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Income Tax Appellate Tribunal, “D”BENCH, MUMBAI
Before: SHRI B.R. BASKARAN, AM & SHRI RAVISH SOOD,JM
PER RAVISH SOOD, JUDICIAL MEMBER
The present appeal is directed against the order passed by the CIT(A)-41, Mumbai, dated 25.09.2014, which in itself arises from the order passed by the A.O under Section 144 r.w.s 153C of the Income-tax Act, 1961(for short ‘Act’). The assessee being aggrieved with the order of the CIT(A) had assailed the same before us by raising the following grounds of appeal: -
“l. The Commissioner of Income Tax (Appeals) erred in upholding the order of A.O. wherein he did not give sufficient opportunity of being heard to appellant and completed the assessment order u/s 144 r.ws. 153C of I.T. Act, 1961. Under the facts and circumstances of the matter he ought not to have upheld the order of A.O. wherein he did not give sufficient opportunity of being heard to appellant and completed the assessment order u/s 144 r.w.s 153C of I.T. Act,1961.
The Commissioner of Income Tax (Appeals) erred in upholding the order of A.O. wherein he added Rs.17,00,000/- being loan taken from M/S Divyasagar Restaurant (Prop: Mrs. Meera D. Shetty) into appellant's total income as unexplained cash credit u/s 68 of I.T. Act, 1961. Under the facts and circumstances of the matter he ought not to have upheld the said addition of Rs.17,00,000/- into the total income of appellant.
The Commissioner of Income Tax (Appeals) erred in upholding the order of A.O. wherein he added Rs.2,57,350/- being cash deposited in PMC Bank into appellant’s total income as unexplained cash credit u/s 68 of I.T. Act. Under the facts and circumstances of the matter he ought not to have added the said amount of cash deposits in PMC Bank into appellant's total income.
4. The appellant craves, leave to add, amend or alter the above grounds of appeal at or before the time of hearing.”
That still further the assessee had raised the following ‘additional grounds of appeal’.
Additional Ground No. 1: “On the facts and in the circumstances of the case, and in law, the assessment order dated 30.12.2011 passed u/s 144 r.w.s. 153C of the Income-tax Act, 1961 ('Act") is bad in law in as much as the proceedings u/s. 153C read with section 153A of the Act could not have been taken for the assessment year 2004-05. Your appellant therefore, prays that the impugned assessment order, being bad in law, be quashed.”
Additional Ground No.2: “On the facts and in the circumstances of the case, and in law, the additions made in the impugned assessment order, which are disputed in Ground No. 2 & 3 could not have been legally made in assessment order u/s. 153C, there being no reference to any incriminating material on record having any bearing on those additions. Your appellant, therefore, prays that the said additions, being bad in law, be deleted.”
The ld. Departmental Representative (for short ‘D.R’) had objected to the admission of the additional grounds of appeal. We however find that as the aforesaid additional grounds of appeal involve purely a question of law emerging from the facts available from record, therefore going by the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Limited Vs. CIT (1998) 229 ITR 383 (SC), we thus admit the same.
2. Briefly stated, the facts of the case are that the assessee who is engaged in the business of running a wine shop under the name and style of M/s Divyasagar Enterprises and was also a proprietor of a concern M/s Sagar Developer, which however was converted into a partnership firm w.e.f from March, 2007 and one Mr. Gangadhar Shetty was inducted as a partner in the said concern. The assessee had filed his original return of income for A.Y 2004-05 on 01.11.2004, declaring total income at Rs.3,94,350/-. That pursuant to search and seizure action under Section 132(1) of the ‘Act’ conducted in the case of Gangadhar Shetty group on 20.08.2009, it is claimed that certain incriminating documents belonging to the assessee were seized. The A.O after recording reasons in this behalf, therein called upon the assessee to file his return of income under Section 153A r.w Sec.153C. That as it so emerges from the orders of the lower authorities, though notices under Section 143(2) and 142(1) along with detailed questionnaire were served on the assessee from time to time, however the assessee consistently evaded furnishing of the requisite replies and failed to place on record the material called for by the A.O. The assessee throughout the assessment proceedings furnished partial, sketchy and incomplete details in ‘Tapal’ through his counsel and avoided putting up an appearance before the A.O. That due to the non- cooperative attitude of the assessee and absence of the requisite replies, the A.O proceeded with and framed assessment under Section 144 r.w.s 153C of the ‘Act’ on 30.12.2011 at an income of Rs.59,52,330/-.
3. The assessee being aggrieved with the assessment carried the matter in appeal before the CIT(A). That before the CIT(A) the assessee assailed the assessment framed by the A.O on multiple grounds, viz. he was not afforded sufficient opportunity for presenting his case during the course of the assessment proceedings; the return of income filed by him under Section 153C was not considered by the A.O while framing the assessment; alleged absence of satisfaction on the part of the A.O for taking action under Section 153C, as well as assailed on merits the addition aggregating to Rs.53,00,592/- so made by the A.O on merits. The CIT(A) after deliberating on the contentions of the assessee, therein observing that the assessee had remained absolutely non-cooperative during the course of the assessment proceedings and had throughout evaded furnishing of the replies to the queries raised by the A.O in the course of the assessment proceedings, as well as failed to place on record any material which could go to substantiate that he had filed the return of income in response to notice under Section 153C, therein rejected the contentions raised by the assessee. The CIT(A) further observing that not only the satisfaction on the part of the A.O for taking the requisite action under Section 153C was duly recorded, but rather a copy of the reasons for initiating action under Section 153C was supplied to the assessee, in response to which the assessee had even filed his objections vide his letter dated 23.12.2011, thus finding no force in the aforesaid contention of the assessee, rejected the same. The CIT(A) further adverting to the contentions raised by the assessee as regards the addition aggregating to Rs.53,00,592/- made in the course of the assessment proceedings, therein called for a remand report from the A.O. The CIT(A) after perusing the report filed by the A.O, therein deleted an addition of Rs.36,00,592/- (out of total addition of Rs.53,00,592/-), while for the balance addition of Rs.17 lac made by the A.O under Section 68 was sustained by him. The CIT(A) further upheld the addition of Rs.2,57,350/- made by the A.O under Section 68, in respect of the credits appearing in the joint S.B. account No.005555 held by the assessee and his wife Mrs. Meera Diwakar Shetty with PMC Bank, Branch: Andheri (E), Mumbai.
The assessee being aggrieved with the order of the CIT(A), to the extent the latter had sustained the additions made by the A.O, had therein carried the matter in appeal before us. We firstly take up the additional grounds of appeal raised by the assessee before us. The Ld. Authorised representative (for short ‘A.R’) for the assessee adverting to the additional ground of appeal no.1, had therein contended that the assessment framed by the A.O vide his order dated 30.12.2011, passed under Section 144 r.w.s. 153C of the Income-tax ‘Act’, 1961 (for short ‘Act’) was bad in law, as the proceedings under Section 153C r.w.s 153A could not have been initiated by the A.O for A.Y 2004-05. That to be brief and explicit, it was averred by the ld. A.R that the A.O had exceeded his jurisdiction and framed assessment under Section 144 r.w.s. 153C in the hands of the assessee for A.Y 2004-05. That during the course of hearing of the appeal it was vehemently submitted by the ld. A.R for the assessee that as per the mandate of the 2nd proviso of Section 153A r.w. the 1st proviso of Section 153C, the six assessment years for which assessment /reassessment could be made, had to be construed with reference to the date of handing over of the assets/documents relatable to the assessee by the Assessing Officer of the searched person, to the Assessing Officer of the assessee. The ld. A.R thus submitted that though the search and seizure action under Section 132(1) was conducted in the case of Gangadhar Shetty group on 20.08.2009, however the reasons for assuming jurisdiction under Section 153C were recorded in the case of the assessee for A.Ys 2004-05 to 2009-10 by the ACIT, Central Circle-34, Mumbai, on 21.12.2010. The ld. A.R in the backdrop of the aforesaid facts therein submitted that though in the reasons recorded there was no clear mention of the date of actual handing over of the seized ‘material’ relatable to the assessee by the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. (a concern of Gangadhar Shetty Group), but from the very fact that the reasons for issuing notice under Section 153C were recorded on 21.12.2010, it could thus safely be inferred that the actual handing over of the said seized material by the Assessing officer of the searched person, viz. M/s Om Sai Motors Pvt. Ltd.(supra), to the Assessing officer of the assessee, must have taken place on that day itself. The ld. A.R in support of his aforesaid contention therein drew our attention to Page 17-20 of his ‘Paper book’ (APB), which we find is a copy of the “reasons recorded for issue of notice under Section 153C of the Income-tax Act 1961” in the case of the assessee, viz. Shri Diwakar N. Shetty for A.Ys 2004-05 to 2009-10. The ld. A.R thus submitted that now when the handing over of the incriminating material by the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. (supra), to the A.O of the assessee had taken place only in the Financial year 2010-11 relevant to A.Y 2011-12, therefore the A.O though remained vested with the jurisdiction to frame assessments in respect of the preceding six assessment years ,viz. A.Y 2005-06 to A.Y 2010-11, but had no jurisdiction to frame assessment in the hands of the assessee for the year under consideration, viz. A.Y 2004-05. It was thus in the backdrop of the aforesaid facts averred by the ld. A.R that as A.Y. 2004-05 was not covered within the block of six years, thus no proceeding under Section 153C could have been initiated in the hands of the assessee for A.Y 2004-05. The ld. A.R thus submitted that the jurisdiction assumed by the A.O under Section 153C for A.Y 2004-05 and the consequent proceedings initiated against the assessee, which thereafter had culminated into an assessment under Section 144 r.w.s. 153C of the ‘Act’, dated 30.12.2011, could safely be characterized as a blatant transgression of jurisdiction on the part of the A.O. It was thus averred by the ld. A.R that as the A.O had traversed beyond the scope of jurisdiction as stood vested with him under Section 153A r.w. Sec.153C, therefore, the assessment framed in the hands of the assessee for the year under consideration, viz. A.Y 2004-05 was non est, and thus was liable to be vacated. The ld. A.R in support of his aforesaid legal proposition so raised before us, and to drive home his contention that the A.O by framing the assessment in the hands of the assessee for A.Y. 2004-05 had traversed beyond the scope of his jurisdiction, therein relied on the judgment of the Hon’ble High Court of Delhi in the case of CIT-7 Vs. RRJ Securities Ltd. (2015) 62 taxmann.com 391 (Delhi). Still further, the assessee fortified his aforesaid contention by drawing support from the orders of the coordinate benches of the Tribunal in the following cases:- (i) Rajeev Behl Vs. DCIT, Central Circle-15, New Delhi (ITA 1927-1931/Del/2015), dated 29.06.2016 (ITAT- Delhi bench ‘F’, New Delhi) (ii) DSL Properties (P) Ltd. Vs. DCIT, Central Circle-8, (2013) 33 taxmann.com 420 (Delhi – Trib). (iii) M/s. R.L. Allied Industries Vs. ITO, New Delhi (ITA 567/568/Del/2011, dated 28.11.2014)(Delhi-Trib).
Per contra, it was submitted by the ld. D.R that the six assessment years for which the assessment/re-assessment proceedings could be initiated in the hands of the assessee were regulated by the 2nd proviso of Section 153A(1), and as the search and seizure action under Section 132(1) of the ‘Act’ was conducted in the case of Gangadhar Shetty Group on 20.08.2009, viz. the period relevant to A.Y 2010-11, therefore the A.O had validly assumed jurisdiction and framed assessment in the hands of the assessee for A.Y 2004-05.
We have heard the ld. Authorized Representatives for both the parties on the issue under consideration, perused the orders of the lower authorities and the material placed on record. We have given a thoughtful consideration to the facts of the case and find that the jurisdiction to frame assessment or re-assessment pursuant to search and seizure action under Section 132, or making of a requisition under Section 132A, as regards the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made, can be traced in Section 153A of the ‘Act’. However, for the purpose of framing of an assessment in the case of a person where the jurisdiction had been assumed by the A.O under section 153C, viz. a person other than the person referred to in Section 153A, the reference to the “date of initiation of the search under Section 132, or making of a requisition under Section 132A” provided in the 2nd proviso of Section 153A, shall therein stand substituted by and read as the “date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person”. We find that pursuant to a conjoint reading of Section 153A and the 1st proviso of Section 153C, it emerges that for the purpose of assessment or re-assessment in the case of a person covered by Section 153C, the date of initiation of the search under Section 132 or making of requisition under Section132A contemplated in the 2nd proviso of Section 153A, stands substituted by 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. The aforesaid view so arrived at by us is fortified by the judgment of the Hon’ble High Court of Delhi in the case of CIT-7, Vs. RRJ Securities, Ltd. (2015) 62 taxmann.com 391 (Del), wherein the Hon’ble High Court has held as under: -
“As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the A.O. having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment /reassessments could be made under Section l53C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the A.O. of the assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessment made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the A.O. of the searched person. It is contended by Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the A.O. would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section153C(1) of the Act, which construes the date of receipt of assets and documents by the A.O of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the A.O. of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized documents belonging to a person other than a searched person come into possession of the A.O. of that person only after the A.O. of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the A.O. of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for A.Y. 2003-04 and A.Y.2004-05 were outside the scope of Section 153C of the Act and the A.O. had no jurisdiction to make an assessment of the Assessee’s income for that year.”
The aforesaid judgment of the Hon’ble High Court of Delhi in the case of RRJ Securities Ltd. (supra) had thereafter been followed by the Tribunal, Delhi Bench ‘F’ in the case of Rajeev Behl Vs. DCIT Central Circle-15, New Delhi (ITA 1927/1931/Delhi/2015), dated 20.06.2015, wherein the Tribunal has observed as under: -
“The Block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the A.O. of person other than the searched person. Respectfully following the aforementioned decision of Hon’ble Delhi High Court in the case of RRJ Securities Ltd. (supra) we hold that assessment for A.Y 2007-08 was outside the ambit of the block period and the A.O. had no jurisdiction to make assessment of the assessee’s income for that year. Accordingly, assesse’s appeal for A.Y. 2007-08 is allowed.”
That a similar view had been arrived at by the coordinate benches of the Tribunal in the case of DSL Properties (P) Ltd. Vs. DCIT Central Circle-8, (2013) 33 taxmann.com 420 (Delhi-Trib) and in the case of M/s R.L. Allied Industries Delhi Vs. ITO, Ward 20(1) New Delhi (ITA 567/568/Del/2011)(Delhi- Trib),dated 28.11.2014.
We have given a thoughtful consideration to the facts of the case and in backdrop of the aforesaid settled position of law are of the considered view that though in the case of an assessee where search and seizure action is initiated under Section 132, or books of accounts, other documents or any assets are requisitioned under Section 132A after the 31st day of May, 2003, the Assessing Officer gets vested with the jurisdiction to assess or re-assess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search proceedings were initiated under Section 132, or requisition is made under Section 132A, as the case may be. We however find that in the case of a person other than the searched person, where action is initiated under Section 153C, the jurisdiction to frame assessment/reassessment in the hands of such other person would be the six assessment years relevant to the previous year in which such books of accounts or documents or assets seized or requisitioned relatable to such ‘other person’ are delivered by the Assessing Officer of the searched person, to the Assessing Officer of such ‘other person’. Thus in the backdrop of the aforesaid settled position of law, we are of the considered view that now in the case of the present assessee as the “reasons recorded for issue of notice under Section 153C for A.Y. 2004-05 to 2009-10” are dated 21.12.2010, therefore though it can safely be presumed that the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. (supra) must had handed over the ‘seized material’ relatable to the assessee, to the A.O having jurisdiction over the latters case in the Financial year 2010-11 relevant to A.Y. 2011-12, and if that be so, then the A.O would had no jurisdiction for issuing notice under Section 153A r.w Sec. 153C for the said year, viz. A.Y. 2004-05, to the assessee, and as a fall out of the same the assessment framed in the hands of the assessee under Section 144 r.w.s. 153C, dated 30.12.2011, being devoid of any force of law, would be rendered non est. We therein find that the ld. D.R had neither placed on record any ‘material’ to controvert and dislodge the claim of the ld. A.R that the handing over of the assets/documents relatable to the assessee by the Assessing officer of the searched person, to the Assessing officer of the asessee had taken place in F.Y. 2010- 11 relevant to A.Y. 2011-12, but then we being not oblivious of the fact that as the exact date of actual handing over of the material by the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. (supra) cannot be deciphered from either the orders of the lower authorities, or the record before us, therefore in all fairness for the said limited purpose of verifying the said factual position, therein set aside the matter to the file of the A.O. That in case if it emerges from the records that the ‘material’ relatable to the assessee had been handed over by the Assessing officer of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. (supra) to the Assessing officer of the assessee in the financial year 2010-11, then in light of our aforesaid observations, the assumption of jurisdiction by the A.O. under Section 153C in the case of the assessee for A.Y. 2004-05, as observed by us hereinabove, would be devoid of any force and the entire proceedings following therein being non-est in the eyes of law, would thus stand vitiated. We thus in terms of our aforesaid view, therein remand the matter to the file of the A.O for carrying out the necessary verifications by strictly confining himself to our aforesaid clear observations. The Additional Ground of appeal No. 1 raised by the assessee before us is thus allowed for statistical purpose in term of our aforesaid observations.
That as the core issue relatable to the validity of assumption of jurisdiction by the A.O for initiating the assessment in the hands of the assessee for the year under consideration, viz. A.Y. 2004-05 had in itself been restored by us to the file of the A.O. while disposing of the aforesaid additional ground of appeal No. 1, therefore we do not advert to remaining grounds of appeal so raised by the assessee before us, and the same are left open.
Resultantly, the appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the open court on 07/04/2017