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Facts
The assessee's appeals were recalled by the Tribunal due to non-representation. The assessee raised an additional ground challenging the validity of reassessment proceedings under Section 153C of the Income-tax Act, 1961. The grounds were related to additions made under Section 68 of the Act.
Held
The Tribunal held that for invoking Section 153C, the incriminating material must be seized during a search action under Section 132, not impounded during a survey action under Section 133A. Since the material was impounded during a survey, the reassessment proceedings under Section 153C were deemed invalid.
Key Issues
Whether reassessment proceedings initiated under Section 153C are valid if the material relied upon was impounded during a survey action and not seized during a search action.
Sections Cited
68, 153C, 132, 133A, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
These appeals by the assessee were adjudicated by the Income-tax Appellate Tribunal (in short ‘the Tribunal’) on 15.09.2022, however, on Miscellaneous Applications filed by the
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assessee on the ground for non the ground for non-representation by the assessee representation by the assessee before the Tribunal, the appeals have been recalled by the Tribunal before the Tribunal, the appeals have been recalled before the Tribunal, the appeals have been recalled on 05.01.2023 by way of order passed in MA No. 287/Mum/2022. on 05.01.2023 by way of order passed in MA No. 287/Mum/2022. on 05.01.2023 by way of order passed in MA No. 287/Mum/2022. Hence, these appeals Hence, these appeals were before us for adjudication. before us for adjudication.
The grounds raised in the appeals are identical, mostly related The grounds raised in the appeals are identical, mostly related The grounds raised in the appeals are identical, mostly related to the addition u/s 68 of the Income to the addition u/s 68 of the Income-tax Act, 1961 (in sh tax Act, 1961 (in short ‘the Act’). Before us, the assessee has also raised an additional ground Act’). Before us, the assessee has also raised an additional ground Act’). Before us, the assessee has also raised an additional ground in all the appeals challenging the validity of the reassessment challenging the validity of the reassessment challenging the validity of the reassessment proceedings completed u/s 153C of the Act. The relevant additional proceedings completed u/s 153C of the Act. The relevant additional proceedings completed u/s 153C of the Act. The relevant additional ground is reproduced as under: ground is reproduced as under:
On the facts and On the facts and in circumstances of the case as well as law in circumstances of the case as well as law on the subject, learned Assessing Officer has erred in issuing on the subject, learned Assessing Officer has erred in issuing on the subject, learned Assessing Officer has erred in issuing notice u/s 153C and passing assessment order u/s 143(3) notice u/s 153C and passing assessment order u/s 143(3) notice u/s 153C and passing assessment order u/s 143(3) r.w.s. 153C. r.w.s. 153C. 2.1 The grounds and additional ground raised being identical in The grounds and additional ground raised being identical in The grounds and additional ground raised being identical in all these appeals, same were heard together and disposed off same were heard together and disposed off by way same were heard together and disposed off of this consolidated order for convenience and avoid repetition of this consolidated order for convenience and avoid repetition of this consolidated order for convenience and avoid repetition of facts.
In view of the settled principle held by the Hon’ble Supreme In view of the settled principle held by the Hon’ble Supreme In view of the settled principle held by the Hon’ble Supreme Court in the case of Court in the case of NTPC Ltd. 229 ITR 283 (SC) NTPC Ltd. 229 ITR 283 (SC), the additional ground raised by the assessee is admitted after hearing arguments ground raised by the assessee is admitted after hearin ground raised by the assessee is admitted after hearin of both the parties as ground being purely legal in nature and no of both the parties as ground being purely legal in nature and no of both the parties as ground being purely legal in nature and no investigation of fresh facts is required. investigation of fresh facts is required.
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We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of additional ground and perused the relevant material on record und and perused the relevant material on record und and perused the relevant material on record including paper book filed by the assessee including paper book filed by the assessee. In the case , the In the case , the Assessing Officer has completed impugned assessments u/s 153C Assessing Officer has completed impugned assessments u/s 153C Assessing Officer has completed impugned assessments u/s 153C of the Act. The Assessee has challenged the legality of jurisdiction of the Act. The Assessee has challenged the legality of jurisdiction of the Act. The Assessee has challenged the legality of jurisdiction acquired by the AO for invoking proceedings u/s 153C of the Actr. AO for invoking proceedings u/s 153C of the Actr. AO for invoking proceedings u/s 153C of the Actr. Before us, the Ld. Before us, the Ld. Counsel for the assessee referred to the the assessee referred to the satisfaction note recorded recorded by the Assessing Officer by the Assessing Officer of searched person as well as assessee, person as well as assessee, for issuing notice u/s 153C of the Act, for issuing notice u/s 153C of the Act, which is available on Paper Book page 1. ilable on Paper Book page 1. In the case the Assessing In the case the Assessing Officer is same for searched person and the assessee. The Ld. Officer is same for searched person and the assessee. Officer is same for searched person and the assessee. Counsel for the assessee submitted that the documents on the for the assessee submitted that the documents on the for the assessee submitted that the documents on the basis of which proceedings u/s 153C of the Act have been initiated basis of which proceedings u/s 153C of the Act have been initiated basis of which proceedings u/s 153C of the Act have been initiated were impounded during t ded during the course of the survey action, w he course of the survey action, whereas for invoking proceedings u/s 153C of the Act invoking proceedings u/s 153C of the Act, the law requires the law requires that assets or documents or documents should be seized in the course of the search be seized in the course of the search action. For ready reference the relevant provisions of section 153C action. For ready reference the relevant provisions of section 153C action. For ready reference the relevant provisions of section 153C reproduced as under: of the Act are reproduced as under:
“153C. (1))"(Notwithstanding anything contained in section 139, 153C. (1))"(Notwithstanding anything contained in section 139, 153C. (1))"(Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section section 147, section 148, section 149, section 151 and section section 147, section 148, section 149, section 151 and section 153, where the Assessing 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or (a) any money, bullion, jewellery or other valuable article or (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned seized or requisitioned, belongs to; or seized seized or or (b) any any books books of of account account or or documents, documents, requisitioned, pertains or pertain to, or any information , pertains or pertain to, or any information , pertains or pertain to, or any information contained therein, relates to, contained therein, relates to, a person other than the person referred to in section 153A, then, n other than the person referred to in section 153A, then, n other than the person referred to in section 153A, then, the books of account or documents or assets, seized or the books of account or documents or assets, seized or the books of account or documents or assets, seized or
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requisitioned shall be handed over to the Assessing Officer requisitioned shall be handed over to the Assessing Officer requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] "[and that Assessing having jurisdiction over such other person] "[and that Assessing having jurisdiction over such other person] "[and that Assessing Officer shall pro Officer shall proceed against each such other person and issue ceed against each such other person and issue notice and assess or reassess the income of the other person in notice and assess or reassess the income of the other person in notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that accordance with the provisions of section 153A, if, that accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or Assessing Officer is satisfied that the books of account or Assessing Officer is satisfied that the books of account or documents or assets seized or documents or assets seized or requisitioned have a bearing on requisitioned have a bearing on the determination of the total income of such other person [for six the determination of the total income of such other person [for six the determination of the total income of such other person [for six assessment years immediately preceding the assessment year assessment years immediately preceding the assessment year assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or relevant to the previous year in which search is conducted or relevant to the previous year in which search is conducted or requisition is made and] for the r requisition is made and] for the relevant assessment year or elevant assessment year or years referred to in sub years referred to in sub-section (1) of section 153A]]” 4.1 On perusal of the above proceedings, it is evident that On perusal of the above proceedings, it is evident that On perusal of the above proceedings, it is evident that for invoking provisions of section 153C of the Act, invoking provisions of section 153C of the Act, the Assessing Officer the Assessing Officer should record satisfaction that any should record satisfaction that any any money, bullion, ny money, bullion, jewellary or other valuable article or thing, seized or requisition during the seized or requisition during the other valuable article or thing, course of searched person course of searched person belonged to the assessee or any other belonged to the assessee or any other books of account or documents, seized or requisitioned, seized or requisitioned, pertains books of account or documents, or pertain to, or any information contained therein, relates to the or pertain to, or any information contained therein, relates to or pertain to, or any information contained therein, relates to assessee, then the Assessing Officer of the searched person shall then the Assessing Officer of the searched person shall then the Assessing Officer of the searched person shall handover that material or books of account or assets to the handover that material or books of account or assets to the handover that material or books of account or assets to the Assessing Officer of the third person ( Assessing Officer of the third person (i.e. the asse the assessee in present case) and then the Assessing Officer of the third person ) and then the Assessing Officer of the third person ) and then the Assessing Officer of the third person ( i.e. the assessee) shall also record the satisfaction that the books of shall also record the satisfaction that the books of shall also record the satisfaction that the books of accounts of the documents or assets seized accounts of the documents or assets seized or requisitioned have a or requisitioned have a bearing on the determination of the total bearing on the determination of the total income of such other income of such other person.
4.2 In the instant case in the satisfaction recorded the Assessing In the instant case in the satisfaction recorded the Assessing In the instant case in the satisfaction recorded the Assessing Officer has referred to loose papers No. 1 to 8 of the Annexure A has referred to loose papers No. 1 to 8 of the Annexure A-1 has referred to loose papers No. 1 to 8 of the Annexure A containing pages 1 to 33 found from the office premises of M/s containing pages 1 to 33 found from the office premises of M/s containing pages 1 to 33 found from the office premises of M/s
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Ankur Shubham Developers, Mi Ankur Shubham Developers, Micro Ankur Developers, Sahaj Ankur cro Ankur Developers, Sahaj Ankur Developers, Shubham Developers. For ready reference, the Developers, Shubham Developers. For ready reference, the Developers, Shubham Developers. For ready reference, the satisfaction note recorded by the AO is reproduced as under: satisfaction note recorded by the AO is reproduced as under: satisfaction note recorded by the AO is reproduced as under:
“Recording of satisfaction for issuance of notice u/s. 153C in Recording of satisfaction for issuance of notice u/s. 153C in Recording of satisfaction for issuance of notice u/s. 153C in the case of Dinesh V ShaH (HUF) (A.Y. 2008-09 to 2013-14) A search and seizure action u/s 132 of the act, was conducted on 10 A search and seizure action u/s 132 of the act, was conducted on 10 A search and seizure action u/s 132 of the act, was conducted on 10- 12-2013 in the case of M/s Ankur Shubham Group. From the office 2013 in the case of M/s Ankur Shubham Group. From the office 2013 in the case of M/s Ankur Shubham Group. From the office premises of Ankur Shubham Developers, Micro Ankur Developers, premises of Ankur Shubham Developers, Micro Ankur Developers, premises of Ankur Shubham Developers, Micro Ankur Developers, Sahaj Ankur Developers, Shubham Developers ce Sahaj Ankur Developers, Shubham Developers certain loose papers rtain loose papers were found which were seized as annexurised as Annexure A were found which were seized as annexurised as Annexure A were found which were seized as annexurised as Annexure A-1 (Page No. 1 to 33). Page nos. 1 to 8 of the said annexure belonging to the assessee Page nos. 1 to 8 of the said annexure belonging to the assessee Page nos. 1 to 8 of the said annexure belonging to the assessee contains certain information which need to be probed further. contains certain information which need to be probed further. contains certain information which need to be probed further. In view of the above and In view of the above and provisions of Section 153C of I.T. Act, 1961, provisions of Section 153C of I.T. Act, 1961, notice u/s 153C is being issued in the case of Dinesh V. Shah(HUF). notice u/s 153C is being issued in the case of Dinesh V. Shah(HUF). notice u/s 153C is being issued in the case of Dinesh V. Shah(HUF).” 4.3 The Ld. counsel The Ld. counsel for the assessee referred to paper book page the assessee referred to paper book page No. 2 which is the first page of Annexure A No. 2 which is the first page of Annexure A-1 referred by the 1 referred by the Assessing Officer. The said page indicates that this Annexure was he said page indicates that this Annexure was he said page indicates that this Annexure was impounded during the course of the survey conducted on the office impounded during the course of the survey conducted on the office impounded during the course of the survey conducted on the office premises of Ankur Shubham Group at premises of Ankur Shubham Group at 303, Santacruz, West, 303, Santacruz, West, Mumbai on 10.12.2013. Mumbai on 10.12.2013. The ld Counsel also referred to a copy of The ld Counsel also referred to a copy of authorization dated 11/12/ 2013 ed 11/12/ 2013 ( PB-I/35) I/35) issued by the concerned Deputy Director of Income concerned Deputy Director of Income-tax for carrying carrying out survey in the name of four parties namely (i) M/s Ankur Shubham the name of four parties namely (i) M/s Ankur Shubham the name of four parties namely (i) M/s Ankur Shubham Developers, (ii) Micro Ankur Developers, (iii) Sahaj Ankur Developers, (ii) Micro Ankur Developers, (iii) Sahaj Ankur Developers, (ii) Micro Ankur Developers, (iii) Sahaj Ankur Developers, and (iv) Shubham Develop Developers, and (iv) Shubham Developers at address 303, Golden ers at address 303, Golden Bunglow, Juhu Road, Sant Bunglow, Juhu Road, Santacruz (w), Mumbai. The paper book page acruz (w), Mumbai. The paper book page 37 is the Annexure 37 is the Annexure-A impounded during the course of survey, impounded during the course of survey,
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which contains one of the items as s one of the items as loose papers 1 to 33. This same 1 to 33. This same annexure of loose papers has been refer annexure of loose papers has been referred by the AO in his red by the AO in his satisfaction note as seized material. satisfaction note as seized material. In view of the above it is In view of the above it is evident that the Assessing Officer has wrongly mentioned in the evident that the Assessing Officer has wrongly mentioned in the evident that the Assessing Officer has wrongly mentioned in the satisfaction note that the Annexure was seized satisfaction note that the Annexure was seized (i.e. during the (i.e. during the course of search) but it was actually imp course of search) but it was actually impounded during the course ounded during the course of survey u/s 133A of the Act. of survey u/s 133A of the Act. We are of the opinion that We are of the opinion that as per the provisions of section 153C of the Act, provisions of section 153C of the Act, unless the documents unless the documents belonging to or pertaining to the other person belonging to or pertaining to the other person (i.e. the assessee i.e. the assessee in instant case) are seized during t are seized during the course of search action at the he course of search action at the premises of the searched person, n remises of the searched person, no proceedings u/s 153C of the o proceedings u/s 153C of the Act can validly be taken in the course of the other person i.e. the Act can validly be taken in the course of the other person i.e. the Act can validly be taken in the course of the other person i.e. the assessee. Since, in the instant case, the material considered for assessee. Since, in the instant case, the material considered for assessee. Since, in the instant case, the material considered for initiating action u/s 15 initiating action u/s 153C of the Act in the case of the assessee was 3C of the Act in the case of the assessee was not seized in the course of the search action but was impounded in not seized in the course of the search action but was impounded in not seized in the course of the search action but was impounded in the course of the survey the course of the survey action, therefore, the action of therefore, the action of reassessment u/s 153C of the Act is reassessment u/s 153C of the Act is not as per the provisions of law not as per the provisions of law and stands invalid. id. The Hon’ble Supreme Court in the case The Hon’ble Supreme Court in the case Commissioner of Income Commissioner of Income-tax v. Sinhagad Technical Education tax v. Sinhagad Technical Education Society [2017] 84 taxmann.com 290 (SC) Society [2017] 84 taxmann.com 290 (SC) held that for invoking held that for invoking section 153C of the Act the incriminating material section 153C of the Act the incriminating material should should pertain to assessment years in question whereas in the instant case the assessment years in question whereas in the instant case the assessment years in question whereas in the instant case the incriminating material have not even seized during the course of the incriminating material have not even seized during the course of the incriminating material have not even seized during the course of the search action. The Ld. Departmental Representative relied on the search action. The Ld. Departmental Representative relied on the search action. The Ld. Departmental Representative relied on the decision of the of Hon’ble Supreme Court in the ca Hon’ble Supreme Court in the case of CIT v. S. Hon’ble Supreme Court in the ca
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Ajit Kumar [2018] 93 taxmann.com 294 (SC) Ajit Kumar [2018] 93 taxmann.com 294 (SC) wherein it is held wherein it is held that any material or evidence found/collected in a survey which has that any material or evidence found/collected in a survey which has that any material or evidence found/collected in a survey which has been simultaneously been simultaneously made at premises of the connected person can made at premises of the connected person can be utilized while making block assessment in r be utilized while making block assessment in respect of assessee espect of assessee u/s 158BB, r.w.s. 158BH. We find that in the case, the issue was of u/s 158BB, r.w.s. 158BH. We find that in the case, the issue was of u/s 158BB, r.w.s. 158BH. We find that in the case, the issue was of considering the any other material or information available and considering the any other material or information available and considering the any other material or information available and relatable to such evidence during the course of the assessment u/s relatable to such evidence during the course of the assessment u/s relatable to such evidence during the course of the assessment u/s 158BB/158BC of the Act. I of the Act. In the said decision, the issue in dispute the issue in dispute is not regarding the assessment u/ is not regarding the assessment u/s 158BD which is which is pari-materia with assessment u/s 153C of the Act. The issue in dispute in above u/s 153C of the Act. The issue in dispute in above u/s 153C of the Act. The issue in dispute in above decision being different decision being different, the ratio of the said decision is not ratio of the said decision is not applicable over the facts of the applicable over the facts of the instant case. Since, the material to instant case. Since, the material to be considered for invoking u/s 153C of the Act should be seized be considered for invoking u/s 153C of the Act should be seized be considered for invoking u/s 153C of the Act should be seized during the course of the during the course of the search u/s 132 of the Act on search u/s 132 of the Act on searched action or requisitioned u/s 132A of the Act or requisitioned u/s 132A of the Act and this being a and this being a mandatory condition mandatory condition for invoking action u/s 153C of the Act u/s 153C of the Act, failure on the part of the Assessing Officer in recording the satisfaction on the part of the Assessing Officer in recording the satisfaction on the part of the Assessing Officer in recording the satisfaction based on any material seized during the course of the search, the based on any material seized during the course of the search based on any material seized during the course of the search action taken u/s 153C of the Act u/s 153C of the Act do not meet requirement of law do not meet requirement of law and therefore stand quashed. The additional ground raised in all ground raised in all the four years is accordingly allowed. accordingly allowed.
Since, we have already quashed the proceedings u/s 153C of the Since, we have already quashed the proceedings u/s 153C of the Since, we have already quashed the proceedings u/s 153C of the Act, therefore, we are not required adjudicate therefore, we are not required adjudicate regular grounds of the regular grounds of the appeal as same are rendered merely same are rendered merely academic.
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In the result, all four appeals of the assessee are allowed. In the result, all four appeals of the assessee are allowed. In the result, all four appeals of the assessee are allowed.
Order pronounced in the open Court on nced in the open Court on 13/03 /03/2024. Sd/ Sd/- Sd/ Sd/- (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/03/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai