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Income Tax Appellate Tribunal, DELHI BENCH “B”, NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI WASEEM AHMED
The aforesaid appeal has been filed by the assessee against the impugned order dated 11/3/2013 passed by the ld. CIT (Appeals)-II, New Delhi for the quantum of assessment passed under section 143(3) for assessment year 2008-09.
2. In the grounds of appeal, several grounds have been raised, whereby assessee has challenged the validity of assessment passed under section 143(3) on various counts; firstly, no notice under section 143(2) was served within the time prescribed under the Act; secondly, assessment order could not have been passed under section 143(3), but only under section 153C r.w.s. 153A; thirdly, assessment order is barred by limitation; and lastly, assessee has also challenged the validity of the assessment on the ground that there is a violation of the principles of natural justice and copy of ‘satisfaction’ under section 153C has not been provided to the assessee. Besides this on merits also, assessee has challenged the addition of Rs.3,52,50,000/- made by the Assessing Officer on account of alleged cash payment made to acquire the property; and further the ld. CIT(A) has erred in law and on facts in not admitting the additional evidences which were filed before him vide application made under rule 46A.
Brief facts qua the legal issues raised challenging the validity of the impugned assessment order on various counts, are that, a search and seizure action under section 132(1) was conducted by the Department on 19/2/2008 in the case of M/s B.L. Kashyap & Sons and group of cases. At the time of examination of seized documents seized in the case of M/s B.L. Kashyap & Sons, it was noticed that the assessee-company, i.e., ‘M/s EON Auto Industries (P) Ltd.’ has made unaccounted cash payments of Rs.3,37,50,000/- in the property situated at Sy. No.12/2B, Whitefield Village, Krishnarajapura, Hubli, Bangalore. The Assessing Officer in the assessment order has noted that, since the documents seized belong to the assessee-company who was the “person” other than the person referred to in section 153A, assessee was required to be assessed by acquiring jurisdiction in terms of section 153C. The case was centralized by order passed under section 127(2) by CIT Central, vide order dated 19/11/2009 and thereafter, notice under section 153C was issued for assessment years 2002-03 to 2007-08 and notice under section 143(2) was issued for the assessment year 2008-09 after recording the “satisfaction” on 20/11/2009. The Assessing Officer in the impugned assessment order also mentions that notice under section 143(2) was issued on 20/11/2009 requiring the assessee to file its return of income. In response to the said notice, assessee vide reply/ letter dated 1/12/2009 stated that the return of income for assessment year 2008-09 has already been filed electronically on 27/9/2008. The copy of the acknowledgment of return of income was also filed before the Assessing Officer along with the said reply. From the events as noted by the Assessing Officer in the assessment order, following chronology of events can be culled out, which is relevant for the adjudication for legal grounds raised before us by the assessee:-
Sl.No. Particulars Date Date of search on B.L. Kashyap & Sons Ltd, 1. 19.02.2008 group companies (no search on Assessee)
Return of income filed by the assessee u/s 139 27.09.2008 Order u/s 127 for transfer of case from ITO 3. Ward 11(1), New Delhi to ACIT, Central Circle- 19.11.2009 17, New Delhi. Recording of ‘satisfaction’ by ACIT, Central 4. 20.11.2009 Circle- 17, New Delhi. Issue of notice u/s 142(1) by ACIT, Central 5. 20.11.2009 Circle- 17, New Delhi. 6. Reply against notice u/s 142(1) by assessee 01.12.2009 Issue of notice u/s 143(2)/142(1) by ACIT, 7. 01.12.2009 Central Circle-17, New Delhi.
Assessment completed u/s 143(3) by ACIT, 8. 29.12.2009 Central Circle-17,New Delhi U/s 143(3)
During the course of hearing, as required by the Bench, the Department had filed copy of “satisfaction recorded” for issuance of notice under section 153C in the case of the assessee, wherein it has been mentioned that same was recorded on 28/11/2009 by the present Assessing Officer and not by the Assessing Officer of the person searched during the assessment proceedings u/s 153A.
From the aforesaid events and facts, Shri Salil Kapoor, ld. counsel for the assessee submitted that the Assessing Officer here in this case has passed the assessment order under section 143(3) by treating the assessment year 2008-09 as the year of search in terms of section 153A (1) (b). Admittedly, here it is not the case of a searched person under section 153A, albeit jurisdiction has been acquired under section 153C as ‘other person’ and therefore, the date of search would be reckoned from the date handing over of the documents, etc., and not the date of search of the person covered u/s 153A. In terms of first proviso to section 153C, reference to the date of initiation of search in the cases of a person covered under section 153C has been construed as reference to the date of receiving the books of account or assets seized or requisitioned by the Assessing Officer, who has the jurisdiction over the person in whose case proceedings under section 153C is being initiated. Here in this case, from a perusal of the date of recording of ‘satisfaction’ by the ACIT, Central Circle 17, New Delhi, it can be seen that reference date as construed in terms of proviso to section 153C at the most can be reckoned as 28/11/2009 and if that is the reference date, then the assessment order cannot pertain to the year of search and in that case such an assessment could have been passed only under section 153C. Once assessment itself has not been completed under section 153C, then the entire assessment gets vitiated. In support, he strongly referred and relied upon the judgment on the Hon'ble jurisdictional High Court in the case of CIT vs. RRJ Securities Ltd. In 175 to 177/2015, judgment dated 30/10/2015, wherein the Hon'ble High Court held that in the case of ‘other persons’ covered under section 153C in terms of proviso therein, the reference date has to be construed as date of handing over of assets/documents belonging to the assessee to the Assessing Officer having jurisdiction over the assessee. In the absence of such date, then the recording of ‘satisfaction’ under section 153C should be considered as reference date. The assessment for the period of six years has to be seen with reference to the date of recording of satisfaction by the Assessing Officer. He drew our specific attention to the finding and observation of the Hon'ble Court appearing in paragraphs 11 to 24, wherein their Lordships, after referring to various judgments of the Hon'ble Delhi High Court and other Courts, have held that in the case of ‘other person’ covered under section 153C, reference date of search in terms of second proviso to section 153A has to be reckoned from the date of requisition of documents or date of recording of satisfaction under section 153C. Thus, here in this case, reference date should have to be taken as date of recording of the ‘satisfaction’ which is 28/11/2009 and, therefore, regular assessment under section 143(3) could not have been made and the only manner in which assessment could have been framed for assessment year 2008-09 was in terms of section 153C read with section 153A as required under the statute.
The other alternative legal argument put forth by the ld. counsel for the assessee was that, if the present assessment order is to be treated as regular assessment order under section 143(3), then issuance and service of notice under section 143(2) was beyond the statutory time limit as prescribed under the Act, because here in this case return of income u/s 139 was filed on 27/9/2008 and the last date for service of notice under section 143(2) was 30/9/2009 and here in this case notice under section 143(2) has been issued on 1/12/2009; and if one goes by the observation made by the Assessing Officer in the impugned assessment order, then it is 20/11/2009, although it was a notice under section 142(1) and not under section 143(2). Even if the issuance and service of notice is dated 20/11/2009, then also it is barred by limitation in terms of section 143(2) and no addition could have been made in the order passed under section 143(3). He submitted that these grounds and issues were raised before the ld. CIT(A) also vide grounds No.4 to 7 and the ld. CIT(A) has duly considered these grounds and have rejected them after detailed discussion. Thus, these legal grounds are arising from the impugned appellate order.
On the other hand, the ld. CIT (DR) has filed detailed written submissions; firstly, on the merits of the addition; and secondly, on issue of jurisdiction and validity of the assessment order. One of the main limb of her arguments was that jurisdictional issue and point of jurisdiction cannot be challenged by the assessee after completion of the assessment and in support of this proposition, she relied upon the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Kapil Jain reported in 50 DTR 342 (Delhi), wherein the Hon'ble High Court has taken note of section 124(3) on such matters. On the issue of assessee’s submission with respect to the contention that assessment year 2008-09 will fall within six assessment years pertaining to assessment covered under section 153C r.w.s. 153A and not to be reckoned as year of search whereby regular assessment under section 143(3) is to be made, she submitted that six assessment years pertaining to assessment under section 153C have to be reckoned in the same assessment years which is in respect of assessments to be made under section 153A. The reason being that, the concept of six assessment years are covered both in respect of section 153A and 153C by the same clause (b) of sub-section (1) of section 153A. The reference of the date of initiation of search in first proviso to sub-section (1) of section 153C is only limited and restricted to the purpose of abatement and not for any other purpose. In sum and substance, the contentions of the ld. D.R. as summarized by her in her written submission are as under:-
� The reference of second proviso to sub-section (1) of section 153A in first proviso to sub-section (1) of section 153C is for the limited purpose of ascertaining and declaring the date on which all pending assessments and reassessments shall abate. It is quite logical and rational to interpret so because there is a time gap between the date of search and the date when the AO of such other person (153C cases) receives documents and come to know that there is a 153C proceeding to be initiated. In the intervening period, new assessment and reassessment proceedings may be initiated. Therefore, it was necessary to provide for abatement of such assessment and reassessment proceedings that could be initiated after the date of search up to the date of receiving of documents by the AO of such other person. The reference of second proviso to sub-section (1) of section 153A in first proviso to sub-section (1) of section 153C was therefore, made with the specific purpose of setting the date on which all pending assessments and reassessments must abate. A careful analysis as highlighted by her, she pointed out that it will clearly establish such intent of the legislature and also that six assessment years for assessment shall remain the same in respect of section 153A as well as section 153C (assuming anything to the contrary would lead to a situation, where there would be assessments under section 153C that would pertain to assessment years falling after the assessment year relevant to previous year in which search was conducted and this will create an absurdity in the interpretation of the statute.
After referring to various provisions contained in sections 153A to 153C, ld. CIT (DR) submitted that point of departure for section 153C from 153A in terms of provisions of section 153C is only for two instances, namely in respect of time limitation for completion of assessment under section 153A and 153C and for the purpose of ascertaining the status of pending assessment or unabated assessment and beyond that nothing should be read under the said provisions. She has also filed detailed written objections on the additional ground filed by the assessee that the order passed under section 143(3) is illegal and bad in law as the order has to be passed under section 153C.
However, we are not dealing with her objections on additional grounds, because this issue is already emanating not only from the order of ld. CIT (A) but also from the grounds taken by the assessee being ground No.4 before us, wherein the assessee had challenged that the ld. CIT (A) has erred in upholding the addition made by the Assessing Officer since the assessment order has not been passed as per provisions of section 153C. Thus, at the time of hearing itself we have made it clear that we are not entering into the admissibility of additional grounds, as the issue raised therein is already emanating from the original ground taken before us in Form No.36.
We have heard the rival submissions, perused the relevant material referred to before us at the time of hearing. The main legal issue which has been raised in the grounds of appeal and which has also been argued at length by both the parties are that:-
� Firstly, whether the Assessing Officer under the law could have passed assessment order under section 143(3) by treating the assessment year 2008-09 as year of search; or under section 153C r.w.s. 153A whereby Assessing Officer is required to assess or reassess the total income of six assessment years immediately preceding assessment year in which search was conducted. If assessment year 2008-09 is not reckoned as year of search, then it has to be treated as part of assessment to be framed for six preceding assessment years in terms of clause (b) of sub-section (1) of section 153A.
� Secondly, assessee has challenged that in case assessment order passed by the Assessing Officer is reckoned as regular assessment under section 143(3) for the year under search, then in the absence of notice under section 143(2) being served on the assessee before statutory time limit, the entire assessment order passed under section 143(3) and the additions therein gets vitiated.
As discussed in the foregoing paragraphs, the crucial date for determining the issue before us are as under:-
S.N. Particulars Date Date of search on B.L. Kashyap & Sons Ltd, 1 19.02.2008 group companies (no search on Assessee)
2 Return of income filed by the assessee u/s 139 27.09.2008 Order u/s 127 for transfer of case from ITO 3 Ward 11(1), New Delhi to ACIT, Central Circle- 19.11.2009 17, New Delhi. Recording of satisfaction by ACIT, Central 4 20.11.2009 Circle- 17, New Delhi. Issue of notice u/s 142(1) by ACIT, Central 5 20.11.2009 Circle- 17, New Delhi. 6 Reply against notice u/s 142(1) by assessee 01.12.2009 Issue of notice u/s 143(2)/142(1) by ACIT, 7 01.12.2009 Central Circle-17, New Delhi. Assessment completed u/s 143(3) by ACIT, 29.12.2009 8 Central Circle-17,New Delhi U/s 143(3)
Here in this case, assessee has been roped in as a person other than the person referred to in section 153A, i.e. assessee is covered under section 153C, whereby provisions of section 153A has been made applicable, that is, the Assessing Officer was satisfied that any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to the assessee; or any books of account or documents seized or requisitioned pertain or pertains to the assessee; or any information contained therein relates to a person (i.e. assessee) other than the person referred to in section 153A. If the Assessing Officer of the person searched, records such ‘satisfaction’, then the documents or assets seized or requisitioned is handed over to the Assessing Officer having jurisdiction over such other person and then the Assessing Officer has the jurisdiction to proceed to rope in the assessee under the provision of section 153C r.w.s 153A, by issuance of notice under section 153C/153A and will proceed to assess or reassess the income of ‘other person’, i.e., the person covered under section 153C in accordance to the provisions of section 153A. Once jurisdiction is assumed under section 153C in the case of “other person”, then all the provisions of section 153A have been made applicable. However, in terms of first proviso to section 153C, reference date for the purpose of construing the date of initiation of search in terms of second proviso to sub-section (1) of section 153A has been envisaged as reference to the date of receiving the books of account or documents or asset seized or requisitioned by the Assessing Officer having jurisdiction over such other person. In other words, reference date in the cases of other person for the purpose of section 153A (1) has been reckoned as date of receiving of books of account or documents by the Assessing Officer of the other person. If such a date is to be applied here in this case, then ostensibly date of ‘satisfaction’ as recorded by the ACIT, Central Circle, New Delhi, at the most can be reckoned as reference date, which is 20/11/2009, because the date of receiving the books of account or documents or assets seized is not available. If reference date in terms of first proviso to section 153C is taken as 20/11/2009, then assessment year 2008-09 will not be covered under the year of search, albeit it would be covered under the period of six assessment years immediately preceding to the assessment year relevant to the year of search as given in clause (b) of section 153A (1) and also first and second proviso to section 153A. This issue has been dealt in detail by the Hon'ble Delhi High Court in the case of CIT vs. RRJ Securities Ltd. (supra), wherein the Hon'ble High Court after referring to the judgments of Hon'ble Delhi High Court in the cases of SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax reported in (2012) 346 ITR 177 (Del); In Pepsi Foods Pvt. Ltd. v. Assistant Commissioner of Income Tax reported in (2014) 367 ITR 112 (Del) and catena of other judgments of other High Courts; held that for the purpose of determining abated and unabated assessment and reckoning of period of six assessment years prior to the year of search, reference date in terms of provisions of section 153C can be taken as date of recording of satisfaction under section 153C. The relevant observation in this regard reads as under:-
“24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments /reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C (1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year.”
If the ratio of the Hon'ble jurisdictional High Court in the aforesaid case is to be applied on the facts of the present case, then, firstly, reference date has to be reckoned as date of recording of ‘satisfaction’ under section 153C which is 20/11/2009; and secondly, if such a date is taken as date of initiation of the search or requisition for the purpose of second proviso to section 153A(1), that is, for the purpose of abatement of pending assessment proceedings; then the year of search in terms of clause (b) of section 153A(1) would be assessment year 2010-11; and 2008-09 would fall within the category of six assessment years prior to the year of search. In such a situation, assessment for assessment year 2008-09 should have been completed in terms of section 153C read with 153A and not as a regular assessment under section 143(3). The reason being entire concept of abated; unabated as laid down in 2nd proviso to section 153A(1) and other issue of limitation as contained section 153 B has to be seen with reference to such reference date which has different consequences. Like for instance in section 153 B the period of limitation for completion of regular assessment for the year of search and for the assessment falling in each of the six assessment years are different. Thus, in our humble opinion, assessment for assessment year 2008-09 should have been completed under section 153A read with 153C and not as regular assessment under section 143(3), by treating the A.Y. 2008-09 as year of search.
Now coming to the alternative argument of the ld. counsel for the assessee that in case regular assessment under section 143(3) is to be treated as valid assessment, then such an assessment itself is bad in law for the reason that no notice under section 143(2) has been served upon the assessee within the period of 12 months. The ld. CIT D.R. before us though has argued vehemently that such an issue of jurisdiction and challenge of non-service of notice under section 143(2) cannot be made post-completion of assessment, but could not provide any evidence or document on record that any notice under section 143(2) has been issued prior to 30/9/2009, which was the last date of service of notice under section 143(2). Here in this case, return was filed on 27/9/2008 and time limit in terms of proviso to section 143(2) was on or before 30/9/2009, up to which notice under section 143(2) was mandatorily required to be served upon the assessee, in case the Assessing Officer wanted to vary the returned of income filed under section 139. It is trite proposition of law that if no notice has been issued in accordance to provisions of section 143(2), then no addition over and above the returned income can be made and this law has been well settled by various judgments including that of Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon [2010] 321 ITR 362(SC).
Thus, on this count also, we hold that addition made by the Assessing Officer in the impugned order is unsustainable being beyond the scope of assessment framed under section 143(3). Thus, on legal grounds, the appeal of the assessee is allowed and other grounds raised on merits have become purely infructuous and the same are treated as dismissed.
In the result, appeal of the assessee is allowed.