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TMI Blog2020 (1) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... marjit Singh, JM For the Assessee : Dr. K. Shivaram For the Revenue : Shri Durga Dutt/ Akhtar H. Ansari (DR) ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 30.10.2017 passed by the Commissioner of Income Tax (Appeals)-50, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2008- 09. 2. The assessee has raised the following grounds of appeal: - The Learned CIT(A) erred in upholding the validity of Notice u/s 148 where the proceedings u/s 153C had already been initiated which were dropped and immediately the reassessment proceedings had been initiated without any fresh material on record and hence reopening is void- ab - initio Merit : Addition of ₹ 237.00.000/- based on entries in diary of Third person: 2. No addition can be made based on entries found in the books in third party's premises since no search u/s 132 had taken place on the Assessee and hence S.132(4A) would not be applicable to the present facts of the case. In view of the same the entire addition may be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the no assessment could have been made under section 143(3) r.w.s. 147 of the Income tax Act. The appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal. 4. The brief facts of the case are that the case of the Assessee was reopened by issuance of notice dated 31.03.2014 u/s 148 of the I. T. Act, after recording necessary reason to believe that an income chargeable to tax has escaped Assessment and after obtaining the prior approval of higher authorities. In response to the notice, the assessee has filed the return of income on 23.04.2014 declaring the total income to the tune of ₹ 4,25,15,255/-. Notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. The reasons for reopening of the case were supplied to the assessee who filed the objection and the objection of the assessee was disposed of. A search and seizure action u/s 132 of the I. T. Act, 1961 was carried out at the residences and business premises of the Rohan Group related entities on 26.05.2011 by the Dy. DIT(Inv.), Unit- III(3), Mumbai. During the course of search and seizure action at the residence of late Jitendr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tilani Ent Lic 2008-09 35.5335 4,36,990 18.07.2007 3,41,582 United Arab Emirates Labdhi International Fze 2008-09 35.2141 1,20,28,502 16.07.2007 5,668 United Kingdom The Katy Bakery Agency 2008-09 35.1963 1,99,492 26.06.2007 2,35,349 United Arab Emirates Labdhi International 2008-09 34.6777 81,61,362 24.05.2007 49,982 United Arab Emirates Komal Ashok Rupani 2008-09 33.3736 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has been ordered to be dropped. The Ld. Representative of the assessee has argued that the proceeding u/s 153C of the Act was initiated and subsequently dropped on account non-satisfaction and thereafter the proceeding u/s 148 of the Act was initiated on similar grounds which is not justifiable, hence, the proceeding u/s 148 of the Act is liable to be set aside in the interest of justice. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. The revenue has submitted the letter dated 05.02.2019 before us in which it has been specifically conveyed that the proceeding was initiated u/s 153C of the Act by virtue of notice dated 14.01.2013 and was subsequently dropped on account of non-satisfaction drawn by the AO. It is admission on the part of the revenue that the proceeding initiated u/s 153C of the Act was withdrawn on account of non-satisfaction. Subsequently, the notice u/s 148 of the Act was issued on similar grounds. Where the provisions u/s 153C of the Act is applicable then it excludes the application of the provision u/s 147/148 of the Act. In this regard we also find support of law settled in the case of ITO Vs. Arun Kuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y capital gain on account of transfer of shares in his return of income for assessment. As such income to the tune of ₹ 2,02,10,000 (20,41,00,000 sale price-1,00,000 cost price) has thus escaped assessment for the asst. yr. 2006-07. In view of the above, we reject the contention of the learned Departmental Representative that no incriminating documents relating to the assessee were found during the course of search. 7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case of M/s. Today Homes Infrastructure (P.) Ltd. on 28th March, 2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the Dy. CIT, Central Circle-22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under s. 153C/148 of the Act. It is after that that during the course of appellate proceedings before the CIT(A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal. 7. On appraisal of the above mentioned finding, we noticed that there was no new material with the AO to initiate the proceeding u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Block assessment under section 158BC and as per the said provisions, the concept of block assessment was in force. The amendment brought in to the statue w.e.f. 1-6-2003, replaces the existing provisions with the new section, i.e. 153A to 153C governed the new scheme of search assessments, which abundantly clear that search assessment are separate provisions governed by these sections is independent from any other provisions of the Act. 9. The Income tax Act, 1961, by sections 153A, 153B and 153C provides for new scheme of assessment of search cases where the search is taken place on or after 31st Day of May 2003. The relevant provision reads as under: 153C. Assessment of income of any other person.-(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer satisfied that any money, bullion, jewellery or valuable article or thing or books of account or other documents seized or requisitioned belongs to a person other than the person referred to in section 153A, then the books of accounts or documents shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed in accordance with the provisions of section 153A. The CBDT issued a circular No.7 of 2003 dated 5-9-2003 reported in CIT v. B. Narasimha Rao [2003] 263 ITR 62/132 Taxman 821 (AP) explained the new scheme of assessment procedure in the following manner: 65. The special procedure for assessment of search cases under Chapter XIV-B be abolished 65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed. 65. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin six assessment years under 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. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed 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, as the case may be, was executed. 65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any Court; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that subsection, or the time taken in reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment u/s 147 has been removed by the non abstante clause used in section 153A. 14. In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary. 15. A similar issue came up for consideration before the Special Bench of this tribunal and the special bench had an occasion to deal with the interpretation of section 153A of the Act in the case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum) (SB). The Special Bench after considering the provisions of section 153A and CBDT circular has held as under: '52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 1 before us is answered a) as under (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately ;' 16. In yet another case, the ITAT Mumbai Bench, in the case of State Bank of India v. Dy CIT [2013] 22 ITR (Trib.) 609, had considered the issue. The Mumbai bench after considering the relevant sections and CBDT circular has held as under: 18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV- B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as block assessment because the Chapter provided for a single assessment to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12-2010 passed u/s 143(3) r.w.s. 147 is quashed. 8. However, the assessee took the alternate plea that the notice u/s 147/148 of the Act was issued after the expiry of 4 years and no sanction was taken, therefore, the order is not liable to be sustainable in the eyes of law. There is no need to go to the alternate ground because it is a matter of record that the proceeding u/s 153C of the Act was initiated against the assessee and on the same day the proceeding was dropped and notice u/s 148 of the Act was issued which was unjustifiable. In view of the said circumstances and in view of the law relied by the Ld. Representative of the assessee discussed above, we are of the view that the assessment order is not liable to be sustainable in the eyes of law, hence, we set aside the same. Accordingly, this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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