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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’: NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KUL BHARAT
This appeal by the Assessee is preferred against the order of the CIT(A)-XXVI, New Delhi, dated 20.11.2017 pertaining to AY 2013-14.
2. The grievance of the assessee read as under:
”1. The order of the Honble Commissioner of Income Tax (A) is arbitrary, against law and facts on record. Page 1 of 9 ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd.
The Honble Commissioner of Income Tax (A) has failed to consider that the issuance of notices u/s 153C/142(1)/143(2) of the Income Tax Act, 1961 by the learned Assessing officer and the proceedings conducted there under are against the provisions contained in the Income Tax Act, 1961 and is bad in law and hence liable to be quashed.
3. The Honble Commissioner of Income Tax (A) has erred in confirming addition of Rs. 14, 49,742/- u/s 68 of the Income Tax Act without going through the facts of the case, statutory provisions as well as explanation filed during the course of assessment proceeding as well as during appellate proceeding and order so passed shows lack of application of mind.
4. The Honble Commissioner of Income Tax (A) while confirming the addition of Rs. 14, 49,742/- made by the learned Assessing officer has failed to consider the fact that during the course of search no incriminating documents in respect of transaction appearing in the bank account have been found and as such addition made by the Assessing officer while passing the order u/s 153C/ 143(3) is against the provision contained in the Income Tax Act, 1961.
5. The appellant herein craves its right to alter, amend, add and / or withdraw any grounds of appeal and/or to take any additional grounds of appeal.
Representatives of both the sides were heard at length. The case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules.
Briefly stated the facts of the case are that a search and seizure operation U/s 132 of the Act was conducted in the J.P. Minda Group of cases on 20.09.2013. During the search and seizure operation documents belonging to the assessee alleged to be incriminating materials were found and seized from the business and residential premises of the J.P. Minda group.
Taking a leaf out of the alleged incriminating materials, Satisfaction Note was drawn which reads as under:
ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd.
ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd. 6. Annexure referred as page no. 85 is as under:
ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd. 7. The assessment was framed vide order dated 31.03.2016 framed U/s 143(3) read with Section 153C of the Act. The concluded part of the assessment order reads as under:
“11.1 Till the completion of the assessment proceedings the assessee company could not explain the credits appearing in its bank accounts. Considering this fact as well as the facts and circumstances of the case I am left with no other option but to treat all such unexplained credits as the income of assessee and accordingly the same are added to the total income of assessee company u/s 68 of the IT Act. This would result in an addition of Rs. 14,49,742/- to the declared income of the assessee.”
We have given a thoughtful consideration to the aforementioned conclusion drawn by the Assessing Officer. Keeping in mind, the Satisfaction Note exhibited elsewhere. We are of the considered view that the additions made by the AO has no bearing with the alleged incriminating material a referred in a Satisfaction Note which triggered the assessment proceedings U/s 153C of the Act.
The Hon'ble Supreme Court in the case of Singhad Technical Education Society 397 ITR 344 has held that when the seized documents did not establish any co-relation document wise with the assessment years in question, then the validity of the assessment so framed was legally unsustainable.
It would be pertinent to understand the scheme of assessment u/s 153C of the Act. Relevant provisions of the Act read as under:
“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, belongs to or ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd. (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 3 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 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. 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 6 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: Provided further that the Central Government may by rules 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 made4 and for the relevant assessment year ar years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (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 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.
ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd. 11. The above provision needs to be read with the Circular No. 1/2015 dated 21.01.2015 by the CBDT being Explanatory Notes to the Provisions of the Finance [No.
2] Act, 2014 and the same reads as under:
“45. Assessment of income of a person other than the person who has been searched 45.1 Section 153C of the Income-tax Act relates to assessment of income of any person other than the person in whose case search has been initiated or requisition is made. The provisions contained in sub-section (1) of section 153C of Income-tax Act, before its amendment by the Act, provided that notwithstanding anything contained in section 139, section 147, section148, section 149, section 151 and section 153 of the said Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to any person, other than the person referred to in section 153A of the said Act, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A of the Income-tax Act. Page 50 of 59. 45.2 Section 153C of the Income-tax Act has been amended to provide that notwithstanding anything contained in section 139, section147, section 148, section 149, section 151 and section 153 of the said Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to any person, other than the person referred to in section 153A of the said Act, then books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A if he 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 for the relevant assessment year or years referred to in subsection (1) of section 153A of the Income-tax Act. 45.3 Applicability:-This amendment takes effect from 1st October, 2014.”
In light of the above, we are of the considered opinion that, even after the amendment, the Assessing Officer can proceed only on the basis of incriminating material which has a bearing on determination of the total income of such other person.
Nowhere in the Satisfaction Note it has been mentioned that the said description of ITA No.- 364/Del/2018 M/s Consortium Vyapar Ltd. shares is related to alleged business of providing accommodation entries by the captioned assessee.
In the light of the decision of the Supreme Court (supra) read with CBDT Circular (supra) we are of the considered view that the additions made by the AO has no bearing with any incriminating materials found during the course of search and such action of the AO cannot validate the assessment order framed u/s 153C of the Act which deserves to be quashed.
Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case. The appeal of the assessee is allowed qua Ground No. 2.
Order pronounced in the Open Court on 13 .09.2023