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TMI Blog2020 (10) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... otective basis for AY 2008-09 to 2010-11 are concerned, the said addition was made not on the basis of any incriminating material found in the search of K.Mahesh Kumar which relate to the Assessee and therefore the said addition can also not be sustained as it is contrary to the provisions of Sec.153C - no basis for protectively assessing the income in the hands of the Assessee and substantively in the hands of K.Mahesh Kumar. There is no material to show that the income declared by K.Mahesh Kumar is either his income or that of the Assessee. From the fact that K.Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K.Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. The declaration of income by K.Mahesh Kumar is in his hands and not in the hands of the Assessee firm in his capacity as partner. Differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K.Mahesh Kumar. Since the additions are deleted on merits, we do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the partner of assessee firm. Since the assessee was not subjected to search u/s. 132 of the Act, proceedings consequent to search in the case of K. Mahesh Kumar was initiated u/s. 153C of the Act. It may be mentioned that the case of K. Mahesh Kumar who was subjected to search as well as the assessee, Sri Lakshmi Venkateshwara Minerals, were centralized and the DCIT, Central Circle 2(1), Bangalore was the Officer who ultimately concluded the assessment in the case of Sri Lakshmi Venkateshwara Minerals as well as the assessee. 5. The requirement to invoke proceedings u/s. 153C of the Act is that if any money, bullion, jewellery or other valuable article or thing or any books of account or documents are found in a search u/s. 132 and the AO is satisfied that the money, bullion, jewellery or other valuable article or thing belongs to, or books of account or documents found relate to, a person other than the person who was subjected to a search u/s. 153A of the Act, then those assets or books of account and documents seized should be handed over to the AO of the other person and that AO will proceed in accordance with the provisions of section 153A of the Act. The 2nd condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income in response to the notice issued u/s. 153C dated 18.11.2011. In the course of assessment proceedings the assessee could not participate in the proceedings and therefore the AO proceeded to frame the assessment in the absence of proper details from the assessee. The AO made a disallowance of 20% of the expenses claimed in the P L account. The gross receipts and expenses claimed in the P L account for AYs 2008-09 to 2010-11 were as follows:- AY Gross Receipts Expenses claimed 2008-09 3,13,25,578 39,75,60,876 2009-10 7,26,95,976 5,59,40,723 2010-11 48,86,94,442 3,06,82,078 8. The AO disallowed 20% of the expenses for the reason that the details of expenses were not furnished by the assessee in the course of assessment proceedings. 9. The AO also noticed that for AY 2008-09 total credit in the books of account was ₹ 3,84,24,996 comprising cash credit of ₹ 60,10,500 and cheque credit of ₹ 3,24,17,496. 10. The AO noticed that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee M/s Venkateshwara Minerals is a partnership firm in which Mr Karapudi Mahesh is a key person. During the course of search action in the case of Mr-Mahesh on 25-10-2010, Mr Mahesh had admitted vide letter dated 28-03-2011 total turn over of ₹ 204 crores in his hands, which is not disclosed to tax. The undisclosed business receipts for A.Y 2009-10 in the case of M/s Venkateshwara minerals of ₹ 9,76,46,289/- shall be protectively added in the case of M/s lakshmi Venkateshwara minerals. 6. The same amount shall be substantively added in the hands of Mr Mahesh. The digital data seized during the course of search in the case of Mr Mahesh, Annexed as 'Payment betails.xls', 'Sha Received amount 01.02.2010.xls clearly records the transactions done by Mr Mahesh for the period 10-11-2009 to 31-07 2010. Moreover in the letter dated 28-03-2011, Mr Mahesh has owned up to having done business of transportation and trading of iron ore in his various concerns. One such concern he has mentioned is M/s Lakshmi venkateshwara minerals. Hence the above amount is substantively added in the hands of Mr Mahesh for A.Y 2009-10. 12. For the AY 2010-11, the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny incriminating material pertaining to the said addition. 15. As far as protective addition made in the hands of assessee and substantive addition in the hands of K. Mahesh Kumar are concerned, the CIT(Appeals) deleted the addition made by the AO by observing that addition made protectively in the hands of assessee and substantively in the hands of K. Mahesh Kumar was confirmed in the hands of K. Mahesh Kumar on substantive basis. The CIT(Appeals) therefore deleted the addition on protective basis in the hands of assessee. 16. Aggrieved by the order of the CIT(Appeals) in sustaining the disallowance of expenses made by the AO the assessee has preferred the appeals and aggrieved by his order in deleting the protective assessment made in the hands of assessee of undisclosed income, the revenue has preferred appeals before the Tribunal. 17. We have heard the submissions of the ld. counsel for the assessee and the ld. DR. 18. The first submission of the ld. counsel for the assessee was that the satisfaction recorded by the AO before proceeding to invoke the provisions of section 153C in the case of assessee is not in accordance with law and therefore assumption of jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction note for taking up the case of M/s. Super Malls (P.) Ltd. Sector-12, HUDA, Karnal Regd. Office at 51, Transport Centre, Punjabi Bagh, New Delhi under section 153C of the Income-tax Act, 1961. The jurisdiction of this case has been assigned to this Office u/s 127 of the Income-tax Act, 1961 by the worthy Commissioner of Income Tax-III New Delhi vide order F. No. CITIII/Delhi/Centralization/1012-1312455 dated 15-1-2013. By virtue of the authorization of the Director of Income-tax (Investigation), Chandigarh, a search seizure operation u/s 132(1) of the Act was carried out on 8/9-4-2010 at the residential/business premises of Sh. Tejwant Singh Sh. Ved Parkash Bharti Group of cases, Karnal, Panipat Delhi and a survey u/s 133A of the IT Act, 1961 was also carried out at the business premises of M/s. Super Mall (P.) Ltd. Karnal New Delhi. During the course of search on 8/9-4-2010 at residence of Sh. Ved Parkash Bharti who is a Director in the assessee company M/s. Super Mall (P.) Ltd., Pen drives were found and seized as per Annexure-3 from vehicle No. HR 06 N-0063 parked in front of the residence of Sh. Ved Parkash Bharti. Some documents as per Annexure A-1 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2011 has to be regarded as the date of search in terms of 1st proviso of section 153C(1) of the Act. The relevant dates with regard to the assessment in the case of the Assessee for AY 2008-09 to 2010-11 having already been completed prior to the date of Search in the case of the Assessee i.e., prior to 18.11.2011 are as follows:- AY Date of filing of return of income Date of issue of notice u/s. 143(2) Remarks 2008-09 07.10.2008 20.9.2009 No notice u/s. 143(2) issued. 2009-10 05.12.2009 30.9.2010 No notice u/s. 143(2) issued. 2010-11 13.10.2010 30.9.2011 No notice u/s. 143(2) issued. 24. It was thus contended by ld. counsel for the assessee that since pursuant to the return of income filed by the assessee for the 3 assessment years, the acknowledgement has already been issued by the AO and since no further proceedings by issue of notice u/s. 143(2) within the time contemplated by law was issued, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance (No.2) Act, 2014 w.e.f 1.10.2014 for the following words and that Assessing Officer shall proceed against each of such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A 27. The Assessments in the present case relate to the period prior to the amendment referred to above. The aforesaid amendment has been held to be clarificatory in nature and therefore has to be held as applicable retrospectively from the inception of Sec.153C of the Act in the statue, by the ITAT Kolkata Bench in the case of Trishul Hi-Tech Industries Vs. DCIT IT(SS)A.Nos.84-86/Kol/2011 (AY 04-05, 05-06 06-07) order dated 24.9.2014. In the aforesaid decision the Hon ble Kolkata Bench of ITAT, after considering the amended provisions of Sec.153C of the Act by the Finance Act, 2014, held that the provisions of Sec.153C of the Act as amended by Finance (No.2) Act, 2014 though is made applicable on and from 1.10.2014, is also relevant for earlier assessment years as it cures the infirmities of the previous legislation and also makes the provisions workable by avoiding absurd consequences. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment and as to why it should held to be retrospective. The condition precedent for assessing or reassessing income u/s.153C is that the AO has to be satisfied that the seized material in the course of search has a bearing on determination of the total income of the other person i.e., it should be incriminating in nature. 28. We are in respectful agreement with the view expressed by the ITAT Kolkata Bench in the case of Trishul Hi-Tech (supra). We may also add that it is settled rule of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. Ordinarily the Courts are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. What happens sometimes is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation, if subsequently some amendment is carried out to clarify the real intent, such amendment happens to be retrospective from the date the earlier provision was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 . The Honble Court came to the above conclusion 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 and CBDT, Circular No.24/2015 dated 31.12.2015 . The Hon ble High Court also took the view that the AO is expected to spell out as to how the documents were incriminating in nature and prima facie represent undisclosed income. In this regard, we also find that in the order of assessment, the AO has not proceeded to make any assessment on the basis of material referred to in the satisfaction note. On the other hand, he has made additions which are not based on any seized material which pertains to assessee. Such a course is not permissible u/s. 153C of the Act as laid down by the Hon ble High Court of Karnataka in the case of IBC Knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is either his income or that of the Assessee. From the fact that K.Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K.Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. The declaration of income by K.Mahesh Kumar is in his hands and not in the hands of the Assessee firm in his capacity as partner. Even going by the theory of the AO that there are differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K.Mahesh Kumar. As we have already observed assessment u/s.153C of the Act has to be based on material found in the course of search which are relate to or belong to Assessee. 32. Since the additions are deleted on merits, we do not wish to address the arguments made by the learned counsel for the Assessee that the condition precedent for initiating proceedings u/s. 153C of the Act have not been satisfied in the present cases and therefore the assessment is liable to annulled. In view of the above conclusion, we don t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the following incriminating documents which belong to the above mentioned assessee firm were seized. 1.A/DP/10 - Pages 34, 35 and 36 I am satisfied that the proceedings u/s 153C required to be initiated in this case. Hence, the notice u/s. 153C of the IT Act 1961 dated 18-11-2011 is issued calling for return of income for the above Asst. year. DCIT-CC-2(2) 35. It is further seen from the satisfaction note filed before us that the reference is to a search in the case of one Dada Peer. The date of handing over of the seized material on 18.11.2011 which is the same date as in the first set of cases i.e., the case of other assessee, Sri Lakshmi Venkateshwara Minerals. The seized document referred to as Document A/DP/10 Pages 34 to 36. Therefore, there is a contradiction in the assessment order and satisfaction note with regard to the person searched. The assessment order refers to search in the case of K.Mahesh Kumar. Be that as it may. As far as this assessee is concerned, all the assessments for 3 assessment years became final prior to the date of handing over the assessee s documents i.e., 18.11.2011. Relevant dates in this regard are as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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