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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SMT. DIVA SINGH & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: The present appeals by the assessee are directed against different orders, dated 07.01.2013 & 11.12.2012 of learned Commissioner of Income Tax (Appeals)-III, New Delhi, passed for the assessment years 2003-04 and 2002-03 respectively. Since grounds of appeal raised in the both the appeals are common, except difference in amount, they are being disposed of by a consolidated order. The assessee raised the following grounds of appeal in AY 2003-04: i. That on the facts and circumstances of the case and the provisions of law the ld. CIT Appeal has failed to appreciate that initiation of proceeding u/s 153C and the assessment order passed by the ld. AO u/s 143(3)/153C is illegal, bad in law and wrong on facts.
2 & 943/Del/2013 AYs: 2003-04 & 2002-03 ii. That on the facts and circumstances of the case and the provision of law the Ld. CIT Appeal has failed to appreciate that the proceeding initiated under section 153C including issue of notice under section 153C is time barred and as such the assessment order passed in consequence thereof also become barred by limitation. iii. That the Ld. CIT (Appeal) has failed to appreciate that impugned assessment order passed by the learned assessing officer is against the principles of natural justice and has been passed without affording reasonable opportunity of being heard. iv. That on the facts and on the circumstances of the case and the provision of law the Ld. CIT(Appeal) has erred in sustaining an addition of Rs. 6,00,000/- u/s 68 on account of unexplained credit. v. That on the facts and on the circumstances of the case and the provision of law the ld. CIT(Appeal) has erred in sustaining an addition of Rs. 7,521/-on account of disallowance u/s 14A. vi. That the Appellant craves the right to amend, append, delete any or all grounds of appeal
2. The assessee also filed an additional ground Act whereby the reassessment in such search cases is to be confined to the additions and disallowances consequently to the material found during the course of the search and the material collected/available with the AO and relatable to such evidences and does not give power to the AO to re-appraise the already settled issues and the completed assessment.”
AY 2003-04 3. The learned Authorized Representative of the assessee submitted that this ground was though raised before the learned CIT(A), however, omitted to raise before the Tribunal. He further submitted that ground raised is legal in nature and can be raised at any time in appellate proceedings.
3 & 943/Del/2013 AYs: 2003-04 & 2002-03 3.1 Ld. DR, on the other hand, opposed the admission of the above additional ground. We find that the additional ground raised on appeal is purely legal in nature and goes to the root of the matter. It is settled law that legal ground can be raised at any time in appellate proceedings; therefore, we admit this additional ground raised by the assessee.
4. The facts in brief are that the original return of income under Section 139(1) of the Act was filed declaring loss of Rs. 7521/-. A search and seizure operation under Section 132 of the Income-tax Act, 1961 (for short “the Act”) was carried out in the case of M/s Wing Pharmaceuticals and Associated cases on 14.02.2008. The group cases of M/s Wings Pharmaceuticals Pvt. Ltd. were centralized with the ACIT, Central Circle-2, New Delhi. The case of the assessee was also centralized with the ACIT, Central, Circle-2, New Delhi i.e. the Assessing Officer. In the case of assessee, notice under Section 153A of the Act was issued by the Assessing Officer on 31.01.2009. However, once it was noticed that the assessee was not covered under the search action, the notice issued under Section 153A of the Act was withdrawn by the Assessing Officer. Subsequently, it was noticed by the Assessing Officer that certain documents including profit and loss account of the assessee company for the assessment year 2003-04 to 2005-06 were found in the hard disc seized from the premises of the M/s Wings Pharmaceuticals Pvt. Ltd. i.e. the party searched upon. The Assessing Officer of the party searched upon and the assessee, being the same 4 & 943/Del/2013 AYs: 2003-04 & 2002-03 officer, he recorded satisfaction for issuance of notice under Section 153C of the Act on 2nd November, 2009 and notice under Section 153C r.w.s. 153A was issued to the assessee, requesting to file the return of income. The assessee filed its return of income on 11.11.2009 declaring loss of Rs. 7521/-. Further, notices u/s 143(2) and 142(1) of the Act were issued and the reassessment proceedings were completed making addition of Rs. 6,00,000/- under Section 68 of the Act and disallowance of Rs. 7,521/- under Section 14A of the Act. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the learned Commissioner of Income Tax (Appeals) and challenged the initiation of proceedings under Section 153C legally as well as contested the additions made by the Assessing Officer. The assessee could not succeed before the learned Commissioner of Income Tax (Appeals), both on legal grounds as well as on merit of the additions. Aggrieved, the assessee is before us with the present appeal.
At the time of hearing of the case, in respect of ground No. 2 , the learned Authorized Representative submitted that the proceedings initiated under Section 153C in the case of the assessee are barred by limitation. He brought our attention to the provisions of Section 153C and particularly to the first proviso of section and submitted that in the case of a person covered under Section 153C of the Act, the reference to the date of initiation of search should be construed as reference to the date of receiving of books of account or documents etc. by the 5 & 943/Del/2013 AYs: 2003-04 & 2002-03 Assessing Officer having jurisdiction over the assessee. He further submitted that in the present case, the Assessing Officer of the assessee and the person searched upon, is same, therefore, though no actual handing over of books of account or documents is involved, however, the Assessing Officer assumes jurisdiction, once he records satisfaction for issuance of notice under Section 153C of the Act. In the case of the assessee, satisfaction was recorded on 02.11.2009. The learned Authorized Representative further submitted that six years which could be assessed under Section 153C of the Act in the case of assessee would be previous six years starting from 01.04.2003 to 31.03.2009 i.e. AYs 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 and not from 01.04.2001 to 31.03.2007. In support of the submission, the ld. Authorized Representative relied on the recent judgments of the jurisdictional High Court dated 30th October, 2015 in the case of CIT Vs. RRJ Securities Ltd., in ITA No. 164/2015, ITA Nos. 175 to 177/2015. He further submitted that in view of the judgment of Hon’ble Delhi High Court, the assessment for the year under consideration were outside the scope of Section 153C of the Act and the Assessing Officer had no jurisdiction to make assessment for the year under consideration. The learned Commissioner of Income-tax (Departmental Representative), in respect of the ground No. 2, submitted that the provisions of the section should be so construed as not the defeat the purpose for which same 6 & 943/Del/2013 AYs: 2003-04 & 2002-03 are introduced. He relied on the judgement of Hon’ble Supreme Court in the case of Tarulata Shyam reported in 108 ITR 345.
We have heard the rival submission on this issue and also perused the judgment dated 30th October, 2015 of the Hon’ble jurisdictional High Court in the case of CIT Vs RRJ Securities in ITA No. 164/2015 and ITA No. 175 to 177/2015. For ready reference, the relevant para of the judgment is reproduced as under: “24. 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 AO 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 years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO 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 assessments made in respect of assessment year 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 AO of the searched person. It is contended by the 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 AO would be subsequent to the date of the search. This, in our view, 7 & 943/Del/2013 AYs: 2003-04 & 2002-03 would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO 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 AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO 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 Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year.”
The fact that satisfaction u/s 153C of the Act in the case was recorded on 2nd November, 2009 is not disputed by both the parties. In judgemnt cited above, the Hon’ble High Court has held that when the Assessing Officer of searched person and such other person in whose case proceedings under section 153C are initiated, is same officer, then the date of recording of satisfaction would be construed as the date of handing over of the seized records by the Assessing Officer of searched person to the Assessing Officer of such other person in whose case proceedings under section 153C are initiated. Since the Hon’ble High Court has already construed the relevant provisions, we are not in agreement with the learned CIT (DR) to take recourse of the case relied upon by him. Following the above judgment of the Hon’ble High Court in RRJ Securities (supra) the date of handing over of seized material record by the Assessing Officer of search upon party to the Assessing Officer of the assessee would be 8 & 943/Del/2013 AYs: 2003-04 & 2002-03 2nd November, 2009. Further, following the judgment, the six assessment years for which assessment/re-assessment could be made u/s 153C of the Act would also have to be construed as from the reference date of handing over of assets/documents to the Assessing Officer of the assessee. In the case in hand, it would be the date of recording satisfaction under section 153 of the Act i.e. 2nd November, 2009, and so the six assessment years which would eligible for assessment/re-assessment would be from assessment year 2004-05 to assessment year 2009-10. The assessment/re-assessment in respect of assessment year 2002- 03 and 2003-04 would be beyond the period of six assessment year as computed with reference to the date of satisfaction recorded by the Assessing Officer of the searched person. Accordingly, we, therefore, hold that the assessment for assessment years 2002-03 and 2003-04 are outside the scope of section 153C of the Act and being without jurisdiction, liable to be quashed. We decide accordingly.
As we have already quashed the assessment, the other grounds are rendered merely academic and, therefore, we are not required to adjudicate on those grounds at this point of time. Accordingly, the appeal filed by the assessee for the assessment year 2003-04 is allowed. ITA No. 943/Del/2013 for AY 2002-03 9. Since we have already quashed the assessment in 2003-04, the assessment in the present appeal for 9 ITA Nos. 1720 & 943/Del/2013 AYs: 2003-04 & 2002-03 assessment year 2002-03 is also quashed as the issues as well as the facts in both the appeals are identical. Accordingly, the appeal for assessment year 2002-03 is allowed.
In the result, both the appeals filed by the assessee for the assessment years 2003-04 and 2002-03 are allowed. The decision is pronounced in the open court on 6th January, 2016.