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TMI Blog2011 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... t must be given a reasonable opportunity to object to the same - Neither the documents mentioned in the said satisfaction note stated to be belonging to the appellant have been provided to the appellant with due certification thereon - In absence of any seizure of any asset, documents etc proceeding cannot be initiated against the appellant u/s. 153C(1) r.w.s 153 It is the settled position of the law based on the decision of the Tribunal in the case of LMJ International (2007 (12) TMI 237 - ITAT CALCUTTA-E) that the issue of notice under the provisions of the first proviso to section 153A(1) is not automatic and there is need for AY-Specific Incriminating Information (ASII) in the possession of the AO to be the fountain head for springing satisfaction to him that there exists some income or asset to be assessed in the hands of any other person, who are referred to in section 153C - it is evident that the where nothing AY and assessee specific incriminating "money, jewellery or other valuable article or thing or books of account or documents", the assessments for assessee years cannot be distributed - in favour of assessee. - ITA Nos. 114 to 117/PN/2010 - - - Dated:- 28-1-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a pre-condition for availing the loan from the said co-operative bank. Ground No.3 On the facts and in the circumstances of the case and without prejudice to ground no.. 1 to 3 the CIT(A) has erred sustaining the disallowances of ₹ 15,130/- u/s. 40A(3) and treating the revenue expenditure as capital expenditure. Ground No. 4. On the facts and in the circumstances of the case and without prejudice to Ground No.1 to 3 the CIT(A) has erred in treating the donations received towards trust corpus as revenue income. Denial of exemption u/s. 11 cannot change the basic and true nature of the receipt. Ground No. 5 On the facts and in the circumstances of the case and without prejudice to the ground No. 1 to 3 the CIT(A) has erred in sustaining the addition of ₹ 4,43,012/- proposed and made by the special auditors by invoking the provisions of section 36(1)(va) of the Act on account of delay in payment of employees share of provident fund rws section 2(24). Ground No. 6 On the facts and in the circumstances of the case and without prejudice to the ground No. 1 to 3 the CIT(A) has erred in sustaining that the disallowance of ₹ 51,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds ie the registration granted u/s 12A cannot be cancelled u/s 12AA(3) of the Act. 3. Coming to the search assessment proceedings of the Society, the AO issued the notice u/s. 153C of the Act after recording the reasons and the assessee field the return claiming the exemption U/s. 11 of the Act. In the course of Assessment Proceedings, the Assessing Officer made the reference for special Audit U/s. 142(2A) of the Act. In due course, the Special Auditor completed the audit. However, there is an allegation by the assessee that the Special Auditor conducted the audit totally in contrast to the terms and references made by the Assessing Officer for conducting the special audit. The Assessing Officer on the basis of the order of cancellation of registration held that the assessee has to be treated as AOP and it would not be entitled to the claim of exemption U/s. 11 of the Act. Assessing Officer assessed the income at ₹ 246,13,935/- as computed by Special Auditor. 4. Aggrieved with the above order of the AO, the assessee filed an appeal before the CIT(A) and made various submissions. CIT (A) allowed the appeal of the assessee partly. Aggrieved with the said decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is made. Neither the notice is enclosed with the satisfaction note. 4. As per the Satisfaction note it is clear that both the satisfaction note and notice u/s. 153C are dated 18/4/2007. 5. It is also not known as to the date on which this document belonging to the appellant were received by the Assessing Officer of the appellant. Search on 20/07/2005 on which date, Assessing Officer of searched person was ITO, Ward 1(3) and that of the appellant was ITO, Circle 6. As the satisfaction note is made on 18/04/2007 and assuming the said date as the date of receiving the documents alleged to be belonging to the appellant the Assessing Officer of the appellant can issue the notice for six preceding assessment years. As the documents are received on 18/04/2007 relevant to the A.Y 2008-09, the Assessing Officer of the appellant can issue notices u/s. 153C for the A.Y's 2002-03 to 2007-08. In the case of the appellant notices u/s. 153C are issued for A.Y 2000-01 to 2001-02 which is not permissible, refer the judgement of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TTJ 508. Copy enclosed. (See Page 31 of the paper Book - Ahamadabad Bench). The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avale who hosted the party in Hotel Aurora on 29/08/2004 and the amount mentioned therein of ₹ 55811.94 is paid in cash by Shri M.N. Navale and the same has been debited to his Capital Account in his return of income (See Page No. 24 to 26) None of these pages suggest prima-facie belief of hidden income. These papers relate to F.Y. 2004-05 that too of Shri M.N. Navale and none of these papers therefore are related to Financial Years 1999-00 to 2002-03 i.e. (AY. 2000-01 to 2003-04). Therefore on the basis of these documents pertaining to the F.Y. 2005-06 by any standard, there could be any suggestion that even prima-facie there is some hidden income in the Assessment Years 2000-01 to 2003-04, warranting issue of notice u/s. 153C. Therefore the Assessing Officer should not have proceeded mechanically in issuing the notices u/s. 153C. 9. Nothing is seized pertaining to A.Y 2000-01 to 2003-04 obviously there is no question of recording satisfaction note and forwarding those Seized materials to the assessing Office of the appellant. In absence of any seizure of any asset, documents etc proceeding cannot be initiated against the appellant u/s. 153C(1) rws 153A refer P. Srinivas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained, in that case it would be incorrect or unfair for the Assessing Officer to proceed against the connected person causing unnecessary inconvenience and trouble. 14. It is a known fact that in the course of search while effecting the seizure, the search officials need not have to find out whether the valuable document etc, belonging to the connected person are duly disclosed by him or otherwise and naturally these documents, valuables, etc., are also seized. Therefore mere act of seizure does not by itself lay the foundation for the reasonable prima-facie belief that there is some undisclosed income. The seizure must be of such a character as to persuade the Assessing Officer to even reopen the completed assessment - Sarya Industries vs. UOI - 216 CTR 25/306 ITR 189, (See page No. 40). The tax law will be interpreted reasonable and inconsonance with justice, adopting a purposive approach to effectuate the legislative intention. Refer CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd.- Supreme Court - 196 ITR 149 and CIT vs. Dodsal Ltd., - Bombay High Court - 218 CTR 430. (See Page No. 67 to 75 and Page No. 76 to 78). The object behind section 153A and section 153C is undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and he read out the contents of para 24 of some of the findings of the Tribunal. 6. During the time for rebuttal, Ld. Counsel relied on another order of the Tribunal in the case Kumar and Company vide ITA No. 463/PN/08 for the A.Y 2000-01 dated 02-02-2010 and read out para 25 of the said order for the proposition that the A.O cannot assume jurisdiction u/s. 153C unless the documents seized belong to the assessee must not only be a speaking one but also the prima facie incriminating one and the such incriminating material should pertain to the six assessment year attempted to be disturbed by issue of notice u/s. 153C of the Act. As per Ld counsel, the provisions of sec. 153C cannot be invoked automatically in respect of the six A.Y's, unless there exists incriminating documents for all the six A.Ys and the provision of section 153C cannot be invoked based on the routine information or already accounted information disclosed to the department. Further, it is mentioned that unless some seized papers are available with incriminating document, settled and completed assessment should not be disturbed routinely and automatically merely for the reasons of the first proviso to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded assessments and such incriminating material should be of that nature it should not be a dumb documents. In this regard, the stand of the revenue is that the express provisions are clear on the proposition that the AO is empowered under the statute to 'assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted.. (first proviso). Considering the contrary stands of the parties, without going into the merits of the additions, we have decided to adjudicate the legal issue ie additional ground and it involves the study the details of the reasons recorded by the AO based on which the AO issued the impugned notices u/s 153C of the Act for the impugned four AYs. For this purpose, we have extracted the relevant portion of the reasons and the same read as follows. 9. Satisfaction Note for proceedings u/s 153C of the I T Act, 1961 in the case of M/s Sinhgad Technical Educational Society (STES), Pune......... 1) page 11 - this is voucher of Sinhgad Technical Education Society (STES) dt. 17-01-2004 for cheque payment of ₹ 2.80 lacs to Amir Moiddin Shaikh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted or undisclosed or hidden information to the revenue by the assessee. In our opinion, the impugned satisfaction note is very general one for six years. It is surprising to note that the AO has narrated some information against the Mr Navale HUF, which is not relevant for the present assessee. In the process, the AO totally missed the requirements of the law ie only the AY with the pending assessments and the AY with the AY specific incriminating documents/transactions or seized asset should only be reopened under the provisions of the first proviso to section 153A of the Act and not otherwise. 11. In this regard, we have perused various legal propositions. First, we have perused the decision of this Tribunal in the case of Kumar Company for the AY 2000-01 (supra) and para 26 of the M/s. Kumar and Company vide ITA No. 463/PN/08 for the A.Y 2000-01 and the same reads as follows:- 25. Thus, we find that the seized documents belong to the assessee by way of limited ownership and they are not dumb documents as advocated by the Ld Counsel for the reason mentioned above. However, they are not found to be incriminating documents for the AY 2000-01. The document may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded by the AO as extracted above do not contain anything incriminating for the AYs upto 2003-04. It is the settled position of the law based on the decision of the Tribunal in the case of LMJ International (supra) that the issue of notice under the provisions of the first proviso to section 153A(1) of the Act is not automatic and there is need for AY-Specific Incriminating Information (ASII) in the possession of the AO to be the fountain head for springing satisfaction to him that there exists some income or asset to be assessed in the hands of any other person, who are referred to in section 153C of the Act. Reason for this kind of interpretation was already given in para 25 and 26 of our order in the case of Kumar Company for the AY 2000- 01. In this regard, we posed question to ourselves if it is fair to reopen the assessment which is already concluded without any reason or logic thereby encroach on the rights of the tax payers? Should the AO be given unfettered or arbitrary powers to issue notice for the six AYs specified in the first proviso to section 153A(1) of the Act when the impugned assessments for the said six AYs are otherwise reached finality after due process of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the disallowed amounts in the search proceedings. 5) Kailash Auto Finance Ltd. (2009) 32 SOT 80 (Luck) Conclusion:- A notice under s. 148(1) can be issued even where notice under s. 143(2) has been pending and not closed. By processing the return and by issuing acknowledgment as token of accepting the return, the proceedings initiated by filing the return are terminated and no proceedings, therefore, remain pending. 6) R.M.L. Mehrotra (2010) 320 ITR 403 Conclusion:- Undisclosed income of the block period has to be determined on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the A.O and relatable to such evidence; AO cannot compute the income on the basis of best judgement. 14. From the above, it is evident that the where nothing AY and assessee specific incriminating money, jewellery or other valuable article or thing or books of account or documents , the assessments for assessee years cannot be distributed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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