ACIT, JAIPUR vs. SHRI KALYAN BUILDMART PVT. LTD., JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jkWo] U;kf;d lnL; ,oa Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 152 & 153/JP/2018 fu/kZkj.k o"kZ@Assessment Years : 2007-08 & 08-09. cuke M/s. Kalyan Buildmart Pvt. Ltd., The ACIT, Vs. D-44, Subhash Marg, C-Scheme, Central Circle-1, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAKCS 1090 B vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 517 & 518/JP/2017 fu/kZkj.k o"kZ@Assessment Years : 2007-08 & 08-09. cuke The ACIT, M/s. Kalyan Buildmart Pvt. Ltd., Vs. Central Circle-1, D-44, Subhash Marg, C-Scheme, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAKCS 1090 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri S.R. Sharma and Shri R.K. Batra (C.As.) jktLo dh vksj ls@ Revenue by : Shri Varinder Mehta (CIT)

lquokbZ dh rkjh[k@ Date of Hearing : 15.05.2018. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 28/06/2018. vkns'k@ ORDER PER BENCH :

These two sets of cross appeals are directed against two separate orders of ld. CIT (Appeals) both dated 31st March, 2017 for the assessment years 2007-08 and 2008-09 respectively. There is a delay of 240 days in filing both the appeals by the

2 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

assessee. The assessee has filed the applications for condonation of delay which are

supported by the affidavit. The reasons given in the application for condonation of

delay are identical for both the appeals.

filing the appeals by the assessee. The assessee has explained the cause of delay in

filing the appeals that the ld. CIT (A) has decided the appeals of the assessee in

deleting the addition made by the AO on protective basis and, therefore, since the

ld. CIT (A) has given a finding in favour of the assessee on merits of the issue, the

assessee did not file the appeals against the impugned orders of the ld. CIT (A).

However, when the assessee received the notice of the appeals by the revenue, the

assessee has consulted its Chartered Accountant and after the advise of the Counsel,

the assessee preferred these cross appeals wherein the validity of reopening of the

assessments is challenged. The ld. A/R of the assessee has submitted that the ld.

CIT (A) has not adjudicated the grounds of the assessee challenging the validity of

reopening of the assessment by giving the reason that since the appeals on merits

were decided in favour of the assessee, therefore, the legal ground raised by the

assessee becomes infructuous. Hence the ld. A/R has pleaded that once the

revenue preferred the appeals against the impugned orders of the ld. CIT (A), the

assessee also filed these cross appeals and raised the issue of validity of reopening

of the assessment. It is pleaded that the delay in filing the appeals may be

condoned as it was neither willful nor deliberate but due to the facts and

circumstances as explained.

3 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

2.1. On the other hand, the ld. D/R has vehemently opposed the condonation of

delay in filing the appeals and submitted that there is inordinate delay of 240 days in

filing the appeals and, therefore, the assessee cannot be allowed to file the appeals

as and when the assessee thinks or decide to file the appeals ignoring the limitation

provided under section 253 (3) of the IT Act.

record, we note that the ld. CIT (A) has deleted the protective addition made by the

AO in the hands of the assessee while passing the impugned orders and

consequently did not propose to adjudicate the grounds raised by the assessee

against the validity of reopening of the assessments for the assessment years under

consideration. The assessee initially did not prefer appeals against the impugned

orders of the ld. CIT (A) as the same were decided in favour of the assessee except

non adjudication of the legal issues. Since the revenue has filed the appeals against

the impugned orders of the ld. CIT (A), the assessee also filed the cross appeals

after receiving the notice of the appeals filed by the revenue. Thus there is a delay

of 240 days in filing these two appeals by the assessee. It is pertinent to note that

as per the provisions of section 253(4) even in case the assessee or Assessing

Officer may not have appealed against the order of the ld. CIT (A) but on receipt of

notice that an appeal against the impugned order of the ld. CIT (A) has been

preferred by the other party, he may file a Memorandum of Cross Objection within a

period of 30 days of receipt of notice. For ready reference we quote section 253(4)

as under :-

4 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

“ Sec. 253(4) :

The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Commissioner (Appeals), has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner (appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).”

Such memorandum of cross objection shall be disposed off by the Tribunal as if it

was an appeal presented within the time prescribed in sub-section (3) of section 253

of the IT Act. Therefore, the assessee could have very well file the cross objection

after receiving the notice of appeals filed by the revenue against the impugned

orders of the ld. CIT (A). The ld. CIT (A) has not adjudicated the grounds raised by

the assessee regarding validity of reopening on the reason that the issue of quantum

has been decided in favour of the assessee as observed at page 73 of the impugned

order :-

“ Further, it view principle of piercing the corporate veil to book behind it, no addition required to be made in the hands of the assessee M/s. Shri Kalyan Buildmart Pvt. Ltd. as additions (supra) are required to be made in the hands of (i) Sh Rajendra Kr. Jain, (ii) Sh Navrattan Kothari, (iii) Sh Vimal Chand Surana & (iv) Sh Kushal Chand Surana. Further, no addition is also required to be made on protective basis in the hands of Sh Madan Mohan Gupta.

5 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

As issue of the quantum has been decided in favour of the assessee, the issue pertaining to re-open u/s 147 of the Act, has become academic in nature, hence not adjudicated.”

Hence, if the assessee has preferred the present appeals instead of filing the cross

objections then the delay in filing these appeals are only because of the technical

reason of not preferring the cross objections and further since the issue on merits

was decided by the ld. CIT (A) in favour of the assessee, then to protect its interest

the assessee has preferred these cross appeals. Accordingly, in the facts and

circumstances of the case, we find that filing the appeals belatedly the assessee

could not achieve any ulterior purpose in under-hand way. Hence we condone the

delay of 240 days in filing of both these appeals.

ITA No. 152/JP/2018 A.Y. 2007-08 :

“ 1. That on facts and in the circumstances of the case the ld. CIT (A) has erred in not adjudicating the ground that the ld. Assessing Officer has erred in issuance of notice under section 148 of the Income Tax Act, 1961 (the Act) and making assessment under section 143(3) r.w.s. 147 of the Act. The ld. Assessing Officer failed to appreciate that conditions for reopening the assessment as mentioned in first proviso to section 147 of the Act are not fulfilled before issuance of notice under section 148 of the Act.

6 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

thus on these facts of the case the ld. Assessing Officer in law could only initiate action under section 153C of the Act.

Your appellant craves leave to add, alter, amend or withdraw all or any of the above grounds of appeal herein and to submit statements, documents and papers as may be considered necessary either at or before hearing of appeal.

The revenue has also raised common grounds except the difference of quantum in

these appeals as under :-

ITA NO. 517/JP/2017 A.Y. 2007-08 :

“ 1. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 5,00.00.000/- made by the AO on protective basis and, in not issuing directions u/s 150(1) of the I.T. Act for taxing the said amount in the hands of Sh. Madan Mohan Gupta and Smt. Shashikala Gupta who were the share holders of the assessee company, as the land rights were transferred through sale of shares of assessee company.

The Appellant crave leave or reserves the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

The ld. A/R of the assessee has stated at Bar that since the assessment year 2007-

08 is beyond the period of six years from the date of search, therefore, the assessee

does not press ground no. 2 and the same may be dismissed as not pressed. The

ld. D/R has raised no objection as the ground no. 2 of the assessee’s appeal for the

assessment year 2007-08 is dismissed as not pressed.

7 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Ground No. 1 of the assessee’s appeal is regarding validity of

reopening the assessment.

2013. During the course of search and seizure operation certain incriminating

materials were found and seized including a diary from possession of Shri Madan

Mohan Gupta. The said diary allegedly contained transactions of cash dealing in

respect of land situated at village Chainpura, behind Entertainment Paradise, Tehsil

Sanganer, Jaipur (Rajasthan). The statement of Shri Madan Mohan Gupta was

recorded during the search and post search enquiry wherein he stated that the land

in question was purchased by Shri Rajendra Kumar Jain through him. The deal was

stated to be finalized at Rs. 12,43,27,000/- on which discount of 1% was allowed for

registration of land. Therefore, a net payable amount of Rs. 12,30,84,000/- was

agreed by the parties. Later on, this land was sold to Shri K.G. Kothari by way of

transfer of shares of M/s. Kalyan Buildmart Pvt. Ltd. in the land which was originally

purchased. Thus Shri Madan Mohan Gupta stated that he purchased the land on

behalf of Shri Rajendra Jain. Subsequently, the land was stated to have been sold to

Shri Navratan Kothari, Shri Vimal Chand Surana HUF and Shri Kushal Chand Surana

by way of Sale Deed/Transfer of Shares of M/s. Kalyan Buildmart Pvt. Ltd. On the basis of the seized material found during the search conducted on 23rd May, 2013

and statement of Shri Madan Mohan Gupta, the A.O. proposed to reopen the assessment by issuing the notice under section 148 dated 27th March, 2014 to

assess the income of Rs. 5,00,00,000/- being ‘On Money’ paid in respect of purchase

8 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

of land vide Sale Deed dated 24th August, 2006. The AO completed the assessment under section 147 read with section 143(3) on 27th March, 2015 but made the

addition of the said amount of Rs. 5,00,00,000/- in the hands of the assessee on

protective basis as the addition on substantive basis has been made in the case of

Shri Madan Mohan Gupta. The assessee challenged the action of the AO before ld.

CIT (A) and also challenged the validity of reopening. The ld. CIT (A) deleted the

addition made by the AO on protective basis and, therefore, did not prefer to

adjudicate the issue of validity of reopening on the ground that it becomes academic

in nature.

processed under section 143(1). He has further contended that the reasons

recorded by the AO for reopening of the assessment do not reveal any income

assessable to tax in the hands of the assessee escaped assessment. The assessee

had duly recorded the transaction of purchase of land in its books of account and also shown in the Balance Sheet as on 31st March, 2007. Therefore, in the absence

of any material or even in the absence of any allegation in the statement of Shri

Madan Mohan Gupta that the assessee has paid any money over and above shown

in the Sale Deed and duly recorded in the books of accounts, the AO was having no

basis to form the belief that the alleged income of Rs. 5,00,00,000/- has escaped

assessment in the hands of the assessee. The ld. A/R has further contended that

there must be some material on record to enable the AO to entertain belief or for

initiating reassessment proceedings. The material on record should be such as to

9 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

lead to the inference that income has escaped assessment. In support of his

contention he has relied upon the decision of Hon’ble Supreme Court in case of ITO

vs. Lakhmani Mewal Das, 103 ITR 437 (SC) and submitted that there should be a

rational connection/direct nexus or live link between the material and the belief. In

the absence of rational and intelligible nexus between the material and the belief,

the AO could not have reason to believe that any part of the income of the assessee

has escaped assessment. The ld. A/R has further contended that the assessee

company was incorporated on 21.08.2006 and the transaction of purchase of the

land in question was done vide Sale Deed dated 24.08.2006. Therefore, there is no

question of assessee just on the date of incorporation could have any undisclosed

income. The reasons for forming of belief do not have a rational connection with the

relevant material as the basis of reopening of the assessment. The ld. A/R has

further contended that the reassessment proceedings cannot be initiated to make a

protective assessment as did by the AO in the case of the assessee. Therefore, the

AO was not having any reasonable and rational basis to believe that the income

assessable to tax has escaped assessment. He has relied upon the decision of

Hon’ble Bombay High Court in the case of DHLF Venture Capital Fund vs. ITO, 358

ITR 471 (Bom.).

7.1. On the other hand, the ld. D/R has submitted that there is no dispute that the

land in question was purchased by the assessee vide Sale Deed dated 24.08.2006.

The seized material and particularly the diary contains the transactions of cash

payment against the purchase of the land in question and, therefore, the prima facie

tangible material was came to the notice of the AO which revealed that an income

10 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

assessable to tax in the hands of the assessee had escaped assessment. The ld.

D/R has further contended that when the purchase transaction is not in dispute then

all other connected transactions of the purchase of the land are also done on behalf

of the assessee and the income resulting in the transactions of payment of cash has

to be assessed in the hands of the assessee. At the time of reassessment

proceedings, the AO is not required to establish the correctness of the reasons to

belief but if on the basis of the material available with the AO a prima facie

reasonable belief can be formed that an income assessable to tax has escaped

assessment then the initiation of reassessment proceedings are valid and justified.

record. There is no dispute that the assessee company had purchased the land in

question vide Sale Deed dated 24.08.2006. The said transaction of purchase of land

was duly recorded in the books of accounts of the assessee and also reflected in the Balance Sheet as on 31st March, 2007. The original return of income was filed by the assessee on 20th February, 2008 which was processed under section 143(1) by

the AO. The reopening of the assessment is based on the seized material and

statement recorded under section 132(4) of Shri Madan Mohan Gupta pursuant to the search under section 132 of the Act on 23rd May, 2013 in the case of Shri

Rajendra Jain Group. Since this assessment under consideration is beyond the

period of six years from the date of search, therefore, it was not falling in the scope

of section 153A/153C of the Act and consequently the AO reopened the assessment by issuing the notice under section 148 on 27th March, 2014. The reasons recorded

by the AO for reopening of the assessment are as under :-

11 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

“ During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exhibit 1 to 5 of Annexure-AS and Exhibit 1 to 8 of Annexure-A. The documents found and seized from the residence and business premise of Shri Madan Mohan Gupta during the course of search proceedings revealed that on various page of Exhibit-1, 2 & 5 of annexure A as well as Exhibit-1 of Annexure AS, some date wise amounts have been written in the name of ‘KGK’. These transactions total up to Rs. 5,00,00,000/-. It is further seen that these transactions are in respect of the registered sale deeds made in favour of Shri Kalyan Buildmart on 24.08.2006 falling in FY 2006-07 i.e. AY 2007-08. The details of cash payment are in respect of the registered sale deed mentioned above. The assessee has failed to satisfactorily explain the transactions recorded on this page. I have thus reason to believe that income to the extent of Rs. 5,00,00,000/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.”

Thus the reopening is based on certain incriminating documents found and seized during the search and seizure operation dated 23rd May, 2013 as well as the

statement of Shri Madan Mohan Gupta recorded during the search proceedings. The

AO proposed to reassess the income of Rs. 5,00,00,000/- in the hands of the

assessee being the cash payment in respect of the transaction of purchase of land

vide Sale Deed dated 24.08.2006. It is pertinent to note that the assessee company

was incorporated on 21.08.2006 and there was no business activity between

21.08.2006 to 24.08.2006. Therefore, the payment of alleged On Money of Rs.

5,00,00,000/- cannot be imputed in the hands of the assessee as undisclosed

income when the assessee itself has came into existence only on 21.08.2006. This

fact of incorporation of the assessee on 21.08.2006 was very well explained by Shri

12 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Madan Mohan Gupta who is the promoter of the assessee company along with his

wife and subsequently the shares of the assessee company was sold/transferred to

Shri Navratan Kothari, Shri Vimal Chand Surana HUF and Shri Kushal Chand Surana.

The documents were found and seized from Shri Madan Mohan Gupta and in his

statement it was explained that the transactions recorded in the diary pertains to

cash dealings regarding the purchase of land in question on behalf of one Shri

Rajendra Jain. Hence, except the actual transaction of purchase of land by the

assessee vide Sale Deed dated 24.08.2006 which is duly recorded in the books of

accounts, there is no material or document found and seized during the search and

seizure action which reveals or indicates payment of any cash by the assessee. The

transactions recorded in the seized material were explained by Shri Madan Mohan

Gupta as the amount received from Shri Rajendra Jain and, therefore, in the

absence of any allegation or any fact recorded in the seized document or revealed in

the statement made by Shri Madan Mohan Gupta that the alleged payment was

made by the assessee, there is no rational in forming the belief that an amount of

Rs. 5,00,00,000/- was assessable to tax in the hands of the assessee has escaped

assessment particularly keeping in view the fact that the assessee itself was

incorporated on 21.08.2006. The Hon’ble Bombay High Court in case of DHLF

Venture Capital Fund vs. ITO (supra) has held in para 18 and 19 as under :-

“ 18. A protective assessment as the learned author indicates is regarded as being protective because it is an assessment which is made ex abundanti cautela where the department has a "doubt as to the person who is or will be deemed to be in receipt of the income". A departmental practice, which has gained judicial recognition, has emerged where it appears to the Assessing

13 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Officer that income has been received during the relevant Assessment Year, but where it is not clear or unambiguous as to who has received the income. Such a protective assessment is carried out in order to ensure that income may not escape taxation altogether particularly in cases where the Revenue has to be protected against the bar of limitation. But equally while a protective assessment is permissible a protective recovery is not allowed. However, such an exercise which is permissible in the case of a regular assessment must necessarily yield to the discipline of the statute where recourse is sought to be taken to the provisions of Section 148. Protective assessments have emerged as a matter of departmental practice which has found judicial recognition. Any practice has to necessarily yield to the rigour of a statutory provision. Hence, when recourse is sought to be taken to the provisions of Section 148, there has necessarily to be the fulfilment of the jurisdictional requirement that the Assessing Officer must have reason to believe that income has escaped assessment. To accept the contention of the Revenue in the present case would be to allow a reopening of an assessment under Section 148 on the ground that the Assessing Officer is of the opinion that a contingency may arise in future resulting an escapement of income. That would, in our view, be wholly impermissible and would amount to a rewriting of the statutory provision. Moreover, the reliance which is sought to be placed on the provisions of Explanation 2(a) to Section 147 is misconceived. Explanation 2 provides a deeming definition of cases where income chargeable to tax has escaped assessment and clause (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simpliciter. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs.32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment' in future. Writing legislation is a constitutional function entrusted to the legislature.

14 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

assessment under Section 147 for Assessment Year 2008-09 has not been fulfilled.”

Therefore, when the AO finally found that the material on the basis of which the

proceedings for reassessment were initiated were not sufficient to assess the income

and only made a protective assessment then such an exercise of the AO is not

permissible to take a chance by resorting to the provisions of section 147/148 of the

Act. In view of the above discussion, facts and circumstances of the case and the

decision of Hon’ble Bombay High Court in the case of DHLF Venture Capital Fund vs.

ITO (supra), we hold that the reopening of the assessment is not valid and

consequently we quash the reopening and reassessment made by the AO.

Ground No. 2 for the assessment year 2008-09.

the assessee has also challenged the reopening on the ground that when the

reopening is based on the seized material, then the only course available with the

AO is to initiate the proceedings under section 153C read with section 153A of the IT

Act and not under section 147/148 of the Act.

of the seized material and statement of Shri Madan Mohan Gupta in pursuant to the search and seizure under section 132 on 23rd May, 2013 the AO reopened the

assessment by recording the reasons as under :-

15 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

“ During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exhibit 1 to 5 of Annexure-AS and Exhibit 1 to 8 of Annexure-A. The documents found and seized from the residence and business premise of Shri Madan Mohan Gupta during the course of search proceedings revealed that on various page of Exhibit-1, 2 & 5 of annexure A as well as Exhibit-1 of Annexure AS, some date wise amounts have been written in the name of ‘KGK’. These transactions noted on page no. 28, 43, 69 and 73 of Exhibit-1 of Annexure-A total up to Rs.14,24,12,650/-. It is further seen that these transactions are in respect of the sale deed made in favour of Shri Kalyan Buildmart Pvt. Ltd. made on 24.08.2006. However, the cash transactions detailed above have been made during FY 2007-08 i.e. AY 2008-09. The assessee has failed to satisfactorily explain the transactions recorded on this page. I have thus reason to believe that income to the extent of Rs. 14,24,12,650/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.”

Thus it is clear that the reopening is based on the incriminating documents seized

during the search and seizure action and were inventorized as Exhibit 1-5 of

Annexure AS and Exhibit 1-8 of Annexure-A. When the AO himself has initiated the

proceedings of reassessment on the basis of the seized material, then a question

arises whether invoking of provisions of section 147/148 by the AO was right and

legal course or not. At the outset, we note that an identical issue was considered

by this Tribunal in case of Shri Navratan Kothari vs. ACIT vide order dated

13.12.2017 in ITA No. 425/JP/2017 in para 6 as under :-

“6. We have considered the rival submissions as well as relevant material on record. The matter revolves around the transaction of purchase and sale of land situated at Village Chainpura, Tehsil Sanganer (behind of Entertainment Paradise) Jaipur. The said land was purchased by M/s Shri

16 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Kalyan Buildmart Pvt. Ltd. on 24.08.2006. Thereafter the assessee purchased 8,000 shares M/s Shri Kalyan Buildmart Pvt. Ltd. from Shri Madan Mohan Gupta and his wife Smt. Shashi Kala Gupta. There is no dispute that this transfer of purchase of shares of M/s Shri Kalyan Buildmart Pvt. Ltd. was dully reflected in the books of accounts as on 31.03.2008 and also brought before the Assessing Officer in the course of initiation assessment completed u/s 143(3) r.w.s. 153A on 31.03.2013. Thereafter the AO proposed to reopen the assessment to assess the consideration paid by the assessee for alleged purchase of land by issuing notice u/s 148 on 25.03.2014. The AO recorded the reasons for reopening of the assessment as reproduce at page 4 of the assessment order are as under:-

“During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exhibit 1 to 5 of Annexure-AS and Exhibit 1 to 8 of Annexure- A. The documents found and seized from the residence and business premise of Shri Madan Mohan Gupta during the course of search proceedings revealed that on various page of Exhibit- 1,2 & 5 of Annexure-A as well as Exhibit-1 of Annexure-As, some date wise amounts have been written in the name of ‘KGK’. These transactions noted on page no. 28,43,69 and 73 of Exhibit-1 of Annexure-A total up to Rs. 14,24,12,650/-. The assessee has failed to satisfactorily explain the transactions recorded on this page. I have thus reason to believe that income to the extent of Rs. 14,24,12,650/- has escaped assessment within the meaning of section 147of the I.T. Act, 1961.”

Thus, it is clear that the basis of reopening of the assessment is the seized material found during the course of search and seizure operation in the case of Rajendra Jain Group and the statement of Shri Madan Mohan Gupta recorded u/s 132(4) and 131 of the Act. The Assessing Officer analyzed the statement and the seized material for his satisfaction as recorded in paras 4 and 5 of the assessment order as under:-

17 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

“4. In his statements, recorded during the course of search/post search proceedings, Shri Madan Mohan Gupta submitted that the following pagers of various exhibits are related to land transactions at Chainpura behind Entertain Paradise, Jaipur.

Sr. Annexure No. & Exhibit Page No. Found/seized from No. 1 Annexure A Exhibit-1 15 to 24,27,38,43,44, and 69 to 74 Residential premises 2 Annexure A Exhibit-2 47 and back side of 48, 50 to 54 Residential premises 3 Annexure A Exhibit-5 1 to 77 Residential premises 4 Annexure AS Exhibit-1 1 to 3,7,9,10 Office premises

18 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Thus it reveals from the assessment order that after the initial assessment u/s 143(3) r.w.s. 153A the AO got the alleged incriminating material in the shape of diary and transactions recorded therein found and seized in the search and seizure operation in case of Rajendra Jain Group. Accordingly, the AO proceeded to reassess the income of the assessee u/s 147 of the Act. The entire decisions of the AO to reassess the income of the assessee is based on the seized material and statement of Shri Madan Mohan Gupta recorded u/s 132(4) of the Act for which the specific remedy is provided u/s 153C of the Act. For ready reference we quote section 153C as under:-

“ 153C. 79[(1)] 80[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, 81belongs 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] 82[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 82a[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] :] 83[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 84[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 :] 85[Provided further that the Central Government may by rules86 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

19 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

made 86a[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.] 87[(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.”

This section begins with non-obstante clause and therefore, has an overriding effect on the Sections 147&148 of the Act. As per the scheme and object of Section 153C r.w.s 153A the AO has no discretion or choice to invoke the provisions of Section 147/148 instead of section 153C r.w.s. 153A of the Act. Once the case of reassessment is made out by the AO which falls in the preview of specific provisions of section 153C of the Act, the AO cannot resort to invoke the provisions of Section 147/148 of the Act to assessee or reassess income of the assessee. The action of the AO to initiate the proceedings Under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the Assessing Officer shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be

20 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

assessed or reassessed. The Amritsar Bench of this Tribunal in case of ITO vs. Arum Kumar Kapoor (supra) while deciding an identical issue of validity of initiation of proceedings u/s 147/148 on the basis of seized material has held in paras 7.2 and 8 as under:-

“7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case of M/s. Today Homes & Infrastructure (P.) Ltd. on 28th March, 2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the Dy. CIT, Central Circle-22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under s. 153C/148 of the Act. It is after that that during the course of appellate proceedings before the CIT(A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO under s. 148 are illegal and void ab initio. In the instant case, the learned CIT(A) has correctly observed that the AO should have issued notice under s. 153C of the Act and should have framed the assessment under s. 153C r/w s. 153A of the Act. Sec. 153C of the Act reads as under :

"153C. Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, where the AO is satisfied that any money, bullion or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A."

21 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

only the provision in which any assessment could be made against the assessee in the IT Act was s. 153C r/w s. 153A of the Act. It is also apparent from the record that the officer at Delhi has mentioned in his letter that the necessary action may be taken as per law under s. 153C/148 of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of s. 153C of the Act, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal.”

A similar view was taken by the Visakhapatnam Bench of this Tribunal in case of G. Koteswara Rao vs. DCIT (supra) in para 11 to 17 as under:-

“11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made

22 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV - B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the reassessment proceedings, he has to cross the hurdles attached with reassessment by way reasons for reopening of assessment, time limit for issue of notice and provision for obtaining sanction of higher authority in certain circumstances. Under the provisions of section 153A to 153C these hurdles are cleared by using the non abstante clause in the said section. In other words, under the new provisions of section 153A, the AO is not required to satisfy these conditions before issue of notice. The only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where

23 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish the returns of income for each assessment years falling within the six assessment years immediately preceding the assessment year in which search or requisition is made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid period which includes disclosed and undisclosed income. Therefore, the new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment u/s 147 has been removed by the non abstante clause used in section 153A. 14. In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the

24 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary. 15. A similar issue came up for consideration before the Special Bench of this tribunal and the special bench had an occasion to deal with the interpretation of section 153A of the Act in the case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum) (SB). The Special Bench after considering the provisions of section 153A and CBDT circular has held as under: '52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment

25 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the A.O. (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search."

26 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

"18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV- B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as block assessment because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as block period. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income' of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved,

27 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate'. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the 'six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of

28 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 20. Applying the ratio of the above decisions to the facts of the present case, we find that there is no dispute that the original assessment for the A.Y. 2001-02 was completed u/s 143(3) on 13-2-2004 determining the total income at Rs. 26354942360/-. Thereafter, a search and seizure action was initiated in assessee's case by the Department on 2-7-2005 on which date the assessment for the A.Y. 2001-02 was not pending. Therefore, in view of the non- obstinate clause with which sub section (1) of section 153A opens, the A.O. has no jurisdiction to issue notice u/s 148 of the Act in respect of those

29 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

six assessment years which falls within the exclusive jurisdiction of section 153A of the Act and accordingly the A.O. was not justified in issuing notice u/s 148 on 28-8-2006 and in completing the impugned assessment u/s 143(3) r.w.s. 147 of the Act on 31-10-2006. The A.O. instead of complying with the requirement of section 153A proceeded with the provisions of section 147/148 which are not applicable in the assessment u/s 153 A of the Act, therefore, the impugned assessment completed u/s 143(3) r.w.s. 147 of the Act is a nullity and as such the assessment order dtd. 31-10-2006 passed u/s 143(3) r.w.s. 147 of the Act is illegal, arbitrary, wholly without jurisdiction and, hence, the same is quashed." 17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section 153A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12-2010 passed u/s 143(3) r.w.s. 147 is quashed.”

Thus, it is clear that the Tribunal has taken a consistent view on this issue and further the Delhi Benches of this Tribunal in case of Rajat Shubra Chatterji vs. ACIT (supra) has held in para 7 as under:- “7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases

30 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab 8 initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur – 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed.” Therefore, in conjoint reading of provisions of section 153A, 153C and 147/148 of the Act as well as a consistent view taken by this Tribunal in a series of decision cited (supra) we hold that the assessment or reassessment of income of the person other than search persons based on seized material can be only be made u/s 153C r.w.s. 153A and the provisions of section 147/148 of the Act are not applicable in such cases. No contrary decision has been brought to our notice. Accordingly, we hold that initiation of proceedings u/s 147/148 by the AO to reassess the income is illegal being without jurisdiction and consequently the reassessment order passed u/s 147 r.w.s. 143(3) is also illegal and void abinitio and is liable to be quashed.”

Following the earlier decision of this Tribunal, we hold that the reopening under

section 147/148 of the Act is not valid when the proper course of action was only to

initiate the proceedings under section 153C/153A of the Act. Since we have

31 ITA Nos. 152, 153/JP/18 & 517, 518/JP/17. Shri Kalyan Buildmart Pvt. Ltd., Jaipur.

quashed the initiation of the reopening of the assessment as well as consequent reassessment order for both the years, therefore, the ground raised by the revenue on the merits of the addition on protective basis becomes infructuous. 11. In the result, appeals of the assessee are allowed and appeals of the revenue are dismissed.

Order pronounced in the open court on 28/06/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28/06/2018. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant-M/s. Shri Kalyan Buildmart Pvt. Ltd., Jaipur. 1. izR;FkhZ@ The Respondent-The ACIT, Central Circle-1, Jaipur. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File {ITA No. 152, 153/JP/2018, 517 & 518 /JP/2017} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत