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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH,
Before: SHRI B.P. JAIN
This appeal of the assessee arises from the order of the ld. CIT(A) - 5, New Delhi vide order dated 27.02.2017 for assessment year A.Y. 2007-08.
2. The assessee has raised as many as 6 grounds of appeal. However, only Ground Nos. 1 and 2 have been pressed which read as under:
“1. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in confirming the action of the Assessing Officer in framing the impugned reassessment order u/s 148/143(3) and that too without assuming jurisdiction as per law and without complying with the mandatory conditions u/s 147 to 151 as envisaged under the Income tax Act, 1961.
That in any case and in any view of the matter, assumption of jurisdiction u/s 147 passing the impugned reassessment order u/s 143(3)/148 is bad in law and against facts and circumstances of the case.”
Facts of the case, in brief, are that the assessee declared income from salary as director of M/s Lion Guard & Secure Services [P] Ltd commission, and interest income from bank in his return originally filed on 12.11.2007 declaring income of Rs. 13,46,600/-. Subsequently, information was received from the Investigation Wing, New Delhi that a search and seizure operation was conducted in AKN Group of cases on 11.9.2013 and consequent search was conducted at the business premises and residential premises of Sh. Naresh Gupta on 17.09.2013. During the course of search proceedings an agreement to sell was found in respect of land at Bhiwadi where by a consideration of Rs. 1,50,00,000/- was paid by the assessee out of total consideration of Rs. 8.59 cr. which included an amount of Rs. 50 lacs in cash along with cheques and pay orders. On the basis of the information the case of the assessee was reopened u/s 147 of the IT Act after obtaining necessary approval from the Additional Commissioner of Income Tax, Range-4, New Delhi. Accordingly notice u/s 148 of the IT Act, 1961 was issued on 25/03/2014. In response to this notice the assessee company replied vide letter dated 22/4/2014 that the return of income filed on 12/11/2007 may be treated as compliance of notice u/s 148 of the IT Act, 1961 and also requested to provide the reasons under section 148. Reasons recorded were supplied to the assessee vide letter dated 19/05/2014. During the course of hearing the assessee raised objections vide letter dated 12.06.14 stating that the reasons for reopening of the case was not valid because the agreement to sell was unsigned and, was a soft copy. The objections were duly met out vide letter dated 16/06/2014.
The ld. CIT(A), in fact, rejected the legal ground raised by the assessee. His findings at para 4.3.7 are reproduced as under: “Consequently, on the basis of the definite and credible information received by the A.O from the Investigation Wing, there being no details of the cash transactions reflected in the return of income of the appellant, it is held that the A.O had reason to believe that income had escaped assessment. The reasons were properly recorded, as the record shows, on 21.03.2014. The communication of reasons was made and the appellant at no stage in the reassessment proceedings raised any objection to the reasons recorded or to the sufficiency of material, based on which the reopening had been done. Taking into account all the above facts into consideration, the additional ground challenging the validity of the reopening, stands dismissed.”
I have heard both the sides and perused the relevant material on record. On the perusal of reasons recorded and on the facts of the case, the jurisdiction of the Assessing Officer u/s 148 cannot be there and at the most it could have been u/s 153C of the Act since seized material was found in the case of one Shri Naresh Gupta as mentioned in the reasons and assessment order itself. The ld. counsel for the assessee submitted that the case of the assessee taken in the proceeding under section 147/148 is without jurisdiction as the same could be taken only u/s 153C and not u/s 148 as the basis of the present proceeding is the seized material. The ‘reason’ recorded shows that basis of assessment was seized material and even the assessment order says so. Therefore, the ld. counsel for the assessee submitted that in the view of the following judicial decisions, such action u/s 147 is not sustainable:
Rajat Shubra Chatterji vs ACIT in ITA 2430/Del./2015 •
“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 8 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. 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.”
ACIT vs Arun Kapur 140 TTJ 249 (Amritsar) • Cargo Clearing Agency vs JCIT 307 ITR 1 (Guj.) • M/s Chopra Marketing (P) Ltd. vs. DCIT in • dated 28.12.2016 Schliecher India Ltd. vs. DCIT in ITA No. 6253/Del/2013 dated • 24.03.2017
The conclusion in the case of Rajat Shubra [supra] is that reassessment was initiated on the basis of incriminating material found in the search of a third party provisions of section 153C would be applicable for framing assessment, if any, which would exclude application u/s 147 and hence notice u/s 148 and assessment framed in furtherance thereto u/s 147 r.w.s. 143(3) of the making in the impugned case was void ab initio and reassessment in question was justified to be quashed.
Similarly, reliance was placed on the case of the Schleicher India Ltd in for assessment year 204-05 wherein it has been held at para 14 page 12 as under:
“14. Admittedly, in the present case assessment has been reopened on the basis of search and seizure action at the premises of SK Gupta Group Companies. At this juncture, we agree with submissions made by Ld. Counsel that on receipt of information received on the basis of search and seizure operation, assessing officer should have followed procedure under section 153C, instead of reopening the assessment u/s 147. Further it is observed that the reopening has been done on the basis of reasons recorded on incorrect facts. That being so the reasons are in fact no reasons at all. This view finds support from the decision of Hon'ble Punjab and Haryana High Court in the case of CIT Versus Atlas Cycles Industries reported in 180 ITR 319. On these counts itself notice issued under section 147 of the Act initiating reassessment would not stand the test of law.”
In the facts and circumstances of the case, reassessment so initiated on the basis of material found in search of third party, no notice u/s 148 can be issued and the Assessing Officer does not acquire jurisdiction u/s 147/148 of the Act. Accordingly, assessment/re assessment so made is directed to be quashed.
Since the assessee succeeds on the legal ground, I do not decide the other grounds on merits. Thus, the grounds of appeal raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed. The order is pronounced in the open court on 18.10.2017.