DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2)(1), BANGALORE vs. SHRI SACHIN KAMATH, BANGALORE

Per BENCH:

These are appeals filed by the Revenue against different orders

of the CIT(A)-1, Bengaluru, for assessment years 2006-07 to 2011-12.

The assessee has filed cross objections in revenue appeals. Since

common issues are involved, all the appeals and cross objections were

clubbed and heard together and consolidated order is being passed. We

shall first take up the revenue’s appeals.

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 2 of 22 2. All the appeals are directed against the order of the CIT(A) passed u/s 147 r.w.s. 143(3) and 250 of the Income-tax Act,1961 ['the Act' for short] except the appeal ITA No.1785/Bang/2017 which is passed u/s 143(3) and 250 of the Act.

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 3 of 22 statement given under oath tantamount to disregard of law and subversion of the facts.

business and filed the Return of income for assessment year 2006—07

on 05/01/2009 disclosing total income of Rs.3,25,000/- and the Return

of income was processed u/s 143(1) of the Act. Subsequently, the AO

has reason to believe that there is escapement of income and notice u/s

148 was issued and also notice u/s 143(2) of the Act was issued. In

compliance, learned AR appeared from time to time. The AO, in the

search proceedings at the residence of Smt. Adleens Kagoo in

connection with Shri Dayananda Pai, certain CDs were found and they

were seized, which contain information and data pertaining to

unaccounted receipts and payments of Shri Dayananda Pai and group.

The ledger account revealed unaccounted cash transactions between

the assessee and Shri Dayananda Pai. Further, based on the seized

material, survey u/s 133A of the Act was conducted on the premises of

the assessee on 03/06/2011 and consequent to search proceedings on

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 4 of 22 the premises of Shri Dayananda Pai and M/s. Canara Housing

Development Company [‘CHD’ for short]. Acting on seized material

and cash transactions, the AO recorded reasons for issue of notice for

re-assessment and also copy of the reasons were supplied to the

assessee. The AO dealt on the ledger account copies in the name of

assessee in the search proceedings of Shri Dayananda Pai and such

ledger account contained transaction from Dummy Tally Training

Environment [‘DTTE’ for short] which the AO has referred at pages 3

and 4 of the assessment order. The assessee was provided an

opportunity to explain the nature of transactions in seized ledger and

the AO has worked out the peak credit. Show-cause notice was also

issued. The assessee filed reply on 7/3/2013, 18/3/2018 and

25/03/2013 which was dealt by the AO at pages 5, 6 and 7 of the

assessment order. The AO, considering the statements recorded and

particular questions raised in the statements has concluded that the

assessee could not explain the transactions found in the seized ledger;

in spite of providing adequate opportunity and the assessee could not

substantiate with any evidence or support, finally AO made disallowance

of peak cash balance of Rs.1,92,10,000/- as unexplained income of the

assessee from other sources and passed order u/s 147 r.w.s. 143(3) of

the Act dated 28/03/2012.

CIT(A). The CIT(A), considered the submissions, grounds of appeal and

the findings of the AO on the grounds of re-assessment and the

statement recorded and the comparative summary of various

transactions. The CIT(A) made observations in para.6 of the order that

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 5 of 22 in the course of appellate proceedings, the assessee has filed the copy of the Settlement Commission order of Shri Dayananda Pai and CHD and requested through letter dated 1/3/2016 on 3/3/2016 to delete the addition. The CIT(A) considered and referred in para.7 of the order, and the letter submitted by Shri Dayananda Pai and CHG on 18/3/2016 in respect of entries in the name of the assessee. The CIT(A) admitted the additional ground filed by the assessee on the legal provisions of section 147 and proceedings u/s 153 r.w.s 153A and dismissed the additional ground of appeal by observing that there is nothing to prohibit the AO to have initiated proceedings u/s 147 and concluding the assessment and confirmed the validity of order u/s 143(3) and 147 of the Act.

Page 4 of 74 - Point No.2.5 of the SC order:- The applicant(CHDC) submits in the 50F that the entries of Debit and Credit in several names appearing in the Dummy Tally do not relate to such third parties but are being considered as additional income related to the applicant(CHDC) and Dr.P.Dayananda Pai. Accordingly the applicant(CHDC) and Dr.P.Dayananda Pai have culled out entries in different names as related to the applicant(CHDC) and Dr.P.bayanda Pai. Thereafter, all such

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 6 of 22 entries whether debit or credit are considered as income inflow or outflow of the applicant(CHDC) and Dr.P.Dayananda Pai.

Page 62 of 74 - Point No.12.1 - Peak Credit: 12.1.1:- Thefirst question that needs to be resolved by us, is whether the peak credit method can be adopted as a reliable method for a correct determination of the applicant's income? The issue relates to the seized evidence marked as Annexure A/AK/PDP/06 which consists of a set of 6 CDs, a pen drive and floppy drive. The above CDs contained Tally accounts data complete with ledgers, cash book, balance hseet, P&: Account, etc. under the caption Dummy Tally Training Environment. This evidence was seized at the residence of 5mt.Adlene Kagoo, P5 to Dr.P.Dayananda Pai. The entries in the Dummy Tally have been owned up by Dr.Dayananda Pal as belonging to him and his firm i.e. CHDC. Page 63 of 74 - Point No.12.1.3 of the 5C order:-Thus the aggregate undisclosed income on the basis of the revised peak would be Rs.171,33,35,796 (being the aggregate of peak credit set out in letter dated 16.09.2015 from Principal Commissioner of Income Tax, Central, Bangaluru) less expenses of rs.13,82,48,882 i.e net of 157,50,86,914. When this was pointed out to the AR during the course of the final hearing, he gave his consent to offer an additional undisclosed income being 75% of Rs.157,50,86,914 which works out to Rs.118,13,15,186/- in the hands of the present applicant.”

The CIT(A) having considered the Settlement Commission order, made observations that the assessee is a liaison person in real estate business assisting Shri Dayananda Pai and his firm CHD for construction of flats. In the course of real estate business activities, the assessee used to receive funds from parties to be utilized for and further on behalf of parties the amounts collected by the assessee and remitted to Shri Dayananda Pai and CHD such transactions does not have income element and has been accounted by the applicants in the Settlement Commission. Further, the CIT(A) observed in paras.18 and 19 which read as under:

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 7 of 22

In view of above, the impugned additions of Rs.1,92,10,000/- from the Dummy Tally made by the AO is hereby deleted. Accordingly the Appeal is allowed on merits, while rejecting the legal objections raised.”

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 8 of 22 and finally, the CIT(A) concluded that the addition by the AO based on

Dummy Tally Account cannot be sustained and deleted the addition and

partly allowed the appeal of the assessee and passed order on

18/05/2017.

the Tribunal. Before us, learned DR argued grounds and referred to

the findings of the AO and the statements and particular documents

seized. The learned DR emphasized that the addition made by the AO

in respect of individual payments and receipts of Shri Dayananda Pai

and CHD are lack of explanation of source of the assessee and has to

be taxed in assessee’s individual hands and cannot be viewed from the

business point of view of Shri Dayananda Pai and CHD. The AO relied

on the evidence available based on the Dummy Tally Account that the

assessee was involved in making cash advances to Shri Dayananda Pai

and others and such amounts are returned to the assessee. Though

the assessee was provided adequate opportunity but could not establish

with any evidence in support of the sources.

Commission, Shri Dayananda Pai and CHD have made application for

disowning the funds but not the assessee sources which could not be

explained and the fact remains that the assessee has advanced

amounts and received back in some instances and the sources of the

assessee has to be considered separately and cannot be merged with

the disowning offer made by Shri Dayananda Pai and CHD which relates

to their individual assessments and the assessee’s sources has to be

independently assessed in his hands and not on third party. Whereas

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 9 of 22 the CIT(A) has only referred to the observations of the Settlement

Commission on peak credit as referred inpara.14 of the order but no

individual peak credit has been worked out in respect of transaction of

three parties Shri Dayananda Pai, CHD and the assessee. Even the

CIT(A)’s order does not specify the basis on which the facts have been

verified on sources but only relied on the statements of applicant and

observations before the Settlement Commission. The learned DR

further submitted that the sources were not explained by the assessee

even before the Tribunal and prayed for allowing the revenue appeal.

disputed issue and stated that the assessee is only an accommodator

and collects advances from property purchasers and accumulates the

fund/property and transacts with Shri Dayananda Pai and CHD and

there is no element of income. Whereas the persons/applicants before

the Settlement Commission have accepted as their income and paid

taxes and the Settlement Commission has worked out the basis of

taxability for the assessment year. The learned AR vehemently

emphasized that since said amounts have been subjected to tax, as per

directions of the Settlement Commission the same amount cannot once

again be taxed in the hands of the assessee as it amounts to double

taxation which is illegal and violates the principles of natural justice.

The learned AR filed information on this issue dealt in the Settlement

Commission to substantiate the peak credit worked out and prayed for

dismissal of the revenue’s appeal.

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 10 of 22 10. We heard rival submissions and perused material on record.

Prima facie, the whole crux of the issue revolves on the peak credit

offered by the applicants before the Settlement Commission viz. Shri

Dayananda Pai and CHD. The learned DR’s contention that the

transaction of the assessee with Shri Dayananda Pai is one to one and

the assessee should explain the sources. We found that the assessee

has not filed application before the Settlement Commission on his

assessment but only Shri Dayananda Pai and CHD have filed application

and the Hon’ble Settlement Commission has passed orders dated

19/10/2015 which the CIT(A), on this specific issue, has referred at

para.14 which is extracted in page 5 of this order. Further the

contentions of the learned AR that the said amount does not belong to

the assessee and are only advances for the property development and

does not include profit or income element. The Settlement Commission

considered the peak credit worked out in respect of transaction of Shri

Dayananda Pai and CHD and granted the relief. Whereas the learned

DR emphasized on the peak credit and argued that the individual peak

credit of the assessee with parties was not worked out in the

proceedings and CIT(A) order is silent on this issue, but the CIT(A)

considered the fact that has been owned by the Settlement Commission

applicants, but prima facie nothing was brought on record to

substantiate the sources and the payments for this assessment year.

We found the arguments of the learned DR are realistic. On perusal of

the CIT(A) order, we found that the CIT(A) has referred to the

observations of the Hon’ble Settlement Commission in particular to Shri

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 11 of 22 Dayananda Pai and CHD and nowhere there is any reference on such

individual peak credit calculations.

respect of peak credit working of CHD and the assessee for the

assessment years 2006-07 to 2011-12 and referred to the markings.

We are of the opinion that these facts were never brought on record

before the lower authorities. Learned AR vehemently submitted that

since assessee’s sources has been offered by way of peak credit by the

applicant before the Settlement Commission, the same cannot be taxed

twice. But we are unable to understand the methodology of

consolidated peak credit considered and there is no reference to peak

credit calculation in respect of this assessee. The details filed by the

learned AR are for the first time before the Tribunal based on the

statements recorded in Dummy Tally Account in the course of search

operations of Shri Dayananda Pai and CHD. We, therefore, considering

the material filed on record and the Settlement Commission and

CIT(A)’s observations, are of the substantive opinion that these facts

are to be examined and verified and the matter needs to be re-

considered for limited purpose for calculation of peak credit between

the transaction of the assessee, Shri Dayananda Pai and CHD on the

basis of documents filed in the course of hearing and accordingly, we

restore this disputed issue to the file of the CIT(A) who shall call for

remand report from the AO on these issues and pass a speaking order

on the peak credit calculation only. The assessee shall co-operate in

submitting information at the earliest and we allow the grounds of

appeal of Revenue for statistical purposes.

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 12 of 22 In the result, the revenue’s appeal for the assessment year 2006-

07 is allowed for statistical purposes.

revenue’s appeals for assessment years 2007-08 to 2011-12 are similar

to the revenue’s appeal for assessment year 2006-07, for parity of

reasons mentioned in the revenue’s appeal for assessment year 2006-

07, the revenue’s appeals for assessment years 2007-08 to 2011-12

are also restored to the file of CIT(A) and allow grounds of appeal of

the Revenue for statistical purposes.

At the time of hearing of the cross objections, the assessee has filed

application for condonation of delay in filing the cross objections. We,

having considered the learned AR’s submissions, the affidavit and

application for condonation of delay and also there is no serious

objection from the learned DR, we consider it appropriate to condone

the delay in filing the cross objections and admit the same.

for assessment years 2006-07 to 2011-12. For the sake of

convenience, we take up the CO No.27/Bang/2018 for the assessment

year 2006-07. The assessee raised the following grounds of cross

objections:

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 13 of 22 2. The AO ought to have proceeded in terms of section 153C whenever material seized u/s 132 at third party place is utilised for reopening assessments related to the material seized. 3. The Hon'ble Tribunal may therefore kindly consider the cross objection raised and dismiss the departmental appeal.”

void as the search u/s 132 of the Act has taken place at third party

place and when there is search u/s 132 of the Act on third party

premises, assessment based on the seized material shall be under the

provisions of section 153C of the Act. The learned AR filed written

submissions and relied on the decision of the Hon’ble Calcutta High

Court in the case of Rawatmal Harakchand vs. CIT (129 ITR 346) (Cal)

and the decision of the Hon’ble jurisdictional High Court in the case of

CIT vs. IBC Knowledge Park (P) Ltd., (2016) 287 CTR 261(Kar) and

particular attention was drawn to para.50 of the judgment and

submitted that proceedings u/s 153C shall prevail. The learned AR also

relied on the decision of the co-ordinate bench in ITO vs. Arun Kumar

Kapoor (2011) 58 DTR(AT) 201(ITAT, Amritsar).

order u/s 143(3) r.w.s. 147. The learned DR relied on the decision of

Ahmedabad Bench of Tribunal in the case of Shailesh S. Patel vs. ITO

(97 taxmann.com 570), CIT vs. D.K. Garg (84 taxmann.com 257 )(Del)

B.Kishore Kumar vs. DCIT (62 taxmann.com 215)(SC), B.Kishore

Kumar vs. DCIT (52 taxman. 449((Madras), Bhagirath Aggarwal vs. CIT

(31 taxmann.com 274(Del).

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 14 of 22 17. After hearing the submissions of both the parties on the disputed

issue of assessment u/s 143(3) r.w.s. 147, though the assessee’s

premises was not searched u/s 132, the fact remains that the assessee

is only a third party and the details which are unearthed in the case of

a searched person or belonging to assessee are prima facie cannot be

disbelieved. The learned AR has vehemently argued on the aspect of

applicability of provisions of sec.153C of the Act but we consider it

appropriate to refer to the provisions of section 153C and section 147

which read as under: “Assessment of income of any other person. 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 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 such other person notice and assess or reassess income of such other person in accordance with the provisions 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 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.

(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

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 15 of 22 (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 143has 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.”

Similarly, provisions of sections 147 and 148 read as under:

[Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153, referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure 1 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts 1necessary for his assessment, for that assessment year. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily 1amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 16 of 22 previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed”

Issue of notice where income has escaped assessment. 3148. 4[(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve 5 on the assessee a notice requiring him to furnish within such period, 6[* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be pres-cribed; and the provisions of this Act shall, so far as may be 7, apply accordingly as if such return were a return required to be furnished under section 139 :] 8[Provided that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or re- computation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 17 of 22 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, re-assessment or re-computation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.] 9Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.”

On perusal of the provisions, the AO has chosen to go ahead in the

assessee’s case by issuing notice u/s 147 of the Act and completed the

assessment u/s 148 r.w.s. 143(3). The fact remains that the assessee

is a third party and the documents seized in the search proceedings of

Shri Dayananda Pai and CHD are related to assessee and belong to him.

The learned AR submitted that the amount mentioned in the seized

documents has been owned by the applicants of the Settlement

Commission viz., Shri Dayananda Pai and CHD though belonging to the

assessee. But the learned AR could not controvert with any material

evidence except submitting that the amount owned by the applicants in

the Settlement Commission belongs to the assessee Further, the

decision of the co-ordinate bench in the case of ACIT vs. Srinvas Rao

Hoskote in ITA Nos.1154 & 1155/Bang/2015 dated 21/02/2018 relied

by the learned AR, the revenue filed appeal to the Hon’ble High Court

and the Hon’ble High Court dismissed the revenue’s appeal on the

ground of low tax effect. As far as our view is concerned, on the

assessment u/s 147 r.w.s 143(3) or 153C of the Act, we consider it

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 18 of 22 appropriate to refer to the provisions and the decisions as envisaged in

the case of Shailesh S. Patel vs. ITO (97 taxmann.com 570)

(Ahmedabad.Trib) and we consider it to refer to the observations at

para.14.2, 1 and 14.2.3 and 14.5 of the order which read as under: “14.1 Before we proceed for determination of issue, it would be pertinent to refer to the provisions of s. 153C and also s. 147 of the Act, as appearing in the statue at the relevant time, to the extent as may be relevant in the context. "Assessment of income of any other person. - 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 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 such other person notice and assess or reassess income of such other person in accordance with the provisions 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.] " [underline is ours] "Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 19 of 22 assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further --------- " 14.2 On a bare reading of s. 153C noted above, it is self evident that this provision governs assessment of income of a person other than a person in whose case search was initiated. 14.2.1 Also, this provision along with other provisions of s. 153A to 153D exerts an overriding effect over the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act since these provisions contain non-obstante clause. Secondly, the assessment proceedings under s. 153C are far more onerous qua s. 147 in the sense that proceedings are initiated for six assessment years immediately preceding the year in which search u/s. 132 is initiated or requisition is made u/s.132A. Thirdly, the provisions of section 153C are analogous to section 158BD of the Act. Therefore, decision of the Apex Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 159 Taxman 258/289 ITR 341 would also apply where assessment is to be made u/s. 153C. As per the aforesaid decision, the precondition for invoking jurisdiction for issue of notice u/s. 153C is that the AO must "record satisfaction" as to the seized material 'belongs to' the third person i.e. assessee. . . . . . . . 14.2.3 Therefore, question posed whether, in view of the phraseology employed in the section, if the books of account belong to the person searched but entry in such books reflect the undisclosed income of the third party then, whether the AO can assume jurisdiction under s.153C to assess such undisclosed income or not. The expression 'belongs to' was a subject matter of debate. The point in issue was examined by Hon'ble Delhi High Court in Pepsico India Holdings (P.) Ltd. (supra). It observed in essence that expression belonging to assessee implies something more than idea of casual association. It was observed by the Hon'ble Delhi High Court that s. 153C cannot be invoked unless the AO is satisfied for cogent reasons that the seized documents do not belong to the searched person. It was observed that finding of photocopies with the searched person does not necessarily mean and imply that they "belong" to the person holding the originals. The distinction between "belongs to" and "relates to" or "refers to" must be borne in mind by the AO. The Assessing Officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". The Hon'ble Court went on the explain the purport of the expression by giving illustration that a registered sale deed, for

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 20 of 22 example, "belongs to" the purchaser of the property although it obviously "relates to" or "refers to" the vendor. In this example if the purchaser's premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy "belongs to" the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner.

. . . . . . . . .

14.5 The decisions cited on behalf of the assessee are clearly distinguishable and do not raise any conflict with position of law narrated above. The decision rendered by the Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1 has been rendered under a different scheme for assessment of search cases i.e. with reference to block period regime. The Hon'ble Gujarat High Court also echoes that in case of conflict between the operation of erstwhile Section 158BC of the Act (pertaining to erstwhile assessment procedure in the case of third person under old scheme) and Section 147/148 of the Act under normal provisions, provisions of erstwhile Section 158BC will prevail. The Hon'ble Gujarat High Court has also opined that proceedings under s.147/148 of the Act will not lie where it is repugnant to the procedure laid down under erstwhile Chapter XIV-B relating to search cases. In the instant case, where the onerous proceedings under s. 153C of the Act has not been invoked and could not possibly be invoked, there was no impediment for initiating proceedings under s.147 of the Act by the AO as discussed in elaboration above. Therefore, in Cargo Clearing Agency and other decisions of the co-ordinate bench cited on behalf of the assessee rendered on similar lines do not give rise to any conflict and are of no assistance to the assessee.”

the Dummy Tally Account belongs to third party, i.e. the assessee. We

concur with the decision of the Ahmedabad Bench in the case of

Shailesh S. Patel (supra) in respect of alternative remedy available to

the AO for initiating reassessment proceedings u/s 147 of the Act and

accordingly, we dismiss the cross objections of the assessee. Since the

facts and circumstances and the grounds of cross objections for

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 21 of 22 assessment years 2007-08 to 2010-11 are similar, the reasons given

for assessment year 2006-07 will apply mutatis mutandis. Accordingly,

the cross objections filed by the assessee for assessment years 2007-

08 to 2010-11 are also dismissed.

assessee has filed revised grounds of cross objection challenging the

validity of issue of notice u/s 143(2) of the Act. At the time of hearing,

the learned AR submitted that for the assessment year 2011-12, the

assessment was completed u/s 143(3) of the Act without issuing notice

u/s 143(2) of the Act. On perusal of the assessment order, we found

that notice u/s 143(2) was issued on 20/01/2014. When we called for

assessment records of the AO, the said information could not be

explained and also there is no finding of the CIT(A) on this legal issue

which was raised. Hence, we consider it appropriate to remit this

disputed issue to the file of the CIT(A) for adjudication. Accordingly,

the cross objection for the assessment year 2011-12 is partly allowed

for statistical purposes.

Order pronounced in the open court on 31st January, 2019.

Sd/- sd/- (CHANDRA POOJARI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Place : Bengaluru D a t e : 31/01/2019. srinivasulu, sps

ITA No.1780 to 1785-B-17 & CO 27 to 32-B-2018 Page 22 of 22

Copy to : 1 Appellant 2 Respondent 3 CIT(A)- 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore