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Before: Shri H.S. Sidhu & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: The appeal at the instance of the Revenue and the Cross-objection by the assessee are directed against the order of ld. CIT(A)-I, New Delhi dated 15.03.2011 pertaining to assessment year 2006-07, whereby the appeal of the assessee was allowed on merits of the addition u/s. 68 of the Income-tax Act, 1961 (for short ‘the Act’) made vide assessment order dated 24.12.2009 u/s. 153C/143(3) of the Act.
./2011 & C.O. No. 473/Del./2012 2
Briefly stated, the facts of the case are that the assessee is one of the companies of Surya Vinayak Group headed by two brothers, namely Mr. Sanjay Jain and Mr. Rajiv Jain, residing at I-42, Ashok Vihar, Phase-I, New Delhi. The assessee filed its return of income on 30.11.2006 declaring Nil income but the tax was paid on the book profit of Rs.11,707/-. The return so filed was processed on 16.07.2007.
2.1 A search and seizure operation was carried out u/s. 132 of the Act in Surya Vinayak Group on 21.03.2007. The said group is alleged by the Revenue to have taken a large number of accommodation entries in various group companies through various entry operators. Accordingly, notice u/s. 153C of the Act was issued on 24.11.2008 requiring the assessee to file its return of income. In response, the assessee vide letter dated 30.12.2008 submitted that the return originally filed may be treated as filed in response to notice u/s. 153C. As culled out from the requisite details filed by the assessee, the Assessing Officer noted that the assessee had received share application money to the tune of Rs.11,95,00,000/- through account payee cheques from various parties, the details of which are given at page Nos. 3 & 4 of the assessment order. In order to verify the aforesaid share applicants, the Assessing Officer issued summons to the parties and found that some of the summons returned back un-served and some of them were served but not responded to. The Assessing Officer, therefore, relying on various judicial precedents, as mentioned in the assessment order, concluded that the assessee failed to discharge its onus to prove the identity & creditworthiness of the share applicants and genuineness of the transactions as per section 68 of the Act and, therefore, treating the share application money received of ./2011 & C.O. No. 473/Del./2012 3 Rs.11,95,00,000/- as not genuine, added the same to the total income of the assessee u/s. 68 of the Act. The Assessing Officer also made a disallowance of expenditure of Rs.3,56,228/- u/s. 14A read with Rule 8D.
2.2. The assessee carried the matter in appeal before the ld. CIT(A) and challenged the assessment order both on validity of assessment and merits of additions u/s.
On the legal issue, the validity of assessment was challenged u/s. 153C, having been made beyond jurisdiction, as the completed assessment was reopened u/s. 153C without there being any incriminating documents/material found during the course of search. The addition made u/s. 68 was also challenged on merits on the premise that the onus cast upon the assessee by section 68 was satisfactorily discharged; that most of the investors were corporate assessees, the particulars of whom are available at the official site of Ministry of Corporate Affairs; that all the investors are assessed to income tax; that all of them have their PANs; that the balance sheets of all of them were submitted to the Department showing creditworthiness of the investors; that the subscription to share capital were received through banking channels; that no incriminating material was found in the course of search; that share application forms were filed for all the share holders; and that financial statements/resolution/affidavits were also filed for all the share holders and that all these documentary evidence furnished go to discharge the onus of assessee and to satisfy the conditions given in section 68 of the Act. The assessee had filed detailed submissions before the ld. CIT(A) and also relied on plethora of decisions in support, as mentioned in the impugned order. ./2011 & C.O. No. 473/Del./2012 4 2.3 The learned CIT(A), after considering the detailed submissions of the assessee and relying on various judicial pronouncements, rejected the legal plea of assessee made on validity of assessment. He, however, deleted the addition on merits. While rejecting the legal plea of the assessee, the ld. CIT(A) considering the provisions of section 153A and relying on the decision of ITAT Delhi Bench (infra), observed as under : “3.2 The perusal of the above section would show that assessment is to be made of the total income of each of the assessment years and is not confined to merely undisclosed income found as a result of search u/s. 158BC of the Act or income which has escaped assessment u/s. 147 of the Act. Infact, similar view has been expressed by Delhi Bench in the case of Ms, Shyam Lata Kaushik vs. ACIT reported in 114 ITD 305 wherein it was held as under: "2.3 We are of the view that this contention of the learned counsel, for the assessee cannot be accepted. As rightly contended by the learned Departmental Representative, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or reassessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abate. Thus the Assessing Officer, gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or reassessment. It is not the complaint of the assessee that any income, which is already subjected to assessment under section 143(3) or under section 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153 A of the Act. In such circumstances the plea of the assessee cannot be accepted. Ground No. 1 is, therefore, rejected." Moreover, in this case, original return was accepted in an intimation u/s 143(1) of the Act and therefore, there is no expression of opinion, as held by Apex Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. ./2011 & C.O. No. 473/Del./2012 5
reported in 291 ITR 500 and in any case provisions of section 147 of the Act and, section 153A operate in different fields. In light of the above, argument of the AR is without merit and hence, ground raised is rejected.”
2.4 These findings of the ld. CIT(A) have been challenged by the assessee by way of cross-objection filed before us, inter alia on the following grounds: “1. That the assessment order passed under section 153C/143(3) is bad in law and required to be quashed – a). because the same is based on no search material, seized documents in the case of assessee. b). because the assessment is barred by limitation.
2.5 On merits of addition, the ld. CIT(A), after considering the provisions of section 68 of the Act and relying on plethora of decisions mentioned in the impugned order, deleted the addition observing as under :
“5.8 Applying the aforesaid principles to the facts in the instant case, it is noted that, a) Share application money has been received by account payee cheques; b) No incriminating material found in the course of search; c) All shareholders are corporate assessee's; d) That assessee has filed PAN No./Income Tax Particulars of all shareholders; e) That share application forms has been filed for all share holders; and f) That financial statements/resolution/affidavits have also been filed for all shareholders. 5.9 On the basis of the aforesaid, it is seen that, copies of application for allotment of shares were provided to the Assessing Officer. As regards identity of the subscribers, the assessee filed income tax returns, PAN details and, subscribers are companies. It is not the case that, PAN details or company details submitted by the assessee were forged documents. In fact, the Assessing Officer did not even make an attempt to verify the genuineness of these documents by summoning the record of Registrar of Companies or Department of Company ./2011 & C.O. No. 473/Del./2012 6 Affairs and, also, from respective Assessing Officer's of the applicant companies. The identity of the subscribers thus stood duly established from the documents produced by the assessee. There is also no evidence to show that money originated from the coffers of the assessee, as held in the case of CIT vs. Value Capital Services P. Ltd. reported in 307 ITR 334 (Del). In view thereof, it is held that, burden of the appellant company stood discharged u/s 68 of the Act in respect of all shareholders. 5.10 So far as the observation of the Assessing Officer that acknowledgement of returns for the year 2009-10 have not been provided or such corporate assessee's share holders have not declared dividend or such share have been re- purchased are irrelevant consideration, in the context of burden u/s 68 of the Act, in respect of share application money received by the appellant as has been held by the Apex Court in the case of Lovely Exports and series of judgments of jurisdictional High Court stated here-in-supra. Reliance is also placed on the judgment of the jurisdictional High Court in the case of M/s Victor Electrodes Ltd. in dated 12.05.2010 wherein it was held that "there was no legal obligation on the assessee to produce some Director or other representative of the applicant companies before the Assessing Officer. Therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wanted, could have summoned them for verification". It was held that, once the identity of the shareholders was established and, no efforts were made to summons the records of the bank or verification of the internal records of the department, no adverse inference could be drawn against the appellant. 5.11 In light of the aforesaid, it is held that, identity of the shareholders stood duly established and, hence burden of the appellant company stood discharged. Accordingly, addition made of Rs. 11,95,00,000/-, is deleted.”
The ld. CIT(A) also restricted the disallowance made u/s. 14A by deleting the addition of Rs.23,168/- out of Rs.3,56,228/-. Being aggrieved, the Revenue has challenged the impugned order of the ld. CIT(A) by way of this appeal before us on the following grounds : “On the facts and in the circumstances of the case the Ld. CIT(A) has erred in : ./2011 & C.O. No. 473/Del./2012 7
1. The order of the Ld. CIT(A) is not correct in law and facts.
2. Whether in the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.11,95,00,000/- made u/s. 68 of the Income Tax Act by the A.O. in respect of share application money introduced during the year. 3. Whether in the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.23,168/- out of total addition of Rs.3,56,228/- made u/s. 14A of the I.T. Act.” 3. We take up the cross objection filed by the assessee first for the sake of convenience. The cross objection of the assessee is reported to have been filed with delay, for condonation of which the assessee has filed an application stating that the delay occurred in filing the cross objection was due to change of its earlier counsel and handing over the matter and records to the new counsel. It was submitted that the earlier counsel did not advise to file the cross objection by raising the legal grounds which had been rejected by the ld. CIT(A). However, the new counsel on receipt of papers, advised to raise the legal grounds by way of cross objections. There being no objection of the ld. DR on the reasons for delay assigned, we condone the delay in filing the cross objections by the assessee. Even otherwise, the assessee by filing an application contended that as per provisions of Rule 27 of the ITAT Rules, the assessee can support the order appealed against, on any issue decided against the assessee, even if no appeal is filed by it.
4. With reference to the cross-objections of the assessee, the contentions made by the ld. Authorized Representative are manifold. She has also submitted a written synopsis, which is placed on record. The first contention with reference to ground No. 2 of the cross objection, is that the assessment order passed u/s. 153C/143(3) is barred by limitation. It was submitted that ./2011 & C.O. No. 473/Del./2012 8 the search took place on 21.03.2007 and concluded on 22.03.2007. Therefore, as per provisions of section 158B of the Act, the order u/s. 153C could be passed by the Assessing Officer on or before 31.12.2008, i.e., within 21 months from the end of financial year in which last of the authorization for search u/s. 132 of the Act was executed, as contemplated u/s. 158B of the Act.
4.1 The next contention with reference to ground No. 1 of the cross objection is that original return was filed on 30.11.2006 which was processed u/s. 143(1). The time allowed for making assessment u/s. 143(3) stood expired on 30.11.2007 and thus, no assessment was pending. Notice u/s. 153C was issued on 24.11.2008, i.e. much beyond the time after 30.11.2007. Therefore, in order to reopen the assessment u/s. 153C, it was imperative on the part of Revenue authorities to point out the incriminating material belonging to the assessee found in the search for making any addition in proceedings u/s. 153C of the Act, which is lacking in the present case.
4.2 In support of both the aforesaid contentions, the ld. Counsel also referred to the decision of co-ordinate Bench dated 30.05.2014 in the cases of JH Finvest Pvt. Ltd. (CO Nos. 131 to 137/Del/2011 for A.Yrs. 2001-02 to 2006- 07), which is also a company of the same group, whereby the assessments in the similar set of facts, have been quashed being barred by limitation and additions also deleted having been not based on any incriminating material found in the search. It is also contended that on appeal by Revenue before the Delhi High Court, the Hon’ble Court vide orders dated 30.11.2015 upheld the decision reached by Tribunal. ./2011 & C.O. No. 473/Del./2012 9 4.3 He has also referred to another order of Co-ordinate Bench of Tribunal dated 06.10.2015 in the case of same group Company M/s. Surya Vinayak Industries (CO Nos. 265 to 269/Del./2011 in to 3162/Del/2011- for A.Yrs. 2001-02, 2002-03, 2004-05, 2006-07 and 2007- 08) wherein also the assessments were held as barred by limitation and this order stood confirmed by Hon’ble Delhi High Court vide order dated 17 July, 2017 (copy placed on record) on both the issues – the assessment being barred by limitation and additions u/s. 153C not sustainable for want of any incriminating material found during the search.
4.4 Similar view is also stated to have been taken in other case of same group company, JCIT vs. Global Business India Pvt. Ltd. (CO Nos.261 to 264 & 281/Del./2011 in to 3157/Del/2011 – A.Yrs.), whereby the Co- ordinate Bench vide order dated 15.07.2016 after following the decision of Hon’ble Delhi High Court in JH Finvest Pvt. Ltd.(supra) has quashed the assessments being barred by limitation and deleted the additions not based on any incriminating material found during the course of search. This decision of ITAT has also been affirmed by the Hon’ble Delhi High Court vide order dated 23.05.2017 (Copy placed on record). The ld. Counsel for the assessee also relied on following decisions for the proposition that no addition could be sustained in proceedings u/s. 153C if the same is not based on any incriminating material found during the course of search :
(i) CIT vs. Kabul Chawla, 380 ITR 573 (Del.) (ii) CIT vs. Singhad Technical Education Society, 397 ITR 344 (SC) (iii) Pr. CIT vs. N.S. Software (Firm) (Delhi High Court order dated 18.04.2018- (iv) DCIT vs. PPC Business & Products Pvt. Ltd.--- (group company) (v) JCIT vs. Allied Perfumers Pvt. Ltd. (group company)
./2011 & C.O. No. 473/Del./2012 10
(vi) SVIL Mines Ltd. Vs. DCIT (group company) (vii) JCIT vs. Sidhi Vinayak Aromatics Pvt. Ltd. (Group company)
4.5 It was lastly contended that the issues involved are covered in favour of the assessee and against the Revenue by plethora of decisions referred to above and therefore, the assessment order is liable to be quashed on the above legal aspects of the case.
5. On the other hand, the ld. Departmental Representative relied on the order of the ld. CIT(A) on the validity of assessment u/s. 153C of the Act. He further submitted that, however, the ld. CIT(A) was not justified to delete the addition ignoring the fact that the share application money received by the assessee was not found verifiable and the assessee failed to discharge its onus cast upon it by section 68 of the Act. He, therefore, urged for sustenance of addition made u/s. 68.
We have heard the rival submissions of both the parties and have gone through the entire material available on record including various judicial precedents relied upon and we find considerable force in the contentions of the assessee that both the issues raised in the cross objections, i.e., the assessment being barred by limitation and the addition made vide proceedings u/s. 153C being not sustainable without reference to any incriminating material belonging to the assessee found during the course of search, are covered by plethora of decisions rendered by co-ordinate Benches as well as the decisions of Hon’ble jurisdictional High Court referred to above in favour of the assessee and against the Revenue. The decision of Hon’ble Jurisdictional High Court rendered in to 39 and 47 & 48 of 2015 ./2011 & C.O. No. 473/Del./2012 11 dated 30.11.2015 in the case of J.H. Finvest Pvt. Ltd. (supra) squarely covers the issues in favour of assessee on the identical facts and circumstances, as under :
“3. The background to the present appeals is that on the basis of authorizations dated 20th March 2007 under Section 132 (1) of the Act, a search was commenced on 21 st March 2007 in the office premises of the above Assessees as well as the other Assessees, including Rim Zim Valley Products Pvt. Ltd, Aakriti International, apart from the residences of Mr.Sanjay Jain and Mr. Rajeev Jain, Directors of J.H. Finvest Pvt. Ltd. The search apparently continued on 22nd and 23rd March 2007 as well. It appears that during the said search, the jewellery items of Mrs. Neena Jain, wife of Mr. Sanjay Jain were seized on 21st March 2007 and some part of the jewellery was released to her after preparing a valuation report dated 21st March 2007. The learned counsel for the Assessees has placed before the Court a compilation of documents containing, inter alia, the panchnamas drawn up in the course of the search. He states that these documents were part of the record of the case before the ITAT.
A perusal of the said documents shows that as far as the panchnama prepared on 23rd March 2007 was concerned, it was in respect of the authorizations issued for search of the above Assessees. It notes in para 8 that “The search commenced on 23/3/07 at 2.15 pm. The proceedings were closed on 23/3/07 at 5.55 pm as finally concluded”. It must be noted that para 8 is a pre-printed clause with blanks for the date and time. There is an option to choose one of the expressions: “as finally concluded/as temporarily concluded”. In this particular para 8 the words “as temporarily concluded" have been omitted and there is a tick mark on the words “as finally concluded”.
On the same day, a restraint order was passed under Section 132(3) of the Act, in respect of the jewellery items of Mrs. Neena Jain and Mrs. Shail Kumar Jain kept in some wooden cupboards in their residential premises. There were also restraint orders, communicated to the Managers of some of the banks, in respect of lockers and bank accounts of the said persons. Restraint orders were also issued in respect of certain small safes in which there were materials/documents and for which keys were not available.
./2011 & C.O. No. 473/Del./2012 12 The search purportedly continued thereafter on 15th May 2007 when another panchnama was drawn up. In para (A) of the said panchnama it is mentioned that the warrants of authorization were issued in the case of the above Assessees apart from Mr. Sanjay Jain and Mr. Rajeev Jain, Rim Zim Valley Products Ltd. In para 2, it was stated that the search “was in continuance of the proceedings on 22/3/07.......”. Para 8 then states that “The search commenced on 15/5/07 at ....../pm . The proceedings were closed on 15/5/07 at 6.45 pm as finally concluded”. It is not in dispute that the assessment orders pursuant to the said searches were passed on 24/31st December 2009.
6. The first question that arises for consideration was whether in terms of Section 153B, the assessments were completed within the time stipulated therein. The case of the Assessees, which has been accepted by the ITAT in the impugned order, was that the assessment ought to have been completed by 31st December 2008, but was completed on 31st December 2009, i.e., beyond the period of twenty one months from the end of the financial year in which the last authorisation for the search under Section 132(3) was issued. This is in terms of Clause (i) of the second proviso to Section 153B (1) of the Act. It is pointed out that the names of the Assessees were included in the panchnama drawn up on 15th May 2007 although no fresh search authorisations qua any of them were issued. The case of the Revenue has been that the search did not conclude on 23rd March 2007 but on 15th May 2007. This was on account of the restraint orders claimed to have been validly passed on 23rd March 2007 in peculiar circumstances where either the person searched was not present or the witnesses were not present or the keys of some of the cupboards were not available.
7. The ITAT has in the impugned order, after discussing the earlier decisions of the ITAT and the High Courts, noted that mere passing of a restraint order would not extend the time limit available for completion of the assessment pursuant to the search. It has been noted that Section 132(3) of the Act for passing a restraint order can be only resorted to if there is any practical difficulty in seizing the item which is liable to be seized. If all actions of the search were completed and nothing was left to be done by the search party, then the action of the authorized officer under Section 132(3) would be illegal and consequently any panchnama prepared on the extended date of search, after lifting the restraint, would be of no consequence, for the purposes of computation of limitation under ./2011 & C.O. No. 473/Del./2012 13 Section 153B of the Act. In particular, the ITAT referred to the decision of this Court in V.L.S. Finance Ltd. Vs. CIT 289 ITR 286 (Del).
The ITAT correctly concluded that where there are various authorisations issued and various panchnama prepared, it would be the last panchnama prepared in respect of the last authorisation which would be relevant for computing the limitation period.
In the present case, as noted by the ITAT, there is only one authorisation which was issued on 20 th March 2007. Although, the ITAT in para 10.5 of the impugned order noted that “in the authorization letter dated 20/3/2007, names and address of the assesses in question have not been mentioned but in Panchnama dated 15/5/2007 drawn in pursuance to the executive of the said authorization letter dated 20/03/2007 names of all these assessees have been mentioned”, the original authorisation letters issued on 20th March 2007 are not before the Court. The Court, therefore, proceeds on the basis that such authorisation had indeed been issued in the names of each of the Assessees. The panchnama drawn up on 23rd March 2007 shows that the search that commenced on that date i.e., 23rd March 2007 stood finally concluded on that date itself. It appears that no further authorisation had been issued for the search of the Assessees who are the Respondents in these appeals. Consequently, the Revenue cannot take advantage of the restraint orders passed in respect of other persons in order to seek extension of the time period for completion of the assessment proceedings in terms of Section 153B qua the Respondent Assessees herein.
Even assuming that the restraint orders were validly passed, once the search stood concluded on 23rd March 2007 in respect of these Assessees, in the absence of a fresh authorisation for another search, the time period for conclusion of the assessment in terms of clause (i) of the second proviso to Section 153 B (1) of the Act does not get extended only because their names were included in the panchnama drawn up on 15th May 2007. It is possible that their names were included in the said panchnama drawn up on 15th May 2007 in order to avoid the consequence of expiry of the period of limitation which, as far as these Assessees are concerned, commenced on 23rd March 2007, when the search "finally concluded".
./2011 & C.O. No. 473/Del./2012 14
Consequently, the impugned order of the ITAT, holding that the assessments in question were barred by limitation, and therefore liable to be quashed, does not call for any interference.
The second ground on which the ITAT has invalidated the assessments is that there was no incriminating material found in the course of the search against any of the Respondents/Assessees in these appeals. In this context, reference only need be made to a recent decision of this Court in CIT v. Kabul Chawla (2015) 234 Taxman 300, which holds that in the absence of any incriminating material found in the course of search the framing of assessment under Section 153A or 153 C of the Act, as the case may be, would not be valid. 13. It may be mentioned here that in the case of J.H. Finvest Pvt. Ltd., the Revenue has not even urged a question regarding the absence of any incriminating material having been found against the said Assessee invalidating the assessment. 14. No substantial question of law arises from the impugned order of the ITAT in these cases. The appeals are accordingly dismissed.”
The aforesaid decision of Hon’ble Delhi High Court has also been followed by Tribunal as well as by Hon’ble jurisdictional High Court in several other cases of group companies, as referred to above.
6.1 In the instant case, it is an admitted fact that no incriminating material belonging to the assessee was also found during the search, based on which the impugned addition could have been made in the assessment order u/s. 153C. We also do not find any reference to any such material found during the search which led the Assessing Officer to make the impugned addition. The assessment order does not outline any details of the documents which were belonging to the assessee and were seized in the search dated 21.03.2007 so as to acquire the jurisdiction to reopen the assessment u/s. 153C of the Act. Therefore, in view of the decision rendered by Hon’ble jurisdictional High ./2011 & C.O. No. 473/Del./2012 15 Court in the case of CIT vs. Kabul Chawla (supra), in our opinion, no addition can be made in proceedings u/s. 153C in case of completed assessment. The learned Departmental Representative could not be able to controvert the contention of the assessee that no assessment was pending for the impugned year for abatement, as the time for making any scrutiny assessment u/s. 143(3) stood expired on 30.11.2007. The ld. DR also failed to adduce any incriminating material found in the search leading to the impugned addition.
6.2 We also find that the contentions of the ld. Counsel are further garnished from the view expressed by Hon’ble Delhi High Court in the case of M/s. N.S Software (Firm) (supra), which reads as under :
This court concurs with the impugned order. In the present case, the Ld. A.O. has not explained steps taken by him to determine that the seized material belonged to the Assessee Firm. The satisfaction note has been prepared in a standard mechanical format and it does not provide any details about the books of accounts which allegedly belong to the Assessee Firm. Most importantly, a satisfaction note was not recorded by the AO of Sh. Narendra Kumar from whose premises the documents were seized. In light of the decision in Nikki Drugs and Chemicals Pvt. Ltd it is now a settled proposition of law that even if the Assessing Officer for the person from whose premises the documents are seized is the same as the Assessing Officer for the person to whom the document belongs, separate satisfaction notes must be recorded. Here the AO's note nowhere reflects whether any document seized, on application of his mind, disclosed that it belonged to the assessee, and if so, its prima facie nature. Whilst an AO of the searched party and that of the individual under Section 153C may be the same, nevertheless at the stage of sending notice under Section 153C, the AO has to record a specific reason or reasons, why the material seized from the other person has a nexus to the assessee, to whom the notice under that provision is addressed. In this case, this never happened. Thus, for the previous years, the rule in Commissioner of Income Tax v Kabul Chawla 380 ITR 573 (Del), i.e., that in the absence of any incriminating materials, the previous years' assessments cannot be disturbed, applies.
./2011 & C.O. No. 473/Del./2012 16
In the present case, therefore, the failure of the AO to record a specific satisfaction as to how the recovered material belonged to the assessee in the note that preceded the notice issued under it, vitiates the assessments. As far as the pending assessment year is concerned, the return was filed on 29.09.2009. No notice in terms of Section 143 (2) had been issued to the assesses and the time provided by law had expired by the time it’s A.O. received the papers from the searched party. Notice issued, necessarily, in terms of Section 153C (2) had to be in the light of the satisfaction that the books of account or materials seized are relevant (i.e. "..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 hearing 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 section 153A ", As held by previous decisions, without that nexus, and fulfillment of the preconditions, clearly, the option provided by Section 153C (2) to proceed against pending assessments cannot be made recourse to. Since the satisfaction in terms of Section 153C (1) was clearly inadequate (assuming that the original satisfaction, transmitting the papers to the assessee's AO was valid), the assessment completed for these years was also invalid. The court also notices in this regard that the non-obstante provisions in both Sections 153A and 153C are identical; they override Sections 136, 147, 148, 149, 151 and 153. However they do not override the mandatory provisions of Sections 142 (2) or 143 (2), This legislative design is taken further by Section 153 (2) (a) to (c) which are relatable to the satisfaction under Section 153C (1) notice, i.e. that if notice for pending assessments have not been issued, to take further proceedings, and the time has lapsed, the only condition when they can be taken forward, Js if the satisfaction with respect materials seized are relatable to the assessee is through application of mind and not a mechanical one, as insisted by RRJ Securities (supra), Nikki Drugs (supra) etc.”
6.3 Respectfully following the above decisions, we are of the considered view that the ld. CIT(A) was not justified in rejecting the legal pleas raised by ./2011 & C.O. No. 473/Del./2012 17 the assessee on the validity of assessment. In view of the above discussion, the impugned assessment order deserves to be quashed being barred by limitation and having been passed without any reference to the incriminating material found during the course of search. Accordingly, the cross objection of the assessee is found full of merits and deserves to be allowed.
6.4 Since we have allowed the legal issues raised in cross-objection in favour of the assessee, thereby quashing the assessment framed by Assessing Officer u/s. 153C, we need not to give any findings on other issues raised by the Department in its appeal on merits of the additions made u/s. 68 or under section 14A of the Act. Accordingly, the appeal of the Revenue deserves to be dismissed being devoid of any merit.
In the result, the appeal of the Revenue is dismissed and the cross objection of assessee is allowed. Order pronounced in the open court on : 29th June, 2018. Sd/- Sd/- (H.S. Sidhu) (L.P. Sahu) Judicial member Accountant Member Dated: 29th June, 2018. *aks* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi ./2011 & C.O. No. 473/Del./2012 18 Up-loaded on Website on : 29.06.2018. Date 1. Draft dictated (DNS) 18.06.18 PS 2. Draft placed before author 21.06.18 PS 3. Draft proposed & placed before the second member 29.06.18 JM/AM 4. Draft discussed/approved by Second Member. 29.06.18 JM/AM 5. Approved Draft comes to the Sr.PS/PS 29.06.18 PS/PS 6. Kept for pronouncement on 29.06.18 PS 7. File sent to the Bench Clerk 29.06.18 PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.