SRI. ASHOK KUMAR GARG,BANGALORE vs. INCOME TAX OFFICER, WARD- 1(3)(4), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC-A” BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER

ITA No. 1151/Bang/2019 Assessment Year : 2009-10 Shri Ashok Kumar Garg, #T-4, 8th Main Road, 13th Cross, The Income Tax Officer, Galaxy Eternity Apartments, Vs. Ward – 1 [3] [4], Malleshwaram, Bangalore. Bangalore – 560 003. PAN: AGCPG0607P APPELLANT RESPONDENT Assessee by : Shri V. Chandrasekhar, Advocate : Shri Ganesh R. Ghale, Standing Revenue by Counsel for Dept. Date of hearing : 26.09.2019 Date of Pronouncement : 11.10.2019

O R D E R Per Shri A.K. Garodia, Accountant Member This appeal is filed by the assessee which is directed against the order of ld. CIT(A)-3, Bangalore dated 01.04.2019 for Assessment Year 2009-10. 2. The grounds raised by the assessee are as under. “1. The order of the learned Commissioner of Income-tax [Appeals] passed under Section 250 of the Act, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case, may be quashed. 2. The appellant denies himself liable to be assessed on total assessed income of Rs. 21,02,580/- as determined by the learned assessing officer and upheld by the learned CIT[A], as against the gross returned income by the appellant of Rs. 9,02,580/- under the facts and circumstances of the case. 3. The order of assessment passed by the learned assessing officer under Section 143[3] r.w.s 147 of the Act is bad in law for want of requisite jurisdiction for the following reasons: (a) The very initiation of proceedings u/s 147 is bad in law in as much as the assessment proceeding, if warranted, ought to have been initiated u/s. 153C of the Act under the facts and circumstances of the case; (b) Proceedings u/s 147 are commenced based on borrowed

ITA No. 1151/Bang/2019 Page 2 of 8 satisfaction; (c) The notice issued by the learned assessing officer u/s 148 of the Act proposing to ‘Reassess” income of the Appellant is bad in law under the facts Et circumstances of the case, consequently rendering the assessment void ab initio; (d) Even reassessment proceedings in search cases where incriminating material is found, the same has to be taken up under the provisions of 153A not u/s 147 of the Act. (e) No speaking order disposing off the objections to Reasons Recorded has been passed; (f) The Reasons to Reopen are merely Reasons to Suspect Et not Reasons to Believe on the facts and circumstances of the Appellant's case; (g) Order is passed without giving reasonable opportunity to the Appellant; (h) Order is passed without affording the Appellant an opportunity of cross examination, when required; 4. Without Prejudice, the order of Ld. CIT[A] is bad in law for the following reasons also: (a) He has not put forth the First remand report dated 03/09/2018 to the Appellant for his rebuttal; (b) He has relied upon submissions made by the Ld. JCIT, who is not an authorized officer under Section 250 [4], and also not put forth the same to the Appellant for his rebuttal; (c) The order of Ld. CIT [A] is belatedly passed after 26 months without assigning any reasons as to the cause of delay which is in violation of the time prescribed in S 250 (6A). 5. Without Prejudice, the learned CIT [A] erred in confirming the addition of Rs. 12,00,000/- being the alleged cash payment made by the Appellant to M/s. Aishwarya Homes Developers and Builders under the facts and circumstances of the case. 6. Without prejudice, to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act under the facts and circumstances of the case. 7. The appellant contends that the levy of interest under section 234 B of the Act is also bad in law as the period, rate, quantum and method of

ITA No. 1151/Bang/2019 Page 3 of 8 calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 8. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 9. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.” 3. At the very beginning, it was submitted by ld. AR of assessee that as per ground no. 3(a) of his appeal, the assessee is disputing the very initiation of the proceedings u/s. 147 of the IT Act because as per the assessee, the proceedings ought to have been initiated u/s. 153C of the IT Act under the facts and circumstances of the case. He submitted that this ground should be first decided and if the assessee succeeds on this ground, then no other ground is required to be decided. 4. In support of his contention, he submitted that the reasons recorded by the AO for reopening are available on page no. 8 of the paper book as per which it is stated by the AO that information was received from The Deputy Commissioner of Income Tax, Central Circle, Noida vide letter dated 29.03.2016 to the effect that in course of assessment proceedings u/s. 153A of the IT Act in the case of Shri Rajinder Paul Jindal, it came to notice that Shri Ashok Kumar Garg has made payment of Rs. 12 Lakhs in cash to M/s. Aishwarya Home Developers & Builders vide receipt dated 07.08.2008 and on the basis of this, the AO has stated that he has reason to believe that income escaped assessment. He further submitted that the copy of the said letter dated 29.03.2016 issued by DCIT, Central Circle, Noida is available on page no. 5 of the paper book and on page no. 6 of the paper book is the photocopy of the receipt issued by M/s. Aishwarya Home Developers & Builders. He submitted that under these facts, the Tribunal order rendered in the case of ACIT Vs. Shri Srinivas Rao Hoskote in ITA Nos. 1154 & 1155/Bang/2015 dated 21.02.2018 is applicable and my attention was drawn to para no. 6 of this Tribunal order and it was pointed out that in this para, the Tribunal has considered another judgment of the Tribunal rendered in the case of G. Koteshwara Rao Vs. DCIT as reported in (2015) 64 taxmann.com 159 and reproduced the relevant portion of this Tribunal order and it was held

ITA No. 1151/Bang/2019 Page 4 of 8 that if there is any adverse material belonging to the assessee found in course of search of third person then in the case of such an assessee, action can be taken u/s. 153C and not u/s. 147 of the IT Act. He submitted that in the facts of present case, the reopening made by the AO is bad in law and the same should be quashed. 5. As against this, the ld. DR of revenue supported the order of ld. CIT(A). He also submitted that on page nos. 44 to 46 of the paper book is the copy of remand report of AO submitted to ld. CIT(A) on 01.02.2019 and he pointed out that it was stated by the AO in the remand report that as per the judgment of Hon’ble Delhi High Court rendered in the case of M/s. Pepsico India Holdings (P) Ltd. as reported in 379 ITR 295, it was held that if the registered sale deed is found in course of search, it is belonging to the purchaser and not to the vendor although the names of both are mentioned in the said sale deed and the AO has stated that by applying the same analogy, the documents seized in the present case cannot be treated as one which belongs to the assessee and can be treated only as one which relates to the assessee and therefore, the provisions of section 153C are not applicable and the reopening is valid. Regarding the Tribunal order cited by ld. AR of assessee having been rendered in the case of ACIT Vs. Shri Srinivas Rao Hoskote (supra), it was submitted that this Tribunal order is not applicable in the facts of present case. 6. I have considered the rival submissions. First of all, I deal with the remand report of the AO available on page nos. 44 to 46 of the paper book. In this remand report, the AO has noted about the judgment of Hon’ble Delhi High Court rendered in the case of M/s. Pepsico India Holdings (P) Ltd. (supra). It is also noted by the AO that in this judgment, it was held by the Hon’ble Delhi High Court that if a sale deed is found in course of search, it has to be accepted that this sale deed is belonging to the buyer and not the vendor although the names of both are mentioned in the sale deed. On the basis of this judgment of Hon’ble Delhi High Court, this is the submission of the AO in the remand report that the documents seized in the present case i.e. the receipt regarding cash payment by the assessee available on page no. 6 of the paper book is not belonging to the assessee. In my considered opinion,

ITA No. 1151/Bang/2019 Page 5 of 8 this observation of the AO is not correct because if the sale deed is belonging to the buyer, then the receipt issued by any receiver is belonging to the payer and not to the receiver and hence, in the facts of present case, the seized material is belonging to the present assessee. 7. Now I examine the applicability of this Tribunal order rendered in the case of ACIT Vs. Shri Srinivas Rao Hoskote (supra). Para 6 of this Tribunal order is relevant and hence, the same is reproduced hereinbelow for ready reference. “06. We have heard the rival contentions and perused the record. In our view the scope of Section 153C and 148 are clear from the bare reading of the two provisions insomuch as Section 153C it starts with 'Notwithstanding nothing containing in Section 139, 147, 148, 149, 151 and 153'. Thus if there is any contradiction between Sections 153C and 148 ,in that eventuality, Section 148 shall give way to Section 153C. There is a reason for saying so because if a notice u/s.153C is issued to the third party (assessee), then the AO may assess or reassess the income of the assessee for a period of six years whereas this is not the position in case of Section 148. Further u/s.153C of the Act, the assessment / reassessment can only be made based on the satisfaction recorded by the AO or the searched person as well as of the third party and further addition can only be made by the AO in respect of the assessment year for which the incriminating documents were found with the search person belonging to the third party. Therefore in our view the finding of the CIT(A) is in accordance with law, as the proceeding should have been initiated under section 153C of the Act, as it were based on material found during the search from the premises of searched person other than assessee and not under section 148 of the Act. Further we are of the opinion that this issue raised by the parties is no more res integra as the coordinate bench in the matter of G. Koteshwara Rao v. DCIT [(2015) 64 taxmann.com 159] in para 11 to 14 has held 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 obstante 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 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

ITA No. 1151/Bang/2019 Page 6 of 8 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 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

ITA No. 1151/Bang/2019 Page 7 of 8 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 Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-obstante 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

ITA No. 1151/Bang/2019 Page 8 of 8 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. In view of the above and in view of the decision relied upon by the assessee, we do not find any merit in the appeals filed by Revenue.” 8. In my considered opinion, this Tribunal order is squarely applicable in the present case and hence, respectfully following the same, I hold that the reopening by the AO in the present case u/s. 147 of the IT Act is arbitrary and not as per law and the proceedings should have been initiated u/s. 153C of the IT Act as it were based on the material found during the search from the premises of the searched person other than the assessee and under these facts, the reopening u/s. 147 is not valid. This ground is allowed. 9. In view of above decision, other grounds raised by the assessee do not require any adjudication because when the reassessment is bad in law, nothing survives. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the date mentioned on the caption page.

Sd/- (ARUN KUMAR GARODIA) Accountant Member Bangalore, Dated, the 11th October, 2019. /MS/ Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order

Assistant Registrar, Income Tax Appellate Tribunal, Bangalore.