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Income Tax Appellate Tribunal, SMC “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
These are appeals preferred by the assessees against the respective order of the CIT(Appeals)-VI, Bangalore on the common grounds. I, however, for the sake of reference extract the grounds raised in :-
“1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The appellant denies himself liable to be assessed by invoking the provisions of section 153C of the Act, which is unauthorized and misconceived under the facts and in the circumstances of the appellant's case.
3. The order of assessment is also bad in law in as much as, the search in the case of the searched person i.e., M/s. PRATHIBHA JEWELLERY HOUSE, wherefrom the impugned proceedings resulting in the impugned order is made is bad in law as it is ultra-vires the provisions of Section 132[1][a], [b] and [c] of the Act and any seized material or asset alleged to have been seized, if any, belonging to the appellant during the course of the said search even for argument's sake would not clothe the learned A.O. the necessary jurisdiction to invoke the provisions of section 153C of the Act, having regard to the parity of the ratio of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80 and the Hon'ble Karnataka High Court in the case of C. RAMAIAH REDDY reported in 339 ITR 210.
4. The invocation of Section 153C of the Act, is misconceived and illegal as the sine-qua-non mandatory requirement for invoking the jurisdictional provisions of section 153C of the Act, being seizure of any ASSET or DOCUMENT belonging to the appellant being absent, the invocation of the jurisdiction u/s.153C of the Act, by issuance of notice u/s.153C of the Act, is illegal and misconceived and therefore, is bad in law and requires to be annulled.
5. Without prejudice to the above, the learned A.O. not having furnished the basis or the reasons for the satisfaction derived by him to exercise the jurisdiction u/s.153C of the Act, for assumption of jurisdiction u/s.153C of the Act, the mere observation in the order that he recorded the satisfaction without disclosing the same with demonstratable seized material germane to reach such conclusion is bad in law and is in violation of the principles of natural justice and the consequential order passed is bad in law and requires to be annulled.
Without prejudice to the above, the authorities below do not have any seized materials in the shape of either books of accounts or any property seized during the course of search, which is germane to demonstrate the deriving of the necessary satisfaction by the learned A.O. that it belonged to the appellant and it revealed escapement of income for initiation of action u/s.153C of the Act, having regard to the parity of the ratio of the decision of the Hon'ble Supreme Court in the case of CIT V. CALCUTTA KNITWEARS reported in 362 ITR 673.
7. Without prejudice to the above, when the appellant sought for the basis or the reasons for issuing the notice u/s.153C of the Act, and the learned A.O. not having furnished the reasons before he proceeded with the assessment, such assessment order is bad in law and as it is in violation to the parity of the ratio of the decision of the Hon'ble Supreme Court in the case of GKN DRIVES HAFT reported in 259 ITR 19, in the context of the challenge to the proceedings initiated u/s.147 of the Act, by issuance of notice u/s.148 of the Act, since, the proceedings u/s.153C of the Act, are essentially in lieu of or similar to proceedings initiated for escapement of income u/s.148 of the Act and only to obviate the cumbersome procedure before a notice u/s.148 of the Act, is issued to assess the income escaping assessment. The assessment made is violation to the principles of natural justice and requires to be annulled.
8. The learned CIT[A] is not justified in sustaining the addition made of Rs.5,23,985/- as interest received u/s.244A of the Act on the refunds due for the year under appeal under the facts and in the circumstances of the appellant's case.
9. The authorities below failed to appreciate that neither the income-tax payable or paid or the interest payable or paid for the default or for the delay in paying the income-tax is not an allowable item of expenditure and therefore, on the reverse logic neither the refund receivable alongwith interest, which is only a measure of refund receivable is not income and therefore, the so- called interest granted is only a measure of the refund received is not any income, as such liable to tax.
10. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A, 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled.
11. Without prejudice to the above, the learned A.O. ought to have given credit to the TDS, Advance-tax and taxes paid u/s.140A of the Act, if any, and after giving credit only to such payment, he ought to have calculated the interest if any, leviable u/s.234A, 234B and 234C of the Act, as the levy under these sections though mandatory are compensatory in nature
having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of PRONNOY ROY reported in 309 ITR 231. 12. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
In the assessee has raised on more additional ground that the assessment passed u/s. 153C r.w.s. 143(3) of the Income-tax Act, 1961 [“the Act”] is barred by limitation in terms of proviso to section 153C of the Act under the facts and circumstances of the appellant’s case. Since the additional ground is legal in nature and goes to the root of the case, I admit the same and prefer to adjudicate it at the threshold. Accordingly, I have heard both the parties on this issue.
During the course of hearing of the appeal, the ld. counsel for the assessee has invited my attention to proviso to section 153C of the Act with the submission that in the case of such other person, the reference to the date of initiation of the search u/s. 132 or making of requisition u/s. 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to 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.
As per the provisions of section 153A(1), the Assessing Officer shall assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Meaning thereby the AO has jurisdiction to frame the assessment only with respect to the six assessment years immediately preceding the assessment year relevant to previous year in which such search is conducted.
In the instant case, undisputedly the search was conducted in the group of Prathibha Jewellery House on 2.5.2010 and the AO having jurisdiction over the assessee received the information on 2.5.2011 on which date the case was notified. After recording the reasons for initiation of the proceedings, notice u/s. 153C of the Act was issued on 8.8.2011. Therefore, the relevant previous year in which the AO having jurisdiction over the assessee has received the material is 2011-12 and the relevant assessment year is 2012-13. Therefore, the relevant six assessment years preceding to the assessment year 2012-13 are upto A.Y. 2006-07. Therefore, the AO has no jurisdiction to frame the assessment for the AY 2005-06.
6. Per contra, the ld. DR contended that the AO has jurisdiction to frame the assessment over the impugned assessment year 2005-06.
Having carefully examined the relevant provisions of the Act in the light of the rival submissions, I find that this ground was never raised before the lower authorities, therefore they had no occasion to adjudicate the same; but before me it is raised first time. For the sake of reference, I extract the relevant provisions of section 153A and proviso to section 153C hereunder:-
“153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling with such six assessment years:”
“153C. (1) 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 or books of account or documents 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 such other person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub- section (1) of section 153A shall be construed as reference to 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:”
On a careful perusal of the aforesaid provisions of section 153A and section 153C, I find that the AO u/s. 153A or sec. 153C issued a notice to the assessee on account of search for framing assessment for six assessment years preceding to the assessment year relevant to previous year in which such search is conducted or requisition is made. For the purpose of section 153C, the reference to date of initiation of search u/s. 132 or making of requisition u/s. 132A in the second proviso to sub-section of section 153A shall be construed as reference to 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. Undisputedly, the AO has initiated the proceedings u/s. 153C of the Act on 8.8.2011 relevant to previous year 2011-12 and the A.Y. 2012-13. Therefore, the assessment years for which the AO has jurisdiction to frame the assessments are from AY 2011-12 to AY 2006-07. Since in the impugned AY 2005-06 the AO has no jurisdiction to frame the assessment in terms of the aforesaid discussion, I hold that the assessment framed for AY 2005-06 over the assessee on account of search is not valid and I therefore quash the assessment framed consequent to the search u/s. 153C of the Act.
In the remaining appeals, during the course of hearing, the ld. counsel for the assessee raised serious objection that no satisfaction was recorded by the AO having jurisdiction over the searched person to the effect that the incriminating material was found during the course of search which relate to the assessee. But during the course of hearing, when a specific query was raised as to on what basis, the ld. counsel for the assessee has raised an allegation countering the finding of the CIT(Appeals) in which the CIT(Appeals) has categorically held that satisfaction was recorded by the AO having jurisdiction over the searched person. In response thereto, the ld. counsel for the assessee has agreed that satisfaction was recorded, but it was not confronted to the assessee.
On this issue, a specific query was also raised to the ld. counsel for the assessee with regard to the obligation of the Revenue to confront or supply a copy of the satisfaction note recorded by the AO having jurisdiction over the searched person. But no satisfactory reply has been furnished.
I have also carefully examined the relevant provisions of law in this regard and I find that the Revenue is not under obligation to supply the copy of satisfaction note recorded by the AO having jurisdiction over the searched person. For initiating proceedings u/s. 153C of the Act, the AO having jurisdiction over the searched person is required to record a satisfaction that the incriminating material found during the course of search belongs to the third person. But there is no requirement under law that the copy of the said satisfaction is to be supplied to the assessee for his comments.
In the instant case, nothing is placed on record to establish that satisfaction was never recorded. Therefore, I am of the view that since satisfaction has been recorded by the AO having jurisdiction over the searched person, there is no infirmity in the initiation of the proceedings u/s. 153C of the Act.
The ld. counsel for the assessee has also raised an argument that no incriminating material was found with regard to the interest on refund of income-tax received by the assessee and these facts were noted by the AO during course of assessment proceedings over the assessee. But in this regard, no satisfactory evidence is placed on record. It was a mere submission, whereas the ld. DR has contended that the facts relating to receipt of interest on refund of income-tax is part of incriminating material found during the course of search. In order to substantiate these facts, the ld. DR has invited my attention to the order of the AO in which he has recorded that during the course of search, books of account and documents marked A/SNS, A/PJH and A1/SNM were seized u/s. 132(8) of the Income-tax Act and the seized material contained documents belonging to the assessees. In the seized material, the facts relating to receipt of interest on refund of income tax was found and during the course of assessment proceedings, the assessee has not established that he has even offered the interest on refund of income-tax to tax. Therefore, the AO rightly made the addition of the same which was later on confirmed by the CIT(Appeals).
During the course of hearing, the ld. counsel for the assessee has placed heavy reliance upon the judgment of Hon'ble jurisdictional High Court in the case of CIT v. IBC Knowledge Park Pvt. Ltd. in & Ors. Dated 28.04.2016, in support of his contentions that the satisfactory note of the AO having jurisdiction over the searched person is required to be supplied to the assessee and that without the incriminating evidence found during the course of search, assessment proceedings u/s. 153C cannot be initiated. On a careful perusal of this judgment, I do not find any such type of findings of the Hon’ble High Court. The Hon’ble High Court has reiterated the legal position that before initiating the proceedings u/s. 153C of the Act, the AO having jurisdiction over the searched person is required to record a satisfaction with respect to incriminating material found during the course of search that the seized material belongs to the third person and not to the person searched. The Hon'ble jurisdictional High Court also reiterated the legal position that in the absence of incriminating material relating to assessee, proceedings u/s. 153C cannot be initiated.
Having carefully examined the aforesaid judgment of the Hon'ble jurisdictional High Court, I am of the view that there is no quarrel on the above legal position, but in the instant case, the AO has categorically recorded that during the course of search, the seized material relating to the assessee was found. Therefore, it cannot be said that no incriminating material was found during the course of search to initiate proceedings u/s. 153C of the Act. During the course of hearing, the ld. counsel for the assessee could not establish that there is no relevant incriminating material available before the AO on the basis of which the impugned additions on account of interest received on refund of income-tax was made.
Therefore, I find no merit in his contentions and I find that there was sufficient incriminating material available before the AO to initiate proceedings u/s. 153C of the Act and since the assessee has not offered the income received on interest on refund of income-tax to tax, the AO has rightly made the addition which was later on confirmed by the CIT(Appeals). I accordingly find no merit in the assessees’ appeals and I dismiss the same.
In the result, is allowed, whereas all other appeals are dismissed.
Pronounced in the open court on this 4th day of July, 2016.