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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI.
Before: SHRI KULDIP SINGH & DR. M.L. MEENA
PER KULDIP SINGH, JUDICIAL MEMBER :
2 ITA Nos.1571 & 1573/Del./2015
Since common questions of facts and law have been raised
in the aforesaid appeals, the same are being disposed of by way of
composite order to avoid repetition of discussion.
The appellants, Shri Meer Hassan & Shri Ali Hassan
(hereinafter referred to as ‘the assessees’) by filing the present
appeals, sought to set aside the impugned orders both dated
23.12.2014 passed by Ld. CIT (Appeals), Dehradun qua the
Assessment Year 2007-08 on the identical grounds inter alia that :-
“1. That the notice issued under section 148 and the Assessment order passed u/s 143(3) r.w.s. 147 are illegal, bad in law & without jurisdiction.
That in view of the facts & circumstances of the case the CIT (Appeal) has erred on facts & in law in dismissing the appeal of the Assessee and in upholding the order passed by the AO.
That the income has been wrongly & illegally assessed at Rs.51,10,000/- as against Rs.80,890/- in case of Meer Hassan and Rs.50,33,640/- against Rs.97,950/- in case of Ali Hassan, declared by the assessee.
That the addition of long term capital gain has been wrongly & illegally made and it is wrongly upheld by CIT (Appeal).
That the addition has been made & the order has been passed without giving proper & reasonable opportunity to the Assessee.
That in view of the facts and circumstances of the case the CIT (Appeal) has erred on facts & law in upholding the addition of Rs. 50,29,110/- and Rs.49,35,600/- in case of Meer Hassan and Ali Hassan respectively on account of alleged
3 ITA Nos.1571 & 1573/Del./2015
undisclosed sale consideration received by assessee & has also erred in relying on document found from third party.
That the CIT (Appeal) has failed to appreciate that the alleged sale consideration was never accrued nor received by the assessee, hence the addition is illegal & bad in law.
That the additions made by the AO and upholding the CIT (Appeal) are unjust, unlawful and are based on near surmises and conjunctures and also highly excessive. The additions cannot be justified by any material on record.
That the explanation given and material available on record has not been properly considered & the addition has been made against the principle of natural justice. .
That the interest U/s 234A, 2348, 234C has been wrongly and illegally charged by A.O. and the same is highly excessive.”
Briefly stated the facts necessary for adjudication of the
controversy at hand are : On the basis of search and seizure
operation at the premises of M/s. R.B. Enterprises belonging to
Shri Rakesh Batta group of cases wherein certain loose papers
marked as LP-103 A-1 pages 30 was seized showing the fact that
M/s. R.B. Enterprises has purchased land from Meer Hassan and
Ali Hassan, assessees in these cases, for a total sale consideration
of Rs.52,43,720/-. On the basis of these evidences, Assessing
Officer issued a show-cause notice to the assessees; that as against
the sale consideration of Rs.52,43,720/- shown in the sale deed, the
property in question was actually sold for Rs.2,53,60,140/- and
why it should not be presumed that the assessees have received a
4 ITA Nos.1571 & 1573/Del./2015
sum of Rs.2,01,16,420/- in cash over and above the sale proceeds
mentioned in the sale deed. Declining the contentions raised by the
assessee that they along with their family members got the sale
consideration as per sale deed and no amount other than mentioned
in the sale deed was ever paid to them and memorandum of
understanding Annexure LP-103 A-1 pages 30 is an irrelevant
document, AO proceeded to compute the capital gain of the
assessee by taking into consideration the total sale consideration at
Rs.2,53,60,140/- and calculated the capital gains at Rs.51,06,435/-
& Rs.50,29,105/- in case of Meer Hassan & Ali Hassan
respectively and thereby assessed the income of Meer Hassan &
Ali Hassan at Rs.51,10,000/- & Rs.50,33,640/- plus agricultural
income of Rs.1,54,510/- each respectively.
Assessee carried the matter before the ld. CIT (A) by way of
appeals who has confirmed the addition by dismissing the appeals.
Feeling aggrieved, the assessees have come up before the Tribunal
by way of filing the present appeals.
We have heard the ld. Authorized Representatives of the
parties to the appeal, gone through the documents relied upon and
orders passed by the revenue authorities below in the light of the
facts and circumstances of the case.
5 ITA Nos.1571 & 1573/Del./2015
Assessees by moving application dated 13.09.2018 sought to
raise the additional ground no.1A which is to the following effect :-
“That on the facts and in the circumstances of the case and law, the A.O. has erred in initiating proceedings on the basis of incriminating material of appellant found in search of other persons u/s 147 of the Act and CIT (Appeals) in upholding such assessment, when provisions of Section 153C for assessment only were applicable and not of section 147 & section 148.”
It is contended by the ld. AR for the assessee that this
additional ground could not be raised due to inadvertence which
was neither willful nor intentional. The ld. DR for the Revenue
opposed the application for additional ground on the ground that
the assessee has first time raised this ground which is not
permissible under law. Ld. DR for the Revenue also relied on the judgments in cases of CIT vs. Manish Buildwell (P.) Ltd. (2011)
16 taxmann.com 27 (Delhi), Keshav Mills Co. Ltd. vs. CIT (1965) 56 ITR 365 and Goetze India Ltd. vs. CIT 2006-TIOL-198-SC-IT.
However, we are of the considered view that this ground was
very much raised by the assessee as ground no.3 before the ld. CIT
(A) who has determined the same vide impugned order. Moreover,
legal ground can be raised by the parties to the lis at any stage.
Moreover, assessee has already taken this ground as ground no.1
before the Tribunal but he has somehow moved this application to
6 ITA Nos.1571 & 1573/Del./2015
make the ground more formal and specific in the form of additional
ground.
No doubt, Hon’ble Supreme Court in Goetze India Ltd.
(supra) held that the jurisdiction can be challenged within limited
time period maximum one month from the date of receipt of the
relevant notice but, in the instant case, this jurisdictional issue was
categorically raised by the assessee before the AO as is evident
from page 13 of the assessment order as well as before ld. CIT (A)
as ground no.3. So, the contentions raised by the ld. DR is
misconceived being against the facts on record and the judgments
relied upon are not applicable to the facts and circumstances of the
case. Thus, additional ground sought to be raised by the assessee is
allowed being necessary for complete adjudication of the
controversy at hand.
We would like to decide the additional ground no.1A which
is a legal issue first.
undisputedly, AO initialed the proceedings u/s 147 of the
Income-tax Act, 1961 (for short ‘the Act’) on the basis of one loose
paper found and seized, marked as LP-103 A-1 pages 30, which is
a memorandum of understanding containing details of sale
consideration qua the land sold by both the assessees in favour of
M/s. R.B. Enterprises. It is also not in dispute that originally,
7 ITA Nos.1571 & 1573/Del./2015
assessment was completed u/s 153C read with section 153A of the
Act vide order dated 30.12.2011 on the basis of same seized
material LP-103 A-1 pages 30. It is also not in dispute that
assessment order dated 30.12.2011, available at pages 20 to 30 of
the paper book, passed u/s 153C read with section 153A was
annulled by ld. CIT (A) vide order dated 29.08.2012, available at
pages 31 to 38 of the paper book. It is also not in dispute that the
ld. CIT (A) vide order dated 28.08.2012 observed that on the basis
of source of information i.e. document LP-103 A-1, proceeding u/s
147 of the Act was required to be initiated.
In the backdrop of the aforesaid facts and circumstances of
the case, the first question for determination in this case is :-
“as to whether on the basis of alleged incriminating material seized during search at the premises of M/s. R.B. Enterprises on 04.03.2009, AO as well as CIT (A) have erred in initiating the proceedings u/s 147 of the Act.”
The ld. AR for the assessee challenging the impugned order
contended that when the AO has specifically relied upon material/
documents LP-103 A-1 pages 30 seized during the search operation
conducted at the premises of M/s. R.B. Enterprises, he had the
authority to assess that person u/s 153C of the Act as the provisions
contained u/s 153C are non-obstante provisions which specifically
8 ITA Nos.1571 & 1573/Del./2015
exclude the operation of section 147 of the Act and as such,
assessment framed in this case u/s 147 is not sustainable in the eyes
of law.
However, on the other hand, ld. DR for the Revenue relied
upon the order passed by the ld. CIT (A).
For facility of reference, provisions contained u/s 153C are
extracted for ready perusal as under :-
“153C. (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 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 17[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A : 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 requisitioned by the Assessing Officer having jurisdiction over such other person :
9 ITA Nos.1571 & 1573/Del./2015
Provided further that the Central Government may by rules18 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 19[and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.”
Bare perusal of the provisions contained u/s 153C which is a
non-obstante provision shows that when the assessment order
shows that the assessment proceedings were to be initiated on the
basis of incriminating material found in search of a third party, as
in the present case, the provisions contained u/s 153C are
10 ITA Nos.1571 & 1573/Del./2015
applicable which specifically excludes application of sections 147
& 148 of the Act.
In the instant case, undisputedly, originally assessment
proceedings were initiated against the present assessees u/s 153C
read with section 153A of the Act which was completed vide order
dated 30.12.2011 but the same were annulled by ld. CIT (A) vide
order dated 28.08.2012 on the ground that proper course in this
case was to initiate proceedings u/s 147 of the Act and make
assessment accordingly. The said assessment u/s 153C read with
section 153A was completed on the basis of some seized
material/document LP-103 A-1 pages 30, which is a memorandum
of understanding alleged to have been entered into between the
assessees and M/s. R.B. Enterprises.
So, we are of the considered view that when provisions
contained u/s 153C are applicable in this case to initiate assessment
proceedings on the basis of seized material seized in case of some
third party, notice issued u/s 148 of the Act and subsequent
assessment framed u/s 147 of the Act is void ab initio and as such,
assessment framed u/s 147/143(3) of the Act is liable to be
quashed.
Identical issue has been decided by the coordinate Bench of
the Tribunal in case cited as Rajat Shubra Chatterji vs. ACIT –
11 ITA Nos.1571 & 1573/Del./2015
ITA No.2430/Del/2015 order dated 20.05.2016 by returning
following findings :-
“7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur – 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed.”
Similarly, coordinate Bench of the Tribunal in case cited as
ITO vs. Arun Kumar Kapoor – (2011 140 TTJ 249 has upheld the
reassessment order quashed by the ld. CIT (A) by returning
following findings :-
12 ITA Nos.1571 & 1573/Del./2015
“Reassessment-Validity-Reassessment on the basis of incriminating material found in search of third party-Provisions of s. 153C are applicable which exclude the application of ss. 147 and 148 – Hence notice issued under s. 148 and proceedings under s. 147 are illegal and void ab initio – AO having not followed procedure under s. 153C, reassessment order was rightly quashed by the CIT (A).”
Following the mandate of section 153C and orders passed by
the coordinate Bench of the Tribunal in cases of Rajat Shubra
Chatterji vs. ACIT and ITO vs. Arun Kumar Kapoor (supra), we
are of the considered view that assessment framed in this case u/s
147/143 (3) of the Act on the basis of incriminating material
unearthed in case of a third party is not sustainable, hence ordered
to be quashed without entering into the merits of the case. So,
other grounds of appeal raised by the assessee have become
infructuous. Consequently, both the appeals filed by the assessees
are allowed. Order pronounced in open court on this 28th day of February, 2019.
Sd/- sd/- (DR. M.L. MEENA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 28th day of February, 2019 TS
13 ITA Nos.1571 & 1573/Del./2015