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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI PAVAN KUMAR GADALE
O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee and the same is directed against the order of ld. CIT(A)-I, Bangalore dated 28.03.2014 for Assessment Year 2004-05.
The grounds raised
by the assessee are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.
2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the assessing officer has jurisdiction to pass the order u/s 153C of the Act.
3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the documents seized during the search belong to the appellant and that the assessing officer has recorded his satisfaction u/s 153C.
4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not furnishing the documents referred to in Para 3.5 of the appellate order despite a specific request from the appellant and this is violative of principles of natural justice.
5. That the finding of the learned Commissioner of Income Tax (Appeals) that the appellant had transferred the Jakkur property to Dayanand Pai group is perverse as being not based on any materials and evidences on record.
Page 2 of 4 6. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not furnishing the various documents relied on by him to come to a conclusion that Jakkur property has been transferred during the previous year ended 31.3.2004 relevant to assessment year 2004-05.
That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the capital gains has to be taxed in the assessment year 2004-05 by misconstruing the contents of the letter dated 28.12.2010.
That the order of the learned Commissioner of Income Tax (Appeals) in converting the protective assessment into a substantive assessment without giving an opportunity of being heard and such an action is violative of principles of natural justice and therefore, illegal.
That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the transfer has taken place during the assessment year 2004-05 and therefore, the assessment has to be substantive.
That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the interest u/s 234A, 234B and 234C are to be levied. Each of the above grounds is without prejudice to one another and the appellant craves leave of the Hon'ble Income Tax Appellate Tribunal. Bangalore, to add, delete, modify or otherwise amend either all or any of the above grounds either before or during the hearing.”
It was submitted by ld. AR of assessee that as per the judgment of Hon'ble Karnataka High Court rendered in the case of CIT and Another Vs. IBC Knowledge Park P. Ltd. as reported in [2016] 385 ITR 346 (Karn), this was the second question of law raised in that case that “Whether the Tribunal was correct in holding that the assessment u/s. 153C was valid despite there being no satisfaction recorded that the documents found during the search on June 17, 2008 were incriminating in nature and prima facie represented undisclosed income?”. He submitted that this question of law has been decided by Hon'ble Karnataka High Court as per paras 55 and 56 of this judgment and it was held that the Tribunal was not correct in holding that the assessment u/s. 153C was valid despite there being no satisfaction recorded to the effect that the documents found during the search on June 17, 2008 were incriminating in nature and prima facie represented undisclosed income. He submitted that in the present case also, as per the additional ground no. 2 raised before ld. CIT(A), this issue was raised that the AO erred in law and on facts in reassessing the income u/s. 153C of the Act without bringing on record any material to show that the seized material indicates income of appellant is undisclosed. He submitted that as per the impugned order, this issue was decided by ld. CIT(A) against the assessee without giving a finding as to whether the seized material were incriminating in nature and prima facie represented undisclosed income. He submitted that under these facts, this issue should go back to ld. CIT(A) for fresh decision in line with this judgment Page 3 of 4 of Hon'ble Karnataka High Court. The ld. DR of revenue supported the orders of authorities below.
We have considered the rival submissions. As per the ground no. 2 raised before us as reproduced above, this is the grievance of the assessee that ld. CIT(A) has erred in law and on facts in holding that the AO has jurisdiction to pass the order u/s. 153C of the IT Act. Before ld. CIT(A), as per the additional ground no. 2 raised before ld. CIT(A), this was the grievance of the assessee that the AO erred in law and on facts in reassessing income u/s. 153C of the IT Act without bringing on record any material to show that the seized material indicates income of assessee is undisclosed. In para nos. 55 and 56 of the judgment of Hon'ble Karnataka High Court rendered in the case of CIT and Another Vs. IBC Knowledge Park P. Ltd. (supra), this was held that the Tribunal was not correct in holding that the assessment u/s. 153C was valid despite there being no satisfaction recorded to the effect that the documents found during the search on June 17, 2008 were incriminating in nature and prima facie represented undisclosed income. For ready reference, we reproduce para nos. 55 and 56 of this judgment of Hon'ble Karnataka High Court. These paras are as under. “55. If the observations made by the Tribunal are considered in this regard, it is noted by the Tribunal that it is not necessary that satisfaction should be recorded that documents or valuable assets found in the course of search showed undisclosed income. In view of the aforesaid discussion, we do not think that such can be the correct position of law.
Further, in the judgments referred to by the learned counsel for the Revenue, where incriminating material leading to undisclosed income of another assessee was detected in a search operation, in those cases, reopening of the concluded assessment have taken place. There has been no single decision cited by the learned counsel for the Revenue where the assumption of jurisdiction of the Assessing Officer is in the absence of any incriminating material or undisclosed income having been detected during the course of search leading to reopening of a concluded assessment. In the instant case, though documents belonging to the assessee were seized at the time of search operation, there was no incriminating material found leading to undisclosed income. Therefore, assessment of income of the assessee was unwarranted. Consequently, no satisfaction was recorded in the case of the assessee.
We answer the substantial question of law No. 2 by holding that the Tribunal was not correct in holding that the assessment under section 153C was valid despite there being no satisfaction recorded to the effect that the documents found during the search on June 17, 2008 were Page 4 of 4 incriminating in nature and prima facie represented undisclosed income.”
As per the impugned order, it is noted by ld. CIT(A) in para no. 3.6 of his order that on the scrutiny of the seized documents, the AO has observed that the materials in question were belonging to the present assessee and therefore, the AO was satisfied that action u/s. 153C has to be initiated in the present case. There is no finding given by ld. CIT(A) on this issue as to whether the seized material in question is incriminating in nature or not and whether these seized materials represented any prima facie undisclosed income or not. Hence, we feel it proper to restore back the matter to the file of ld. CIT(A) for fresh decision after examining the facts of present case in the light of this judgment of Hon'ble Karnataka High Court rendered in the case of CIT and Another Vs. IBC Knowledge Park P. Ltd. (supra). We also direct the ld. CIT(A) to pass a speaking and reasoned order. If it is found that the AO has no jurisdiction u/s. 153C, then nothing further remains to be decided. But if it is found that the AO has valid jurisdiction, then the issue on merit should be decided afresh. We make no comment on any aspect i.e. jurisdictional aspect or merit.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.