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TMI Blog2019 (7) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... le to concur with this proposition; in as much as the CIT(A) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the orders of assessment for Assessment Years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue s appeals for Assessment Years 2008-09, 2011-12 and 2012-13 are dismissed. Initiation of proceedings as barred by limitation in view of the proviso to section 153C - HELD THAT:- We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting additions of a sum of ₹ 99,31,835/-, on account of Undisclosed Investment in residential House when the assessee has not exercised the cross examination of Shri Sudarshan on the entries thereby conceding that the evidence is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inghad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting additions of a sum of ₹ 43,04,115/-, on account of Unexplained Cash Deposits when the assessee has not discharged the onus of explaining the credit. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting the estimated the undisclosed profit of ₹ 46,97,851/- based on the material found whereas as the decision of Singhad Technical Educational Society case does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertains to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment and total income can be assessed as discussed in SSP Aviation case. 5. Whether on the facts and the circumstances of the case, the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT Vs. Singhad Technical Education Society C.A. No.11080 of 2017 and others dated 29.08.2017. 4.2 Per contra, in response to the above contentions of the Revenue, the learned AR for the assessee submitted that firstly, there was no requirement of law that the assessee must first object to the assumption of jurisdiction by AO under section 153C of the Act for the same issue to be taken up in appellate proceedings. The issue of assumption of jurisdiction involves purely a question of law and the assessee is in no way precluded from raising this issue / question before an appellate authority even if the same is not raised before the AO and the assessee has participated in the assessment proceedings. Secondly, according to the learned AR, the CIT(A) has rightly decided the issue of jurisdiction by relying on the decision of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in 385 ITR 346 (Kar) wherein it was held that the presence of incriminating material leading to undisclosed income was a sine qua non for invoking the provisions of section 153C of the Act. Thirdly, the learned AR contends that the CIT(A) could not have strengthened th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court set aside the judgment of the Hon'ble High Court. In our humble view, the above case does not help Revenue as the same cannot be applied to the facts of the case on hand; which are distinctly quite different. In the case on hand, the assessee has challenged the jurisdiction before the CIT(A) after completion of assessment proceedings and has followed the due process of law. There is no dispute that the seized material belong to the assessee in the case on hand. The subject matter of dispute is whether the said seized material, not being incriminating in nature, can be the basis for invoking the provisions under section 153C of the Act. (ii) CIT Vs. Safetag International Pvt. Ltd., in 332 ITR 622 (Delhi). In this case, the Hon'ble Delhi High Court held that the Tribunal / ITAT was not correct in remanding the proceedings to the AO when the assessee had not asked the AO for the reasons recorded for initiating proceedings under section 147 of the Act and also did not file any objections to the same. In our humble view, the above judicial pronouncement is not relevant to the issue on hand as the said decision was rendered in the context of section 147 and not section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded for re-opening assessment under section 147 of the Act and therefore in our humble view, would not be applicable to the issue of dispute in the case on hand. (xii) Ganapati Fin Cap Services Pvt. Ltd., Vs. CIT (WP(c) 525/2015 and others) (Del. HC) where the Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. 4.4.2 On the issue that the satisfaction recorded by the AO is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material, but can be done even on the basis of material which is not incriminating in nature, the learned DR placed reliance on the following judicial pronouncement. (i) SSP Aviation Ltd., Vs. DCIT in 346 ITR 176 (Del. HC). In a writ filed by the assessee, the Hon'ble Delhi High Court held that the assessee could not get the notice issued under section 153C of the Act quashed for the reason that in the satisfaction note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot incriminating in nature, the learned AR has relied on the following judicial pronouncements:- (i) CIT Vs. IBC Knowledge Park (P) Ltd., in 385 ITR 346 (Kar) In this case, before the Hon'ble jurisdictional High Court of Karnataka, the issue for consideration and adjudication was whether the Bangalore Bench of the Tribunal was right in holding that it was not necessary to record a satisfaction note to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that "the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act". After considering the decision of the Hon'ble Apex Court in the cases of Manish Maheshwari Vs. ACIT (289 ITR 341) and CIT Vs. Calcutta Knitwears (2014) 362 ITR 673 and other judgments of the Hon'ble Apex Court and other Hon'ble High Courts; including the case of SSP Aviations Ltd., Vs. DCIT (2012) 20 taxmann.com 214 (Delhi) which supports the Revenue and on consideration of the CBDT, Circular No.24/2015 dated 31.12.2014, the Hon'ble Karnataka answered the question of law at paras 55 and 56 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assumption of jurisdiction under section 153C of the Act because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating and did not prima facie indicate undisclosed income and nor were any additions made based on these seized materials. It is further submitted that the CIT(A) also must have realized that the material based on which additions were made in the orders of assessment are not the same material relied upon to arrive at a satisfaction to invoke the proceedings for assumption of jurisdiction under section 153C of the Act. It is also contended that the CIT(A) had no choice / option but to cancel the orders of assessment as he was bound by the judgment of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., (supra). According to the learned AR, the CIT(A) could not have strengthened the orders of assessment, despite the fact that his powers are co-terminus with that of the AO, as the very proceedings, initiated under section 153C of the Act was void-ab-initio and he had no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Apex Court in the aforesaid decision in the case of CIT Vs. Sinhgad Education Society has clearly decided this issue in favour of the assessee and against Revenue. Consequently, ground No.1 raised by the Revenue for Assessment Years 2008-09, 2011-12 and 2012-13 is dismissed. 4.8 Ground No.2 4.8.1 "2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment." 4.8.2 It is an undisputed facts that the following two seized material were the only seized material that formed the basis for initiation of proceedings under section 153C of the Act in the case on hand:- (i) A/HBS/10, Page 15 - Lease Agreement entered into by the assessee with one Somegowda; (ii) A/HBS/10, Page 34 - Share allotment certificate issued in favour of the assessee by Pantaloon Ltd., giving details of allotment of Bonus shares as well as original shares h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal; but was argued by the learned DR during the course of hearing. The issue argued was that the CIT(A) had erred in upholding the ground raised by the assessee that the initiation of proceedings for Assessment Year 2008-09 was barred by limitation in view of the proviso to section 153C of the Act. 5.2 After due consideration of the contentions put forth, we find that Assessment Year 2008-09 is outside the ambit of the provisions of section 153C of the Act in view of the proviso thereto. We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C of the Act is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. In coming to this view, we drew support from the decision of the ITAT, Pune Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of ₹ 1,08,26,400/- ; on account of miscellaneous receipts based on seized CD whereas Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective addition of ₹ 12,15,745.1- on election related expenses when Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 5. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged issue of notices as decided by Delhi High Court in the case of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of ₹ 1,10,93,254/- , on account of Undisclosed Investment in residential House where as Gujarat High Court in 140 ITR 517settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT Vs Safetag International Pvt. Ltd. in 332 ITR 622 and Hon'ble Apex Court in the case of Shri Vijyabhai N Chandrani in 357 ITR 713. 2. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment. 3. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in deleting protective additions of a sum of ₹ 1,06,97,067/- , on account of Undisclosed Investment in residential House where as Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality. 4. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that firstly, there was no requirement of law that the assessee must first object to the assumption of jurisdiction by AO under section 153C of the Act for the same issue to be taken up in appellate proceedings. The issue of assumption of jurisdiction involves purely a question of law and the assessee is in no way precluded from raising this issue / question before an appellate authority even if the same is not raised before the AO and the assessee has participated in the assessment proceedings. Secondly, according to the learned AR, the CIT(A) has rightly decided the issue of jurisdiction by relying on the decision of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in 385 ITR 346 (Kar) wherein it was held that the presence of incriminating material leading to undisclosed income was a sine qua non for invoking the provisions of section 153C of the Act. Thirdly, the learned AR contends that the CIT(A) could not have strengthened the orders of assessment since his hands were tied on the issue of jurisdiction because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating as they did not result in any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case on hand, the assessee has challenged the jurisdiction before the CIT(A) after completion of assessment proceedings and has followed the due process of law. There is no dispute that the seized material belong to the assessee in the case on hand. The subject matter of dispute is whether the said seized material, not being incriminating in nature, can be the basis for invoking the provisions under section 153C of the Act. (ii) CIT Vs. Safetag International Pvt. Ltd., in 332 ITR 622 (Delhi). In this case, the Hon'ble Delhi High Court held that the Tribunal / ITAT was not correct in remanding the proceedings to the AO when the assessee had not asked the AO for the reasons recorded for initiating proceedings under section 147 of the Act and also did not file any objections to the same. In our humble view, the above judicial pronouncement is not relevant to the issue on hand as the said decision was rendered in the context of section 147 and not section 153C of the Act. (iii) CIT Vs. Sohan Lal Sewa Ram Jaggi in 222 CTR 412 (All). This case deals with the delay in issue of notice under section 143(2) of the Act and is not applicable to the case on hand. (iv) CIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 525/2015 and others) (Del. HC) where the Hon'ble High Court held that when the AO for the 'person searched' and the 'other person' is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand. 10.4.2 On the issue that the satisfaction recorded by the AO is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material, but can be done even on the basis of material which is not incriminating in nature, the learned DR placed reliance on the following judicial pronouncement. (ii) SSP Aviation Ltd., Vs. DCIT in 346 ITR 176 (Del. HC). In a writ filed by the assessee, the Hon'ble Delhi High Court held that the assessee could not get the notice issued under section 153C of the Act quashed for the reason that in the satisfaction note there was no firm conclusion / opinion that the seized material showed undisclosed income. In our view, this judicial pronouncement does prima facie help the Revenue in the case on hand and we shall come back to the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka, the issue for consideration and adjudication was whether the Bangalore Bench of the Tribunal was right in holding that it was not necessary to record a satisfaction note to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that "the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act". After considering the decision of the Hon'ble Apex Court in the cases of Manish Maheshwari Vs. ACIT (289 ITR 341) and CIT Vs. Calcutta Knitwears (2014) 362 ITR 673 and other judgments of the Hon'ble Apex Court and other Hon'ble High Courts; including the case of SSP Aviations Ltd., Vs. DCIT (2012) 20 taxmann.com 214 (Delhi) which supports the Revenue and on consideration of the CBDT, Circular No.24/2015 dated 31.12.2014, the Hon'ble Karnataka answered the question of law at paras 55 and 56 thereof as under:- (ii) CIT-III, Pune Vs. Sinhgad Technical Education Society (CA No.11080 to 11083 of 2017 dated 29.08.2017) (SC). In this case the Hon'ble Apex Court held at paras 18 and 19 of its order that proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and nor were any additions made based on these seized materials. It is further submitted that the CIT(A) also must have realized that the material based on which additions were made in the orders of assessment are not the same material relied upon to arrive at a satisfaction to invoke the proceedings for assumption of jurisdiction under section 153C of the Act. It is also contended that the CIT(A) had no choice / option but to cancel the orders of assessment as he was bound by the judgment of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., (supra). According to the learned AR, the CIT(A) could not have strengthened the orders of assessment, despite the fact that his powers are co-terminus with that of the AO, as the very proceedings, initiated under section 153C of the Act was void-ab-initio and he had no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also contends that it is important to note the fact that the assessment jurisdiction of the assessee was transferred from his regular AO at Chikkamagalur and notified to the Office of the DCIT, Central Circle 2(3), Bangalore by order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue for Assessment Years 2008-09 to 2012-13 is dismissed. 10.8 Ground No.2 10.8.1 "1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the AO from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment." 10.8.2 It is an undisputed facts that the following two seized material were the only seized material that formed the basis for initiation of proceedings under section 153C of the Act in the case on hand:- (i) A/HBS/10, Page 15 - Lease Agreement entered into by the assessee with one Somegowda; (ii) A/HBS/10, Page 34 - Share allotment certificate issued in favour of the assessee by Pantaloon Ltd., giving details of allotment of Bonus shares as well as original shares held by the assessee in the said company. Admittedly, no additions to income / undisclosed income have been made in the orders of assessment based on these two seized materials (cited above at (i) and (ii) (supra). There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was barred by limitation in view of the proviso to section 153C of the Act. 11.2 After due consideration of the contentions put forth, we find that Assessment Year 2008-09 is outside the ambit of the provisions of section 153C of the Act in view of the proviso thereto. We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C of the Act is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. In coming to this view, we drew support from the decision of the ITAT, Pune Bench in the case of Sinhgad Technical Education Society (16 taxmann.com 101), and accordingly hold that the CIT(A) was correct in deciding this ground in favour of the assessee. 12. In view of the fact that we have held that the very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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