SMT. P.ANNAPURNA,,HYDERABAD vs. THE DCIT, CENTRAL CIRCLE-1,, VISAKHAPATNAM

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax (Appeals)-I {CIT(A)}, Hyderabad vide ITA

No.0356/CC-1/Vizag/CIT(A)-I/10-11 dated 28.3.2013 for the assessment

year 2007-08.

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 2. A search and seizure operation was conducted u/s 132 of the

Income Tax Act, 1961 (hereinafter called as 'the Act') in the residential

premises of Shri N. Suryanarayana Reddy and M/s. Sailakshmi Township

Pvt. Ltd., Visakhapatnam on 22.8.2008 and also a survey u/s 133A of

the Act was conducted in the Branch offices of the above company.

During the course of search, it was found that the assessee has made

the investment in acquiring 2.08 acres of land at Annavaram village.

When the same was enquiried, on behalf of all the family members

of the assessee, Shri P.Srinivas, brother-in-law of the assessee had

admitted a sum of Rs.27 lakhs as unaccounted investment in

purchase of the land at Annavaram Village for the FY 2006-07 in

the hands of the assessee Smt. P.Annapurna. Subsequently, the

assessee has retracted the admission given during the course of

search proceedings stating that her brother in law has admitted the

additional income without her consent and the funds for purchase of

the lands were from her explained sources. In view of the

information collected during the course of search, the Assessing

Officer issued the notice u/s.148 of the Act on 13-10-2010. In

response to the notice issued, the assessee submitted letter stating

that the return of income filed on 4-9-2008, declaring taxable income

of Rs.1,39,135/- and agricultural income of Rs.55,000/- be treated as

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad the return filed in response to the said notice. The assessing officer

completed the assessment making the addition of Rs.35,00,000/- as

unexplained investment for purchase of land at Annavaram village

and accordingly determined the total income of Rs.36,39,135/- apart

from agricultural income.

CIT(A).The only ground raised by the assessee before the Ld. CIT(A) is

that the Assessing Officer should not have added the unexplained

investment amount of Rs.35,00,000/- in her hands. The assessee

submitted before the Ld.CIT(A) that, she has filed a letter dated

6-12-2010 before the A.O. stating that her brother-in-law, Sri

P.Srinivas has stated that additional cost of the land over and

above the sub registrar’s value amounting to Rs.55,00,000/- was

met by the firm, for purchase of 2.41 acres land out of her funds.

The assessee stated before the CIT(A) that while giving statement

before the Investigation Officer, her brother-in-law was not having

sufficient information with regard to the source of funds as to how

she had arranged the cash. Afterwards, she came to know that the

funds had come from her brothers as sale advance of Rs.35 lakhs,

which she had received for the Revada land. Hence, she had filed

the retraction statement to that effect, and her brother in law 3

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad was not aware of the assessee’s source of funds and hence the

statement given earlier by him admitting Rs.27,00,000/- on behalf

of the assessee was wrong and the additional income offered was

not correct as per the cash flow filed by the assessee. However,

the Assessing Officer viewed that the same was only an after-

thought in order to establish sources for the admission made

u/s.132(4) and to support the retraction from the admission made

in respect of undisclosed investment. The assessee also raised

additional ground before the CIT(A) stating that assessment made

u/s 147 r.w.s. 143(3) of the Act is bad in law and the assessment

should have been made u/s 143(3) r.w.s. 153C of the Act. The Ld.

CIT(A), in his order with regard to the additional ground raised by

the assessee challenging the issue of notice u/s.148 of the Act,

observed that the evidence was gathered from the search and

survey proceedings conducted in the cases of Shri

N.Suryanarayana Reddy and M/s. Sai Lakshmi Township Pvt Ltd

relating to the investments made in 2.08 acres of land at

Annavaram village. In view of fresh information coupled with the

admission given by Shri P. Srinivas, brother-in-law of the assessee

additional income of Rs.27 lakhs for the assessment year 2007-08,

the A.O. formed the belief regarding the escapement of income

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad and hence reopened the assessment by issue of notice u/s 148 of

the Act and accordingly upheld the notice issued by A.O. u/s 148 of

the Act.

that despite being given more than sufficient opportunity, the

appellant could not substantiate the genuineness of the claim

regarding receipt of advance of Rs.35 lakhs for the Ravada land in

terms of the agreement dated 20-2-2007.Thus Upheld the addition

of Rs.35 lakhs and dismissed the appeal of the assessee.

appeal before this Tribunal and challenged the validity of

assessment made u/s 143(3) r.w.s. 147 of the Act instead of

making the assessment u/s 153C r.w.s. 143(3) of the Act.

placed before us. During the course of search, carried out u/s

132 of the Act in the case of M/s. Sai Lakshmi Township Pvt. Ltd.

and N. Suryanarayana Reddy, it was found that the assessee has

invested unaccounted income in purchase of land at Annavaram

village, Denkada Mandalam along with others during the financial

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad year 2006-07 relevant to A.Y. 2007-08. This is established by the

reasons recorded in the order sheet in the assessee’s case.

Therefore, it is clear that the assessment required to be made in

the case of the assessee with reference to the incriminating

material found during the course of search. As per the provisions

of Income Tax Act, in case incriminating material is found, in the

case of other than a person searched u/s 132 of the Act, the

correct provision to be invoked for making the assessment is

section 153C of the Act but not section 147 of the Act. For ready

reference, we extract relevant part of the section u/s 153C of the

Act which reads as under:

Assessment of income of any other person.

153C. [(1)] Not withstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery 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 section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment yar or years referred to in sub section (1) of section 153A]. [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 [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 6

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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 except in cases where any assessment or reassessment has abated.]”

From plain reading of section 153C it is clear that in case of

money, bullion, jewellery 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 section 153A the AO require to invoke the

provision u/s 153C but not 147.

case of G. Koteswara Rao Vs. DCIT (Central Circle),

Visakhapatnam in ITA No.400/Vizag/2014 dated 29.10.2015. For

ready reference, we extract relevant part of the order, which

reads as under:

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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-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.

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 &Ors. Vs DCIT (2012) 137

ITD 287 (Mum). The Special Bench after considering the

provisions of section 153A and CBDT circular has held as under.

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad "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 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.

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad In so far as pending assessments are a) 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.

in respect of non-abated assessments, the b) 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."

.. …. …

Thus, question No.1 before us is answered a) as 58. under (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately ;

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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.

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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. A question may arise as to how this is sought to 20. 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.

Now there can be cases where at the time when 21. 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 12

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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 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 13

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 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 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.

ITA No.368 /Vizag/2013 Smt. P. Annapurna, Hyderabad 7. Since the facts are identical, respectfully following the view

taken by the coordinate bench, we hold that reopening of

assessment u/s 148 of the Act is bad in law and accordingly the

notice issued u/s 148 is quashed and the appeal of the assessee

is allowed.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 04.04.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-