable in nature and the same was not amenable to rectification under section 154 of the Act. The Revenue, after a change in incumbent in the office of the CIT(A), filed one more application for rectification under section 154 of the Act, on the ground that the previous CIT(A) had erred in dismissing the rectification application under section 154 by overlooking certain important facts on record. This time the application under section 154, filed by the AO, came to be allowed.

24. Aggrieved by the Order of the CIT(A), in allowing the rectification application, the Assessee has filed this appeal before this Tribunal on the following grounds.

2. The learned Commissioner of Income-tax [Appeals] erred in recalling the original appellate order passed by his predecessor dated 17/10/2019, which is not in accordance with law, on the facts and circumstances of the case.

Page 72 of 77 first rectification application filed by the learned assessing officer under section 154 of the Act dated 30/07/2021, on the facts and circumstances of the case.

4. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the first application filed by the learned assessing officer under section 154 of the Act before the then learned Commissioner of Income-tax [Appeals] having been considered and dismissed, a second application for the rectification of very same mistake was not maintainable and ought to have dismissed the second rectification application filed by the assessing officer as not maintainable, on the facts and circumstances of the case, 5. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the issues sought to be rectified under section 154 of the Act by the learned assessing officer, against the original appellate order passed by the predecessor Commissioner of Income-tax [Appeals], is bad in law in as much as the issue sought to be rectified, required a long drawn process of verification and debatable issue, consequently the learned Commissioner of Income-tax [Appeals] did not have jurisdiction or power to review the original appellate order passed by his predecessor, on the facts and circumstances of the case.

6. The impugned order of recalling passed by the learned Commissioner of Income-tax [Appeals] is bad in law as he has traversed beyond his scope and consequently passed a perverse order by recalling the original appellate order passed by his predecessor, on the facts and circumstances of the case.

Page 73 of 77 requires to be set aside as bad in law, on the facts and circumstances of the case. 8. The Appellant craves leave to add, alter, amend, delete or substitute any of the grounds urged above. 9. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed and appropriate relief may be granted in the interest of justice and equity.

We note the fact that the CIT(A), being the very same person 25. who passed the first appellate order, while dismissing the first application for rectification has analyzed the issue, the facts and the judicial decisions relied upon to give relief to the assessee in the original appellate order, which is the subject matter of rectification and the ld. CIT(A) holds that there is no error, much less an error which is amenable to rectification under section 154 of the Act. Further the CIT (A), relying upon the decision of the jurisdictional Karnataka High Court in the case of one K.S. Venkatesh, has held that issue whether the substitution to the section 153C of the Act brought about in the statute was prospective or being clarificatory, is retrospective, being debatable in nature, the same cannot be a subject matter of rectification under section 154 of the Act.

26. In the second application under section 154 of the Act, which came to be allowed, the new incumbent CIT(A) has relied upon the order of the Supreme Court in the case of CIT Vs. Sinhgad Technical , 46, 47, 48/Bang/2020 ITA No.205/Bang/2022

Page 74 of 77 Education Society 84 Taxmann 290 (SC) & held that the original appellate order suffered from Mistake Apparent On Record & needs to be rectified & allowed the appeal of the Revenue.

27. We find that the incumbent CIT(A) was not correct in allowing this appeal for the reason that the proposition dealt with & approved by the Hon’ble Supreme Court is that initiation of proceeding under section 153C of the Act in respect of an assessment year can be done only if there was seized material, pertaining to such Assessment Year and not otherwise. This case law is not relevant to the issues raised in the rectification application under section 154. The actual proposition approved by the Supreme Court, in this cited case, has held that incriminating Seized material pertaining to one year does not give jurisdiction to reopen an assessment under section 153C of another assessment year.

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Page 76 of 77 rectification order passed by the CIT(A). The very same issue was also involved in the Assessment Year 2007-08 to 2010-11 and facts are also same. Only the Revenue has taken recourse against the first Order passed by the CIT(A) dated 17.10.2019 and which was dismissed and again the Revenue filed rectification application which was accepted. We noted that in the case of assessee, the notice has been issued under section 148 of the Act on the basis of information received from DDIT (Inv.) and resorted to section 148 of the Act for the Assessment Years 2006-07 to 2010-11. The Hon’ble Apex Court has decided the issue in the case of Vikram Sujitkumar Bhatia (supra) and held that amendment made in section 153C of the Act is retrospective as we have held above in appeals for Assessment Years 2007-08 to 2010-11 in favour of the assessee. Since the issues involved in this case are also similar, therefore, the CIT(A) has wrongly decided the issue against the assesse and allowed the rectification application in favor of revenue. Accordingly, we set aside the Order passed by the CIT(A) dated 27.01.2022 vide DIN and Order No.ITBA/REC/M/154/2021- 22/1039114500(1). In the result, we allow appeal filed by the assessee.

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Pronounced in the open court on the date mentioned on the caption page.