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TMI Blog2013 (1) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... GUJARAT HIGH COURT] in which it was held that under section 153C notice can be issued only where the money, bullion, jewellery or other valuation article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the AO was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Considering the facts recorded the assessee in the present case had a case for quashing of proceedings u/s 153C. No material is produced to prove that the AO in the case of person searched was satisfied that any money, bullion, jewellery or other valuable articles or things or books accounts or documents seized or requisitioned belongs to or belong to a person other than the person referred to in sec. 153A. No material is produced to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition was accordingly deleted - against revenue. Addition on account of difference in market price and sale - Held that:- the land is owned by the Society, Sanatan Grah Nirman and the assessee only acted as construction agency and has not made any sales. Therefore, the addition is deleted - against revenue. Addition on account of current liabilities - CIT(A) deleted the addition - Held that:- In assessment year under appeal, i.e., 2003-04, only Rs.30,000/- has been received in advance whereas full amount of Rs.2,00,000/- has been received and credited during the assessment year 2004-05. The CIT(A) on examination of the documents accepted the contention of the assessee and deleted the addition - against revenue. Addition on account of unconfirmed unsecured loan - CIT(A) deleted the addition - Held that:- The CIT(A) accepted the contention of the assessee because the opening balance as on 01.04.2007 (PB-44) was Rs.5,56,880/-, which is closing balance of the last year. During the year under consideration, only quarterly interest of Rs.54,289/- was credited in the books of account along with confirmation. The addition was, accordingly, deleted - against revenue. Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with proceedings u/s 153A. Vide letter dtd. 26.10.09, the assessee has informed the A.O. that no search warrant in the name of M/s. Global Estate has been served on it and, therefore, consequential assessment proceedings u/s 153A are without jurisdiction and illegal. Return u/s. 153 has been filed under protest. Subsequently, A.O. has issued notice dated. 29.10.09 u/s. 153C requiring the assessee to file its return on or before 06.11.09. The said notice has been received by Smt. Neeru Wadhwa on 30.10.09. Vide letter dated. 06.11.09, the assessee has requested the A.O. to communicate the reasons which have resulted in satisfaction for issue of notice u/s 153C. The assessee has further requested to give reasonable and adequate time after communication of reasons, so that objections against the notice u/s 153C be filed by it and accordingly disposed off by the A.O. Vide order sheet entry of the same date, i.e. 06.11.09, when assessee s A.R. has attended before the A.O. requiring reasons for issue of notice, the A.O. has mentioned that there is no provision in the Act which provides that reasons recorded u/s 153C are to be communicated to the assessee. Hence reasons recorded are not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the assessment made accordingly cannot be sustained in law and decided this issue in favour of the assessee and cancelled the assessment u/s. 153C of the IT Act. The findings of the ld. CIT(A) in para 3.1 and 3.2 of the appellate order are reproduced as under : 3.1 Appellant s submissions on this ground have been considered carefully. Assessment records alongwith appraisal report and copy of panchnama have also been perused. No authorization is found issued in the name of the appellant firm, i.e. M/s. Global Estate on the date of search operations. The appellant firm is situated at the same number of premise i.e. Krishna Kunj, Gandhi Road, Gwalior in respect of which search has taken place for P.C. Wadhwa and his family members. In the absence of any authorization in the name of the appellant firm, no valid proceedings u/s 153A could be initiated by the A.O. As per the appellant, its offices are located different and hired premises which have been unauthorizedly searched. Though the A.O. has issued notice u/s 153C subsequently, but this fact cannot make the proceedings earlier initiated u/s 153A, by any means, valid. Further, on perusal of records, it is seen that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. ITO (2003) 259 ITR 19, the Supreme Court, while considering the provisions of section 148, pointed out as under: However, we clarify that when a notice u/s 148 of the Income tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. The A.O. is bound to furnish reason within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the A.O. is bound to dispose of the same by passing a speaking order . Using the same parity of reasoning, we direct the A.O. to supply the reasons recorded for arriving at satisfaction to the petitioner within a reasonable time upon the petitioner filling a return as required by the impugned notice. On receipts of the same, the petitioner would be entitled to file objections to the issuance of the notice and the A.O. shall dispose of the same by passing a speaking order. Same view has also been reiterated by Hon ble Supreme Court in the case of Manish Maheshwari Vs. ACIT Another (2007) 289 ITR 341 (SC). In that case, premises of a director of a company (Indore Construction (P) Ltd. And hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicate that any money, bullion, jewellery, books of account or other documents belong to the assessee. No incriminating material has been discussed in the assessment order to satisfy the requirement of section 153C of the IT Act and the additions have been made merely on presumption. Even no satisfaction as required u/s. 153C has been communicated to the Tribunal during the course of proceedings. He has relied upon following decisions : (i). Decision of ITAT, Ahmedabad Bench in the case of ACIT vs. Gambhir Silk Mills, 6 ITR 376, in which it was held as under : Held, that when the search was conducted the premises of S, no mount of money, bullion, jewellery or other valuable article or thing or books of account or documents seized, belonged to the assessee. Nothing was handed over to the Assessing Officer having jurisdiction over the assessee. No such valuable article or thing or any books of account or documents had been referred even in the assessment order for framing assessment under section 153C of the Act. Since for all these years, the returns were originally filed and processed and since no additional material was found pertaining to the assessee which was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than one covered by s. 132 or s. 132A; action cannot be taken for mere further investigation. 9. We have considered the rival submissions and the material available on record. Section 153A, 153B and 153C of the IT Act provides :- Assessment in case of search or requisition. 153A. Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2004 or any subsequent financial year,- (i) the provisions of clause (a) or clause (b) of this sub-section shall have effect as if for the words two years the words twentyone months had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later :] [Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2005 or any subsequent financial yea ..... 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(iii) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee of being reheard under the proviso to section 129; or (iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, 55[or] [(v) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under subsection (3) of section 245R, or (vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Commissioner under subsection (7) of section 245R,] shall be exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious 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. ] 9.1 Hon ble Supreme Court in the case of Manish Maheshwari vs. ACIT and others, 289 ITR 341 considering the earlier provisions of section 158BD of the IT Act (analogous to sec.153C of IT Act) held that - The condition precedent for invoking a block assessment is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that the assessee had utilized undisclosed income for making contributions to certain unregistered chits conducted by the said person. Thereafter, a survey was conducted in the business premises of the assessee which indicated certain real estate transactions carried on by the assessee and profits derived thereon had not been disclosed to the Department. The Assessing Officer included under section 158BB the undisclosed income found during the survey made under section 133A. The Commissioner (Appeals) excluded that portion which had been included based on the material found during the survey on the premises that in respect of block assessment under section 158BB material collected during the survey under section 133A could not be taken into consideration. This was confirmed by the Tribunal. On appeal contending that the material gathered in the course of survey under section 133A could also be regarded as a material for the purpose of block assessment under section 158BB: Held accordingly, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal having decided the issue in accordance with the statutory provisions, it required no interference. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or documents seized or requisitions belongs or belong to a person other than the person referred to in sec. 153A. 3. The books accounts or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person. 4. The AO has proceeded u/s 153C against such other person. 9.5 As is noted above, there are certain distinguished features in earlier provisions of law in Chapter XIV-B contained u/s sec. 158BA, 158BB and 158BC as compared to sec. 153A but the provisions contained u/s 158BD are more or less similar to provisions contained in sec. 153C of the IT Act except undisclosed income which is mentioned in sec. 158BD, however, in sec. 153C, it is mentioned any money, bullion, jwellery or other valuable articles or things or books accounts or documents seized or requisitions. The conditions precedent for invoking provisions u/s 158BD as is held by Hon ble Supreme Court in the case of Manish Maheshwari (supra) are therefore same as are provided u/s 153C of the IT Act. It is admitted fact that no search warrant was executed in the case of the present assessee u/s 132(1) of the IT Act, therefore, provisions of sec. 153A were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for quashing of proceedings u/s 153C of the IT Act. No material is produced before us to prove that the AO in the case of person searched was satisfied that any money, bullion, jwellery or other valuable articles or things or books accounts or documents seized or requisitioned belongs to or belong to a person other than the person referred to in sec. 153A. No material is produced before us to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s 132 of the Act. Ld. DR did not produce any material before us to show if any such satisfaction as required u/s 153C was recorded by the AO in the case of person searched. No material is produced in reference to above requirement. No material is also produced before us to show that books accounts or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any adequate material produced by ld. DR, we find the contention of ld. counsel for assessee was justified that in this case, the AO has not recorded any satisfaction that any seized document or material belongs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Hotel Blue Moon (supra), held as under : A search under section 132(1) of the Act was carried out in the residential premises of the assessee as well as his bank locker. In the course of search, cash and jewellery were found at the residence and jewellery was found in the locker. In response to a notice under section 153A, the assessee filed a return declaring a total income of Rs.90,080. Two questionnaires were issued to the assessee which were duly complied with by him. After hearing the assessee, the total income was computed at Rs.23,31,760/-. The assessee preferred an appeal before the Commissioner (Appeals). An additional ground taken before the Commissioner (Appeals) was that since the issuance of a notice under section 143(2) is a mandatory requirement, the assessment was bad in law and void ab initio and required to be cancelled. The Commissioner (Appeals) did not agree with the contention of the assessee and upheld the assessment as framed by the Assessing Officer. Another ground taken before the Commissioner (Appeals) was against the addition of Rs.10 lakhs under section 69A of the Act in the hands of the assessee in respect of cash seized from an employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of addition of Rs.17,17,005/- on account of concealed work in progress. The assessee maintained complete details of work in progress. The AO has made the addition on the basis of total work carried out by the assessee firm in three years, from which average monthly work in progress has been computed. The ld. CIT(A) discussed this issue in detail and found that the assessee maintained complete details of work in progress and that when the addition is made in assessment year under appeal, the benefit should have been given in the next assessment year 2004-05 which is not given in the case of the assessee. The ld. CIT(A) was satisfied with the complete details filed by the assessee and, therefore, held that the addition is made on surmises and presumption and cannot be sustained. In view of these findings of ld. CIT(A), we do not find any infirmity in the order of ld. CIT(A) in deleting the addition. 13. On ground No. 3, the Revenue challenged the deletion of addition of Rs.14,37,693/- on account of disallowance of expenses by rejecting book results u/s. 145(3) of the IT Act. The AO disallowed 60% of the expenses. The ld. CIT(A) found that the assessee had made purchase of 90% thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) and the ld. CIT(A) following the order of assessment year 2003-04, quashed the assessment proceedings u/s. 153C of the IT Act. 19. The Revenue on ground No.1 in all the appeals challenged the order of ld. CIT(A) in canceling the assessment order u/s. 153C of the IT Act. It is admitted by the ld. Representatives of both the parties that the issue is same as in the assessment year 2003-04. Therefore, following the reasons for decision for the assessment year 2003-04 above, we confirm the order of the ld. CIT(A) in canceling the assessment orders u/s. 153C of the IT Act. In the result, ground No. 1 of departmental appeals are dismissed. 20. On rest of the grounds, substantial issues are same, i.e., non-issuance of notice u/s. 143(2) which has already been decided in favour of the Revenue, but the additions on the some issue on merits are different. As noted above, they need not to be decided on merits because the assessment orders u/s. 153C have already been quashed. In view of this, when the assessment orders u/s. 153C of the IT Act have been quashed, the additions on merits would be deemed to be deleted. Therefore, the departmental appeals have no merits and are ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenged the deletion of addition of Rs.3,65,000/- on account of difference in market price and sale price of property. The ld. CIT(A) following his order for the assessment year 2003-04, deleted the addition, in which we have confirmed the order of the ld. CIT(A). Following the order for assessment year 2003-04, we dismiss this ground of appeal of the Revenue. 24. On ground No. 4, the Revenue challenged the deletion of addition of Rs.54,289/- on account of unconfirmed unsecured loan. The addition was made in respect Sheetal Bhadoria for the reason that no documents relating to genuineness of the transaction or copy of account has been furnished by the assessee. It was submitted before the ld. CIT(A) that the confirmation was filed before the AO and further, the balance of Sheetal Bhadoria is old and only carried forward in the assessment year under appeal. The ld. CIT(A) accepted the contention of the assessee because the opening balance as on 01.04.2007 (PB-44) was Rs.5,56,880/-, which is closing balance of the last year. During the year under consideration, only quarterly interest of Rs.54,289/- was credited in the books of account along with confirmation. The addition was, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as have been made in earlier years relating to search cases. The ld. CIT(A) found that the method of the AO is incorrect because the closing stock/work in progress is to be valued at cost or market price whichever is lower. The assessee maintained the same at cost as per books of account, therefore, the addition was deleted. It is the same issue, which is considered in the assessment year 2003-04. Therefore, we do not find any merit in the departmental appeal on this issue. We may note here that it appears that the AO on the basis of the assessments made in the proceedings u/s. 153C has considered all these issues on the same basis and made the substantial additions against the assessee. Since nothing was found against the assessee incriminating in nature, therefore, there was no reason to sustain the addition. Further, when the assessments u/s. 153C have already been cancelled, therefore, on the same line when additions have been made in the regular assessment, we do not find any justification to interfere with the order of the ld. CIT(A) and the ld. CIT(A) on proper appreciation of facts and material on record rightly deleted all these additions. In the result, the departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X
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