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TMI Blog2019 (4) TMI 1755X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings u/s. 153A of the Act always precede the proceedings u/s. 153C of the Act and without recording satisfaction note by the Assessing Officer initiating proceedings for completion of assessment u/s. 153A of the Act cannot be proceeded u/s. 153C of the Act in the case of such other person not searched. Same view was taken by the Supreme Court in the case of CIT vs. Calcutta Knitwears, Ludhiana [ 2014 (4) TMI 33 - SUPREME COURT] In the present case, there was a search u/s. 132 of the Act in M/s. Kunhitharuvai Memorial Charitable Trust, Calicut which revealed that the assessee received training charges from College of Nursing which is an institute under KMTC. It was also noted that during the course of search, the assessee had not filed return of income from assessment year 2006-07 onwards. It received income from IP and OP collections, dialysis, advertisement, X-rays, Lab, CT scan, MRI, income from hospital canteen in addition to the training charges received from KMCT. Consequently, notice u/s. 153A(a) r.w.s 153C was issued to the assessee. It was therefore, a prima facie proof that condition of section 153C was satisfied before invoking the jurisdiction in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned. Hence, this ground of appeals of the assessee are dismissed. - I.T.A. Nos. 62-68/Coch/2016 Assessment Years : 2006-07 to 2012-13 - - - Dated:- 10-4-2019 - S/Shri Chandra Poojari, AM And George George K., JM Assessee by Shri G. Surendranath Rao, CA Revenue by Smt. A.S. Bindhu, Sr. DR ORDER Chandra Poojari, These appeals filed by the assessee are directed against the different orders of the CIT(A)-IV, Kochi and pertain to the assessment years 2006-07 to 2012-13. 2. Since the issues raised in these appeals are common in nature, they were clubbed together, heard together and are being disposed of by this common order. 3. The first common ground raised by the assessee in ITA Nos. 62 to 68/Coch/2016 reads as follows: (2) The Commissioner of Income-tax(Appeals) is not justified in confirming disallowance only because of the jurisdictional Kerala High Court decision. The issue whether the disallowance under section 40(a)(ia) is attracted only if the amounts are remaining payable at the end of year or whether it is applicable even for amounts paid during the year has not become final and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/10/2011 in the case of M/s. Kunhitharuvai Memorial Charitable Trust, Calicut. The search revealed that the assessee was receiving training charges for College of Nursing which is an institution under KMCT. A notice u/s. 153A(a) r.w.s. 153C was issued to the assessee for A.Y. 2006-07 to 2011-12 on 31/05/2012 and notice u/s. 142(1) dated 08/08/2012 was issued for A.Y. 2012-13 for furnishing the return of income. Notices were issued to the assessee on 05/06/2012 and 14/08/2012 respectively. The assessee vide letter dated 09/07/2012 informed that they could not finalize their accounts for the previous year ended 31/03/2006 till now and requested for an extension of time for furnishing the return of income till 16th August 2012. A reminder was issued on 19/09/2012 and 24/09/2012 due to non compliance to the notice u/s. 153A(a) of the Act. In response, the assessee submitted as under: We had been instructed to file returns of income u/s. 153A of the income Tax Act, 1961 on 4th July 2012. We wish to submit the following: We belong to a group of concerns whose chairman is Dr. K. Moidu. Search was conducted at all the concerns and residential premises. All the matters are de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that recording of satisfaction by the Assessing Authority that any money, bullion, jewellery or other valuable article/thing or books of account/documents seized during search belong to the person other than the person searched is a sine qua non for initiating action under Section 153C. It was submitted that that no such satisfaction was recorded by the assessing authority before the assessment u/s. 153A read with section 153C commenced on the assessee as a connected person. The Ld. AR relied on the judgment of the Apex Court in the case of CIT vs. Calcutta Knitwears, Ludhiana, (362 ITR 673), wherein it was decided that recording of recording of satisfaction note is pre-requisite before commencing assessment proceedings in the case of the person other than the person who has been searched. The Ld. AR also relied on the CBDT Circular No. 24/2015 [F.NO.279/Misc./140/2015/ITJ], dated 31-12-Z015 in which it was mentioned that the principles as reiterated by the Supreme Court, with regard to recording of satisfaction note have to be strictly complied with and this would apply even if the AO of the searched person and the connected person is the same. If this condition has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the Ld. AR, unless there is a clear recording that the AO is satisfied about the discovery of incriminating documents or valuables which belong to the assessee, the proceedings initiated u/s 153A read with section I53C against the assessee would be invalid. Such an assessment is clearly not sustainable as the assessing authority wrongly assumed jurisdiction under Sec. I53C as has been held by the Supreme Court in the case of Sinhgad Technical Education Society v. CIT(397 ITR 344) (SC). The Ld. AR also relied on the decision of the ITAT, Hyderabad Bench in the case of Shettys Pharmaceuticals Biologicals Ltd. vs. DCIT (47 taxmann.com 85 (Hyderabad Trib.) 7.3 The Ld. AR referred to para 5 of the assessment order dated 31.03.2014 wherein it was mentioned that there was a survey in the premises of the assessee. It was submitted that if the estimated additions were made on the basis of survey with respect to receipts from hospital collections and income from medical check-up apart from the addition made u/s 40a(ia) on account of non-deduction of income tax at source on some payments, then the AO should have proceeded against the assessee by issuing notice u/s 148 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee u/s. 153C r.w.s. 153A of the Act consequent to the search conducted u/s. 132 of the Act. Therefore, provisions of section 153C stand applicable in the case of present assessee to frame the assessment. For the sake reference, we prefer to reproduce section 153A to 153C of the Act hereunder: 153A. [(1)] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year falling within six assessment years referred to in clause (b) of 53[sub-section (1) of] section 153A, within a period of two years 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; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of two years 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 : Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or one year 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 further that in the case where the last of the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords two years , the words three years had been substituted: 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 or after the 1st day of April, 2005 but before the 1st day of April, 2009] and during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the period of limitation for making the assessment or reassessment in case of such other person shall, notwithstanding anything contained in clause (ii) of the second proviso, be the period of thirty-three 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 twenty-one months from the end of the financial year in which books of account or documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (1) of section 245D is received by the Commissioner under sub-section (2) of that section; 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 sub-section (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 sub-section (7) of section 245R; or (vii) the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub-section (2) of section 153A till the date of the receipt of the order setting aside the order of such annulment, by the Commissioner; or (viii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of such other person in accordance with the provisions of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of] section 153A shall be construed as reference to 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: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (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 ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income of such other person in accordance with the provisions of section 153A of the Act, meaning thereby that action u/s. 153C of the Act always depends upon the action u/s. 153A of the Act upon some other person. The AO of such person in whose case search was conducted is satisfied that the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belong to some other person, he after forming the belief to that extent regarding the same shall hand over the relevant material to the concerned AO having jurisdiction over such other person. In other words, we say that before initiating proceedings u/s 153C, the AO who has initiated proceedings for completion of assessment u/s. 153A of the Act should be satisfied that there is no undisclosed income which has been traced out when a person was searched u/s. 132 of the Act or the books of account were requisitioned u/s. 132A of the Act. Thus, in contrast to the provisions of section 148 of the Act where recording a reason in writing are sine qua non. Under Section 153C the existence of cogent and demonstrative material is germane to the assessing officers satisfaction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of such other person is that, the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned should belong to such other person. If the said requirement is not satisfied recourse cannot be made to the provisions of section 153C of the Act. Thus, the provisions contained u/s. 153C of the Act can only be invoked where there was satisfaction by the AO having jurisdiction over the person searched or requisitioned u/s. 132A during the course of assessment proceedings. Therefore, the proceedings u/s. 153A of the Act always precede the proceedings u/s. 153C of the Act and without recording satisfaction note by the Assessing Officer initiating proceedings for completion of assessment u/s. 153A of the Act cannot be proceeded u/s. 153C of the Act in the case of such other person not searched. Same view was taken by the Supreme Court in the case of CIT vs. Calcutta Knitwears, Ludhiana in civil appeal Nos. 3958 of 2014 (SLP) (C) No. 10542 of 2011 dated 12th March, 2014. Further it was also held by the Supreme Court in the case of Manish Maheswari vs. JCIT (289 ITR 341) as under: Held, Sec. 158BD provides for taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , X-rays, Lab, CT scan, MRI, income from hospital canteen in addition to the training charges received from KMCT. Consequently, notice u/s. 153A(a) r.w.s 153C was issued to the assessee. It was therefore, a prima facie proof that condition of section 153C was satisfied before invoking the jurisdiction in the case of the assessee. The assessee had not raised this issue before the Assessing Officer. The additional ground raised by the assessee is not arising out of the impugned order of the authorities below. The assessee must have brought on record the Panchanama from the date of search till the date on which prohibitory orders were lifted in the case of the searched parties, statement recorded u/s. 132(4) of the searched parties, the order sheet entries made by the concerned Assessing Officer in respect of searched parties and order sheet entries made by its Assessing Officer and also if any statement recorded from the present assessee to show that the initiation of proceedings u/s. 153C was not proper. It involves investigation of facts which have not been brought on record by the assessee. In the present case, the assessee brought on record only one Panchanama recorded from M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by, change the very basis of assessment. In the facts and circumstances of the case, we are of the view that it would be proper not to exercise the discretionary power vested with the Tribunal in favour of the assessee by permitting them to raise this issue before the Tribunal for the first time. We also place reliance on the judgment of the Jurisdictional High Court in the case of Dr. R.P. Patel vs. CIT (225 CTR 378). In view of this, the additional ground raised by the assessee is rejected. 9. The first common ground of appeals in ITA Nos. 62-68/Coch/2016 reads as under: (2) The Commissioner of Income-tax(Appeals) is not justified in confirming disallowance only because of the jurisdictional Kerala High Court decision. The issue whether the disallowance under section 40(a)(ia) is attracted only if the amounts are remaining payable at the end of year or whether it is applicable even for amounts paid during the year has not become final and there are conflicting judgments of various high courts on the said issue. 9.1 The facts of the case are that in these assessment years, the assessee made various payments without deduction of tax in respect of IP an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government is mentioned in rule 30(2) of the Income Tax Rules, 1962. The liability to deduct tax at source is mandatory. Section 40(a)(ia) of the Act relates not only to ossessees who follow the mercantile system but also assessees who follow the cash system. Section 40(a) is applicable irrespective of the method of accounting followed by an assessee. Therefore, by using the term payable the Legislature included the entire accrued liability. If the assessee follows the mercantile system of accounting, then the moment the amount is credited to the account of the payee on accrual of liability, tax deduction at source is required to be made but if the assessee follows the cash system of accounting, then on making payment tax deduction at source has to be made as the liability is discharged by making payment. The provisions of deduction of tax at source are applicable both in the situation of actual payment as well as of the credit of the amount. It follows that section 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid. When the entire scheme of obligation to deduct the tax at source and paying it over to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by law. 10.1 The main contention of the assessee is that the Assessing Officer cannot invoke the provisions of section 40(a)(ia) of the Act when the income of the assessee was estimated. It was submitted that once the income was estimated, it take care of the irregularities committed by the assessee and further addition by invoking the provisions of section 40(a)(ia) of the Act leads to double addition. 10.2 The ld. DR submitted that this ground was a fresh ground which was not at all raised before the lower authorities. Hence, it shall be dismissed. 10.3 We have heard the rival submissions and perused the record. The fact that the assessee failed to deduct tax on various payments was noted by the CIT. The fact that the entries are shown in the books of the assessee whose income had already been computed on the basis of the estimate but not on the return filed by the assessee, that does not prevent the ITO from invoking the provisions of section 145 of the Act for estimation of income and provisions of section 40(a)(ia) of the Act. In the case of CIT vs. Devi Prasad Vishwanath Prasad (72 ITR 194), the Supreme Court discussed the applicability of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimate ..... the question whether income represented by an entry in the books of a business is income of that business or of another business would have to be decided on the facts which showed the business to which it belonged. But quite clearly, the answer to that question would not depend on whether the income from the first mentioned business had been computed on the basis of a return filed or of an estimate of the income made by the taxing authorities Therefore, it cannot be said that the taxing authorities were precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appear in the books of a business whose income they had previously computed on a percentage basis. 10.5 Thus, there is nothing in law which prevents the Assessing Officer to invoke the provisions of section 145 of the Act for estimation of income and provisions of section 40(a)(ia) of the Act. We do not find any infirmity in the order of the Assessing Officer and the same is concerned. Hence, this ground of appeals of the assessee are dismissed. 11. In the result, all the appeals filed by the assessee are dismissed. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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