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Income Tax Appellate Tribunal, BENGALURU BENCH B, BENGALURU
Before: SHRI. JASON P. BOAZ & SHRI. LALIET KUMAR
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IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A Nos.1154 & 1155/Bang/2015 (Assessment Years : 2010-11 & 2011-12) Asst. Commissioner of Income-tax, Circle -2(3)(1), Bengaluru .. Appellant v. Shri. Srinivas Rao Hoskote, No.4/7, 3rd floor, Sidda Enclave Nehrunagar, 1st Main Road, Seshadripuram Bengaluru 560 020 .. Respondent PAN : AAEPH8477J Assessee by : Shri. V. Chandrashekar, Advocate Revenue by : Smt. Padmameenakshi, JCIT Heard on : 31.01.2018 Pronounced on : 21.02.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER :
These are two appeals filed by the Revenue feeling aggrieved by the order passed by the CIT (A)-1, Bengaluru, dt.01.06.2015, for the AY 2010-11, on the following effective ground :
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i) The CIT (A) has not appreciated that the assessment was concluded u/s.143(3) after invoking provisions of section 147 consequent to survey carried out in the assessee’s premises.
Brief facts are that the assessee has filed the return of income on 15.10.2010 declaring income of Rs.9,60,227/-. Thereafter a survey u/s.133A of the Act was conducted on 13.06.2011, consequent to which the assessee filed a revised return declaring the same amount of Rs.9,60,227/-. Thereafter notice u/s.148 was issued.
In the assessment order it was mentioned that during the course of survey on 13.06.2011 the assessee was confronted with the document marked as AK/PDP/17 seized from the residence of Adelne Kagoo, related to one Dr. Dayanand Pai.The said document was confronted to the assessee during the course of survey as there is a description of giving an amount of Rs.2.60 to the assessee. In response thereto, the assessee has submitted that he has not given an amount of Rs.2.60 crores as written in the document seized but his relative has given an amount of Rs.1.85 crores at various point of time to Dr. Dayanand Pai for short-term deposits and the said amount was received back after some time. However the AO was not convinced with the reasoning given by the assessee and accordingly made addition for an amount of Rs.65 lakhs for the AY 2010-11 and an amount of Rs.1.30 lakhs for AY 2011-12 and Rs.12 lakhs as long-term capital gains for AY 2011-12. Feeling aggrieved by the order assessee filed appeal before the CIT (A). The CIT (A)
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had examined this issue and had held as mentioned in para 3.8 to 3.10, as under : 3.8 I have carefully considered the appellant's submissions and perused the assessment order. The pith and substance of the submissions made on this issue are that the seized material, which forms the sole basis of the search, does not belong to Adelene Kagoo, the person at whose residence the same was found and seized during search proceedings u/s 132. The material must then be held to belong to the appellant as the same relates to the appellant and also bears the name and signature of the appellant. Under these circumstances the entire assessment must necessarily be commenced and completed u/s 153C and not u/s 148 as has been done in this case. I find merit in the stand taken by the appellant. A satisfaction to the effect that material seized during the search belongs to the appellant ought to have been arrived at and proceedings u/s 153C read with section 153A ought to have been commenced against the appellant. Recourse to section 147 is expressly prohibited by the fact that section 153C starts with a non obstante clause and specifically prohibits recourse to section 147 and other sections. The same is reproduced under:
"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 issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A". 3.9 In the present. Case, the assessment proceedings have been commenced and completed u/s 147, which is patently erroneous, and renders the entire assessment proceedings void abinitio as urged by the appellant.
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3.10 In this background I hold that the reassessment proceedings u/s 147 resorted to by the AO are bad in law and the assessment order passed is therefore cancelled as being void abinitio On account of the above said findings given by the CIT(A), Revenue is in appeal before us.
At the outset the Ld. DR brought to our notice the decision passed by the Hon’ble jurisdictional High Court in the matter of Gudwill Housing Ltd v. ITO [(2014) 45 taxmann.com 144] wherein in paras 5 & 6 the Hon’ble jurisdictional High Court has held as under : 5. It is true that Section 158BD states that where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132, then the books of accounts, other documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed under Section 158BC against such other person and the provisions of these Chapter shall apply accordingly. This provision by itself, in our opinion, is not sufficient to hold that the Assessing Officer, on the facts and in the circumstances, as occurred in the present case, could not have proceeded against the assessee under Section 147 by issuing notice under Section 148 of the Act. This provision fell for consideration of the Delhi High Court and the Allahabad High Court. The Allahabad High Court in CIT v. Abhyudaya Builders (P.) Ltd. [2012] 340 ITR 310/20 taxmann.com 851 was considering not only these provisions but was examining the same in the light of similar facts, as fall for our consideration in the present case. While doing so, the Allahabad High Court placed reliance upon the judgment of the Delhi High Court in Janki Exports International v. Union of India [2005] 278 ITR 296/145 Taxman 82 (Delhi) to hold that the provisions contained in Section 158BD of the Act are analogous to the provisions contained in Section 147 of the Act, insofar as the procedure that is required to be followed. Section 147 contemplates that
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if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued under Section 148 of the Act. Section 158BD of the Act provides that if the Assessing officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under Section 132 of the Act, upon such satisfaction, is required to forward the relevant documents, papers, etc. to the Assessing Officer having jurisdiction over such other person in respect of whom the undisclosed income has been disclosed for block assessment. Thus, it is open to the Assessing Officer to proceed against the assessee, if he has reason to believe that his income has either escaped the assessment or whose undisclosed income is unearthed during the search conducted under Section 132 of the Act of the premises of some other person. From plain reading of these provisions, we do not find any impediment in proceeding against such person by issuing notice under Section 148 of the Act. In other words, Chapter XIV-B do not preclude the Assessing Officer to proceed against such assessee by issuing notice under Section 148 of the Act. The remedies, available to the Assessing Officer, under these provisions are independent of each other, and the provisions being analogous, it is for the Assessing Officer to opt for either of them in a situation, such as in the present case. The Legislature, in our opinion, has given choice to the Assessing Officer to either proceed under Chapter XIV-B or under Section 148 of the Act against the assessee, such as the one in the present case. 6. In the present case, the Assessing Officer reopened the case under Section 147 by issuing notice under Section 148 and completed the assessment. Till the assessment was completed and till the matter reached the Tribunal, the assessee did not make any grievance whatsoever. Even before the Tribunal, though the ground of jurisdiction was raised, it was not seriously pressed by learned counsel appearing for the assessee and in this view of the matter, the Tribunal proceeded to consider merits of the case. In the present appeal, the appellant chose to confine its challenge only on the ground of jurisdiction and did not raise challenge on merits. In this backdrop, we find no reason to interfere with the order passed by the Tribunal. We are satisfied that the Assessing Officer has option to proceed against the assessee by issuing notice under
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Section 148 of the Act in a situation as occurred in the present case. Hence, we answer the substantial questions of law as formulated by this Court vide order dated 29.01.2008 against the assessee and in favour of the Revenue.
Per contra the Ld. AR has brought to our notice the decision rendered by the Delhi Tribunal in the matter of Rajat Shubra Chatterji v. ACIT [ITA.2430/Del/2015, dt.20.05.2016] in para 7 the Tribunal has held as under : 7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur – 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec.
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147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed.
The Ld. AR has also drawn our attention to the decision of the Tribunal in ITO vs Arun Kumar Kapoor (2011)140 TTJ (ASR) 249 wherein the Tribunal at para 8 had held as under : 8. On a perusal of the above provisions, it would be clear that the provisions of s. 153C of the Act were applicable, which supersedes the applicability of provisions of ss. 147 and 148 of the Act. As we have already noted hereinabove that the documents were seized during the search under s. 132 of the Act and the same were sent to the assessee's AO at Amritsar by the officer at Delhi in our view, the learned CIT(A) has correctly observed that only the provision in which any assessment could be made against the assessee in the IT Act was s. 153C r/w s. 153A of the Act. It is also apparent from the record that the officer at Delhi has mentioned in his letter that the necessary action may be taken as per law under s. 153C/148 of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of s. 153C of the Act, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal.
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On the basis of the above it was submitted that once incriminating document was recovered during the course of search then the proceedings should have been initiated u/s.153C and not u/s.148 of the Act. Therefore the decision rendered by the CIT (A) was in accordance with law.
We have heard the rival contentions and perused the record. In our view the scope of Section 153C and 148 are clear from the bare reading of the two provisions insomuch as Section 153C it starts with ‘Notwithstanding nothing containing in Section 139, 147, 148, 149, 151 and 153’. Thus if there is any contradiction between Sections 153C and 148 ,in that eventuality, Section 148 shall give way to Section 153C. There is a reason for saying so because if a notice u/s.153C is issued to the third party (assessee), then the AO may assess or reassess the income of the assessee for a period of six years whereas this is not the position in case of Section 148. Further u/s.153C of the Act, the assessment / reassessment can only be made based on the satisfaction recorded by the AO or the searched person as well as of the third party and further addition can only be made by the AO in respect of the assessment year for which the incriminating documents were found with the search person belonging to the third party. Therefore in our view the finding of the CIT(A) is in accordance with law, as the proceeding should have been initiated under section 153C of the Act, as it were based on material found during the search from the premises of searched person other than assessee and not under section 148 of the Act. Further we are of the opinion that this issue raised by the parties is
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no more res integra as the coordinate bench in the matter of G. Koteshwara Rao v. DCIT [(2015) 64 taxmann.com 159] in para 11 to 14 has held as under : 11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non obstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests that there is an
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escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the reassessment proceedings, he has to cross the hurdles attached with reassessment by way reasons for reopening of assessment, time limit for issue of notice and provision for obtaining sanction of higher authority in certain circumstances. Under the provisions of section 153A to 153C these hurdles are cleared by using the non abstante clause in the said section. In other words, under the new provisions of section 153A, the AO is not required to satisfy these conditions before issue of notice. The only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish the returns of income for each assessment years falling within the six assessment years immediately preceding the assessment year in which search or requisition is made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid period which includes disclosed and undisclosed income. Therefore, the new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment
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u/s 147 has been removed by the non abstante clause used in section 153A. 14. In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-obstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal
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exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary. In view of the above and in view of the decision relied upon by the assessee, we do not find any merit in the appeals filed by Revenue.
At this stage we may like to point out that the decision relied upon by the Revenue in the matter of Gudwill Housing Ltd (supra) was a decision on Section 158BD under the old Act. There is a significant difference in the construction, language and content of both the provisions i.e Section 158BD under the old Act and section 153C of new Act of 1961. Section 153C of 1961 Act, starts with a non-obstante clause, whereas this non-obstinate provision was not there in Section 158BD. Therefore in our considered opinion the decision relied upon by the Revenue is not applicable to the facts and circumstances of present case. We hold accordingly.
In the result, appeals of the Revenue are dismissed. Order pronounced in the open court on 21st day of February, 2018. Sd/- Sd/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Bengaluru Dated : 21.02.2018 MCN*
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copy to: 1. The assessee 2. The Assessing Officer 3. The Commissioner of Income-tax 4. Commissioner of Income-tax(A) 5. DR 6. GF, ITAT, Bangalore By order Senior Private Secretary, Income Tax Appellate Tribunal, Bangalore.