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Facts
The assessee's original assessment for A.Y. 2011-12 was completed. Subsequently, information from a search on the Globe Group indicated the assessee received bogus Long Term Capital Gains (LTCG). A reassessment was initiated under section 147. Later, a search on another group yielded incriminating documents related to the assessee, leading to a notice under section 153C, and the section 147 proceedings were abated. The assessment was then completed under section 153C read with 143(3), making additions for unexplained money and cash credits, which the assessee challenged as time-barred and lacking a proper satisfaction note.
Held
The Tribunal ruled that the assessment under Section 153C read with Section 143(3) for A.Y. 2011-12 was invalid as it was time-barred. Relying on Supreme Court and Delhi High Court decisions, it held that for a non-searched person, the block period for Section 153C proceedings should be counted from the date of receipt of documents by the jurisdictional AO or the recording of a satisfaction note, not the search date. Since the satisfaction note was recorded in AY 2018-19, and the search was conducted before April 1, 2017, A.Y. 2011-12 fell outside the permissible six-year block period, thus quashing the assessment.
Key Issues
1. Whether the assessment proceedings initiated under Section 153C of the Income Tax Act, 1961 for A.Y. 2011-12 against a non-searched person were time-barred. 2. What is the correct 'date of initiation' for computing the limitation period under Section 153C for a non-searched person, especially in relation to the requirement of a satisfaction note and the applicability of Finance Act, 2017 amendments.
Sections Cited
143(3), 153C, 69A, 10(38), 147, 148, 132, 153A, 139, 149, 151, 153, 132A
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Before: SMT. BEENA PILLAI & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals arising from the appellate order dated 11.07.2024 are filed by the assessee and the Revenue respectively ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla against the order passed by the Learned Commissioner of Income-tax (Appeals) [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) r.w.s. 153C of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2011- 12.Since both the appeals are inter related, they are being adjudicated vide this composite order for the sake of convenience and brevity. Assessee's appeal as below is taken up first. ITA 4024/M/2024
The grounds of appeal are as under:
On facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) (CIT(A)) has erred in confirming the order of the Ld. Assessing Officer (AO) passed under section 153C read with section 143(3) of the Income-tax Act, 1961 (Act) of the Act, for AY 2011-12 as the same is time-barred hence the assessment order may be quashed as void ab initio.
Without prejudice to the above, on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the order of the Ld. AO passed under section 153C read with section 143(3) of the Income-tax Act, 1961 without a satisfaction note which is the mandate of the law.
Without prejudice to the above, on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming an addition of Rs. 77,50,000/- under section 69A of the Act as on-money when the assessee has not made any cash payments and the consideration made by the appellant is more than the stamp duty value assessed by the registering authority
On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming an addition of Rs. 77,50,000/- under section 69A of the Act as on-money when the provisions of section 69A of the Act are not applicable to the facts of the assessee as the documents relied on by the Revenue which was found in the third- party premises, has no evidentiary value as the same is authenticated as required by the Indian Evidence Act, 1872. ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla
On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming an addition of Rs. 77,50,000/- under section 69A of the Act as on-money, in violation of principles of Natural justice by not providing the documents, statements relied on by the Department and an opportunity of cross-examination.
Without prejudice to the above, on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming an addition of Rs. 77,50,000/- under section 69A of the Act as on-money when the assessee is only 50 per cent owner of the property hence the addition may be deleted.
Since ground no.1 challenges the very validity of the assessment order claiming that it barred by time limitation, the same is taken up by us for adjudication at the outset.
Facts in brief are that the assessee filed original return of income u/s.139 of the Income Tax Act,1961 declaring total income at Rs. 19,72,435/-. Assessment order u/s 143(3) of the Act was passed on 31.01.2014 assessing total income at Rs. 19,74,250/-. Subsequently, information was received from the office of the Pr. DIT(Inv.), Ahmedabad that the search and survey action was carried in the case of Globe Group. Ahmedabad on 23.01.2015. As per the statement recorded during the course of survey proceeding, these were the only paper companies and scrips were traded on stock exchange only by limited persons who had brought the shares off market and availed bogus Long Term Capital Gains. As per information, the he had sold 1,07,000/- shares for Rs. 2,51,38,729/-. As per the return of income and computation of income the assessee had shown sale price of the shares of Rs. 2,45,83,280/- and claimed exempt income from LTCG of Rs. 2,44,82,483/- u/s 10(38). Thus,it was observed that the assessee had obtained bogus LTCG of Rs. 2,44,82,483/-.On the basis of this information, the assessment was reopened u/s 147 and notice u/s 148 of the Act was issued on 29.03.2018 and duly served on the appellant. Subsequently, notice u/s 153C was ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla issued on 04.04.2018 and the assessment u/s.143(3) r.w.s.153C of the Act was completed on 28/12/2018, assessing the total income of the assessee for the year under consideration at Rs. 3,98,57,530/-. While doing so, the AO made addition of Rs. 1,33,00,000/- towards unexplained money u/s.69A & Rs. 2,45,83,280/- towards unexplained cash credits u/s 68 of the act u/s. 143(3) r.w.s. 153C of the Act.
1 Before the ld.CIT(A),the ld.AR of the assessee has, in support of the additional ground relating to validity of assessment order on the issue of time limitation, submitted that initially the assessment was reopened u/s. 147 of the I.T. Act. on 29.03.2018 on the basis of information received by the A.O. regarding the availing of accommodation entries of bogus long term capital gains. During the pendency of this assessment proceedings u/s. 147, an information was received on 31.03.2018 from the office of DCIT CC-1(2) Ahmedabad that Search and seizure action was carried out u/s 132 in the case of Shri Anil H Shah, Sanket J Shah and Sarthav Infrastructure Pvt Ltd & Others on 4.12.2014 and in this search incriminating documents pertaining to the appellant were found. On the basis of this information, notice u/s 153C of the I.T. Act was issued on 04.04.2018. Apparently proceedings initiated u/s. 147 were abated and assessment was completed u/s 153C r.w.s 143(3) of the Act. Before the ld.CIT(A) the appellant claimed that in view of the decision of Hon'ble Supreme Court in case of Jasjit Singh, the proceedings initiated u/s 153C are time-barred. However, he rejected the ground with the observation that the information regarding the documents found pertaining to the appellant was received by the A.O on 31.03.2018. As per the decision of Hon'ble Supreme Court in case of Jasjit Singh, the First Proviso to Section 153C introduces a legal fiction based on which the commencement date for computation of the six year or the ten ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla year block is deemed to be the date of receipt of books of accounts by the juri ictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the juri ictional AO of the non-searched person. Hence, from the date 31.03.2018 i.e. the date on which the information was received by the juri iction A.O of the appellant, limitation period has to be considered. It's a fact that the A.Y 2011-12 is beyond the period of 6 Assessment Years but within 10 Years from the A.Y in which the documents pertaining to the assessee had been received.
In the course of hearing before us, it was pleaded by the learned Counsel that the material to AO was forwarded on 31/03/2018 by the Builder's AO, Ahmadabad though notice u/s.153C was issued on 04/04/2018. According to the Supreme Court judgment in CIT v/s Jasjit Singh (2023) 458 ITR 437 (SC) or (2023) 155 Taxmann.com 155 (SC), the assessment u/s 143(3) to be made for the A.Y. 2018-19 and for six years preceding the AY 2018-19 will be made u/s.153C i.e. (1) AY 2017-18 (2) AY 2016-17 (3) AY 2015-16 (4) AY 2014- 15 (5) A.Y. 2013-14 (6) A.Y. 2012-13 (Thus the AY 2011-12 will not form part of block period).In view of the Supreme Court decision(supra) assessment completed for the AY_2011-12_u/s 153C read with section 143(3) on 28/12/2018 is invalid and hence this assessment is liable to be cancelled. ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla
1 Per contra, the ld.CIT(DR) has supported the appellate order of the ld.CIT(A) reiterating that it is deemed that the date of search invoking provisions of section 153C in the case of non searched person is the date of receipt of seized materials by the AO of such non searched person. In this case, the relevant date being 31.03.2018,all the requisite conditions stand fulfilled. Thus the ground of the assessee on assessment being time barred deserved to be dismissed.
We have carefully pondered over all the relevant facts of the case, position of law in this regard as also various judicial decisions on the issue involved. We find that in the recent past, in various decisions of courts have deeply analysed the issue in hand at length. It is worthwhile to mention some of such important decisions. In Co-ordinate Bench of Ahmedabad Tribunal had an occasion to decide an issue involving almost identical facts where also the assessment order was claimed to be time barred in terms of section 153C/143(3) of the Act. Relevant parts of the Ahmedabad) Appeal Number : I.T (SS).A. No. 398/Ahd/2019 are reproduced as under for the sake of clarity: 66
The brief facts of the case are that a search under Section 132 of the Act was carried out in Suraj Group of cases on 18.12.2013. Certain incriminating documents belonging to the assessee was found during the course of search proceeding. Therefore, the AO initiated proceeding under Section 153C of the Act against the assessee for the A.Y. 2008-09 by issuing notice under Section 153C of the Act on 11.01.2016. In response, the assessee had filed e-return on 20.01.2016 declaring Nil income. The assessment was completed under Section 143(3) r.w.s. 153C of the Act on 29.03.2016 at total income of Rs.11.06 Crores.
It was noticed by us that proceeding under Section 153C of the Act was initiated in this case on 11.01.2016 for the A.Y. 2008-09. The Hon'ble Supreme Court had held in the case of CIT vs. Jasjit Singh, [2023] 155 taxmann-com 155 (SC) that the block period for the proceeding under Section 153C of the Act has to be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person. The Co- ordinate Bench of this Tribunal has also taken an identical view in the case of Ushaben Jayantilal Patel vs. ITO in IT(SS)A No. 12/Ahd/2024 dated 01.07.2024 ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla [authored by one of us (Accountant Member)]. As the notice under Section 153C of the Act was issued in this case on 11.01.2016, it prima facie transpired that the six years for which proceeding under Section 153C of the Act could have been initiated in this case were the A.Ys. 2015-16 to 2010-11 only. Thus, the proceeding under Section 153C of the Act initiated for the A.Y. 2008-09 in this case was found to be not in order and beyond the permissible period.
We have given a thoughtful consideration to the issue and deeply pondered over the rival submissions. The contention of the Revenue is that the AO of the searched person and the AO of the other person was the same in this case and there was no requirement to transfer the seized documents belonging /pertaining to the assessee. Therefore, according to the Revenue, only the date of search needs to be applied in the present case as the reference point to calculate the block period of six years for initiating proceeding under Section 153C of the Act. As per the scheme of the Act, the year of search is considered as the reference point to determine the preceding six years only in respect of the searched person, where the proceeding is initiated u/s 153A of the Act. In case of non- searched person, proceeding is initiated u/s 153C of the Act and not u/s 153A of the Act. as no warrant of authorization was issued in the name of the assessee, even though the search was conducted in the group, we have to find out the reference point for considering the preceding six years in this case, u/s 153C of the Act.
As per provision of Section 153C of the Act, if the AO of the searched person is satisfied that any books of accounts or documents or assets belong or pertain to other than the searched person (other person), then such books of accounts or documents or assets shall be handed over by the AO of the searched person to the AO of the other person. In the present case the AO of the searched person and the AO of the other person was same. Therefore, there was no requirement of actual handing over of the seized documents belonging to the assessee to any other AO. Nevertheless, in order to assume juri iction on the case of the other person it is necessary for the common AO to record his satisfaction that the seized document pertains/belongs to the other person. Until and unless he records such satisfaction, he can't assume the juri iction to initiate proceedings u/s 153C of the Act in the case of other person. The condition of recording satisfaction note by the AO of the searched person was, therefore, required to be mandatorily complied in this case as well.
Even if we accept the contention of the Revenue that there was no requirement of transfer of seized documents from one AO to another in this case, the proceeding under Section 153C of the Act could have been initiated only after recording of satisfaction by the AO of the searched person. It has been held by the Hon'ble Supreme Court in the case of Super Malls (P.) Ltd. vs. Pr. CIT [2020] 273 Taxman 556 (SC) that before ITA No. 4024 and 4512/Mum/2024 Α.Υ. 2011-12 Rupesh Kantilal Savla issuing notice under Section 153C of the Act the AO of the searched person must be satisfied that any document seized or requisitioned belongs to a person other than the searched person. The recording of satisfaction by the AO of the searched person is sine qua non to initiate proceeding u/s 153C of the Act, even in a case where the AO of the searched person and AO of the other person is common. To quote from the order of the Hon'ble Supreme Court:
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This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd. (supra). As held, before issuing notice under Section 153C of the Act, the Assessing Officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned