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TMI Blog2020 (2) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in quashing the order u/s 143(3) for the last year in the period to be covered u/s 153C of the Act. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the date of recording of satisfaction note instead of date of search is to be taken as the base date for calculating the period to be covered u/s 153C of the Act. 4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that no addition can be done u/s 153C in the case of completed assessment, if no incriminating document has been found during search." 2. Briefly the facts of the case are that return of income was filed originally on 21.09.2010 declaring NIL income. The same was processed under section 143(1) of the I.T. Act, 1961. A.O. issued notices under sections 143(2) as well as 142(1) of the I.T. Act, 1961. The A.O. noted that search and seizure operation under section 132 of the I.T. Act, 1961 was carried out in Raj Darbar Group of Cases on 31.07.2008. The assessee was incorporated on 15.03.2004. During the year under consideration, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties Ltd., (supra) in the impugned order as under : (i) "that in accordance with the provisions of the 1st Proviso to s. 153C read with 2 Proviso to s. 153A(1) of the Act since the AO of the searched person and the person other than the searched person are the same, the 'date of satisfaction' of the AO for initiating proceedings u/s 153C of the Act in the present case would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the searched person, i.e., 20.07.2010 in this case; (ii) accordingly, the AO was required to make assessment u/s 153C, in the manner as mentioned in S.153A of the Act, for the AYs 2005-06 to 2010-11 in terms of the 'date of satisfaction', i.e. 20.07.2010, and not AYs 2003-04 to 2008-09 in accordance with the date of search in the Rajdarbar group of cases as has been done by the AO (in fact assessments were made for AYs. 2005-06 to 2008-09 since the appellant firm was registered on 15.03.2004); (iii) the assessment/reassessment pending on that date (20.07.2010) would abate, and in respect of such assessments which have abated the AO would have the jurisdiction to proceed and make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.153A of the Act and the principles laid down by the Hon'ble Delhi High Court in RRJ Securities Ltd. (supra), the assessment of AY 2010-11 as well had abated since the return of income for this year had not become due on 20.07.2010, the date of recording of the satisfaction, and had not been filed. Therefore, the appellant's case for the present assessment year, AY 2010-11, was to be assessed u/s 153C read with S.153A of the Act, but the AO neither recorded any 'satisfaction' for this assessment year in the case of the appellant nor did he make the assessment u/s 153C of the Act, rather the assessment has been made u/s 143(3) of the Act without recording the mandatory 'satisfaction'. The assessment order is, therefore, not sustainable on this account itself. 4.1.6. I may, however, make mention of the fact that S.153A and 153C of the Act are special provisions for assessment or reassessment emanating from search u/s 132/132A of the Act, and the period after the date of search are to be assessed under the normal provisions of the Act. In terms of the provisions of the 1st Proviso to s. 153C of the Act the date of handing over the seized books/documents/assets, or the date of sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 'undisclosed income' was available with the AO. However, respectfully following the judgment of the Hon.ble High Court of Delhi in RRJ Securities (supra) I hold that the assessment of the appellant for AY. 2010-11 was to be made u/s 153C of the Act, but the AO neither recorded any 'satisfaction' for this assessment year in the case of the appellant nor did he issue any notice u/s 153C of the Act and make assessment u/s 153C read with S.153A of the Act, rather the assessment has been made u/s 143(3) after issue of notice u/s 143(2) of the Act without recording the mandatory 'satisfaction'. The assessment order is, therefore, not sustainable on this account itself and held to be ab initio void." 3. The Ld. D.R. relied upon the Order of the A.O. and submitted that since it was not year of the search, therefore, A.O. correctly framed the assessment under section 143(3) of the I.T. Act, 1961. He has referred to comments of the A.O, in which, A.O. has highlighted that in previous years i.e., A.Ys. 2005-2006 to 2009-2010, the Ld. CIT(A) has decided the appeals in favour of the Revenue and the Ld. CIT(A) while deciding the appeal of the assessee for the A.Y. 2010-2011 under appeal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted fact that search operation was conducted in the case of Rajdarbar Group of cases on 31.07.2018. During the course of search, various papers were found and seized belonging to the assessee. The A.O. recorded satisfaction note in the case of assessee on 23.07.2010. Therefore, the issue would be squarely covered by the Judgment of Hon'ble Delhi High Court in the case of RRJ Securities Ltd., (supra) and the assessment year under appeal 2010-2011 would be governed by the provisions of Section 153C of the I.T. Act, 1961. Since no satisfaction note have been recorded for the assessment year under appeal i.e., 2010-2011, therefore, A.O. was not justified in passing the Order under section 143(3) of the I.T. Act, 1961. In preceding A.Y. 2009-2010 similar view have been taken by Hon'ble Delhi High Court in the case of assessee and a specific question as noted above have been considered by the Hon'ble Delhi High Court and it was held as under : "Where in course of search carried out at premises of a third person, a hard disk was seized and on basis of same proceedings under section 153C were initiated against assessee, since Assessing Officer of searched person failed to record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C, assessee filed revised return declaring total income of ₹ 2,22,43,593/-. Assessment was framed at ₹ 5,22,43,593/- by making addition of ₹ 3 crores as surrendered amount not incorporated in the return of income. Assessee challenged the validity of the assessment proceedings as well as addition on merit before the Ld. CIT(A). However, appeal of the assessee has been dismissed. 3. Assessee in the present appeal, challenged the validity of the proceedings under section 153C of the I.T. Act and addition of ₹ 3 crores. The assessee also moved an application for admission of additional grounds in which assessee raised the following additional grounds : 1. Additional Ground No. 1 "That under the facts and circumstances, in the absence of issuance and service of notice U/s. 153 C r/w. Sec. 153A of the I.T.Act, the jurisdiction for framing the impugned Asstt. has been wrongly assumed, hence, the impugned Asstt. is without jurisdiction, illegal and unsustainable in law." Additional Ground No. 2 "That without prejudice, As the seized documents in search of a 3rd party have been received by the AO of the assessee on 29.08.2013, therefore, in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I.T. Act, therefore, the same should be admitted for deciding the appeal. The Hon'ble Punjab & Haryana High Court in the case of VMT Spinning Co Ltd., vs. CIT (2016) 389 ITR 326 (P & H) considering various decisions including the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., (1998) 229 ITR 383 (SC) held that "the Tribunal could decide the appeal on a ground neither taken in the Memorandum of Appeal nor by seeking its leave. The only requirement was that the Tribunal could not rest its decisions on any other ground unless the party who might be affected had sufficient opportunity of being heard given on that ground. Therefore, the Tribunal ought to have exercised its discretion in view of the fact that assessee intended raising only a legal argument without reference to any disputed question of facts." 5.1. Considering the issue in the light of the fact that additional grounds are legal in nature and shall have bearing on the validity of the assessment proceedings, therefore, the same is admitted for the purpose of disposal of the appeal. 5.2. Learned Counsel for the Assessee submitted that search was conducted in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy P. Ltd., (2017) 397 ITR 400 (Del.), Order of ITAT, Delhi, B-Bench in the case of ACIT vs. Empire Casting Pvt. Ltd., New Delhi in ITA.No.4018/Del./2011 and C.O.No.207/Del./2012 dated 21.11.2017 and Order of ITAT, Delhi, C-Bench in the case of PavitraRealcon Pvt. Ltd., New Delhi vs. ACIT, Central Circle-32, New Delhiin ITA.Nos. 3185, 3186 & 3253/Del./2015 dated 04.10.2017. He has also referred to Memorandum explaining Finance Bill 2017 in which it is provided that "Amendment in Section 153C shall apply in respect of search conducted or requisition made on or after 1st day of April, 2017." 6. On the other hand, Ld. D.R. submitted that Section 153A(1) deals with the years of reopening in the case of search proceeding and as per Section 153C(1) after the satisfaction, the A.O. shall proceed in accordance with provisions of Section 153A(1) of the I.T. Act. Section 153A(1)(b) is very clear that "A.O. shall assess or re-assess the total income of 06 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted". No where the Section contains the word "Date of initiation of the Search" which are referred to by the First Proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow' that the six assessment years for 'which assessments or reassessments could be made under section 153C of the Act would also have to be construed with reference to the date of handing aver of assets or documents to the Assessing Officer of the assessee. The amendment in section 153C of the Act by the Finance Act, 2017 with effect from April 1, 2017 to the effect that the Block Period for the person in respect of whom the search was conducted as well as the "other person" would be the same six assessment years immediately preceding the year of search is prospective. A search under section 132 of the Income-tax Act, 1961 took place on November 11,2010 in the T group of cases. The documents pertaining to the assessee were forwarded along with a satisfaction note by the Assessing Officer of the party in respect of which the search was conducted to the Assessing Officer of the*assessee on January 3, 2013. The Assessing Officer of the assessee issued notice to the assessee under section 153C of the Act on January 4,2013 for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of satisfaction recorded by the Assessing Officer of the searched person. We, therefore, hold that the learned CIT(A) was quite justified in considering the assessment for assessment year 2003-04 as outside the scope of section 153C of the Act, being barred by limitation and without jurisdiction. Accordingly, the impugned assessment order is liable to be quashed. We decide accordingly." 7.3. The ITAT, Delhi, C-Bench, in the case of Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT, C.C.32, New Delhi (supra) under the same circumstances held that "assessment completed under section 143(3) is invalid". The relevant para-16 of the order is reproduced as under : 16. "We find the year for which the impugned assessment order has been passed u/s 143(3) is for assessment year 2011-12. This year falls within the period of six years when counted from the date of recording of satisfaction note u/s 153/153C of the I.T. Act which is deemed date of search. The Act h as been amended recently by the Finance Act, 2017 with prospective effect i.e., from assessment year 2018-19. Thus, the period is same now only for the searched parties as well as the other person as per the amended provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and cannot be sustained. The contention of the Ld. D.R. have already taken care in the above judgments. 9. Considering the totality of the facts and circumstances of the case, we set aside the orders of the authorities below and quash the same and allow the additional grounds of appeals. Resultantly, all additions stands deleted. Since the assessment order is set aside on legal grounds, therefore, there is no need to decide the addition on merit which has been left with academic discussion only. 10. In the result, ITA.No.504/Del./2013 of the Assessee is allowed. ITA.No.503/Del./2015 - Shri Ranjan Gupta - A.Y. 2012-2013 11. In this appeal, the facts and issue is identical. The assessee also moved for admission of the additional grounds as have been considered in the case of M/s. BNB Investment and Properties Ltd. Following the reasons for decision in the case of M/s. BNB Investment and Properties Ltd., (supra), we admit the additional grounds of appeal, set aside the orders of the authorities below and quash the same. Resultantly, delete the entire addition. 12. In the result, appeal of assessee is allowed. 13. To sum-up, both the appeals of the assessees are all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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