Loading judgment…
Facts
The Assessee, a Hindu Undivided Family, claimed Long Term Capital Gain (LTCG) exemption under Section 10(38) from the sale of KGN Enterprises Ltd. shares for AYs 2012-13 and 2013-14. Reassessment proceedings were initiated under Section 147 based on information from the Investigation Wing that KGN Group companies provided bogus LTCG entries. The Assessing Officer (AO) treated the share sale proceeds as unexplained cash credit under Section 68, which was confirmed by the CIT(A).
Held
The Tribunal dismissed the Assessee's additional ground challenging the validity of reassessment under Section 147, ruling that Section 153C was not applicable as its jurisdictional conditions were not met, thus allowing recourse to Section 147. However, the Tribunal restored the issue of additions made under Section 68 on merits back to the Assessing Officer, directing them to properly confront the Assessee with all relied-upon material (like BSE data and SEBI orders) and allow the Assessee to furnish further evidence to prove the genuineness of transactions.
Key Issues
1. Whether reassessment proceedings initiated under Section 147 were valid, or if proceedings under Section 153C should have been invoked based on information from a third-party search. 2. Whether the addition of Long Term Capital Gain proceeds as unexplained cash credit under Section 68 was justified on merits.
Sections Cited
Section 10(38), Section 68, Section 131, Section 132, Section 132A, Section 139, Section 142, Section 143(1), Section 143(3), Section 147, Section 148, Section 149, Section 151, Section 153, Section 153A, Section 153B, Section 153C, Section 153D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Per Rahul Chaudhary, Judicial Member:
These are two appeals preferred by the Assessee pertaining to Assessment Years 2012-2013 and 2013-2014. Since the appeals involved identical issues arising from common factual matrix the same were heard together and are, therefore, being disposed off by way of a common order.
The facts common to both the appeals are that Assessee is a Hindu Undivided Family. The return of income filed by the Assessee for the relevant assessment years was processed under Section 143(1) of the Act. Subsequently, on the basis of information received from Deputy Commissioner of Income Tax (Investigation Wing), Ahmadabad to the effect that M/s. KGN Group of Companies were engaged in providing bogus Long Term Capital Gain entries in respect of two scripts (i.e., KGN Industries Ltd. and KGN Enterprises Ltd.). Followed by the inquiry/verification by the Assessing Officer, reassessment proceedings under Section 147 of the Act were initiated in case of the Assessee for the Assessment Years 2012-2013 and 2013-2014. The Assessing Officer noted that the Assessee had claimed Long Term Capital Gain exemption under Section 10(38) of the Act in respect of sale of shares of KGN Enterprises Ltd. (in short ‘KGN Enterprises'), during the relevant previous years. The aforesaid reassessment proceedings culminated into passing of the Assessment Order(s) under Section 143(3) read with Section 147 of the Act whereby the transaction of purchase/sale of share of KGN Enterprises were held to be pre- determined transactions and additions were made in respect of the same in the hands of the Assessee under Section 68 of the Act. Being aggrieved, the Assessee challenged the validity of reassessment proceedings as well as the additions made in the hands of the Assessee on merits in appeal before the Learned CIT(A). Assessee's challenge to validity of reassessment proceedings was rejected by the CIT(A) and the grounds raised by the Assessee challenging the additions made by the Assessing Officer under Section 68 of the Act on merits in respect of Capital Gain and/or sale consideration were also dismissed. Being aggrieved, the Assessee has carried the issues in appeal before this Tribunal in two separate appeals filed for the Assessment Years 2012-2013 and 2013-2014. ITA No.300/Mum/2024 [Assessment Year 2012-2013]
We would first take up appeal preferred by the Assessee for the Assessment Year 2012-2013 directed against the Order, dated 16/01/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the `CIT(A)'], whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 29/12/2017, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as `the Act') for the Assessment Year 2012-2013. 2. 1. The Assessee has raised following grounds of appeal in ITA No.300/Mum/2024 [Assessment Year 2012-2013] :
"
The re-opening of the assessment of the appellant by the issue of notice under section 148 without satisfying the juri ictional conditions precedent to assuming juri iction under section 147 is without juri iction and bad-in-law and consequently, any assessment made on the basis of the notice which is bad-in-law may kindly be annulled.
On the facts and in law, the Learned Commissioner (Appeals) had erred in confirming the addition of Rs.59,24,273/- being the sale proceeds of shares by treating the same as unexplained cash credit under section 68 of the I.T.Act. Under the facts and circumstances of the matter, he ought not to have confirmed the said addition of Rs.59,24,273/-."
Additional ground "
The notice u/s.148 of the Act is bad in law as the reopening is pursuant to the search of third party, and therefore the provisions of section 153C of the Act ought to have been invoked."
Additional Ground and Ground No. 1 The Additional Ground and Ground No. 1 raised by the Assessee challenge the validity of reassessment proceedings.
By way of the additional ground raised by the Assessee it has been contended on behalf of the Assessee that the reassessment proceedings were bad in law since the same have been initiated under Section 147 of the Act whereas the Assessing Officer ought to have initiated proceedings under Section 153C of the Act. It is the contention of the Assessee that the reasons recorded for reopening the assessment provided that the reassessment proceedings have been initiated on the basis of information/material discovered during the search proceedings conducted on a third party and therefore, the Assessing Officer was required to take reference to Section 153C of the Act.
Per contra the Learned Departmental Representative supported the assumption of juri iction by the Assessing Officer under Section 147 of the Act and submitted that the Assessee had not raised any objections in this regard either during the assessment proceedings before the Assessing Officer or during the appellate proceedings before the CIT(A). Therefore, the additional ground raised by the Assessee should not be entertained in any case.
We have considered the rival submissions (oral as well as written) on the additional ground and have perused the material record including the judicial precedents cited by both the sides.
During the course of hearing Learned Authorized Representative for the Assessee had extensively relied upon the judgment of the Hon'ble Bombay High Court in the case of Sejal Jewellary Vs. Union of India [2025] 171 taxmann.com 846 (Bombay), judgment of the Hon'ble High Court of Rajasthan in the case of Shyam Sunder Khandelwal & Ors. Vs. Assistant Commissioner of Income Tax [2024] 338 CTR, and judgment of the Hon'ble Supreme Court of India in the case of Principal Commissioner of Income Tax Vs. Abhisar Buildwell Private Ltd. [2023] 454 ITR 212 (SC), dated 24/04/2023. 4. 4. In the case of Abhisar Buildwell Private Ltd. (Supra), the core issue raised in a batch of appeals before the Hon'ble Supreme Court revolved around scope of assessment under Section 153A of the Act. The contention of the Revenue was that the Assessing Officer was competent to assess/reassess the total income of the Assessee taking into consideration the incriminating material unearthed during the search proceedings as well as other material available with the Assessing Officer. On the other hand, it was contended on behalf of the Assessee that in case of completed/unabated assessments, the Assessing Officer could only consider incriminating material unearthed during the course of search and was precluded from considering any other material derived from any other source. After examining the scheme of Section 153A of the Act and its legislative history the Hon'ble Supreme Court concluded as under:
"9. 9.1 While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961. That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.
On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "xx XX"
As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the juri iction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the juri iction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re- open the completed/unabated assessments, unless any incriminating material is found with respect to concerned
assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy."
On perusal of the provisions contained in Section 153A of the Act and their interpretation as adopted by the Hon'ble Supreme Court by way of above judgment, it becomes clear that once search and seizure is made under Section 132 of the Act, a mandate is cast upon the Assessing Officer to issue notice under Section 153A of the Act in case of searched person require him to furnish return of income in respect of six assessment year following the assessment years immediately proceedings the assessment year relevant to previous year in which search is conducted.
However, we note that the scheme contained for Section 153C of the Act which has application in case of `a person other than the person referred to in section 153A' (i.e., a person other than searched person [hereinafter referred to as `Other Person'] is slightly different. This becomes clear on perusal of Section 153C of the Act which reads 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 juri iction 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 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 juri iction over such other person:
(2) XX XX 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 juri iction 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 juri iction 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.” (Emphasis Supplied)
As per Section 153C(1) of the Act, the assumption of juri iction by the Assessing Officer to assess/reassess total income of the ‘Other Person' is predicated on (a) First the Assessing Officer of the searched person being satisfied that material unearthed during the search proceedings belongs/pertains to `Other Person (and not to the searched person); (b) Second - recording of such satisfaction to the aforesaid effect by the Assessing Officer of the searched person; (c) Third - transmitting of such material along with the satisfaction recorded as aforesaid by the Assessing Officer of the searched person to the Assessing Officer of such Other Person; (d) Fourth the Assessing Officer of Other Person being satisfied that the material received has a bearing on the determination of the total income of such Other Person; and, (e) Fifth the Assessing Officer of such Other Person issuing a notice to commence assessment/reassessment. It is settled position that in case any one or more of the aforesaid events/conditions are not fulfilled, the assumption of juri iction by the Assessing Officer of the Other Person under Section 153C of the Act shall stand vitiated. Bare perusal of Section 153C of the Act make it is clear that the Assessing Officer of the Other Person comes into action only after satisfaction note and the material unearthed during the course of searched in received from the Assessing Officer of the searched person.
In the present case it is the contention of the Assessee is that the reassessment proceedings were initiated solely on the basis of incriminating material found during the course of the search conducted in the case of KGN Group of Companies and therefore, the Assessing Officer should have exercise juri iction under Section 153C of the Act in the case of the Assessee. It was submitted by the Learned Authorised Representative for the Assessee that during the search proceedings in the case of KGN Group of Companies incriminating material was found in respect of the Assessee and therefore, the Assessing Officer was mandated to initiated proceedings under Section 153C of the Act and precluded from initiating proceedings under Section 147 of the Act. The aforesaid contention has been raised by the Assessee for the first time before this Tribunal by way of an additional ground. It was submitted by the Learned Authorised Representative for the Assessee that the additional ground raised by the Assessee was a pure question of law and therefore, the same can be admitted and adjudicated by this Tribunal even though it has been raised for the first time as additional ground before this Tribunal. On a without prejudice basis, it was also contended that even if the aforesaid additional ground is not considered to be a pure question of law, the facts relevant for adjudication of the issue raised therein formed part of the assessment records and should be called for and taken into consideration by this Tribunal. Therefore, the issue that assessed for consideration is whether in the facts and circumstances of the present case the additional ground raised by the Assessee can be regarded as a pure question of law. In this regard, it would be pertinent to note that appeal before us pertains to an HUF Assessee. According to the Revenue reassessment proceedings were initiated on the basis of information received from Deputy Commissioner of Income Tax (Investigation Wing), Ahmadabad to the effect that KGN Group of Companies was engaged in providing bogus Long Term Capital Gain accommodation entries and that during relevant previous year the Assessee was one of the beneficiary of such accommodation entries. It is admitted position that the Assessee had claimed Long Term Capital Gain Exemption in the return of income for the Assessment Year 2012-2013 and 2013-2014 in respect of sale of shares of KGN Enterprises. Therefore, the material on record shows that the Assessing Officer had assumed Juri iction under Section 147 of the Act and had framed assessment vide Assessment Order, dated 29/12/2017, passed under Section 143(3) read with Section 147 of the Act. The reasons recorded for reopening assessment provide that reassessment proceedings were on the basis of information received from Deputy Commissioner of Income Tax (Investigation Wing), Ahmadabad. It is not the case where the assessing officer of the searched person (i.e. KGN Enterprises) had handed over the incriminating material unearthed during the course of search to the Assessing Officer of the Assessee. There is nothing on record to suggest that any satisfaction note was drawn by the Assessing Officer of the searched person to the effect that any incriminating material found during the course of search pertained/related to the Assessee. On the contrary, it has been contended by the Revenue that no such satisfaction note was drawn. As noted hereinabove, the juri iction of the Assessing Officer to assess/reassess income under Section 153C of the Act is predicated upon the Assessing Officer of the search person being satisfied that incriminating material found during the course of search belonged/pertained to Other Person (i.e. Assessee in the present case). For assumption of juri iction under Section 153C of the Act by the Assessing Officer of the Assessee it was required that the Assessing Officer of the searched person (i.e. KGN Group of Companies) should have transmitted the satisfaction so recorded alongwith incriminating material found that during the course of search to the Assessing Officer of the Assessee. It is only after the receipt of the same, that the Assessing Officer of the Assessee could have proceeded to take any steps in terms of Section 153C of the Act to draw satisfaction that the material received had a bearing on determination of total income of the Assessee in the present case. It would be pertinent to note that the Hon'ble Supreme Court has, in the case of Commissioner of Income-tax Vs. Jasjit Singh [2023] 155 taxmann.com 155 (SC), held that the Assessing Officer of Other Person would have juri iction to frame assessment under Section 153C read with Section 153A of the Act in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the incriminating material is received by the Assessing Officer of Other Person from the assessing officer of the searched person. In the case before us, neither a satisfaction note has been drawn by the assessing officer of the searched person nor has any material been handed over to the Assessing Officer of the Assessee. Therefore, the scheme contained in Section 153C of the Act would become unworkable in case present case and accepting submission made on behalf of the assessee would lead to absurdity. While it has been contended by the Learned Authorized Representative for the Assessee that in the present case provision of Section 153C of the Act would be attracted, there is nothing on record to support the aforesaid contention raised by the Learned Authorized Representative for the Assessee. The aforesaid submissions are premised upon the fact that in the reasons recorded for reopening the assessment reference has been made in the search carried out in the case of KGN Group of Companies. It has been contended that the reasons recorded are founded on the material found during the course of search. In this regard, we deem it appropriate to revert to the judgment of Hon'ble Supreme Court of India in the case of Abhisar Buildwell Private Ltd. (Supra) where clearly a distinction was drawn in case of incriminating material found during the course of search and `other material' that came to the knowledge in the position of Assessing Officer. The contention of the Assessee is that the basis of initiating reassessment proceedings is the incriminating material found during search. This has been disputed by the Revenue. To answer this disputed question of fact, the Tribunal would be required to inquire into whether all the material on the basis of which reasons were recorded for reopening assessment constituted incriminating material found during the course of search conducted in the case of KGN Group of Companies or whether the same fell into the category of `other material' or information gathered by the Revenue in post-search proceedings. In our view the aforesaid issue can, at best, be regarded as mixed question of fact & law requiring examination of facts. Thus, clearly, in the present case the additional ground raised by the Assessee does not simply raise a pure question of law as was contended by the Learned Authorized Representative for Assessee. Further, the incriminating material found during the course search in the case of KGN Group of Companies as also the other material would form part of assessment records of the searched person and not the Assessee. Material on record clearly shows that reassessment proceedings were initiated on the basis of report of investigation wing whether such report was accompanied only incriminating material pertaining to the Assessee unearthed during the search carried out on KGN Group of Companies would require examination of assessment records of searched persons as well as that of the Assessee. Therefore, we reject the contention of the Assessee that facts relating for adjudication of the additional ground raised by the Assessee form part of the material on record. We are of the view, in order to answer the disputed question of fact & law raised by the Assessee by way of additional ground, this Tribunal would be required to inquire into new facts and material not forming part of record of the present Assessee. Therefore, we hold that the additional ground raised by the Assessee cannot be regarded as a pure question of law in the facts and circumstances of the present case and the same would require examination of facts which do not form part of the record. Accordingly, the additional ground raised by the Assessee for the first time before this Tribunal cannot be admitted as hereby rejected.
During the course of hearing extensive reliance was placed by the Learned Authorized Representative for the Assessee on the judgment of the Hon'ble High Court of Rajasthan in the case of Shyam Sunder Khandelwal & Ors. (Supra). On perusal of the said judgment, we find that the same is not applicable to the facts of the present case. In that case the Revenue had not even set up a case that reassessment proceedings were based upon material other than incriminating material found during the course search and this has been so recorded by the Hon'ble High Court in Paragraph 29 of the said judgement which reads as under:
"
The Department has not set up a case that for initiating proceedings under section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing 'total income' in case of incriminating material found during search or requisition.” (Emphasis Supplied)
In the present case, the Revenue has clearly taken a stand that reassessment proceeding were initiated on the basis of information gathered by the Deputy Commissioner of Income Tax (Investigation Wing), Ahmadabad subsequent to search carried on KGN Group of Companies. On perusal of reasons recorded for reopening assessment, we find that in Paragraph 3, it has been recorded that on verification of list of cases of persons who have availed bogus entries it was found that Assessee had also beneficiary and had availed bogus Long Term Capital Gain accommodation entries. It is the contention of the Assessee that verification was carried out by the Assessing Officer during the course of search. The material on record does not support the aforesaid contention advanced on behalf of the Assessee and the Revenue disputes this position. The Revenue has contended that the reassessment proceedings were initiated on the basis of inquiry/investigation conducted after the search proceedings. The stand taken by the Revenue is consistent with the fact that the Assessing Officer took recourse of reassessment proceedings under Section 147 of the Act. Thus, the judgment of the Hon'ble Rajasthan High Court is distinguishable on facts and does not apply to the facts of the present case.
During the course of hearing Learned Authorized Representative for the Assessee has also placed extensive reliance on the judgement of Juri ictional High Court in the case of Sejal Jewellary (Supra). On perusal of the said judgment we find that the in that case the Hon'ble Bombay High Court has, in exercise of writ juri ictional under Article 226 of the Constitution, quashed the proceedings initiated under reassessment proceedings initiated under Section 147 of the Act. In that case also the judgment of the Hon'ble Supreme Court in the case of Abhisar Buildwell Private Ltd. (Supra) dealing with the interpretation of provisions contained in Section 153A of the Act and the judgment of Hon'ble High Court of Rajasthan in the case of Shyam Sunder Khandelwal & Ors. (Supra) were taken into consideration. We note that in Paragraph 13 of the said judgment, the Hon'ble Bombay High Court has concluded that from the record produced before the Hon'ble High Court it was clear that:
(a) there was a search and seizure action on 04/10/2018, on the business premises of one 'Shilpi Jewellers Pvt. Ltd.', which has been the basis for the reopening of the petitioner's assessment,
(b) the reasons for reopening state that certain incriminating evidences (in the form of various loose papers and data back-ups of various electronic devices) were found and seized.
(c) search action was against Shilpi Jewellers Pvt. Ltd., its associate concerns, as well as revealed that all these persons had accepted large unsecured loans from various shell/papet the key individuals of the Group.
(d) on further enquiries being made, the profiling of the loan creditor companies in ITD Application, indicated that the loan creditor companies/entities who advanced huge loans to Shilpi Jewellers Pvt. Ltd. and its associate concerns, as well as the key individuals of this group, did not have any creditworthiness for extending such huge loans. It was, particularly, recorded that the petitioner/ assessee was part of said group, which had shown loan receipts during the year ended on 31 March, 2012 from a company, viz. M/s Green Valley Gems Pvt. Ltd., which was reported to be a shell/paper company, engaged in providing accommodation entries to the beneficiary parties.
(e) The reasons for reopening of the assessment were set out in detail, referring to such material and further enquiry which was undertaken in that regard, including materials being gathered in regard to M/s Green Valley Gems Pvt. Ltd. from whom the petitioners had alleged to have taken accommodation entries.
(f) It is on the basis of such information (which was certainly not the information borne out or gathered from the return of income), that the the Assessing Officer reached to a conclusion to reopen the assessment, on the ground that the assessee had not explained such loan receipt transactions. Such opinion was formed by the Assessing Officer on the basis that M/s. Green Valley Gems Pvt. Ltd was a shell/paper company.
In the aforesaid, the said facts the Hon'ble Bombay High Court in the case of Sejal Jewellary (Supra) had concluded as under:
“14. Thus, on the perusal of such reasons, it is quite clear that the provisions of Section 153A providing for "Assessment in case of search or requisition" and the provisions of Section 153C, which provide for "Assessment of income of any other person", which ordain that recourse be taken to the provisions of Section 153A stand attracted for an assessment to be undertaken."
We have already concluded hereinabove that the relevant material that could form basis of factual findings similar to those returned by the Hon'ble Juri ictional High Court does not form part of record. The material on record supports the stand taken by the Revenue that the in the facts and circumstances of the present case provisions contained in Section 153C of the Act would not be attracted. Therefore, disputed question of fact & law raised by the Assessee for the first time cannot be admitted/adjudicated by this Tribunal. Perusal of the judgment of the juri ictional High Court in the above case shows that the relief granted by the Hon'ble High Court was based upon the facts peculiar to that case. The scope of powers of the Hon'ble High Court to summon and examine records in writ/supervisory juri iction is much wider that the limited scope available to this Tribunal in appellate juri iction. As noted hereinabove in the facts of the present case the Tribunal is precluded entertaining the additional ground raised by the Assessee since the same raises a mixed question of fact and law disputed by the Revenue requiring inquiry into fresh material/facts not forming part of the record. At this point we deem it appropriate to refer to Paragraph 22 & 23 of the aforesaid judgment of the Hon'ble Bombay High Court which are set out hereinunder:
"
Applying the principles of law as discussed hereinabove, we are of the clear opinion that the foundation of the present case was certainly a search action which was undertaken by the Revenue against one Shilpi Jewellers Pvt. Ltd. and in such search and seizure action, materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Valley Gems Pvt. Ltd., which according to the Revenue had provided accommodation entries to the petitioner, in which it was also revealed that Green Valley Gems Pvt. Ltd. was a shell company. We do not find that the record would indicate something which is not on the basis of such new materials gathered under the search and seizure action under Section 132. If this be the case, then certainly the provisions of Section 153C read with Section 153A would be applicable, as held by the Supreme Court in Abhisar Buildwell (P) Ltd. (supra) when the Court interpreted the effect and purport of Section 153C and 153A, as also held by the Rajasthan High Court in Shyam Sunder Khandelwal (supra).
Insofar as Mr. Suresh Kumar's contention supporting the proceedings under Section 147 and 148 of I.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring to the decision of the Supreme Court in Phool Chand Bajrang Lal (supra), however, the facts in the present case are distinct. There cannot be any doubt on the position in law when the Revenue intends to proceed purely on materials relevant for an action under Section 148 read with Section 147. We have already observed that the provisions of Sections 147, 148 vis-a-vis Section 153A and Section 153 are quite compartmentalized. To avoid any overlapping of these provisions, the legislature in its wi om has thought it appropriate to provide for an independent effect, to be given under Section 153A read with Section 153C by incorporating the "non-obstante" clause, in these provisions, which carves out an exception to any normal/regular action being resorted under Section 147. 24. In this view of the matter, we are of the clear opinion that the impugned notice under Section 147 of the I.T. Act and all actions consequent thereto are required to be held to be without juri iction and bad in law. The petition is accordingly allowed in terms of prayer clauses (a) and (b).” (Emphasis Supplied)
On perusal of the above, it becomes clear that after examination of record the Hon'ble Bombay High Court had concluded that (a) the foundation of reassessment proceedings was a search action and (b) in the said search & seizure action, materials were seized and such materials were further explored and enquired. Therefore, the Hon'ble High Court was of the view that the material gathered during search was further explored/examined during search proceedings itself. In the present case, we have already concluded hereinabove that the record supports the contention of Revenue that further enquiries were carried out after the search proceedings. There is nothing on record from which even an inference can be drawn to the contrary. Therefore, the judgment of the Hon'ble Bombay High Court in the case of Sejal Jewellary (Supra) is distinguishable on facts and does not advance the case of Assessee.
As regards the applicability of non-obstante clause contained in Section 153C is concerned, the same would apply only when the provisions of Section 153C get triggered and therefore, does not have application in the facts of the present case. It is pertinent to note that after considering the `non-obstante' Clause contained in Section 153A of the Act, the Hon'ble Supreme Court had, in the case of Abhisar Buildwell Private Ltd. (Supra), concluded that even in the case where recourse has been taken by the Revenue to the provisions contained in Section 153A of the Act and no addition is made in the hands of the Assessee in a particular assessment year in absence of any incriminating material, the power of the Revenue to initiate proceedings under Section 147 of the Act was saved. Therefore, on the basis of information available and subject to compliance with provisions contained in Section 147 of the Act, the Revenue could take recourse to assessment or reassessment proceedings in the said assessment year. This aspect has been considered and recorded by the Hon'ble Bombay High Court in Paragraph 20 of the judgment in the case of Sejal Jewellary (Supra) in the following manner:
"
It is thus clear that in the event any incriminating material is found during the search, the Revenue necessarily would be required to take recourse to the provisions of Section 153A and in the event no incriminating material found during the search, then the power of the Revenue to have the reassessment under Sections 147/148 of the I.T. Act stands saved, failing which, the Revenue would be left without remedy. It is on such observations the conclusions as rendered by the Supreme Court and which are relevant to the case in hand, are required to be noted, which reads thus:
"
In view of the above and for the reasons stated above, it is concluded as under:
(i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the juri iction for block assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act subject to fulfilment of the conditions envisaged/mentioned under Sections 147/148 of the Act and those powers are saved.
Thus, the observation made by the Hon'ble Bombay High Court in Paragraph 20 above on which reliance was placed on behalf of the Revenue were made in the context of Section 153A of the Act. As noted herein above the scheme of Section 153A of the Act differs from the scheme of Section 153C of the Act. The provisions contained in Section 153A of the Act get triggered on search having been conducted under Section 132 of the Act whereas the provision contained in Section 153C of the Act (including the non-obstante clause contained therein) are triggered only on satisfaction of certain events/conditions discussed in paragraph 4.7. above. In the present case the said events/conditions were not satisfied. The basis of initiation of reassessment proceedings by the Assessing Officer in the present case was the information received from the Deputy Director of Income Tax (Investigation), Ahemedabad wherein it was stated that during the search proceedings it was revealed that KGN Group of companies (including KGN Enterprises) were involved in providing bogus long term capital gains entries. On subsequent investigation carried by the Investigation Wing details of beneficiaries of the aforesaid accommodation entries was collated. Before initiating reassessment proceedings, the Assessing Officer had verified the returns of income filed by the Assessee. In the reasons recorded, the Assessing Officer had not referred to any reference to the material seized during the course of the search on KGN Group of Companies and had recorded as under:
"
Information has been received from the Dy. Director of Income Tax, (Inv.), Ahmedabad that during the course of search and survey action carried out on KGN Group of Companies on 23/01/2015, it was revealed that this Group is providing bogus Long Term Capital Gain entries in two scrips of M/s.KGN Industries Ltd. and KGN Enterprises Ltd.
On verification of the list of cases/persons who have availed bogus entries, it is seen that during the financial year 2011-12 relevant to assessment year 2012-13, Mr. Surendra Garg, who is assessed to tax in this charge has availed LTCG entries details which are as under: Sr. Name of the party from No. of Value INR. No. whom bogus LTCG entries | shares availed
KGN Enterprises Ltd. 44200 1,87,66,525
On the basis of the aforesaid information available with the undersigned, I have reason to believe that income chargeable to tax, as indicated above, to the tune of Rs.1,87,66,525/- or proceedings for reassessment, has escaped assessment with the meaning of section 147 of the IT Act 1961. I am, therefore, satisfied that the assessee has failed to disclose ture and complete particulars of its income for the year under consideration. Accordingly, the case is reopened u/s.147 of the Income Tax Act, 1961 for A.Y.2012-13.”
At this juncture, it would be pertinent to refer to the judgment of Hon'ble Delhi High Court in the case of PCIT Vs. Naveen Kumar Gupta [2024] 168 taxmann.com 574 which was put to the parties during the course of hearing. In that case, the Hon'ble Delhi High Court had, after referring to the judgement of Hon'ble Supreme Court of India in the case of Abhisar Buildwell P. Ltd. (Supra), rejected identical contention raised by the assessee in that case after considering facts similar to the case before us holding as under:
"
The question whether reassessment under Section 147 of the Act can be initiated in cases of material seized or information emanating from a search conducted under Section 132 of the Act or any assets or documents requisitioned under Section 132A of the Act, where the conditions for initiating the assessment under Sections 153A and 153C of the Act are not satisfied, is no longer res integra.
In Abhisar Buildwell (P) Ltd.(supra) the Supreme Court had authoritatively held that even in cases where assessment under Section 153A of the Act cannot be initiated on account of the conditions for initiation of assessment / reassessment under the said Section not being satisfied, it is open for the Revenue to make the assessment / reassessment under Section 147 of the Act. This is of course subject to all conditions for such initiation being fully satisfied.
XX XX
As noted above, the juri iction of the AO to reassess the income under Section 153C of the Act is predicated on (a) the AO of the searched person being satisfied that the assets and material found during the search proceedings or requisitioned are incriminating insofar as the assessee (other than the searched person) is concerned; (b) recording its satisfaction to the aforesaid effect; (c) transmitting the same to the AO of the other person (person other than the searched person); (d) the AO of the non-searched person being satisfied that the material information received has a bearing on the determination of the total income; and, (e) the AO of such non searched person issuing a notice to commence assessment / reassessment proceedings. Indisputably, if any of the aforesaid conditions are not satisfied, the income of such other person cannot be assessed or reassessed under Section 153C of the Act. According to the Assessee (and as accepted by ITAT), in such circumstances, the AO would also be precluded from initiating the proceedings under Section 147 of the Act. This is the central issue that is required to be addressed.
42 to 49 XX XX.
The aforesaid decision was rendered in the contest of Section 153A of the Act. Although, the rationale as set out in the said decision resonate with us, we are unable to concur that issuance of notice under Section 153A of the Act is optional. Once a search has been conducted under Section 132 of the Act or assets, documents or other material is requisitioned under Section 132A of the Act, the AO is required to issue a notice under Section 153A of the Act. This is necessary because in terms of proviso to Section 153A of the Act, the pending proceedings for assessment or reassessment for any of the assessment years falling within the period of six
assessment years prior to the date of initiation of the search under Section 132 of the Act or acquisition under Section 132A of the Act, would abate. The said assessments would necessarily be required to be completed under Section 153A of the Act. However, commencement of proceedings under Section 153C of the Act is subject to additional conditions and it was not necessary that a notice under Section 153C of the Act be issued. Section 153B of the Act also stipulates the time limit for completion of assessment in cases under Section 153A of the Act. In terms of Section 153B(1) of the Act, assessment in respect of each of the six years, as referred to in Section 153A(b) of the Act, are required to be completed within the period of two years from the end of the financial year in which the last of the authorization for search under Section 132 of the Act or acquisition under Section 132A of the Act were executed. The assessment in respect of the year relevant to the previous year in which the search was conducted under Section 132 of the Act or requisition made under Section 132A of the Act is also required to be completed within the aforesaid period.
It is necessary to note that there is a clear distinction between the provisions of Sections 153A and 153C of the Act. The AO under Section 153 of the Act has the discretion to assume juri iction. If the juri ictional conditions are satisfied, it is not necessary for the AO to assume juri iction in such cases.
In Agni Vishnu Ventures Pvt. Ltd. v. Dy. CIT [2023] 157 taxmann.com 242/460 ITR 438 (Madras), the Madras High Court had highlighted the difference between the provisions of Sections 153A and 153C of the Act. It is relevant to refer to the following passages from the said decision:
"XX XX
XX XX
The provision of Section 153C of the Act enables the Assessing Officer to assess or re-assess the income of the assessee where any incriminating assets, material, books of account or documents are found (which either belongs to the assessee a person other than the searched person or contains information pertaining to the assessee), in a search conducted under Section 132 of the Act or requisition made under Section 132A of the Act in respect of another person. However, as stated above, the AO must be satisfied that the assets or material found or information contained in documents and books of account has a bearing on the income of the assessee for the six
assessment years immediately preceding the AY relevant to the previous year in which the search was conducted or the requisition under Section 132A of the Act was made¹. By its very nature, Section 153C of the Act is an enabling provision, which enables the Assessing Officer to assume juri iction to assess/reassess the income of the Assessee, in cases where the juri ictional conditions as set out in Section 153C are satisfied. The non obstante provision as contained in Section 153C(1) of the Act must necessarily be construed in the aforesaid context.
54 to 57 XX XX
In a case where pursuant to search conducted under Section 132 of the Act or requisition made under Section 132A of the Act in respect of another person (searched person), assets, documents or books of account, which either belong to the assessee or contain information pertaining to the said assessee, are found. And, the same are handed over to the AO of the assessee; he would subject to satisfaction of the other juri ictional conditions stipulated under Section 153C of the Act, having the juri iction to make a reassessment/assessment of the income of the assessee under Section 153C of the Act. However, the same does not mean that he is bound to exercise the said juri iction. In the