2016 (8) TMI 686 - AT - Income Tax

Assessment u/s 153C - Held that - The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon ble Delhi High Court in the case of RRJ Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT )we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee s income for that year. Accordingly, assesse s appeal for AY 2007-08 is allowed. - Decided in favour of assessee. Now coming to the appeals for AY 2008-09 and 2009-10, where the regular assessments were completed u/s 143(3) on 30.12.2010 and 30.12.2011 respectively u/s 143(3), the plea of ld. counsel for the assessee is that they were completed assessments and, therefore, the assessee s total income could be tinkered with only when some incriminating material was found during the course of search. He referred to the assessment order passed by the AO and pointed out that both the additions made by AO have no relation with the seized material and therefore, additions could not be made to the income assessed under the regular assessment. We have considered the submissions of both the parties and have perused the record of the case. We find that as far as addition u/s 14A made for both the assessment years is concerned, the same has no relation with the seized material and since this was a case of completed assessment on the date of construed search, therefore, the addition could not be made.

Issues Involved:
1. Validity of proceedings under Section 153C.
2. Requirement of incriminating material for initiating proceedings under Section 153C.
3. Jurisdictional conditions and satisfaction recording under Section 153C.
4. Abatement of completed assessments.
5. Additions made under Section 68 and Section 14A.
6. Assessment for AY 2012-13 under Section 143(3) instead of Section 153C.

Detailed Analysis:

1. Validity of Proceedings under Section 153C:
The appeals arose from orders passed by the CIT(A) for assessment years 2007-08 to 2010-11 and 2012-13. A search and seizure action in the Kalra group of cases led to the retrieval of documents related to the assessee, prompting the AO to initiate proceedings under Section 153C. The AO issued notices under Section 153C for the relevant assessment years, and the assessee filed returns accordingly. The CIT(A) upheld the initiation of proceedings under Section 153C, finding that the seized material pertained to the assessee and that the AO had properly recorded satisfaction.

2. Requirement of Incriminating Material:
The assessee contended that the proceedings under Section 153C were invalid as no incriminating material was found. The CIT(A) rejected this argument, stating that there is no requirement for incriminating material to assume jurisdiction under Section 153C. The AO is empowered to assess the total income of the relevant assessment years, irrespective of whether the material found during the search is incriminating.

3. Jurisdictional Conditions and Satisfaction Recording:
The assessee argued that the satisfaction note was not properly recorded by the AO of the searched person. The Tribunal found that the satisfaction was duly recorded by the AO of the searched person, as evidenced by the centralization order. The Tribunal also noted that the AO of the person other than the searched person must form a prima facie belief that the seized material has a bearing on the total income, but need not conclusively establish that the material is incriminating at the stage of issuing notice under Section 153C.

4. Abatement of Completed Assessments:
For AY 2008-09 and 2009-10, the Tribunal held that since regular assessments were completed under Section 143(3), they could not be tinkered with unless there was incriminating material found during the search. The Tribunal quashed the assessments for these years, as the additions made by the AO had no nexus with the seized material.

5. Additions Made under Section 68 and Section 14A:
The AO made additions under Section 68 for unexplained cash credits and under Section 14A for disallowance of expenses. The Tribunal found that the additions had no relation to the seized material and, therefore, could not be sustained for the completed assessments of AY 2008-09 and 2009-10. For AY 2010-11, the Tribunal noted that no intimation under Section 143(1) was issued, and the assessment was pending on the date of search. However, since the block period was reckoned from the date the documents were handed over to the AO, the assessment was treated as a completed assessment and quashed.

6. Assessment for AY 2012-13 under Section 143(3) Instead of Section 153C:
The AO passed the assessment order for AY 2012-13 under Section 143(3). The Tribunal held that the assessment was validly framed under Section 143(3) as the conditions under Section 153C(2) were not met. However, the Tribunal set aside the orders of the authorities below and restored the matter to the AO for passing the assessment order de novo, providing the assessee with a reasonable opportunity of being heard.

Conclusion:
The Tribunal allowed the assessee's appeals for AY 2007-08, 2008-09, 2009-10, and 2010-11, quashing the assessments. For AY 2012-13, the appeal was allowed for statistical purposes, and the matter was remitted to the AO for fresh assessment.

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