RAJENDRA LADAKCHAND JAIN,MUMBAI vs. DCIT , CC -1 (3), MUMBAI

The present appeals filed by the assessee are directed against the order passed by the CIT(A)-47, Mumbai for A.Y. 2010-11 & A.Y. 2012-13, both dated 27.03.2018, which in turn arises from the respective assessment orders passed by the A.O under Sec.153Cr.w.s. 143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 31.03.2016 for the aforementioned years. As a common issue is involved in the aforementioned appeals, therefore, we shall take up and dispose off the same by way of a consolidated order. We shall first advert to the appeal filed by the assessee for A.Y. 2010-11. The assessee has assailed the impugned order on the following grounds of appeal: “1. The assessee is individual and filing regular return of income. The survey action was initiated on Nakoda Floor Mills Pvt. Ltd., which P a g e | 2 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) was the residence of the assessee and for which necessary documents were also filed during the assessment proceedings before Ld. AO as well as in first appellant proceedings before Ld. CIT (A)-47. It is well settled law that survey action cannot be initiated at residential premises. In view of the same the survey action is illegal.

During the course of the survey proceedings conducted under Sec. 133A on M/s Nakoda Floor Mills Pvt. Ltd., a “blue coloured diary” was found and impounded as Annexure A1 – Page 1-31. The said diarycontained the details of cash loans advanced and received back by the assessee in his individual capacity through various concerns operated and managed by him. In his statement recorded under Sec.131 on 03.10.2013, the assessee admitted that the said diary was found from his premises. Further, it was admitted by the assessee that the diary contained the details of cash loans given and received P a g e | 3 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) back on different dates to/from various parties. It was also admitted by the assessee that the cash loans given and taken mentioned in the aforesaid diary were neither reflected in his personal books of accounts or that of any of the concerns in which he was a director/partner/proprietor. As regards the claim of the assessee that certain loans had been advanced by him through cheques, it was observed by the investigation wing of the department that such loan entries which were provided by the assessee vide cheques/RTGS were in lieu of receipt of cash as against the same. After the survey proceedings, the assessee had once again in his statement recorded under Sec.131 on 27.01.2014 reaffirmed that the “blue coloured diary” that was impounded during the course of the survey proceedings contained the details for cash loans which were advanced by him in his personal capacity. On the basis of the aforesaid facts, the A.O worked out the peak amount of cash loans advanced by the assessee during the year under consideration viz. A.Y. 2010-11 at Rs.62,00,000/- , and called upon him to explain as to why the same may not be added to his total income. In reply, the assessee raised multiple objections as regards the addition of Rs.62,00,000/- that was proposed by the A.O. Also, the assessee objected to the issuance of the notice under Sec.153C of the Act. Apart there from, the assessee also filed an “affidavit”wherein he retracted from his statement that was recorded during the course of the survey action on 03.10.2013 and thereafter as on 27.01.2014. However, the A.O holding a conviction that the retraction filed by the assessee was a result of an afterthought and was a tutored statement, therefore, he declined to accept the same. It was observed by the A.O that the retraction of the assessee was not supported by any independent or reliable evidence to prove the incorrect nature of the facts which were confessed by him in his statements that were recorded under Sec. 131 of the Act. In fact, it P a g e | 4 ITA Nos.2825 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) was noticed by the A.O that the facts stated by the assessee in his aforesaid statements were corroborated by the incriminating material in the form of the“blue coloured diary” that was found and impounded as Annexure A1 – Page 1-31 in the course of the survey proceedings. Accordingly, the A.O was not inclined to accept the contention advanced by the assessee, and added the peak amount of undisclosed cash loans of Rs.62,00,000/- to the returned income of the assessee for the year under consideration. On the basis of his aforesaid deliberations the A.O assessed the income of the assessee at Rs.76,98,850/-.

Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). However, the CIT(A) not being persuaded to subscribe to the contentions advanced by the assessee partly allowed the appeal for statistical purposes.

The assessee being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee, at the very outset of the hearing of the appeal assailed the validity of jurisdiction assumed by the A.O for framing of the assessment under Sec.153C r.w.s 143(3), dated 31.03.2016. The ld. A.R confining himself to the validity of the assessment framed by the A.O under Sec.153C r.w.s. 143(3), dated 31.03.2016 submitted, that as the assessment was framed on the basis of incriminating material i.e a “blue coloured diary” that was found and impounded as Annexure A1 – Page 1-31 in the course of the survey proceedings conducted on M/s Nakoda Floor Mills Pvt. Ltd., therefore, the said assessment was invalid and unsustainable in the eyes of law. It was averred by the ld. A.R that assessment under Sec.153C can be framed only where the A.O is satisfied that viz. (a) any money, bullion, jewellery or valuable article or thing, seized in the P a g e | 5 ITA Nos.2825 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) course of search proceedings conducted u/s 132 or requisitioned u/s 132A of the Act, belongs to ; or (b) any books of accounts or documents seized in the course of the search proceedings conducted u/s 132 or requisitioned u/s 132A pertains or pertain to or any information contained therein, relates to, a person other than the person referred to in Sec.153A of the Act. Accordingly, it was submitted by the ld. A.R that as the “blue coloured diary” in the case of the present assessee was found and impounded as Annexure A1 – Page 1-31 in the course of the survey proceedings conducted under Sec.133A on M/s Nakoda Floor Mills Pvt. Ltd., therefore, the A.O had gravely erred in law in framing the assessment under Sec.153C r.w.s 143(3), dated 31.03.2016. In sum and substance, it was the contention of the ld. A.R that as a document impounded in the course of the survey conducted under Sec. 133A would not confer jurisdiction on the A.O to frame an assessment under Sec.153C of the Act, therefore, the assessment so framed under the said statutory provision in the case of the present assessee was bereft of any force of law and was liable to be quashed on the said count itself.

Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that though the “blue coloured diary” was found and impounded in the course of the survey proceedings conducted under Sec.133A on M/s Nakoda Floor Mills Pvt. Ltd., however, as simultaneously search proceedings were carried out on the other two directors of the aforesaid company i.e S/sh. Bhanwarlal Jain & Rajesh Bhanwarlal Jain, therefore, the A.O had rightly assumed jurisdiction and framed the assessment under Sec.153C r.w.s 143(3) of the Act.

We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material P a g e | 6 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) available on record. We find that our indulgence in the present appeal has been sought by the assessee to adjudicate upon the validity of the assessment framed by the A.O under Sec.153C r.w.s 143(3), dated 31.03.2016. Admittedly, as is discernible from the orders of the lower authorities, the A.O had assumed jurisdiction and framed the assessment under Sec. 153C on the basis of the incriminating material i.e a “blue coloured diary” that was found and impounded during the course of the survey proceedings conducted under Sec.133A on M/s Nakoda Floor Mills Pvt. Ltd. It is undisputed by the revenue that the aforesaid incriminating document viz. “blue coloured diary”, which thereafter had been marked as Annexure A1 – Page 1-31 was found and impounded during the course of the survey proceedings conducted on M/s Nakoda Floor Mills Pvt. Ltd. at 9thFlour, Novelty Chamber, Mumbai. In our considered view, documents found and impounded in the course of the survey action cannot confer jurisdiction on the A.O to frame an assessment under Sec.153C of the Act. As is discernible from a perusal of Sec.153C of the Act, it is only where in a case a search initiated under Sec.132 or books of account, other documents or assets are requisitioned under Sec.132A, that the assessing officer is satisfied that viz. (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of accounts 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 Sec.153A, then the books of accounts 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 his income in accordance with the provisions of Sec.153A, and that too if, that assessing officer is satisfied that the P a g e | 7 ITA Nos.2825 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) 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 year or years referred to in sub- section (1) of Sec. 153A.. Accordingly, in the case before us, as the “blue coloured diary” was neither seized in the course of any search proceedings initiated under Sec.132 nor was requisitioned under Sec. 132A, but was in fact admittedly impounded in the course of the survey proceedings conducted under Sec.133A on M/s Nakoda Floor Mills Pvt. Ltd., therefore, as per the mandate of law, the A.O was divested of assuming jurisdiction and framing of an assessment under Sec.153C r.w.s 143(3) on the basis of the same. We thus being of the considered view that as the A.O had blatantly exceeded his jurisdiction and framed the aforesaid assessment under Sec.153C r.w.s 143(3), dated 31.03.2016,therefore, the same cannot be sustained and is liable to be struck down on the ground of invalid assumption of jurisdiction on his part itself. In the backdrop of our aforesaid observations we quash the assessment framed by the A.O under Sec.153C r.w.s 143(3), dated 31.03.2016. As we have quashed the assessment on account of want of jurisdiction, therefore, we refrain from adverting to and therein adjudicating the other grounds raised

The Ld. AO has issued notice u/s 153C of the Act without any proper and legal satisfaction.

Briefly stated, the assessee had filed his return of income for A. Y. 2012-13 on 29.09.2012, declaring his total income at Rs.14,85,000/-. On the basis of the contents of a “blue coloured diary” that was found and impounded as Annexure A1 – Page 1-31 in the course of the survey proceedings conducted on M/s Nakoda Floor Mills Pvt. Ltd., the A.O called upon the assessee to explain as to why peak addition of the unaccounted cash loan transactions may not be made in its hands. In reply, the assessee objected to the proposed addition. However, the A.O rejected the contentions advanced by the assessee both in respect of the validity of assumption of jurisdiction and also on merits, and made an addition of Rs.4,03,73,139/- towards peak amount of undisclosed cash loan, vide his order passed under Sec. 153C r.w.s 143(3), dated 31.03.2016.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee partly allowed the appeal.

The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised representatives for both the parties submitted, that the facts and the P a g e | 9 & 2827/Mum/2018 A.Ys. 2010-11 & 2012-13 RajendraLadakchand Jain Vs. DCIT, Central Circle-1(3) issue involved in the present appeal to the extent relevant to the validity of the assessment framed by the A.O under Sec. 153C r.w.s 143(3) are identical to those which were involved in the appeal of the assessee for A.Y. 2010-11 i.e Rajesh Ladakchand Jain Vs. DCIT, CC- 1(3), Mumbai ( ). As the facts and the issue involved in the present appeal are identical to those as were there before us in the aforementioned appeal of the assessee for A.Y. 2010- 11, viz. ITA No.2825/Mum/2018, therefore, the view therein taken by us shall apply mutatis mutandis for the purpose of disposing the present appeal for A.Y. 2012-13 in ITA No.2827/Mum/2018. Accordingly, in terms of our aforesaid observations the assessment framed by the A.O under Sec.153C r.w.s 143(3), dated 31.03.2016 is quashed.

The appeal of the assessee is allowed.

The appeals of the assessee for A.Y. 2010-11, A.Y. 2012-13, are allowed in terms of our aforesaid observations.