DCIT, CC-2, JAIPUR vs. SHRI VIMAL CHAND SURANA(HUF), JAIPUR

This appeal by the Revenue is directed against the order dated 21.10.2019 of ld. CIT (A)-4, Jaipur passed under section 250 of the IT Act for the assessment year 2008-09. The revenue has raised the following grounds :-

1. The ld. CIT (A) has erred in law and on facts (independently & severally) in granting relief to the assessee.

2. On the facts and in the circumstances of the case the ld. CIT (A), has erred in quashing the re-assessment proceedings completed u/s 147 of the Act without appreciating the fact that proceedings u/s 147 of the Act was completed after following the due procedure of law.

3. On the facts and in the circumstances of the case the ld. CIT (A), has erred in holding that assessment for AY 2008-09 got time barred on 31.03.2015 and no direction can be given by ld. CIT (A) for AY 2008-09 in spite of the fact that section 150(2) of the Act clearly states that section 150(1) will not apply on those cases which could not have been assessed, reassessed or recomputed at the time of order which is subject matter of appeal.

4. On the facts and in the circumstances of the case the ld. CIT (A), has erred in taking the view that assessment or reassessment of income of the person other than search persons based on seized material can only be made u/s 153C r.w.s. 153A and the provisions of section 147/148 of the Act are not applicable in such cases without appreciating the fact that it is nowhere written in any of the section of the Income Tax Act that proceedings u/s 147 can’t be taken in the cases where the provisions of section 153C can be invoked.

5. On the facts and in the circumstances of the case the ld. CIT (A), has erred in deleting the addition of Rs. 2,64,66,445/- made u/s 69 of the Act on protective basis on account of undisclosed investment.

6. That the appellant craves to add, amend, alter or forego any ground(s) of appeal either before or at the time of hearing of the appeal.

Subsequently, a search and seizure operation was conducted on Shri Rajendra Jain Group and his associate group members on 23-05-2013 by the Investigation Wing, Jaipur of the Income Tax Department, in which Mr. Madan Mohan Gupta was also covered. During the course of search and seizure operation on Mr. Madan Mohan Gupta, various incriminating documents were found and seized. Statement of Shri Madan Mohan Gupta was recorded on 23-05-2013 and 27-05-2013. Shri Madan Mohan Gupta in respect to some notings found in Ex-1, Ann A & Ex-1 & 2 of Ann.-A stated that a transaction of land at village Chainpura behind E.P. was carried out in which the said land was purchased by Shri Rajendra Kumar Jain through Shri Madan Mohan Gupta. The deal was finalized at Rs. 12,43,27,000/- out of which discount of 1% was allowed for early registration of land. Therefore Rs. 12,30,84,000/- was net payable to the sellers. This land was purchased during the A.Y. 2006-07 and later on sold to K.G. Kothari, Prithviraj Road, C-Scheme, Jaipur and Shri Vimal Chand Surana in the month of March, 2007 and the sale transaction was finalized for Rs. 20,83,39,232/-. The notings in those exhibits relates to said transaction. In light of statements of Shri Madan Mohan Gupta statement of Shri Nav Ratan Kothari was also recorded on oath who stated that he did not purchase any land from Madan Mohan Gupta nor any payment was made but accepted that he purchased 8000 (80%) Equity Shares of Shri Kalyan Buildmart P. Ltd. from Shri Madan Mohan Gupta and his wife Smt. Shashikala Gupta. Similarly statement of Shri Vimal Chand Surana was also recorded on oath on 16.08.2013. Shri Vimal Chand Surana had stated that he did not purchase any land from Shri Madan Mohan Gupta nor any payment was made to Shri Madan Mohan Gupta. However, Shri Vimal Chand Surana accepted that he had purchased 1334 (13.34%) Equity Shares of M/s Kalyan Buildmart Pvt. Ltd. in the name of his HUF out of which 667 Equity Shares were purchased from Shri Madan Mohan Gupta and 667 Equity Shares from Smt. Shashikala Gupta w/o Shri Madan Mohan Gupta. In this company, land near E.P. is an asset. These Equity Shares were purchased in March, 2007, Rs. 67,700/- was paid to Shri Madan Mohan Gupta on 23.06.2007 by account payee cheque and Rs. 67,700/- were paid to Smt.

Shashikala Gupta on 19.04.2007 by account payee cheque on account of sale consideration of these shares. Mr. Madan Mohan Gupta on 26-02-2015 retracted his original statement recorded on 23.5.2013 and 27.5.2013 by filing an affidavit, pursuant to filing an affidavit the statement of Shri Madan Mohan Gupta was recorded on 24 March 2015 by ACIT CC-2 and vide answer to question no. 5 he categorically denied having any receipt of cash from said Shri Navratan Kothari and Shri Vimal Chand Surana. The department issued notice u/s 153A to Madan Mohan Gupta and Rajendra Kumar Jain for covered assessment year(s) in search proceedings and also issued notice u/s 148 to Shri Nav Ratan Kothari – individual for A.Y. 2008-09, Shri Vimal Chand Surana (HUF) for A.Y. 2007-08 and Shri Vimal Chand Surana (Individual) for A.Y. 2008-09. In notices issued u/s 148 to Shri Vimal Chand Surana (HUF) and Shri Vimal Chand Surana – individual department mistakenly considered share holding of 20% in place of 13.34% in said company which he actually held. The A.O. of respective assessees thereafter completed assessments of all the persons making additions treating the purchase/sale of land as per original statement of Madan Mohan Gupta.

2.1 Thereafter all the said persons filed respective appeals before CIT (A) – 4, Jaipur and in course of hearing of appeal the Ld. CIT (A) remanded the issue to A.O. for enquiry as per his directions and in remand proceedings in statement recorded by A.O. from Shri Madan Mohan Gupta in which he again changed his stand. The A.O. sent remand report and thereafter Ld. CIT (A) considering remand report and submissions of respective assessees decided all the appeals filed by respective assesses with a common drafted order and by mutatis mutandis changes incorporated the same order in each appeal order while deciding appeals filed by respective assesses. In course of hearing of appeal of Shri Vimal Chand Surana (HUF) for A.Y. 2007-08 it was found by CIT (A) that Shri Vimal Chand Surana (HUF) purchased only 13.34% Equity Shares and remaining 6.66% shares were purchased by Shri Kushal Chand Surana and Vimal Chand Surana – Individual has no connection with the said transaction. The CIT (A) thereafter in appeal order of Vimal Chand Surana – Individual A.Y. 2008-09 (ITA No. 96/2016-17 issued directions that A.O. of Vimal Chand Surana – HUF (PAN AABHV6622G) has been directed u/s 150 (1) of the Act to reopen the case for A.Y. 2008-09 for making addition of Rs. 2,64,66,445/-. The A.O. on the above-mentioned background issued notice u/s 148 to assessee on 07-11-2017 which assessee complied from time to time and as per discussion in assessment order, the A.O. completed assessment u/s 143 (3) / 147 making an addition of Rs. 2,64,66,445/-. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The CIT (A) discussed the entire facts of the case and submissions made by assessee in respect to each ground raised by the assessee on legal as well as on merits in his order. After taking into consideration the detailed submissions and various decisisons of the Hon’ble High Courts and various benches of the Tribunal, allowed the appeal of the assessee.

Now the Revenue is in appeal before us.

Ground nos. 1, 2 & 3 are inter-connected and inter-related and challenging the relief granted to the assessee quashing the reassessment proceedings under section 147 of the Act.

“ The Ld. A.O. while initiated proceedings u/s 148 recorded following reasons u/s 147 of the Act.

“The return of income u/s 139 (1) of the I. T. Act, 1961 for A.Y. 2008- 09 was filed by the assessee of total income of Rs. 39,71,670/- on 27.09.2008, which was processed u/s 143 (1) of the Act on 02.11.2009. Ld. CIT (A) – 4, Jaipur vide his letter No. 13 dated 12.04.2017 and further rectification order dated 10.07.2017 in has given the directions u/s 150 (1) of the I. T. Act, 1961 to re-open/reassess the case of the assessee for A.Y. 2008-09.

During the course of search action u/s 132 of the I. T. Act, 1961 in the case of Shri Rajendra Kumar Jain and Shri Madan Mohan Gupta on 23.05.2013, certain incriminating documents relating to land dealing of Chainpura behind EP were seized from the premises of Shri Madan Mohan Gupta, one of the than director of M/s Shri Kalyan Buildmart (P) Ltd. On the basis of these documents it has been noticed that Shri Kushal Chand Surana alongwith other two persons has purchased this land from M/s Shri Kalyan Buildmart (P) Ltd. at the consideration of Rs. 23,48,60,818/- (inclusive of cheque and cash payments) and entire amount was adjusted/covered with the transaction of purchase of shares of this company by three persons [i.e. Shri Navratna Kothari, Shri Kushal Chand Surana and Vimal Chand Surana, HUF etc.] from the than directors of the company i.e. Shri Madan Mohan Gupta and Smt. Shashikala Gupta. As per details mentioned on these seized documents the said land dealing took place in A.Y. 2008-09 i.e. year relevant to F.Y. in which JDA Patta was issued and shares of M/s Shri Kalyan Buildmart (P) Ltd. transferred.

While deciding the appeals of Shri Madan Mohan Gupta & Others Ld. CIT (A) – 4, Jaipur determined the total out of books payments of Rs. 19,83,99,136/- (i.e. 23,48,60,818 minus 3,64,61,682) and bifurcated the same in the ratio of shares allotted among them i.e. Shri Navratna Kothari (80%), Shri Kushal Chand Surana (6.66%) and Vimal Chand Surana, HUF (13.34%).

Therefore, as per directions u/s 150 (1) of the I. T. Act, 1961 given by Ld. CIT (A) – 4, Jaipur vide his letter No. 13 dated 12.04.2017 and further rectification order dated 10.07.2017 in as well as details available on record and detailed discussion made above the total amount paid by M/s Vimal Chand Surana, HUF during F.Y. 2007-08 in lieu of this transaction was of Rs. 2,64,66,445/- (i.e. 13.34% of 19,83,99,136/-), which has escped the assessment for A.Y. 2008-09.

Thus, I have reason to believe that total income of Rs. 2,64,66,445/- has escaped the assessment within the meaning of provision of section 147 of the Income Tax Act, 1961. Hence, in view of the above, it is fit case for re-assessment u/s 148 of the I.T Act”.

In this connection it is submitted that it is evident that reassessment proceedings initiated only on the direction of CIT (A) u/s 150 (1). However, this does not take away the basic ingredients of law to record reasons for initiating the proceedings u/s 147. It will be found from perusal of reasons recorded that there is no reason by which the A.O. formed the opinion that any income of assessee has escaped to assessment and thus proceedings initiated u/s 148 by Ld. A.O. is wrong and bad in law.

In this connection we make following submissions:

1) The Appellant submits that a plain perusal of the above provided reasons for re-opening are the only reasons that can be considered when the formation of belief of “Income chargeable to tax has escaped assessment” is challenged. The Hon’ble Bombay High court in Prashant S. Joshi v. ITO [2010] 324 ITR 154 (Bom)held that “The basic postulate which underlines section 147 is the formation of the belief by the Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. The Assessing Officer must have reason to believe that such is the case before he proceeds to issue a notice under section 147. The reasons which are recorded by the Assessing Officer for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. The requirement of recording reasons is a check against arbitrary exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well-settled that the question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the Assessing Officer. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under section 148.”

A clear reading of the reasons recorded for re-opening of Assessment in case of the Appellant shows that there is no allusion at all to the appellant in the recorded reasons. There is hence no tangible basis provided in the recorded reasons that show that there may be Income that has escaped Assessment in the hands of the Appellant in the case.

2) The Appellant submits that in 3i Infotech Ltd. V. ACIT [2010] 329 ITR 257 (Bombay), the Hon’ble Bombay High Court held that “the validity of the reopening of the assessment has to be determined with reference to the reasons which have weighed with the Assessing Officer. Those norms cannot be added to or supported on a basis which was not present to the mind of the Assessing Officer when he issued the notice to reopen”. The Appellant submits that the mind of the Assessing Officer while re-opening are given in the reasons recorded for re-opening. When these reasons themselves are vague and ambiguous, then the supplying of further reasons while disposing the objections taken by the Appellant are against the words and the spirit of the Judgement of the Hon’ble Apex Court in the case of GKN Driveshafts (Supra) that holds field on the subject. It is clear that, while justifying the reopening of an assessment, the Assessing officer is bound to prima facie consider only the recorded reasons for re- assessment.

3) The Hon’ble Bombay High Court in the case of Hindustan Lever Ltd. V.

R.B. Wadkar [2004] 268 ITR 332 (Bombay HC) observed that “It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.” This Judgment of the Hon’ble Bombay High Court has been followed in the case of Hon’ble High Court of Gauhati in CIT v. Shiv Shakti Flour Mills Pvt. Ltd. [2010] 327 ITR 430 (Gauhati), Hon’ble Calcutta High Court in Anil Kumar Bhandari v.

JCIT [2007] 294 ITR 222 (Calcutta) and the Hon’ble Gujrat High Court in Aayojan Developers v. ITO [2011] 335 ITR 235 (Gujrat) which observed that “What transpires from the judicial pronouncements, as discussed above, is that there must be a live link between the materials on which conclusions are based and the actual conclusion of the Assessing Officer in formation of his belief that any income chargeable to tax has escaped assessment. Such reason must be held in good faith and cannot be pretence and also cannot be based on extraneous or irrelevant consideration. Unless the Assessing Officer has "reason to believe" and such reason is material and relevant to form a belief that there is an escaped assessment, no action under section 147 of the Act can be taken.

The Appellant submits that the reasons recorded for reopening of the Assessment do not make out any such ‘live link’ between the materials on which conclusions are based and the actual conclusion of the Assessing officer in formation of his belief that any income chargeable to tax had escaped assessment.

4) The Hon’ble Calcutta High Court in the case of East Coast Commercial Co.

Ltd. V. ITO [1981] 128 ITR 326 (Cal.) observed that “The recording of reasons in our opinion is not an idle formality but is a mandatory requirement of the statute casting a duty and obligation on the ITO to record his reasons for issuing a notice for reopening an assessment and the CBDT or the Commissioner, as the case may be, being satisfied that it is a fit case for issue of such notice solely on the basis of the said reasons recorded, accords its sanction to the issue of such notice.” This judgement of the Hon’ble Calcutta High Court has been followed by the Hon’ble ITAT Jaipur bench in the case of Satyam Food Specialities (P) Ltd vs. DCIT [2015] 68 SOT 449 (Jaipur Trib) while examining the provisions of 153C of the Income Tax Act which observed that “Satisfaction note itself must display reasons or basis of conclusion that the documents belong to a person other than the searched person. It is also settled law that the satisfaction note has to be read as it is without any addition, subtraction or with the help of allied documents. It cannot be supplemented or supplanted. The Appellant submits that it is not the case of the Assessing officer that the documents found with Shri Madan Mohan Gupta belonged to the Appellant. In fact there is a categorical conclusion in the assessment order that the primary onus to explain the contents of the loose papers was that of Shri Madan Mohan Gupta.

5) The Hon’ble High Court of Rajasthan in the case of CIT v. Uttam Chand Nahar [2007] 295 ITR 403 (Rajasthan) observed that “the initial satisfaction about the escapement of income, which requires initiation of proceedings under section 147, must be of the Assessing Officer himself”.

If the conditions under section 151(1) or (2) require the satisfaction of the Deputy Commissioner or the Chief Commissioner or the Commissioner, as the case may be, before issuance of such notice, such satisfaction must also be only on the basis of the reasons recorded by the Assessing Officer and not de hors it. That is to say the satisfaction recorded by the Assessing Officer must be endorsed by the Deputy Commissioner, the Chief Commissioner or the Commissioner, as the case may be, before the Assessing Officer assumes jurisdiction. Satisfaction independent of the reasons recorded by the Assessing Officer is not envisaged. This clearly indicates that foundation of initiating the proceedings is the reason to the belief held by the Assessing Officer. Reasons for holding such belief are to be recorded in writing by the Assessing Officer. The satisfaction of the Deputy Commissioner or the Commissioner, as the case may be, has to be only about the fitness of the case to be subject to proceeding by reassessment under section 148 only on the basis of the reasons recorded by the Assessing Officer.

Similarly, in the case of CIT v. Shiv Rattan Soni [2008] 217 CTR 222 (Rajasthan) the Hon’ble High Court observed that if the Reasons recorded before initiating proceeding under s. 148 it need record to find some material which could be related by Court to satisfaction of AO, do not satisfy the test of an honest belief or satisfaction reached by AO about escapement of the income before issuance of notice. It remains an action more on suspicion. Law requires where AO has reason to believe and does not rest at his reason to suspect that income of the assessee has escaped assessment. Such a stand cannot be supported on specious plea that one can make a search or enquiry into any material on record which is relevant for the assessment year for holding the belief whether income for particular assessment year has escaped assessment. If that were so, legislature would not have provided an important safeguard against unnecessary harassment that reasons for such belief must be recorded before issuance of notice, and the existence of such satisfaction has to be supported within the parameter of reasons and not outside. One does not have to remember the contents of material that have gone into consideration but material that has gone into consideration must have specific reference so that check on ultra vires exercise of powers can be effectively exercised through judicial review.

6) The assessee also relies on the recent judgement of Hon'ble ITAT Bench, Jaipur in case of Navrattan Kothari Vs. ACIT (ITA No. 425/JP/2017) order dated 13-12-2017 wherein exactly same facts were involved and after considering the various judicial pronouncements on the issue held the issue of notice u/s 147 without jurisdiction. The assessee relies on the said judgement also. Copy of which is submitted herewith. The issue is also covered from the said judgement of Hon'ble Bench.”

The second leg of contention of the ld. A/R is that even otherwise the reopening of the assessment after 4 years from the end of the relevant assessment year in the case of the assessee is not permissible as the AO was not having the jurisdiction to issue notice u/s 148 when the original assessment was completed under section 143(3) and the Assessing Officer has not alleged in the reasons recorded that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In this regard the ld. A/R submitted as under :-

“ 2. It is submitted that the Ld. CIT (A) has exceeded the jurisdiction in giving direction u/s 150 (1) for another assessee in appeal order while deciding the appeal of Shri Vimal Chand Surana –

Individual for A.Y. 2008-09 (Appeal No. ITA 96/2016-17) decided on 28-04-2017. As the direction were issued while deciding the appeal of third person i.e. Vimal Chand Surana – Individual. Thus the direction given Ld. CIT is contrary to provisions of section 150 (1) and so without jurisdiction. Accordingly the notice issued u/s 148 on basis of direction is also wrong, bad in law and without jurisdiction.

The submissions are also deriving support from the case of GauriShankar Choudhary v. Addl. CIT (1998) 234 ITR 865, 869, 870

(Pat).it is held “Resort to section 150 (1) can be taken only in cases where it becomes necessary to make assessment or reassessment or recomputation in consequence of, or to give effect to, any finding or direction pursuant to an appellate order passed by the appellate authority or pursuant to any order in reference or revision or by a court in any proceeding under any other law. Obviously, the appeal, reference or revision or any other proceeding before a court must relate to the assessee in question and not any direction or assessment made in appeal, reference or revision in the case of any other assessee, or in a proceeding in which the assessee in question is not a party. In that case, direction given by the Settlement Commission in an order passed on an application made by a third party has been held not sufficient so as to attract the provision of section 150 (1).”

Further in the case of Peico Electronics & Electricals Ltd. v Deputy CIT.

(1994) 210 ITR 991, 994 (Cal.) it is held “In order to attract the provisions of section 150 (1), it is necessary that the finding or direction must be in respect of the assessment of the year in question.”

2.1 It is further submitted that in case of A.B. Parikh v ITO (1993)

203 ITR 186, 190, 191 (Guj) that for the purpose of section 150, so as to enable the authority to issue the notice under section 148 at any time without being curtailed by the time-limit prescribed under section 149, there must be satisfaction of the ingredients under Explanation 2 to section 153. The first ingredient is that there must be a finding that the income excluded from the total income of one person is the income of another person. The second ingredient is that the order must be one which has come to be passed after the other person was given an opportunity of being heard. The person concerned must be put on notice that the consequence of the income being held as his is likely to follow in the proceedings prosecuted. Further more, he must be given an opportunity of being heard on that question. All these features must be borne out by records.

2.2 It is further submitted that Explanation 2 and 3 of Section 153

(3) (ii) (prior to substitution by Finance Act, 2016 w.e.f. 1-6-2016, now

Section 153 (6) (i) expl.2) no doubt are relevant to Section 150 but as held by Gujrat High Court in case of CIT v. G. Viswanatham. (1988)

172 ITR 401, 408 (AP) Explanations 2 and 3, are relevant also to section 150, but their purpose is merely to illustrate and clarify the meaning of the words “in consequence of or to give effect to any finding or direction” contained in an appellate, revisional or any other order, and not to remove or obliterate the restriction contained in section 150 (2). In that case, the relevant assessment year was 1966-

(1993) 203 ITR 186, 190, 191 (Guj). For the purpose of section 150, so as to enable the authority to issue the notice under section 148 at any time without being curtailed by the time-limit prescribed under section 149, there must be satisfaction of the ingredients under Explanation 2 to section 153. The first ingredient is that there must be a finding that the income excluded from the total income of one person is the income of another person. The second ingredient is that the order must be one which has come to be passed after the other person was given an opportunity of being heard. The person concerned must be put on notice that the consequence of the income being held as his is likely to follow in the proceedings prosecuted. Further more, he must be given an opportunity of being heard on that question. All these features must be borne out by records.

2.3 In this case it is manifestly evident that no opportunity of being heard was given by CIT (A) to assessee Vimal Chand Surana – HUF in whose case direction u/s 150 (1) given nor it have been put on notice that the consequence of the income being held as of its is likely to follow in the proceedings prosecuted. In view of above legal position in any case the directions so given by CIT (A) are thus unsustainable in law and, “therefore, the above direction given by CIT (A) for assessee

Vimal Chand Surana HUF in respect to A.Y. 2008-09 is wrong and bad in law and consequently the notice issued u/s 148 of the Act is also wrong and bad in law and accordingly proceeding deserves to be quashed.

The Hon'ble High Court of Uttarakhand in the case of CIT,

Dehradun Vs. Uttarakhand Van Vikas Nigam (2016) 66

Taxmann.com 87 held that where during assessment of original assessee, liability of third person is found, such third person must be heard before issuing notice on him for purpose of reassessment.

2.4 It is also further submitted that as per provisions of section 150

(2) the provisions of section 150 (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or re-computation could not have been made at the time the order which was the subject matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or re-computation may be taken. In this case the directions were made by Ld. CIT (A) on 28-4-2017 while adjudicating the appeal for A.Y. 2008-09 of Vimal Chand Surana –

Individual. But, re-assessment for A.Y. 2008-09 got time barred on 31March 2015 itself and, therefore no direction can be given by CIT

(A) for A.Y. 2009-10.

The above legal position is duly supported from the judgement of Hon'ble ITAT, Jaipur Bench, Jaipur in case of Ramesh Chand Soni HUF period limitation for reassessment as prescribed in sub section (2) of section 150, limitation provided u/s 149 has to be counted from the end of relevant assessment year till date of order which is subject matter of appeal wherein directions were passed.

It is also submitted that the order(s) of Ld. CIT (A) – IV, Jaipur in which direction for re-opening of case of assessee was given has already been quashed by Hon'ble ITAT, Jaipur Bench, Jaipur. Thus, the very basis i.e. order of Ld. CIT (A) in which direction were given itself quashed as such there is no validity of direction given by Ld. CIT (A) in the impugned order i.e. there is no such appeal order on which basis the assessment of assessee can be reopened. In view of totality of facts of the case and position of law there is prima facie no material before assessing officer to form his belief pursuant to which reasons could be recorded that income of assessee has been escaped to assessment and, therefore, the proceedings initiated are bad in law and deserves to be quashed. In view of the above order of ld. CIT (A) be upheld.”

Re-assessment proceeding in this case was initiated as per directions under section 150(1) of the IT Act issued by ld. CIT (A)-4, Jaipur. Consequently, the AO while initiating proceedings under section 148 recorded following reasons under section 147 of the Act : -

“The return of income u/s 139 (1) of the I. T. Act, 1961 for A.Y. 2008-09 was filed by the assessee of total income of Rs. 39,71,670/- on 27.09.2008, which was processed u/s 143 (1) of the Act on 02.11.2009. Ld. CIT (A) – 4, Jaipur vide his letter No. 13 dated 12.04.2017 and further rectification order dated 10.07.2017 in has given the directions u/s 150 (1) of the I. T. Act, 1961 to re-open/reassess the case of the assessee for A.Y. 2008-09.

During the course of search action u/s 132 of the I. T. Act, 1961 in the case of Shri Rajendra Kumar Jain and Shri Madan Mohan Gupta on 23.05.2013, certain incriminating documents relating to land dealing of Chainpura behind EP were seized from the premises of Shri Madan Mohan Gupta, one of the than director of M/s Shri Kalyan Buildmart (P) Ltd. On the basis of these documents it has been noticed that Shri Kushal Chand Surana alongwith other two persons has purchased this land from M/s Shri Kalyan Buildmart (P) Ltd. at the consideration of Rs. 23,48,60,818/- (inclusive of cheque and cash payments) and entire amount was adjusted/covered with the transaction of purchase of shares of this company by three persons [i.e. Shri Navratna Kothari, Shri Kushal Chand Surana and Vimal Chand Surana, HUF etc.] from the than directors of the company i.e. Shri Madan Mohan Gupta and Smt. Shashikala Gupta. As per details mentioned on these seized documents the said land dealing took place in A.Y. 2008-09 i.e. year relevant to F.Y. in which JDA Patta was issued and shares of M/s Shri Kalyan Buildmart (P) Ltd. transferred.

While deciding the appeals of Shri Madan Mohan Gupta & Others Ld. CIT (A) – 4, Jaipur determined the total out of books payments of Rs. 19,83,99,136/- (i.e. 23,48,60,818 minus 3,64,61,682) and bifurcated the same in the ratio of shares allotted among them i.e.

Shri Navratna Kothari (80%), Shri Kushal Chand Surana (6.66%) and Vimal Chand Surana, HUF (13.34%).

Therefore, as per directions u/s 150 (1) of the I. T. Act, 1961 given by Ld. CIT (A) – 4, Jaipur vide his letter No. 13 dated 12.04.2017 and further rectification order dated 10.07.2017 in 17 as well as details available on record and detailed discussion made above the total amount paid by M/s Vimal Chand Surana, HUF during F.Y. 2007-08 in lieu of this transaction was of Rs. 2,64,66,445/- (i.e. 13.34% of 19,83,99,136/-), which has escped the assessment for A.Y. 2008-09.

Thus, I have reason to believe that total income of Rs. 2,64,66,445/- has escaped the assessment within the meaning of provision of section 147 of the Income Tax Act, 1961. Hence, in view of the above, it is fit case for re-assessment u/s 148 of the I.T Act”.

Thus, the Assessing Officer has proceeded on the premises that the assessee along with Shri K.G. Kothari and Shri Vimal Chand Surana (Individual) had invested the money in purchase of land in the name of M/s Shri Kalyan Builmart Pvt. Ltd. The Assessing Officer in the reassessment has assessed the income of Rs. 3,04,38,120/- by making an addition of Rs. 2,64,66,445/- on account of unexplained investment under section 69 of the Act and same has to be taxed in the hands of the assessee for the year under consideration. There is no dispute that the Assessing Officer proposed to reassess the income on account of transaction of purchase of land.

However, the said land was purchased by M/s Shri Kalyan Buildmart Pvt. Ltd. on 24/08/2006. Thereafter the assessee alongwith Shri Navratan Kothari and Shri Vimal Chand Surana (Individual) purchased the shares of M/s Shri Kalyan Builmart Pvt. Ltd. from Shri Madan Mohan Gupta and his wife Smt. Shashi Kala Gupta. It is evident from the record that the assessee has duly declared the transaction of purchase of shares of M/s Shri Kalyan Buildmart Pvt. Ltd. in its books of account and also in the return of income originally filed on which the assessment was processed U/s 143(1) of the Act on 02.11.2009. Therefore, the reopening of the assessment to assess the consideration allegedly paid by the assessee for purchase of land is contrary to the record and actual facts of transaction of purchase of the land in question in the name of M/s Shri Kalyan Builmart Pvt. Ltd. and not in the name of assessee. Further, it is also not in dispute that Shri Madan Mohan Gupta and his wife Smt. Shashi Kala Gupta were the promoters and share holders of M/s Shri Kalyan Buildmart Pvt. Ltd. prior to the purchase of shares by the assessee, the Assessing Officer has not brought on record any material to show that M/s Shri Kalyan Buildmart Pvt. Ltd. has any connection with the assessee. We further note that an identical issue of reopening of the assessment in the case of Shri Navrattan Kothari Vs. ACIT in has been considered and decided by this Tribunal vide order dated 13/12/2017 in paragraphs No. 6 and 7, which is reproduced as under:

“ 6. We have considered the rival submissions as well as relevant material on record. The matter revolves around the transaction of purchase and sale of land situated at Village Chainpura, Tehsil Sanganer (behind of Entertainment Paradise) Jaipur. The said land was purchased by M/s Shri Kalyan Buildmart Pvt. Ltd. on 24.08.2006. Thereafter the assessee purchased 8,000 shares M/s Shri Kalyan Buildmart Pvt. Ltd. from Shri Madan Mohan Gupta and his wife Smt. Shashi Kala Gupta. There is no dispute that this transfer of purchase of shares of M/s Shri Kalyan Buildmart Pvt. Ltd. was dully reflected in the books of accounts as on 31.03.2008 and also brought before the Assessing Officer in the course of initiation assessment completed u/s 143(3) r.w.s. 153A on 31.03.2013. Thereafter the AO proposed to reopen the assessment to assess the consideration paid by the assessee for alleged purchase of land by issuing notice u/s 148 on 25.03.2014. The AO recorded the reasons for reopening of the assessment as reproduce at page 4 of the assessment order are as under:-

“During the course search and seizure operation in the case of Rajendra Jain Group DOS 23-05-2013 and survey proceedings at the business premises of Shri Madan Mohan Gupta, certain incriminating documents were found and seized which were inventories as Exhibit 1 to 5 of Annexure-AS and Exhibit 1 to 8 of Annexure- A. The documents found and seized from the residence and business premise of Shri Madan Mohan Gupta during the course of search proceedings revealed that on various page of Exhibit- 1,2 & 5 of Annexure-A as well as Exhibit-1 of Annexure-As, some date wise amounts have been written in the name of ‘KGK’. These transactions noted on page no. 28,43,69 and 73 of Exhibit-1 of Annexure-A total up to Rs. 14,24,12,650/-. The assessee has failed to satisfactorily explain the transactions recorded on this page. I have thus reason to believe that income to the extent of Rs. 14,24,12,650/- has escaped assessment within the meaning of section 147of the I.T. Act, 1961.” Thus, it is clear that the basis of reopening of the assessment is the seized material found during the course of search and seizure operation in the case of Rajendra Jain Group and the statement of Shri Madan Mohan Gupta recorded u/s 132(4) and 131 of the Act. The Assessing Officer analyzed the statement and the seized material for his satisfaction as recorded in paras 4 and 5 of the assessment order as under:- “4. In his statements, recorded during the course of search/post search proceedings, Shri Madan Mohan Gupta submitted that the following pagers of various exhibits are related to land transactions at Chainpura behind Entertain Paradise, Jaipur.

Sr. Annexure No. & Page No. Found/seized from Exhibit No. 1 Annexure A Exhibit-1 15 to Residential premises

24,27,38,43,44, and 69 to 74 2 Annexure A Exhibit-2 47 and back Residential premises side of 48, 50 to 54 3 Annexure A Exhibit-5 1 to 77 Residential premises 4 Annexure AS Exhibit- 1 to 3,7,9,10 Office premises 1

5. Further in the statements of Shri Madan Mohan Gupta, he submitted that on the above page, details w.r.t. a land transactions at Village chainpura behind entertainment Paradise, Jaipur has been recorded which was purchase by Shri Rajendra Kumar Jain resident of D-25, Lal Bahadur nagar, Jaipur, through him i.e. Shri Madan Mohan Gupta. The deal was finalized at Rs. 12,43,27,000/- out of which discount of Rs. 1% was allowed for registration of land. Therefore, Rs. 13,30,84,000/- were net payable to the seller and the details of the same have been recorded on page No. 15-18 of Exhibit-1 of Annexure-A, found and seized from his residence. Later on this land was sold to Shri K.G. Kothari. Shri Madan Mohan Gupta further submitted that this land was purchased in the name of M/s Kalyan Buildmart Pvt. Ltd. in which he was a director along with hiswife Smt. ShashiKala Gupta. This land was purchased during the year 2006-07 and sold to K G. Kothari, Prithviraj Road, C-Scheme, Jaipur and Shir vimal Chand Surana in the month of March, 2007 and the details of the same have been recorded on page Nos. 27 & 28 of Exhibit of Annexure-A. During the course of statement, Shri Madan Mohan Gupta admitted that the amounts mentioned against dates have been recorded in coded form such as Rs. 1.00 crore have been written as 1=00 and Rs. 50.00 lacs have been written as .50. This sale transactions were finalized for Rs. 20,83,39,232/- and the payments to the sellers were made through Shri Rameshwar Prasad Sharma resident of Barkat Nagar, Tonk Phatak, Jaipur. Shri Madan Mohan Gupta further admitted that he got Rs. 8.00 lacs as his reimbursement from this land transaction.”

Thus it reveals from the assessment order that after the initial assessment u/s 143(3) r.w.s. 153A the AO got the alleged incriminating material in the shape of diary and transactions recorded therein found and seized in the search and seizure operation in case of Rajendra Jain Group. Accordingly, the AO proceeded to reassess the income of the assessee u/s 147 of the Act. The entire decisions of the AO to reassess the income of the assessee is based on the seized material and statement of Shri Madan Mohan Gupta recorded u/s 132(4) of the Act for which the specific remedy is provided u/s 153C of the Act. For ready reference we quote section 153C as under:-

“ 153C. 79[(1)] 80[Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, 81belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates 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] 82[and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person 82a[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A] :] 8 3[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 84[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 :]

26 Shri Vimal Chand Surana HUF 8 5[Provided further that the Central Government may by rules86 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made 86a[and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.] 8 7[(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.”

This section begins with non-obstante clause and therefore, has an overriding effect on the Sections 147&148 of the Act. As per the scheme and object of Section 153C r.w.s 153A the AO has no discretion or choice to invoke the provisions of Section 147/148 instead of section 153C r.w.s. 153A of the Act. Once the case of reassessment is made out by the AO which falls in the preview of specific provisions of section 153C of the Act, the AO cannot resort to invoke the provisions of Section 147/148 of the Act to assessee or reassess income of the assessee. The action of the AO to initiate the proceedings Under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the Assessing Officer shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. The Amritsar Bench of this Tribunal in case of ITO vs. Arum Kumar Kapoor (supra) while deciding an identical issue of validity of initiation of proceedings u/s 147/148 on the basis of seized material has held in paras 7.2 and 8 as under:-

“7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case of M/s. Today Homes & Infrastructure (P.) Ltd. on 28th March, 2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the Dy. CIT, Central Circle-22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under s. 153C/148 of the Act. It is after that that during the course of appellate proceedings before the CIT(A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO under s. 148 are illegal and void ab initio. In the instant case, the learned CIT(A) has correctly observed that the AO should have issued notice under s. 153C of the Act and should have framed the assessment under s. 153C r/w s. 153A of the Act. Sec. 153C of the Act reads as under :

"153C. Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, where the AO is satisfied that any money, bullion 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 s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO 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 s. 153A."

8. On a perusal of the above provisions, it would be clear that the provisions of s. 153C of the Act were applicable, which supersedes the applicability of provisions of ss. 147 and 148 of the Act. As we have already noted hereinabove that the documents were seized during the search under s. 132 of the Act and the same were sent to the assessee's AO at Amritsar by the officer at Delhi in our view, the learned CIT(A) has correctly observed that only the provision in which any assessment could be made against the assessee in the IT Act was s. 153C r/w s. 153A of the Act. It is also apparent from the record that the officer at Delhi has mentioned in his letter that the necessary action may be taken as per law under s. 153C/148 of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of s. 153C of the Act, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal.”

A similar view was taken by the Visakhapatnam Bench of this Tribunal in case of G. Koteswara Rao vs. DCIT (supra) in para 11 to 17 as under:-

“11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act.

thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary.

'52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.

(a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the A.O.

(b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search."

"18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV- B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as block assessment because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as block period. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place.

20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.

or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate'. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the 'six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.

17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section 153A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12-2010 passed u/s 143(3) r.w.s. 147 is quashed.”

Thus, it is clear that the Tribunal has taken a consistent view on this issue and further the Delhi Benches of this Tribunal in case of Rajat Shubra Chatterji vs. ACIT (supra) has held in para 7 as under:-

“7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur – 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed.”

Therefore, in conjoint reading of provisions of section 153A, 153C and 147/148 of the Act as well as a consistent view taken by this Tribunal in a series of decision cited (supra) we hold that the assessment or reassessment of income of the person other than search persons based on seized material can be only be made u/s 153C r.w.s. 153A and the provisions of section 147/148 of the Act are not applicable in such cases. No contrary decision has been brought to our notice. Accordingly, we hold that initiation of proceedings u/s 147/148 by the AO to reassess the income is illegal being without jurisdiction and consequently the reassessment order passed u/s 147 r.w.s. 143(3) is also illegal and void abinitio and is liable to be quashed.

“10. We find from the order of the Tribunal and also on the facts as has been culled out from the assessment order in question that there is no element of failure to disclose fully and truly all material facts necessary for assessment. Therefore, there was no justification for the department for invocation of proceeding under Section 147 r/w 148 of the Income Tax Act.

"6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1,29), which reads as follows :

"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147.—A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." (emphasis supplied) 18. Similar view has been taken by this Court in the decision reported in Commissioner of Income-tax v. Cholamandalam Investment and Finance Co. Ltd. [2009] 309 ITR 110 , wherein it was held as follows:

"In those circumstances, it could not be regarded that the assessee had failed to disclose fully and truly all material facts relevant for the assessment. As the facts revealed that the Assessing Officer who made the original assessment order has called for all the details regarding the case where 100 per cent. depreciation were claimed and the assessee had furnished the invoices for purchase of assets on which 100 per cent. depreciation were claimed, there was no failure on the part of the assessee and if at all there was any failure, according to the Commissioner of Income-tax (Appeals), it was on the part of the Assessing Officer, who made the original assessment without going behind the nature of the transactions accepting the details furnished by the assessee. The Tribunal also extracted that portion of the order and found on the fact that there was no fault on the part of the assessee so as to enable the Department to reopen the assessment as the proviso to section 147 of the Income-tax Act would squarely apply to the case of the assessee. We find no infirmity in the order passed by the Tribunal. Hence, the appeal is dismissed."

19. In an identical circumstances, a learned single Judge of this Court considered the issue in the decision reported in Fenner (India)

Ltd. v. Deputy Commissioner of Income-Tax [2000] 241 ITR 672 (Mad), wherein, it was observed as follows: "The pre-condition for the exercise of the power under section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the belief reasonably entertained by the Assessing Officer that any income chargeable to tax has escaped assessment for that assessment year. However, when the power is invoked after the expiry of the period of four years from the end of the assessment year, a further pre-condition for such exercise is imposed by the proviso namely, that there has been a failure on the part of the assessee to make a return under section 139 or in response to a notice issued under section 142 or section 148 or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Unless, the condition in the proviso is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. The relevant words in the proviso are, ". . . . unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee ... . ." Mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147.... . . . . . . . . . . . . . . . . . . . . The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any, on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the Assessing Officer in exercise of his power under section 147, therefore, cannot be sustained. As the error here is one of jurisdiction it is not necessary for the assessee to have recourse to the remedies by way of appeal, revision, etc. It is well settled that when a jurisdictional error is brought to the notice of this court such errors are capable of being corrected by this court in exercise of the court's powers under article 226 of the Constitution of India. The Supreme Court in the case of CIT v. Progressive Engineering [1993] 200 ITR 231 (sic), held that when all the relevant facts were before the court and the law is clear on the subject, it is the duty of the High Court to interfere. That was also a case where the proceedings were sought to be initiated against the assessee under section 147 of the Act.

20. In the case of ICICI Securities Ltd . v. Assistant Commissioner of Income Tax 3(2), Mumbai, the Bombay High Court vide order dated 22.08.2006 in W.P.No.1919 of 2006, while dealing with the issue on the reopening of assessment, held as follows:

"7. In the facts of the present case, there is nothing new which has come to the notice of the revenue. The accounts had been furnished by the Petitioner when called upon. Thereafter the assessment was completed under section 143(3) of the Income Tax Act. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make a proper return. In the present case, no such case is made out on the record.

21. The above-said view of the Bombay High Court was affirmed by the Supreme Court in Civil Appeal No.5960 of 2012.' 12. In the light of the above, we hold that when the Assessing Officer had failed to record anywhere his satisfaction or belief that the income chargeable to tax had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment. On the contrary, it was the Assessing Officer, who failed to consider the materials placed before him at the time of regular assessment for which the assessee cannot be found fault with. Therefore, the notice issued under Section 147 of the Income Tax Act beyond the period of four years was wholly without jurisdiction and cannot be sustained. Accordingly, for the reasons stated above, the substantial question of law is answered in favour of the respondent/assessee and against the appellant/Revenue.” Thus, when the AO has not recorded in his satisfaction or believe that the income chargeable to tax has escaped assessment on account of failure of the assessee to disclose fully and truly all material facts necessary for assessment then the notice issued u/s 148 beyond the period of 4 years was without jurisdiction and is not sustainable. Hon’ble Bombay High Court in case of Sitara Diamond (P.) Ltd. vs. DCIT (supra) while considering the validity of notice issue u/s 148 after 4 years has held in para 6 as under:-

“6. We have considered the rival submissions. By the impugned notice dated 20 June 2011, the assessment for Assessment Year 2005-06 is sought to be reopened beyond a period of four years of the end of the relevant assessment year. The condition precedent to the exercise of the jurisdiction to reopen an assessment beyond a period of four years as spelt out in the proviso to Section 147 is that there ought to be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. In the present case, the sole basis on which the assessment proceedings were sought to be reopened is the order which has been passed on 5 July 2011 for Assessment Year 2007-08. In that order, according to the Revenue, it has been held that the assessee acts as a mere facilitator and is not a manufacturer so as to entitle it to the deduction under Section 10A. The issue, however, before the Court, is as to whether that can form the basis of the reopening of the assessment beyond a period of four years. The reasons which have been disclosed by the Assessing Officer do not set out as to what facts the assessee had failed to fully and truly disclose. Even a prima facie reference to the basis on which it is sought to be inferred that there was a failure to disclose all material facts has not been set out in the reasons. In that view of the matter, we are of the view that the primary jurisdictional requirement for reopening the assessment beyond a period of four years has not been fulfilled in this case. Since the order passed by the CIT (Appeals) for Assessment Year 2007-08 has been passed after the assessment for Assessment Year 2005-06 has been sought to be reopened by the notice dated 29 June 2011, we have, for the purposes of this discussion, kept that circumstance out of consideration. We have come to the conclusion that the Assessing Officer having failed to establish that there was a failure on the part of the assessee to disclose fully and truly all material facts for Assessment Year 2005-06, the reopening beyond a period of four years is clearly not valid. There was a finding of fact by the Assessing Officer in the assessment order for Assessment Year 2005-06 that the business activity of the assessee is manufacturing of jewellery in a Special Economic Zone. That finding, as the assessment order notes, was based upon a consideration of the facts of the case and upon examining the contentions of the assessee.”

When the AO has failed to set out in the reasons recorded as to what facts the assessee has failed to disclose fully and truly then the reopening after 4 years is invalid being without jurisdiction. We do not wish to multiply the precedent on this issue though relied upon by the ld. AR of the assessee. Accordingly, in the facts and circumstances of the case and in view of the various decisions as stated above we hold that the reopening after 4 years from the end of the assessment year is bad in law being without jurisdiction and consequential assessment is invalid, accordingly, the reassessment order is quashed. Since, we have quashed the reassessment order itself, therefore, we do not propose to go into the other grounds raised by the assessee.”

The reasons recorded by the Assessing Officer in reopening the assessment of the assessee are identical to that of Shri Navrattan Kothari. Further the Assessing Officer has proceeded in the case of assessee as well as in the case of Shri Navrattan Kothari on the premises that the assessee alongwith two other persons have purchased the land in question by paying on money as found recorded in the seized material, which was explained by Shri Madan Mohan Gupta. However, as per the sale deed, the said land was purchased by M/s Shri Kalyan Builmart Pvt. Ltd. from the owner of the land and therefore, when the purchase transaction was not in the name of the assessee then the Assessing Officer has failed to set out in the reasons recorded as to how the assessee has failed to disclose fully and truly all relevant materials necessary for assessment particularly when the assessee had already disclosed the transaction of shares of M/s Shri Kalyan Builmart Pvt. Ltd. from Shri Madan Mohan Gupta and Smt. Shashi Kala Gupta. Following the earlier order of this Tribunal in the case of Shri Navrattan Kothari Vs. ACIT (supra), we hold that the reopening of the assessment after four years from the end of the assessment year under consideration and also with reference to the provisions of section 151 is not valid and the same is quashed.

51 Shri Vimal Chand Surana HUF 8. Since, we have quashed the validity of the reopening and consequential reassessment order, therefore, we do not propose to go into the other grounds raised by the revenue on the merits of the addition.

9. In the result, the appeal of the revenue stands dismissed.

Order pronounced in the open court on 6/03/2023.