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TMI Blog2016 (8) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA nos. 1927 to 1931/Del/2015 - - - Dated:- 29-6-2016 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER For The Appellant : Shri Kapil Goel Adv. For The Respondent : Mrs. Nandita Kanchan CIT (DR) ORDER PER S.V. MEHROTRA, A.M: These are assessee s appeals against separate orders passed by the ld. CIT(Appeals) relating to asstt. Years 2007-08 to 2010-11 and 2012-13. Since common issues are involved for adjudication, therefore, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. Brief facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited (xi) Vivid Builders Private Limited (xii) S.S. Con Build Private Limited (xiii) Dove Infrastructure Private Limited (xiv) Pacific Sports Academy private Limited. 4. The AO has further pointed out that when these documents were confronted to Shri Parminder Singh Kalra, he submitted that these papers/documents did not pertain to him. It was explained that due to dispute between the promoters of Realtech Group, namely, Shri Pankaj Dayal, Shri Yogesh Gupta and Shri Rajeev Behl, a memorandum of understanding was drawn by the partners for partition of the group. As per the terms of the MOU, each partner had to appoint one arbitrator which should be acceptable to the remaining two promoters of the Group and in that process, he (Shri Parminder Singh Kalra), was appointed as arbitrator by the Realtech Group promoters. Besides him, Shri B.N. Chandok and Shri Kuldeep Ahuja were also appointed as Arbitrators by the Realtech Group. The AO has further pointed out that during the course of post search proceedings summons were issued to three promoter directors of M/s. Real Tech Group, out of which only Mr. Yogesh Gupta appeared before the Investigation Wing and as per the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish complete details in respect of AYs 2007-08: i. Loan received from Sh. Manish Mehta HUF amounting to ₹ 10,00,000/- ii. Loan received from M/s Incredible Capital Ltd., amounting to ₹ 50,00,000/- iii. Loan received from Sh. Shailesh Dhir/ AR Securities amounting to ₹ 40,00,000/- 8. He, accordingly, made addition u/s 68 of ₹ 1 crore. Further disallowance u/s 14A read with Rule 8D was made of ₹ 40,794/- and on account of telephone and car expenses of ₹ 89,604/-. 9. Before ld. CIT(A), the assessee had raised two additional grounds of appeal. It was claimed that the impugned order u/s 153C was null and void since no incriminating documents pertaining to the assessee had been seized and the AO did not have the power to go beyond the seized documents. In the other ground it was claimed that the assessment proceedings were completed in haste and without giving reasonable opportunity to the assessee to present his case. 10. Ld. CIT(A) admitted both these grounds being legal in nature and adjudicate the same before taking the other grounds of appeal. The first contention of assessee vide letter dated 27.10.2014 was that 153C/153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of Hon ble Delhi High Court in the cases of SSP Aviation Ltd. v. DCIT 346 ITR 177 (Del.) and Anil Kumar Bhatia 24 Taxman.com 98 (Del.), pointed out that there is no condition of satisfaction on the existence of incriminating documents for assumption of jurisdiction u/s 153C. The AO is obliged to initiate proceedings u/s 153C where valuable article, books of account, documents etc. relating to a person other than the searched person is seized. 13. Ld. CIT(A) further examined the assessee s argument that 153C proceedings should be limited to only to the years in respect of which there was some material and that addition was to be confined to the material found during search and rejected the same following the decision of Hon ble Jurisdictional High Court in the case of Anil Kumar Bhatia (supra), after referring to following paras of the judgment: Para 18 .... Under Section 153A and the new scheme provided/or, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. Para 19 .... Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstwhile block assessments under Chapter XIVB, where such a condition was built into the provision itself. That the powers of the AO, under the provisions of section 153A, are beyond sections 147, 148, 151 and 153, has been taken note of in Anil Kumar Bhatia (supra). It is also relevant that section 153A refers to the determination of the 'total income', which is defined in sub section (45) of section 2 of the Income Tax Act thus: total income means the total amount of income referred to in section 5,computed in the manner laid down in this Act; Section 5, mentioned in the definition of 'total income', refers to the 'scope of total income', and states that 'total income' includes 'all income of a person 'from whatever source derived', It may be also mentioned that while under section 158BD there was a need to examine whether the seized material represented undisclosed income of the assessee other than the one searched, under section 153C, as discussed above, there is no such mandate. 4.8. Therefore, considering Anil Kumar Bhatia (supra) and Chetan Dass Lachman Dass (supra), a harmonious interpretation of section 153A/ 153C with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the: circumstances of the case and in law, Ld CIT(A) erred in not quashing the impugned proceedings u/s IS3C by erroneously and perversely holding that: a. Applicable Requirement of belongs to is fulfilled in extant ease on assumptions and presumptions; There: is no requirement of incriminating material at all u/s 153C and can make unrestricted and unbridled de novo examination u/s 153C That there is valid and requisite satisfaction u/s 153C to intimate proceedings; That there is no embargo on Ld AO s power u/s 153C which according to CIT(A) is unfettered; c. Section 292BBwhich is limitedly applicable to service of notice etc. is extrapolated to adjudicate and block legitimate jurisdictional plea u/s 153C; f. That issues closed and settled in previous regular assessments u/s 143(3)and/or section 143(1) prior to instant 153C proceedings has no role to play here; g. That block period u/s 153C (AY 2006-07 to AY 2011- 2012) adopted by Ld AO is correct instead of right period being AY 2008~09 to AY 2013- 2014 which itself vitiates entire action; 3. That on the facts and in the circumstances of the case and in law, Ld CIT(A) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed before ld. CIT(A) vide additional grounds taken before him. Ld. counsel submitted that satisfaction has not been recorded as per the requirement of section 153C. Ld. counsel further submitted that the initiation of proceedings u/s 153C were without jurisdiction as no relevant/ incriminating material, belonging to the assessee, was found during the search conducted in the case of searched person. Ld. counsel further submitted that in view of the decision of Hon ble Delhi High Court in the case of CIT Vs. RRJ Securities (2015) 62 Taxmann.com 391 (Del), the initiation of proceedings for AY 2007-08 were barred by limitation because that fell outside the block period, which was to be reckoned from the date on which the proceedings were centralized u/s 127 on 6.11.2012 vide CIT Central-II, New Delhi order F.No. CIT(C)-II/Cent./2002-13/1368. 20. As regards assessment years 2008-09 and 2009-10, ld. counsel submitted that since the assessment had been completed u/s 143(3) on 30.12.2010 for AY 2008-09 and 30.12.2011 for AY 2009-10, therefore, they were completed assessments, hence, could not be tinkered with unless there was some incriminating material found in course of search in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CBDT Circular on this issue that satisfaction as contemplated u/s 153C has to be recorded by the AO of both, searched person as well as by the AO of person other than the searched person. This is evident from the mandate of section 153C itself. The AO of searched person has to record a satisfaction that- (a) Any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (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 searched person. Thereafter the AO of searched person has to hand over the books of a/c, documents, assets seized or requisitioned to the AO having jurisdiction over such other person. Once the AO of person other than the searched person receives such documents, then he can issue notice to assessee or reassess the income the other person in accordance with the provisions of section 153A, if this AO is satisfied that the books of a/c, documents, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated. The object is that AO should duly apply his mind to the material seized before issuing notice u/s 153C. The recording of satisfaction in the Income-tax Act in different sections have different import, depending upon the context in which the satisfaction is to be recorded. The whole object is to put a check on initiation of proceedings only after due application of mind. 27. Now, coming to the facts of the case, we find that in the satisfaction recorded on 8.8.2013 by the AO of person, other than of the searched person, it has, inter alia, been observed as under: The case has already been centralize with this office u/s 127 of the Income-tax Act, 1961, vide vide CIT, Central-II, New Delhi s order F.No. CIT(C)-II/Cent./2002-13/1368 dt. 06.11.2012. 28. Thus, it is evident that the AO of searched person, had duly recorded the satisfaction and then only the case got centralized. Therefore, the plea of ld. counsel for the assessee that no satisfaction was recorded by the AO of searched person is devoid of any merit. 29. As regards the satisfaction recorded by AO of the person other than the searched person, the plea of argument of ld. counsel is that since no incri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any disclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years . (emphasis supplied by us) 31. Now coming to the plea of ld. counsel for the assessee that no incriminating material was found relating to assessee from the premises of searched person. In this regard we find that during the search operation in the case of M/s Consortium group of cases on 28.7.2011, following documents were retrieved: (i) page no. 14 to 36 of Annexure A-8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther proceedings, by virtue of Section 153C(J) of the Act, would have to be in accordance with Section 1 53A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow the six assessment years for which assessments/ reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003- 04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted 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. 36. 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. 37. As far as the second addition u/s 68 is concerned, we find that the addition has been made in respect of loans in AYs 2008-09 and 2009-10 as under: A.Y. 2008-09 : Sh. Sandeep Sehgal ₹ 35,00,000/- Ms. Asha Hiryani ₹ 4,80,000/- M/s TKS Projects P. Ltd. ₹ 4,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Yagya P Gupta ₹ 500000/- 20. Achla Aggarwal ₹ 1000000/- 21. Nandni Paints P. Ltd. ₹ 500000/- Total: ₹ 28050000/- 39. Further, at page 130 we find that the details of loans received by Realtech Group were as under: There is an existing liability of ₹ 3.67 crore (Rs. Three core sixty seven lac only) on account of loans received on interest on behalf of Realtech group. The details are mentioned hereunder: Nijhawan ₹ 50,00,000/- Ravinder Ahuja ₹ 1,50,00,000/- Sandeep Mehta Rs. 35,00,000/- Sanjay Garg ₹ 72,00,000/- Adarsh India ₹ 60,00,000/- 40. A bare perusal of these details clearly shows that none of the parties in respect of which additions have been made were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, has to be viewed contextually. In plain terms, it would mean when some case, cause or controversy is actually pending consideration before the assessment officer. In the facts of this case, the assessee filed its returns for four successive years: no notice under Section 143 (3) was issued. The AO lost jurisdiction to deal with those matters on the expiry of 21 months' period reckoned from the daters) when the returns were filed. In Calcutta Discount Company Limited vs. Income-tax Officer others, AIR 1961 SC 372, the Supreme Court had ruled that an assessment proceeding commences from the date when the assessee files its return. The terminus quo therefore would be the last date by which the Assessing Officer can legally pass an order. Once that period lapses, the officer loses jurisdiction and authority to issue any order . . 44. Determination of this aspect is necessary in order to find out whether the assessment for a particular will abate or not. If it is a case of pending assessment, then in view of second proviso to section 153A, the assessment will abate but if it is a case of completed assessment, then the assessment will not abate. In this assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C(2). 50. Ld. DR has rightly pointed out that first proviso to section 153C regarding substitution of date of search in the second proviso to section 153C in case of person other than the searched person, is only limited for determining the applicable period and it cannot be extended for determination of the section under which assessment order is to be passed. We find considerable force in the submission. No where u/s 153C, it is mentioned that the assessment for assessment year after the date of actual search has to be made in accordance with the provisions of section 153A. This is clearly evident from the provisions of section 153C(2), which reads as under: (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 notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52. Admittedly the documents were received by AO of assessee after the due date for furnishing the return of income for assessment year 2012-13 relevant to previous year 2011-12. Therefore, assessment could be framed u/s 153A/ 153C only when any of the conditions contemplated under clauses (a), (b) or (c) are fulfilled. 53. As is evident from the assessment order, none of these conditions had been fulfilled and, therefore, the assessment framed u/s 143(3) was proper. 54. On merits, though ld. counsel for the assessee has not advanced any submission, but we find that assessee is aggrieved by the assessment order as well as ld. CIT(A) s order on the ground that sufficient opportunity of hearing was not allowed to him. We notice that AO has also observed that assessee had not furnished necessary details in respect of certain loans for which addition has been made. We notice that assessment has been framed on 29.3.2014, almost at the fag end of limitation. Ld. CIT(A) has confirmed those findings after detailed deliberation. However, in order to impart substantial justice to the assessee, we consider it proper to set aside the orders of authorities below and restore the matter to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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