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TMI Blog2010 (2) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Appellant. Rajesh Kumar Shah for the Respondent. ORDER Deepak R. Shah, Accountant Member. - All these appeals by the Revenue and cross-objections by the assessee are directed against the orders of the learned Commissioner of Income-tax (Appeals)-II, Ahmedabad, dated 29-3-2007 in appeals against assessment framed under section 143(3) read with section 153C of the Income-tax Act. In the cross-objections, the assessee has raised a legal plea as to the validity of assessment framed under section 153C of the Income-tax Act, 1961. 2. When similar plea was raised before the learned Commissioner of Income-tax (Appeals) and various decisions were cited, the learned Commissioner of Income-tax (Appeals) held that there is a vast change in provision relating to framing assessment under sections 153C and 158BD of the Income-tax Act, 1961. He held that there was a search at the group premises as noted by the Assessing Officer and, hence, proceedings under section 153C of the Income-tax Act, 1961 were justifiably initiated and the case law relied upon are not applicable to these cases. 3. Learned counsel for the assessee submitted that a search warrant was issued in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person other than the one with respect to whom search was made under section 132, such satisfaction must be arrived at by the Assessing Officer before invoking the provisions of section 153C on the basis of material found in the course of search of other person and any material coming into the course of search of other person and any material coming into the possession of the Assessing Officer after invoking section 153C cannot be considered for exercising such jurisdiction. In the absence of such satisfaction, the assessment made on any other person would, be illegal and void ab initio since jurisdiction to assess other person can be exercised validly only in accordance with the provisions of section 153C of the Income-tax Act, 1961. 4. The learned Departmental representative, on the other hand, relied upon the finding of the learned Commissioner of Income-tax (Appeals). He also filed before us a copy of notice issued under section 153C of the Income-tax Act, 1961 for initiating action under section 153A of the Income-tax Act, 1961. A query has been raised from the Bench as to whether any money, bullion, jewellery or any other valuable article or thing or books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; ( b )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 or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search, under section 132 or making of requisition under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or re-assessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. The Assessing Officer assumes jurisdiction for framing assessment under section 153C of the 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 to or belong to a person other than the person in whose case search is conducted under section 132(1) of the Act. Therefore, for initiating action under section 153C of the Act for framing assessment under section 153A, the pre-requisite is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard of Direct Taxes in its Circular No. 7 of 2003 in paragraph 65.5 clarify as under ([2003] 263 ITR (St.) 62, 107) : 65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. The assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under the section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. (Emphasis Supplied) 12. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original assessments have not abated. What were pending were only the appeals. However, since the appeals do not abate the original assessments survive and hence cannot be reopened under section 153C proceedings. We, therefore, set aside all the assessments made under section 153C of the Act. 15. The procedure of assessment contained in Chapter XIV visualises various types of assessments; section 143(1) provides for assessment on the basis of return filed by the assessee; section 143(3) visualises assessment on the basis of return filed as scrutinised and examined by the Assessing Officer; section 144 visualises best judgment assessments; section 147 provides for reassessment where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment; section 153A of the Act is titled as assessment in case of search or requisition , where warrant of authorisation is issued in the case of such person; section 263 of the Act empowers the Commissioner to revise any order which is found to be erroneous in so far as it is prejudicial to the interests of the revenue. Thus, all the different types of assessments envisage different situations. 16. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g sections 153A to 153C of the Act observed that the existing provisions of Chapter XIV-B which provide for single assessment of undisclosed income for block period were introduced for avoidance of disputes, early finalisation of such assessments and reduction in multiplicity of proceedings. However, since there were parallel proceedings namely regular assessment proceedings as well as assessment of block assessments for undisclosed income had amounted to multiplicity of proceedings. In order to avoid multiplicity of proceedings and to have only single assessment and in respect of pending assessments, section 153A to section 153C of the Act were proposed to be introduced. If that be the intention, in assessments under section 153C the issue can be considered only if the pending assessment is abated and not otherwise. If the original assessments are completed which are the subject matter of further litigation and if those very assessments are reagitated under section 153C proceedings the same will not only multiply assessment proceedings but will multiply even the appellate proceedings. This can never be the intention of the Legislature. 20. The decision of the Income-tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and anomaly. Suppose in the course of a search, nothing incriminating was found, does this mean that an honest citizen be unduly harassed by facing automatic reopening of the concluded assessments merely because there was search action against him? The absurdity of the construction gets all the more pronounced when say, no incriminating material is found relating to the other person but the material found indicates disclosed income. Suppose, loan confirmations relating to loans duly disclosed in the return of income of A are found at the time of search in the premises of B, should the assessments of A be reopened for all the six preceding years merely because search action has been initiated against B? In selecting out of different interpretations, the courts shall adopt that which is just, reasonable and sensible rather than that which is none of those things. One may also refer to the Central Board of Direct Taxes Circular No. 7 of 2003, dated September 5, 2003. A reading of the circular clearly indicates that the appeal, revision, etc., arising out of earlier assessments shall not abate. In other words, there is no merger of the earlier assessments with the assessments done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern of Shri Reddy. It records the transaction carried out by that group. It does not record the transaction carried out by the assessee. Under the Wealth-tax Act, assets belonging to the assessee were taxable. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest. Of course, belonging to is capable of connoting interest, which is less than absolute perfect legal title. However, there should be some limited ownership of interest, if it is to be permitted that the assets belong to the assessee. In the instant case, documents or books of account found during the course of search and seized cannot be termed to be indicating any limited interest of the ownership of the assessee in such books of account or documents. The language used in section 153C is materially different from the language used under section 158BD. As per section 158BD, if any undisclosed income relates to other person, then action against such other person can be taken provided such undisclosed income is referable to the documents seized during the course of search. However, section 153C says that if valuable article or thing or books of account or document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153C does not survive, the original assessment stands revived." 7. In the present case, it is seen that when the search was conducted at the premises of Shri Subhash Gambhir, no amount of money, bullion, jewellery or other valuable article or thing or books of account or documents seized belonged to the present assessee. Nothing is handed over to the Assessing Officer having jurisdiction over the present assessee. No such valuable article or thing or any books of account or documents have been referred even in the assessment order for framing assessment under section 153C of the Income-tax Act, 1961. Since for all these years, the returns were originally filed and processed and since no additional material is found pertaining to the assessee which is held to be belonging to the assessee, the Assessing Officer does not assume jurisdiction for framing assessment under section 153C read with section 153A of the Income-tax Act, 1961. We, therefore, cancel all the assessments made for all these years. Since we have cancelled the assessments, we do not propose to deal with grounds raised by the revenue in appeals and ground raised by the assessee in cross-objections on the mer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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