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Facts
The assessee, a former trustee of Shri Krishna Educational Trust (SKET), had handed over the management of the trust to Shri Sanjay Bansal. A search was conducted at the premises of Shri Sanjay Bansal and SKET, which led to the discovery of documents suggesting that Shri Sanjay Bansal paid Rs. 13 crores to the assessee. The Assessing Officer (AO) re-opened the assessment based on this information.
Held
The Tribunal held that the AO erred in initiating reassessment proceedings under Section 148 instead of Section 153C. The Tribunal found that the documents seized were not in the assessee's handwriting, not found from the assessee's premises, and the witness statement relied upon was not properly examined or cross-examined. Additionally, the Tribunal noted the absence of a mandatory notice under Section 143(2) for scrutiny.
Key Issues
Whether the reassessment proceedings initiated under Section 148 were valid, or if Section 153C should have been invoked? Whether the addition of Rs. 13 crores based on seized documents was justified, considering procedural irregularities and lack of proper evidence? Whether the penalty under Section 271D for violation of Section 269SS was sustainable?
Sections Cited
148, 153C, 143(2), 139, 147, 149, 151, 153, 132, 131, 271D, 269SS, 271(1)(c), 271D
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Subhash Chander Gupta, The JCIT, Vs House No. 1652 8, Vishnu Colony, Kurukshetra. Railway Road, Kurukshetra. "थायी लेखा सं./PAN NO: AAUPG0038Q अपीलाथ"/Appellant ""यथ"/Respondent Assessee by : Shri Sudhir Sehgal, Advocate and Shri Abhinav Gupta, Advocate Revenue by : Smt. Kusum Bansal, CIT, DR Date of Hearing : 31.01.2025 Date of Pronouncement : 07.04.2025 HYBRID HEARING O R D E R PER RAJ PAL YADAV, VP The present two appeals are directed at the instance of assessee against the separate orders of ld. Commissioner of Income Tax (Appeals) [in short ‘the A.Y.2011-12 2 CIT (A)’] dated 28.06.2024 passed for assessment year 2011-12.
2. We first take ITA 765/CHD/2024. In this appeal, assessee has taken six grounds alongwith sub-grounds.
Therefore, we deem it appropriate to take note of the grounds of appeal taken by the assessee which read as under :
1. That the Ld. CIT(A) has erred in confirming the order of the Assessing Officer, both on the issue of the re-opening of the case u/s 148 and also confirming the addition of Rs.13 crore as made by the Ld. AO. a.) That both the Ld. AO and the Ld. CITA) have failed to appreciate the contention of the assessee that the proceedings have wrongly been initiated u/s 148 and, if at all, the proceedings were liable to be initiated, the same could have been initiated only by issuance of notice u/s 153C and, thus, the assessment as framed by the AO u/s 148/143(3) deserves to be quashed. b) That the Ld. CIT(A) has ignored the binding judgement of the Hon'ble Apex Court in the case of 'Vikram Sujit Kumar Bhatia' reported in, 453 ITR page 417 and that binding judgement have been ignored in a summary manner. c) That the re-opening of the assessment whether u/s 148 or 153C goes to the root of assumption of jurisdiction and since the very basis of the initiation of proceedings have wrongly been initiated u/s 148, the proceedings as initiated by issuance of notice u/s 148 deserves to be quashed. d) That the same contention were raised before the Ld. Assessing Officer as per objections to the reasons recorded for proceedings u/s 148, as made by the appellate but the same have been dismissed without assigning any reasons. 2.a) Notwithstanding, the above said grounds of appeal has erred in confirming the action of the AO in re-opening the case u/s 148, just on the basis of "borrowed satisfaction" as per the report of the DCIT, Centre Circle Dehradun, without any independent application of mind and the said re-opening A.Y.2011-12 3 having been made on borrowed satisfaction, deserves to be quashed as per the binding judgement of 'Meenakshi Overseas' of Delhi High Court 395 ITR 677, & other such case laws. b) That the Ld. AO and CIT(A) has grossly erred in re-opening the case u/s 148 without considering that the primary condition in the reasons so recorded by the Assessing Officer, about the "failure on the part of the assessee to disclose material facts" having not been recorded in the reasons and, as such, since that mandatory condition having not been complied with, the re-assessment proceedings as initiated 148, deserves to be quashed. 3. a.) Notwithstanding the above said ground of appeal
, the Ld. CIT (A) has erred in making an addition of Rs. 13 crore on account of alleged 'undisclosed Income' on the basis of certain documents seized from the premises of the third party Ignoring, the submissions of the assessee that the said documents is undated neither in the handwriting of assessee and nor does not it bear signature of the assessee at all and neither searched person, namely Sh. Sanjay Bansal, had confirmed that the said alleged payment of Rs. 13 crore was made to the assessee. b.) That reliance by the AO only on the statement of the accountant, Sh Sushil Kumar of Sh. Sanjay Bansal is not justified, since he is interested party as, FIR has been lodged by the Sh. Sanjay Bansal against Sh. Sushil Kumar, thus, no authenticity could be attached on the statement of the Sh. Sushil Kumar, being recorded at the back of the assessee, without affording any facility of cross examination, despite the written request of the assessee.
4. That the Ld. CIT(A) has failed to appreciate that no notice u/s 143(2) stipulated under the Act, prior to the completion of the assessment proceedings, which is sine qua non, once return of income has been filed thus, rendering the entire assessment proceedings as null and void.
5. The Ld. CIT(A) has dismissed the appeal of the assessee on certain issues is against the facts and circumstances of the case, which are as under; a.) That the finding of the CIT(A) in para 6.4 ,that cross examination could not be allowed due to paucity of time, since the assessment was getting barred by time. This is apparently incorrect observations as the assessee had made a request for cross-examination vide letter dated 26.11.2018 vide para 2.1 of the letter and repeated request was made by letter dated 26.12.2018. A.Y.2011-12 4 b.) That the finding of the CIT(A) that Sh. Sushil Kumar Accountant of Sh. Sanjay Bansal was known to the assessee is totally misconceived, as appellate had no link or connection with the said Sh. Sushil Kumar as Sh. Sushil Kumar had never worked with the appellate. c.) That the finding of the CIT(A) in para 6.7 about the filing of the affidavit by Sh. Sanjay Bansal and accountant Sh. Sushil Kumar's retraction is concerned, this observation is totally incorrect as Sh. Sanjay Bansal has never stated that the amount have been paid to the appellate and regarding the other person namely Sh. Sushil Kumar, the appellate had/have no connection with him as he is totally stranger, rather Sanjay Bansal have denied to made any such alleged payment, which is even recorded at Para No. 9.2 of Order U/s 153A of Searched person, namely Sanjay Bansal, relied upon by the Ld. AO in the present matter. d.) That the CIT(A) has failed to appreciate that while framing the assessment of Sh. Sanjay Bansal (copy of the order filed before the CIT(A), Sh. Sanjay Bansal had never stated that he had paid any amount to the appellate. e.) That the action is being challenged on facts & law while recording wrong facts that the (person searched Sanjay Bansal) has admitted the payment to appellant which is in conformity with the statement of 3rd party (u/s 131) however the person searched has filed litigation against 3rd party for such wrong statement dehors material facts containing material particulars to the case proceedings. f.) The written submission as filed before CIT(A) vide submission dated 21.08.2020, 29.12.2020,16.06.2023 along with paper book filed on 21.08.2020 have not been considered properly.
That the appellant craves to leave, add, or amend the grounds of appeal before the appeal is finally heard or disposed of.
GROUND NO. 1
A perusal of this ground alongwith the sub-grounds would reveal that basically issue involved under this fold of grievance is, whether in this case a notice ought to have A.Y.2011-12 5 been issued under Section 153C by AO or he has rightly issued under Section 148 of the Income Tax Act. In other words, whether this assessment order is void ab-initio for want of a notice under Section 153C of the Income Tax Act.
The brief facts of the case are that assessee is an individual. He was a Trustee in a Trust namely Shri Krishna Educational Trust (SKET) at Kurukshetra. was handed over to another team of trustees headed by Shri Sanjay Bansal. The search has been carried out at Dev Bhoomi Institute of Technology Group in Dehradoon, Shri Krishna Educational Trust, Ratan Dera, Kurukshetra as well as on the premises of Chairman Shri Sanjay Bansal who happens to be the trustee of the Trust SKET. This search was carried out on 26.04.2012. According to the Revenue, during the course of search certain documents and loose papers were found and seized. Copy of a paper found at the premises has been placed at page No. 43-44 of the Paper Book whose Photostat copy read as under : &768/CHD/2024 A.Y.2011-12 A.Y.2011-12 7
5. The ld. AO has taken note of the contents of above paper in the reasons recorded for re-opening of the assessment whose copies available on page No. 15 of the Paper Book. We deem it appropriate to take note of these reasons which read as under :
1. As per the information received on transfer from ITO Ward-2, Kurukshetra which was received by him through JCIT, Range, Kurukshetra from Dy Commissioner of Income tax, Centre Circle, Dehradun vide file No. DCIT/CC/DDN/MISC/2015-16/5 dated 15.04.2015, a search under Section 132 of the I.T. Act 1961 had taken place on Dev Bhomi Institute of Technology Group on 26.4.2012 and its Chairman Sh. Sanjay Bansal R/o 32/4 EC Road, Dehradun and premises of Shri Krishna Educational Trust, Rattan Dera, Kurukshetra was also covered. During the course of search certain evidences were gathered and subsequently post search enquiries of investigation wing, certain facts emerged which indicated that Sh. Sanjay Bansal and his family members have taken over the management and control of M/S Shri Krishna Educational Trust, Rattan Dera, Kurukshetra by virtue of amended trust deed dated 14.10.2010 from outgoing trustees including the assessee Sh Subash Gupta of SKET. Documents seized from the premises of Shri Krishna Educational Trust, Rattan Dera, Kurukshetra during search revealed that Sh. Sanjay Bansal has made cash payment of about 35 crores to 40 crores to the outgoing trustees of this Trust for taking over the control and management of Shri Krishna Educational Trust, Rattan Dera, Kurukshetra. The seized documents proved that outgoing trustees have earned profit out of sale of trust which is in violation of the primary condition of availing exemption u/s 10(23)(C)(vi) of the I.T. Act, 1961.
Out of the above recipients of the money from sale of trust i.e. Sh. Krishna Education Trust, Sh. Subash Gupta, the Assessee had received the payment of Rs.13 Crores from Sh. Sanjay Bansal the detail of which can also be seen from seized documents seized during the course of search conducted on 26.04.2012. 3. On the receipt of the information from DCIT, Central Circle, Dehradun, the concerned seized documents (copy enclosed), the concerned seized documents were thoroughly analyzed and on careful observations following points were noticed: a) This is a seized document which clearly mentions the name of Sh. Subash Gupta, the assessee on top of documents which clarifies that the documents A.Y.2011-12 8 pertain to the assessee only. This document gives the entire details of transactions/payments received by the Assessee. Further, this document also shows not only the amount paid in cash but also includes other payments such as made towards:
Total Payable 13,00,00,000/- Amt. paid 12,51,66,666/- Balance 48,33,334 Broker 13,00,000/- Salary 12,00,000/- (Self A/c) Staff Salary 60,000/- Advocate 27,000/- Fine received in SKP 1,33,332/- (400000/9x3) 27,20,332/- Net Balance 21,13,002/- Bike splender M2007 40250/- Honda city M2008 729500/- Maruti Swift M2008 527161/- Hundai Santro M-2008 351319/- Arvind Jindal for TDS 442520/- 2812750/- Less Dep 461694/- (All vehicles) 2351056/- Excess amount on S Gupta 238054/- A thorough examination of the seized documents reveals that there is mention of Sh. Arvind Jindal, Advocate who was providing services of depositing TDS liability on behalf of trust and amount of Rs. 4,42,520/- is outstanding against his name as it was paid to him in advance. Further, there is also a reference to various entries such as: Entry standings in the Balance Sheet as white amount: 1) Abhinav Gupta 17250/- 2) Arun Gupta 226056/- 3) Rama Gupta 675322/- 4) Subash Gupta 508110/- 5) Som Parkash 440259/- 6) Varun Gupta 418081/- 2285078 It is extremely pertinent to note that the above entries are clearly reflected in the balance sheet of Shree Krishna Education Trust which therefore, makes a safest assumption that the seized document is true/real/authentic as if, transactions in white are matching with balance sheet then the other notings also have to be correct and true in all true respect. &768/CHD/2024 A.Y.2011-12 9
4. In addition to the above, it is also pertinent to note that during the course of scrutiny proceedings U/s 153A in the case of Sh. Sanjay Bansal, statement of Sh. Sushil Kumar, Accountant of Sh. Sanjay Bansal was recorded who categorically admitted in his statement that this particular document which was seized during search was a real/authentic document and that the same was in his handwriting written on the directions of Sh. Sanjay Bansal.
Further, the retired trustees who received payment on sale of the trust (SKIET) were also examined during search and it was found that Sh. Sushil Kumar in his statement had submitted that vehicles of the trust had been retained and used by the individual trustees for personal purposes and that is why different vehicles are mentioned under the name of each trustee in above documents. The above facts have been found to be correct. A perusal of the balance sheets of the trust for the period A.Y. 2008-09 to A.Y. 2011-12 shows all vehicles are mentioned in the seized papers. Moreover, one of the retired trustees Sh. Mool Chand Gupta in his statement recorded u/s131(1)(b) admitted to have used the vehicle Verna during his tenure in the trust. Even in the court case documents filed by Sh. Sanjay Bansal, the employees of the trust have alleged in their complaint that management of trust had bought luxury vehicles which were being utilized for personal use. This is evident from the details of vehicles purchased by the trust that all are luxury vehicles which could not have been used by the students or the teachers. Therefore, not only the above facts prove the authenticity of seized papers but also the misappropriation of assets of the trust for the personal benefits of the trustees.
Further, the return of the Assessee was downloaded from the system and it is observed that the assessee has shown income of Rs.1,58,670/- in the IT Return filed for the A.Y. 2011-12. It is thus, clear that this income is not at all commensurate with the amount of money received by the Assessee on account of sale of trust of Rs. 13 Crores. Therefore, I am satisfied and have reason to believe that income to the extent of Rs. 13 crores has escaped assessment. Therefore, provisions of Clause(b) of Explanation 2 to Section 147 are applicable to the facts of this case. In view of the above, Notice u/s 148 is required to be issued to bring to tax escaped income of Rs.13 crores for the assessment year 2011-12 as discussed above as well as any other income which comes to the notice during the assessment proceedings.”
The ld. Counsel for the assessee has submitted that 6. as per the belief of the AO, information contained in this document pertains to the assessee Shri Subhash Gupta, A.Y.2011-12 10 therefore, he harboured the belief that income has escaped assessment and a notice under Section 148 deserves to be issued. The ld. Counsel for the assessee drew our attention towards Section 153C of the Income Tax Act after its amendment by Finance Act, 2015.
The ld. Counsel for the assessee while taking us through Section 153C submitted that if clause (b) of sub- clause (1) is being perused, then it contemplates that where the AO is satisfied that any books of account or document, seized or requisitioned, pertains or pertains to or any information contained therein relates to a person other than the person referred to in Section 153A, then the AO of the searched person would record his satisfaction that action under Section 153C is required to be taken against any other person qua him books of account/documents/information unearthed during the course of search. In other words, if any information could be inferred from a seized document, then also notice under Section 153C is required to be issued. The ld. Counsel for the assessee further relied upon the judgement of Hon'ble ITA No.765&768/CHD/2024 A.Y.2011-12 11 Supreme Court in the case of Vikram Sujit Kumar Bhatia reported in 453 ITR 417. Before the Finance Act 2015, Section 153C contemplates that where AO is satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned BELONGS OR BELONGS TO a person other than a person referred to in Section 153A. The expression ‘belong or belong to’ has been further amplified in the Finance Act 2015 wherein under sub-clause (b) of sub- clause (1), the Legislature has used the expression PERTAINS OR PERTAINS TO in place of BELONGS OR BELONGS TO. The ld. Counsel for the assessee has emphasized that Hon'ble Supreme Court in this judgement has held that this amendment will be applicable with retrospective effect. On the strength of this judgement, he submitted that instead of a notice under Section 148, the ld. AO ought to have followed the procedure contemplated in Section 153C which is a mandatory one since he failed to follow this procedure, therefore assessment order is not sustainable. He further relied upon the following judgements whose copies are placed on record : &768/CHD/2024 A.Y.2011-12 12
Judgment in the case of ITO vs. Vikram Sujit Kumar Bhatia as reported in [2023] 149 taxmann.com 123 (SC) 2. Judgment in the case of Rajat Subhra Chatterji vs. ACIT passed by ITAT, Delhi vide order dated 02.03.2016 in ITA No. 2430/Del/2015. 3. Judgment in the case of ITO vs. Shri Meer Hassan passed by ITAT Delhi Bench in ITA. No. 1571/Del/2015. 4. Judgment in the case of Pr. CIT vs. Phonenix Datatech Services passed by Delhi High Court 245 taxman 209 (Del) vide order dated 06.01.2017. 5. Judgment in the case of ITO Amritsar vs. Arun Kumar Kapoor passed by ITAT, Amritsar ; Bench ITA No. 147(ASR)/2010. 8. The ld. CIT DR on the other hand contended that a perusal of Section 153C would indicate that where the evidence pertaining to assessee unearthed during the course of search which may be any money, bullion, jewellery, other valuable articles or things seized or requisitioned or any books of account or documents seized or requisitioned, then action under Section 153(C) was required to be taken but if an information is inferred from the document which may belong to the assessee, then action under Section 148 is to be carried out.
We have considered the rival contentions and have gone through the record carefully. Section 153(C) of the income after its amendment by Finance Act, 2015 has a direct bearing on the controversy, therefore, we deem it A.Y.2011-12 13 appropriate to take note of this Section, which read as under :
153C. Assessment of income of any other person.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153-A, 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 153-A: 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 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153-A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or A.Y.2011-12 14 requisition is made under section 132-A 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 153-A."
A bare perusal of this Section would reveal that it starts with a non obstante clause “not withstanding anything contained in Section” meaning thereby this Section has an over-riding effect over other Sections namely; 139, 147, 148, 149 etc. This Section contemplates that where AO of the searched person is satisfied that ; a) Any money, bullion, jewellery, other valuable article or thing seized or requisitioned belong to or b) Any books of account, document seized or requisitioned pertains or pertains to or any information contained therein relates to a person other than the person referred in Section 153A, then AO of the searched person would record his satisfaction and transmit those materials to the AO of such other person qua whom these A.Y.2011-12 15 materials have been found during the course of search.
Prior to Finance Act, 2015, this Section was not in the present shape. It has been divided in two categories post 2015. The first limb of Section deals with items discovered in physical form i.e. money, bullion, jewellery and the second limb of Section provides if any books of account, documents seized or requisitioned pertains or pertains to or any information contained therein pertains to a person other than the person covered under Section 153A, then procedure contemplated under Section 153C is required to be followed. In the old Section, only sub-clause (1) was available, however in the post amendment, this sub-clause
(1) has been divided in (a) and (b). Under sub-clause (b), the scope of the Section has been amplified. It provides that any books of account, documents seized or requisitioned pertains or pertains to or any information contained therein relates to a person other than the person referred in Section 153A, then also notice under Section 153C is mandatory. &768/CHD/2024 A.Y.2011-12 16
Before embarking on an enquiry further, we deem it appropriate to take note of the judgement of Hon'ble Supreme Court in the case of ITO Vs Vikram Sujitkumar Bhatia reported in 149 taxman.com 123. The basic reason for taking cognizance of this judgement at this stage is the assessment year involved herein is assessment year 2011- 12 and we are taking cognizance of Section 153C as amended by Finance Act, 2015. In this judgement, Hon'ble Supreme Court had an occasion to consider whether this amended Section will be applicable with retrospective effect or not. The question formulated by the Hon'ble Supreme Court in this judgement read as under :
“Whether amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to search conducted under Section 132 of the Income Tax Act, 1961 before 01.06.2015 i.e. the date of amendment ?
11.1 This question has been replied against the assessee and in favour of the Revenue by the Hon'ble Supreme Court. After lot of discussion, Hon'ble Supreme Court has propounded as under : &768/CHD/2024 A.Y.2011-12 17 “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. Present appeals are accordingly allowed in terms of the above. However, in the facts and circumstances of the case, there shall be no order as to costs.”
11.2 Thus, according to this decision of the Hon'ble Supreme Court, this post amended Section of 153C will be applicable in this assessment year also. The assessment
order is dated 31.12.2018 i.e. after the amendment carried out in Section 153C by Finance Act, 2015.
We have taken cognizance of the alleged seized material (extracted supra) as well as the belief formed by the AO while recording the reasons for re-opening of the assessment. According to the Revenue, this paper pertains to the assessee. The information contained in A.Y.2011-12 18 this paper is regarding payment of Rs.13 Cr to the assessee. Thus, this also pertains to the assessee. In such situation, to our mind, the AO ought to have initiated the proceedings under Section 153C. In other words, AO of the searched person i.e. AO of Shri Sanjay Bansal or of the Trust should have recorded satisfaction that information contained in this loose paper pertains to the assessee and action against the assessee deserves to be taken under Section 153C because income has escaped assessment in the hands of the assessee. Such satisfaction ought to have been transmitted to the AO of the assessee and only thereafter, assessment could have been made. No action under Section 147/148 could be taken against the assessee because Section 153C starts with a non obstante clause namely, notwithstanding anything contained in Section 139/147. Thus, Section 147/148 has no bearing if proceeding required to be taken against the assessee under Section 153C of the Income Tax Act. The AO has failed to follow the mandatory procedure required to be followed, hence, assessment
order is not sustainable and accordingly, is quashed. For A.Y.2011-12 19 our above view, we are fortified by the judgements relied upon by the ld. Counsel for the assessee and taken note by us in paragraph No. 7 of this order. The Act contemplated a procedure which is required to be followed mandatorily and which has not been followed by the AO.
GROUND NO. 3 (a) & (b)
In these grounds, grievance of the assessee is that ld. CIT(A) has erred in confirming the addition of Rs.13 Crores which was added by the AO on account of undisclosed income.
The brief facts of the case are that assessee has filed his original return of income under Section 139(1) declaring total income at Rs.1,58,670/-. The assessee was earlier Trustee of SKET (Shree Krishna Education Trust).
He was pre-occupied in his work and therefore, he has relinquished his responsibilities in favour of one Shri Sanjay Bansal. A search was carried out under Section 132 of the Income Tax Act at the premises of Shri Sanjay Bansal as well as SKET. During the course of search, one loose paper was found which has been reproduced while A.Y.2011-12 20 taking note of the reasons recorded by the AO for re- opening (page No. 7,8 and 9 of this order). On the strength of this paper, AO harboured the belief that Shri Sanjay Bansal has paid a sum of Rs.13 Cr to the assessee and hence, this amount deserves to be assessed in the hands of the assessee. He, accordingly, made the addition. The brief discussion made by the AO read as under :
“7.2 Further, it is an admitted fact that the assessee had been a trustee in Shree Krishna Education Trust at Kurukshetra (here-in-after mentioned as SKET) together with other group of trustees; that during the year 2010- 11 the management of said trust was handed over to another team of trustees headed by aforesaid Shri Sanjay Bansal as its chairman; that subsequently, a search & seizure action under section 132 was carried at the residence of said Sanjay Bansal and his business premises in which the premises of SKET were also covered; that during search several incriminating documents were found and seized; that such documents also contained the documents written by one Shri Sushil Kumar accountant of Shri Sanjay Bansal; that Shri Sanjay Bansal as well as Shri Sushil Kumar accountant admitted to have written these documents in the handwriting of Shri Sushil Kumar accountant. These documents contained entries showing the Shri Sanjay Bansal as to have paid Rs. 13.00 crore to the assessee; and Shri Sushil Kumar accountant of Shri Sanjay Bansal confirmed that these seized documents contained the detail of settlement of account, inter alia, with the assessee. A copy of said seized document containing the information relating to the assessee is attached herewith.
7.3 A perusal of the seized document shows that it contain both type of entries i.e. the entries recorded in the books of account of the SKET and those not recorded anywhere. The sum totals and balance amount are the result of both type of the entries. The balance of accounted entries have been shown in the seized document under the head "Entry Standing in Balance Sheet as White Amt" in the different names appearing to be the name of the family members of the assessee. All these balance are also appearing in the audited balance sheet of the SKET placed on record. The outstanding balance in the assessee's own name also matched with the A.Y.2011-12 21 amount appearing in the statement of assets & liabilities filed during the course of assessment proceedings.' Therefore, there remains no doubt that the assessee had received Rs. 13.00 crores from Shri Sanjay Bansal out of which the amounts already receivable from the assessee have been adjusted and balance has been paid as per the document. 7.4 Further, Shri Sushil Kumar was an employee of Shri Sanjay Bansal and he has admitted to have prepared the document as desired by Shri Sanjay Bansal for settlement of account with the assessee. Therefore, Shri Sushil Kumar cannot said to be stranger in relation to the transaction found recorded in the documents. Had there been no such transaction, then how could said Shri Sushil Kumar be expected to have knowledge of all the element of said transactions for preparing the account of the assessee for settlement thereof. Thus, the circumstantial evidence in the form of seized document together with its corroboration with the deposition made by its writer Shri Sushil Kumar and further corroborated with the fact that accounted portion thereof is appearing in the SKET's audited balance sheet and in the statement of assets 85 liabilities filed by the assessee, is held to be a valid basis for initiation of assessment proceedings u/s 147-148.
After examining the case as above together with the information available on record and the replies filed on behalf of the assessee, I hold the afore said amount of Rs. 13.00 crores as to be the assessee's undisclosed income, which, in addition to normal tax liability thereon, also renders the assessee liable for penalty under section 271(l)(c).
9. Further, as the assessee is found to have accepted said amount of Rs. 13.00 crores otherwise than bank cheque, bank draft or other banking channel, therefore, I am satisfied that the assessee has also violated the provisions of section 269SS rendering him liable for penalty under section 27ID.”
Appeal to the CIT(A) did not bring any relief to the assessee.
15.1 While impugning the order of the Revenue Authorities below, ld. Counsel for the assessee has submitted that this document was not found from the possession of the assessee. It was not in his handwriting.
It was a document allegedly recovered from the A.Y.2011-12 22 premises of a third person. It cannot be an incriminating document qua the assessee because assessee has no control over a third person what he writes in his diary, loose paper, books etc. There was no paralleled search conducted upon the assessee. It was stated by the AO that this document was in the handwriting of Shri Sushil Kumar who happened to be the Accountant of Shri Sanjay Kumar Bansal at the relevant time. Statement of Shri Sushil Kumar was not recorded under Section 132(4) of the Income Tax Act. This declaration came to the notice of the Department when his statement was recorded during the assessment proceedings of Shri Sanjay Bansal. It was taken under Section 131 of the Income Tax Act and not under Section 132(4) of the Income Tax Act. The presumption of truth is being attached to a statement recorded under Section 132(4) and such presumption could bind the deponent who has made such declaration.
In a statement under Section 132(4), it cannot bind a third person. The assessee has repeatedly requested for an opportunity to cross examine the alleged witness Shri Sushil Kumar but AO did not grant an opportunity to A.Y.2011-12 23 cross examine him. He has given the statement after Shri Sanjay Bansal has registered a FIR against him on account of some financial irregularities in the Institution. This fact has been disclosed by Shri Sushil Kumar in his statement available at page No. 48 of the Paper Book. The AO himself has also not examined independently any of this aspect. He has not examined what is the source of funds of Rs.13 Crores in the hands of Shri Sanjay Bansal.
No addition on account of unexplained expenditure was made in the hands of Shri Sanjay Bansal.
15.2 In support of his contention, ld. Counsel for the assessee relied upon following judgements whose copies have also been placed. We take note of from the Index of the Paper Book :
1. Judgment in the case of PCIT vs. DSG Papers (P.) Ltd. as reported in [2024] 161 taxmann.com 586 (Punjab & Haryana) 2. Judgment in the case of PCIT Vs. Kishore Kumar Mohapatra as reported in [2024] 162 taxmann.com 5(SC) on the issue of cross examination 3. Judgment in the case of PCIT Vs. Hadoti Punj Vikas Ltd. as reported in [2023] 157 taxmann.com 193 (SC) on the issue of cross examination 4. Judgment in the case of Andaman Timber Industries Vs. Commissioner of Central Excise as reported in (2015) 281 CTR 0241 (SC) on the issue of cross examination A.Y.2011-12 24 15.3 On the other hand ld. DR relied upon the orders of Revenue Authorities below. He submitted that finding of the CIT(A) is categoric on this aspect.
We have duly considered the rival contentions and gone through the record carefully. We have taken note of the finding of the AO. We would appreciate the finding of the CIT(A) in the later part of this order. First let us evaluate quality of evidence possessed by the AO qua the assessee for making addition to his income. The only evidence possessed by the AO is one loose sheet of a paper whose contents are being noted by us while dealing first fold of proposition at page 7 and 8 of this order. This page is neither in the handwriting of the assessee nor was found from his premises. It is a document found at the premises of a third person. The assessee had no control over any other person, what they write in their accounts at their office/residence. He cannot be charged to any liability on the basis of writing made by a third person.
This aspect was considered by the Hon'ble Supreme Court in the case of CBI Vs V.C.Shukla and others (1998) 3 SCC A.Y.2011-12 25 page 410 wherein CBI sought to prosecute certain politicians on the basis of one Diary written by one ‘Jain’ which was known as ‘Jain Hawala Diary’. All the charges were quashed by the Hon'ble Supreme Court by holding that a person shall not be made accountable for the writings made by a third person in his notings. It has came on the record the paper was in the handwriting of one Shri Sushil Kumar whose statement was not recorded under Section 132(4), therefore, no presumption of truth can be attached to his statement. Even otherwise, presumption of truth can be drawn qua deponent who made such declaration. Qua the third person, no presumption of truth can be inferred. He has imputed these allegations in order to settle certain disputes with his erstwhile employer i.e. Shri Sanjay Bansal. This is discernible from his statement available on page No. 48 of the Paper Book. A FIR No. 1/8/2013 was registered against him by the employer for embezzlement of funds.
This witness was never put for cross-examination by the AO inspite of repeated requests. At this stage, we deem it pertinent to take note of the following observations of the A.Y.2011-12 26 Hon'ble Supreme Court from the judgement of Andaman Timber Industries V CCE in Civil Appeal No. 4228 of 2006 dated 02.09.2015 has given following observation: " According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable."
16.1 Therefore, AO was not in possession of any material which can authorize him to firmly reach at a conclusion that Shri Sanjay Bansal has made payment of Rs.13 Cr in cash to the assessee. The AO is simply harping upon the statement of Accountant of Shri Sanjay Bansal against whom a FIR has been lodged by his employer. If we exclude that statement from the evidence on the basis of the judgement of Hon'ble Supreme Court in the case of Andaman Timber Industries V CCE as well as judgement of Hon'ble jurisdictional High Court in the case of PCIT Vs DSG Papers (P) Ltd. reported in 161 taxmann.com 586 (2024), A.Y.2011-12 27 then nothing will remain with the AO to draw such a conclusion. Therefore, this addition is not sustainable. We allow this ground of appeal and delete the addition.
17. In the next fold of grievance, assessee has pleaded that alleged re-assessment is not sustainable because no notice was issued to the assessee under Section 143(2) of the Income Tax Act.
18. The brief facts of the case are that a notice under Section 148 of the Income Tax Act was served upon the assessee on 31.03.2018. The assessee has raised objection against re-opening of the assessment. Simultaneously he submitted that return filed originally under Section 139(1) is to be treated as filed in response to the notice received under Section 148. The assessee again reminded the AO that his original return be treated as filed in response to 148 notice. Copies of these replies are available on page No. 8 and 21 of the Paper Book. On receipt of this reply, the AO was bound to issue notice under Section 143(2) but he has not issued any notice. A narration is being made in the first page of the assessment order that A.Y.2011-12 28 subsequently information was called for vide notices under Section 143|(2) and 142(1). But specifically no notice under Section 143(2) was issued. Thus, according to the ld. Counsel for the assessee, the assessment order is not sustainable. In support of the contention, he relied upon following judgements, whose copies have also been placed on record : i Hotel Blue Moon of Apex Court, 321 ITR 362 (2010) ii) Latest SC-Laxmann Dass Khandelwal reported in (2019) 180 DTR 0313 (SC), (2019) 310 CTR 0008 (SC), (2019) 417 ITR 0325 (SC), (2019) 266 TAXMAN 0171 (SC). iii) Shri Shiv Shankar Traders (2016) 383 ITR 448 (Del.)
18.1 The ld. Counsel for the assessee further apprised us that the assessee has inspected the record and copy of notice was not found in the record.
18.2 The ld. CIT DR, on the other hand submitted that since AO has made an observation in the assessment order that notice under Section 143(2) was issued upon the assessee, therefore, it be construed that such notice must be issued upon the assessee.
We have duly considered rival contentions and gone through the record carefully. There is no dispute with A.Y.2011-12 29 regard to the fact that assessee has filed two applications pleading therein that original return filed under Section 139(1) be treated as filed in response to notice received under Section 148. If Section 143(2) is being perused, then it will reveal that this Section provides first opportunity to an assessee what he wants to say in support of his return. Only thereafter AO would carry out investigation. In the present case, physical copy of the notice has not been brought before us by the Revenue. In the judgement of Hon'ble Supreme Court cited by the assessee as well as of Hon'ble Delhi High Court, it has unanimously been propounded that before taking a return for scrutiny, a notice under Section 143(2) is the pre- requisite condition and if such notice was not issued, then assessment is not sustainable. Therefore, on this ground also, assessment is not sustainable and accordingly quashed.
In other grounds, assessee has raised peripheral arguments in support of the above three central points.
Therefore, it is not necessary to adjudicate rest of the A.Y.2011-12 30 issues separately. In view of the above three fold of contentions, we have taken care of peripheral arguments and sub-grounds.
In the result, appeal of the assessee is allowed.
ITA 768/CHD/2024 : A.Y. 2011-12
As far as is concerned, the assessee is in appeal against the order of ld. CIT(A) dated 28.06.2024 passed for assessment year 2011-12. The ld. AO has imposed a penalty under Section 271D of the Income Tax Act on account of acceptance of loan in cash in violation of Section 269SS of the Income Tax Act. This penalty has been confirmed by the CIT(A).
With the assistance of ld. Representative, we have gone through the record carefully. If Section 269SS of the Income Tax Act is being perused, then it would reveal that it prohibits any person to take or accept from any other person any deposit or loan or any specified sum other than by Account Payee Cheque/Bank Draft or Electronic Clearing System, then such person will be liable to pay A.Y.2011-12 31 penalty of equal amount. According to the AO, assessee has accepted a sum of Rs.13 Cr from Shri Sanjay Bansal in cash, therefore, he deserves to be visited with penalty.
To our mind, this penalty is not sustainable for two reasons : a) We have already deleted the addition made to the total income of the assessee, therefore, it cannot be construed that assessee has accepted a sum of Rs.13 Cr in cash. b) This was neither loan nor deposits. This amount does not fall within the ambit of Section 269SS of the Income Tax Act.
Therefore, no penalty is imposable on the assessee.
Accordingly, this appeal of the assessee is allowed and both orders are set aside. The assessee does not deserve to be visited with penalty under Section 271D of the Act.
In the result, both appeals of the assessee are allowed.