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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ NEW DELHI
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal is preferred by the assessee against the order passed by the Ld. CIT(A)-III, New Delhi wherein by the impugned order dated 7.10.2014, the assessee’s appeal for assessment year 2007-08 has been dismissed both the on the legal ground as well as on merits.
The facts of the case, in brief, are that a search and seizure operation was carried out in the Modi Family Group on 9.11.2011. During the course of search at the residential premises of Shri Krishan Kumar Modi at A-1, Maharani Bagh, New Delhi, a copy of the sale deed executed on 18.12.2007 by one Shri Sanjeev Lal in favour of M/s Bina Fashion N Foods (P)
Ltd. i.e. the assessee, through its Director Ms Bina Modi, was seized and annexed as Annexure-1, page no. 93 to 101 by Party No. D-1. Subsequently, the case was centralised with Central Circle-2, New Delhi and the Assessing Officer, after examining the seized records, recorded the satisfaction on 29.01.2014 that the documents seized during the course of search belonged to the assessee and issued notice to the assessee on 5.2.2014. In response, the assessee filed letter dated 18.2.2014 requesting to treat the original return declaring Nil income filed on 29.11.2006 as the return filed in response to notice u/s 153C of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The assessment was completed u/s 153A/143(3) on 30.3.2014 at a total income of Rs. 2,53,80,452/-.
Aggrieved, the assessee filed an appeal before the Ld. First Appellate Authority raising the legal ground that the issuance of notice u/s 153C of the Act was barred by limitation for the year under consideration as on the date when the seized documents were handed over to the Assessing Officer of the assessee company. The assumption of jurisdiction u/s 153C of the Act was also challenged on the ground that no incriminating documents belonging to the assessee were found at the time of search. The assessment was also challenged on merits.
However, the assessee’s appeal was dismissed and now the impugned order is being challenged by the assessee by taking as many as seven grounds but the ground germane to the whole controversy is ground no. 2 which is being taken up first for adjudication. Ground no. 2 reads as under:-
“2. The first Appellate Authority erred in law and on facts in holding the issuance of notice u/s 153C for the AY 2007-08 as valid, even when it was barred by time limitation as on the date when the seized documents were handed over to the appellant’s AO and, therefore, void ab-initio; which must be quashed.” 4. The Ld. AR submitted that the assessment for the year in appeal i.e. assessment year 2007-08 was barred by limitation since the satisfaction contemplated u/s 153C of the Act was recorded by the Assessing Officer on 29.01.2014 (the relevant assessment year being 2014-15). Accordingly, the date of search i.e. 9.11.2011 gets substituted by the date of recording satisfaction i.e. 29.1.2014 and the six preceding assessment years in the case of the assessee become assessment years 2008- 09, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 and, accordingly, assessment year 2007-08 gets excluded. He relied 3 on the judgement of the Hon'ble Delhi High Court in the case of CIT-14 vs Shree Jasjit Singh (I.T.A. No. 337/2015) for the proposition that for the third party, six preceding years will have to be reckoned from the date of recording of satisfaction note u/s 153C and not from the date of search.
Ld. DR submitted that since the Assessing Officer of the searched party as well as the Third Party was the same, there was no need to transfer the records and, therefore, the date of search would determine the period of preceding six years.
We have heard the rival submissions and perused the relevant records. Hon'ble Delhi High Court, on an earlier occasion, had examined the issue in the case of SSP Aviation Ltd. vs DCIT in WPC 309/2011 wherein, in its judgment delivered on 29.03.2012, the Hon'ble High Court dealt with a similar issue in paras 13 & 14 as under:-
“13. Sections 153A to 153D are placed in Chapter XIV of the Act, which is titled "procedure for assessment". Section 153A provides for the assessment in case of search or requisition. This section applies to a person in whose case a search is initiated under Section 132 or books of account etc. are requisitioned under Section 132A. The procedure prescribed under Section 153A is that the Assessing Officer shall call upon the assessee who is searched to furnish returns of income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. The assessee, on receipt of the notice from the Assessing Officer, shall furnish the returns of income and thereafter the Assessing Officer is empowered to assess or re- assess the total income in respect of different assessment year falling within six assessment years. Now, a question may arise as to what would happen to the regular returns, if any, filed by the searched assessee for any of the six assessment years which are pending on the date on which the search was initiated. The answer is given by the second proviso to Section 153A, which says that if any of those returns is or are pending, the assessment or reassessment relating to those returns shall abate. The object obviously is to avoid multiplicity of assessment or reassessment proceedings in respect of the same assessment year or years. Once Section 153A is found to be applicable, there will be only one assessment in respect of each of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted, in which the "total income" of the assessee will be assessed or reassessed. It should be remembered that only the pending assessment or reassessment proceedings in respect of any those six assessment years that will abate; in case the assessment or reassessment for any of those 6 years have already been completed as on the date of search then there is no question of any of them abating for the simple reason that what can abate is only what remains pending.
Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other 5 valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be 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. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date. ”
The ratio of this judgment has been followed in the case of CIT vs Shree Jasjit Singh (supra) on which the Ld. Counsel for the assessee has relied. The Hon'ble Delhi High Court has also considered Circular dated 31.3.2014 issued by the CBDT in the judgment of CIT vs Shree Jasjit Singh (supra). Para 2.5 of the said circular is being reproduced for ready reference as under:-
"The AO of the other person assumes jurisdiction under Section 153C with the receipt of the relevant seized material from the AO of the searched person. Also, a copy of the satisfaction received from the AO of the searched person in this regard would enable him to proceed further in the case of the other person under Section 153C. Though there is no statutory requirement for the AO of such other person to record any satisfaction/reason before issuing notice under Section 153C and proceeding further, considering the above aspects, it is advisable for maintaining institutional memory that the AO records receipt of the seized material and the satisfaction from the AO of the searched person and such recording/noting may be kept in the assessment folder of such other person. In case, the AO of the searched person exercises jurisdiction over the other person also, appropriate referencing should be made in the relevant assessment records of such other person.”
Thus, the CBDT Circular and the ratio of the two judgements of the Hon'ble Delhi High Court, as discussed above, clinch the issue in favour of the assessee and, accordingly, we quash the assessment framed u/s 153A/143(3) for assessment year 2007-08 as being void ab initio as being barred by limitation.
Ground no. 2 of the assessee’s appeal is allowed. All other grounds are dismissed as having become in fructuous.
In the result, the appeal of the assessee is partly allowed.