KAIVALLYA ENTERTAINMENT PVT LTD.,CHENNAI vs. DCIT, CHENNAI

आदेश /ORDER

Per Sanjay Arora, AM:

2 (AY 2008-09) Kaivallya Entertainment Pvt. Ltd. v. Dy. CIT 2. The only issue agitated before us by the assessee is the validity in law, in the facts and circumstances of the case, of the assumption of jurisdiction u/s.153C of the Act, which reads as under: ‘Assessment of income of any other person. 153C. 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, 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 that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of the other person in accordance with the provisions of section 153A; Provided …… (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.’

4 (AY 2008-09) Kaivallya Entertainment Pvt. Ltd. v. Dy. CIT Page No 131 Trial balance for the period 1.4.2007 to 31.3.2008 pertains to Kaivallya Entertainment Pvt. Ltd. Page No 132 Profit & loss account for the period ended 31.3.2008 pertains to Kaivallya Entertainment Pvt. Ltd. Page No 133 Balance Sheet as on 31.3.2008 pertains to Kaivallya Entertainment Pvt. Ltd. The satisfaction note, enclosed along with, reads as under: ‘M/s. Kaivallya Entertainment Pvt. Ltd. PAN: AADCK 0637K A.Y.: 2008-09 During the course of search in the case of M/s. Vishwakarma Mines & Building Materials Pvt. Ltd. (Vishwakarma group) on 21-06-2011 the following documents belonging to 'M/s. Kaivallya Entertainment Pvt. Ltd. were seized from the premises of M/s. Vishwakarma Mines & Building Materials Pvt. Ltd.: Documents belonging to M/s. Kaivallya Entertainment Pvt. Ltd. were seized vide ANN/SSK/LS/S-1 (final a/cs of F.Y.08-09 to 10-11). In view of the above, I am satisfied that the case of M/s. Kaivallya Entertainment Pvt. Ltd. is liable to be assessed u/s 153C. Notice u/s. 153C issued. Sd/- (S.MOHD MUSTAFA) Deputy Commissioner of Income Tax, Central Circle – III (1), Chennai Notice u/s. 153C r/w s. 153A served on 16/08/13 by Post Ack. Filed in 2012-13 folder.’ Clearly, there is, firstly, no document apart from the final accounts (for the relevant years), including the relevant previous year, i.e., f.y. 2007-08 (even though the note refers to the years as ‘FY 2008-09 to 2010-11’ (i.e., excludes FY 2007-08, the relevant previous year). Further, there is, again, no reference in the satisfaction note as to the basis of the AO’s satisfaction of the said accounts as having a bearing on the assessee’s total income for the year. No doubt, no particular format for recording the satisfaction stands provided, but the same must spell out in clear terms the basis of the said satisfaction by the AO. In the present case, the income stands already returned with reference to the profit (loss) disclosed in the assessee’s operating statement (profit and loss account), 5 (AY 2008-09) Kaivallya Entertainment Pvt. Ltd. v. Dy. CIT found and seized in search. Also, the balance-sheet also agrees with that furnished as a part of the return of income. The opportunity provided by us to the Revenue to exhibit the AO’s satisfaction was guided primarily by the intent to find the basis thereof in-as-much as it could well be that there has been some omission in writing the satisfaction note, even as the satisfaction is otherwise discernible from the seized material itself. For example where a comparison of the two set of documents, i.e., as found and seized and that furnished by the assessee, itself reveals the basis of the said satisfaction, as where there is a difference in some corresponding figure/s, viz. debtors, creditors, etc. We are unable to find any basis for the said ‘satisfaction’ nor could the ld. DR, despite being specifically asked during hearing, point any. He, on being specifically inquired, confirmed the full agreement of the two sets of final accounts, i.e., as seized in search and that furnished, much earlier, by the assessee along with its return of income and, further, subject to assessment. Equally, the return is in conformity with the accounts as filed along with. True, the provision is widely worded, so that the same (satisfaction) does not necessarily have to lead to a belief as to escapement of income. The information found may well be sketchy, being (say) a part of a transaction, yet could provide an important lead to any income escaping assessment, or which may require further investigation in the matter. However, in the present case, at the cost of repetition, there is no basis for any satisfaction and, accordingly, the invocation of s. 153C, which provides for framing an assessment u/s. 153A of such other person, i.e., to whom the documents, etc., seized during search, relate, is bad in law. It is in doubt surprising, even as observed during hearing, that the assessee’s audited accounts were found at the place of another, but that, a valid ground for making further investigation, is by itself not sufficient for invoking s. 153C, or regarding the ingredients of the said provision, as satisfied. There has been thus no valid assumption of jurisdiction for the issue of notice there-under and, accordingly, the impugned assessment, framed u/s. 143(3) r/w s. 153A, is bad in law. While 6 (AY 2008-09) Kaivallya Entertainment Pvt. Ltd. v. Dy. CIT the AO did not address this issue, i.e., as to jurisdiction, which could perhaps be for the reason that the same was not raised by the assessee before him, the ld. CIT(A), before whom this issue was raised per Gd. No.3, proceeded on the basis that the assessee is the person searched, so that the search or the requisition is itself sufficient for assuming jurisdiction for framing an assessment there-under (refer para 8 (through sub-paras 8.1 to 8.2.9), at pgs. 14-25 of the impugned order). The same, as would be apparent from the foregoing narration of facts and the material on record, is without basis in fact and in law. We are conscious, we may clarify, that the condition that the Assessing Officer is satisfied that the books of accounts or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person, stands inserted by Finance (No.2) Act, 2014 w.e.f. 01.10.2014, so that the said condition cannot be imported for the current year. Also, that the Tribunal has no power to read down a provision of law and, even otherwise, the principle of causus omissus is not to be lightly invoked. So however, the subsequent amendment to the provision, which in fact is prompted by jurisprudence in the matter, is indicative of the legislative intent. The same only seeks to clarify that it is not any seized material belonging to, but only that which has a bearing on the determination of total income of, such other person, that shall give rise to the special jurisdiction envisaged by the provision. The same only seeks to take the circumstance of the seized material found in search in respect of the assessee to its logical conclusion, without which the provision becomes open ended and, accordingly, liable to be regarded as arbitrary. Legislative intent is to be the foundation of any interpretative exercise. Again, it cannot be lost sight of that the earlier assessment may be, as in the instant case, under verification procedure, i.e., u/s. 143(3) or u/s.

7 (AY 2008-09) Kaivallya Entertainment Pvt. Ltd. v. Dy. CIT Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC); CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC)). We, therefore, have no hesitation in, accepting the assessee’s Gds. 1 to 3, holding an absence of jurisdiction to assess and, consequently, the impugned assessment as bad in law. The other grounds, not pressed during hearing, are being not adjudicated inasmuch as they become unfructuous in view of our decision upholding the assessee’s objections vide its Gds. 1 to 3. We decide accordingly.