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TMI Blog2021 (4) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod to which they relate. We may refer to 'chaos theory' in this regard. The hypothesis of Edward Lorenz is that the mathematical models for weather systems can be extremely sensitive to initial conditions and that small changes in these initial conditions can result in big effects. The flapping of butterfly in Toronto can cause a typhoon in Tokyo. Correspondence between the two is revealed only with the benefit of hindsight. It is true that while taking action under Section 153C of the Act, the assessments can be reopened only for the period that correspond to the seized material. The question of correspondence with the assessment period has to be borne in mind when final order is passed. At the initial stage, the correspondence cannot be formulated with precision. Things may appear fuzzy at the beginning. Only an enquiry can unearth the entire truth. At the initial stage, certain leeway has to be given to the authorities. The statute itself prescribes the ceiling limit. The long arm of the department cannot extend beyond a point. I am therefore of the view that it would be against public interest to abort the efforts taken by the department to unearth the escaped inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded on various dates. It was revealed that they were involved in money laundering. They had floated shell companies and unaccounted money was routed through them. C.P.Anbanathan was found to charge 5% towards commission for his services while C.Giridharan was found to take 1%. It also came to light that those two individuals had transactions involving MMHRC, Madurai. Based on the materials collected from C.P.Anbunathan and C.Giridharan, Income Tax Department decided to conduct a search operation in the residential and business premises of Dr.S.Gurushankar. On 12.09.2016, the premises of Dr.S.Gurushankar and that of his Personal Assistant Sachithananth were searched. iii) The search yielded certain incriminating material. Since the material related to MMHRC, Madurai, the assessing officer was satisfied that the proceedings have to be initiated under Section 153C of the Act for the period commencing from the assessment years 2012-13 to 2016-17, against M/s.S.R.Trust which is running MMHRC. Thereupon the impugned notices dated 30.10.2017 under Section 153A of the Act was issued to Dr.S.Gurushankar, while the impugned notices dated 04.09.2018 under Section 153C of the Act were is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were passed cancelling the exemption earlier granted. That was challenged by the Trust before the appellate authority which allowed the appeal. The department took the matter before the Income Tax Appellate Tribunal but lost. T.C.A Nos. 161 to 167 of 2020 filed by the department before the Madras High Court were also dismissed on 24.11.2020. The contention of the learned counsel appearing for the petitioners is that the assessment of the petitioners herein was pending when the second search took place in September 2016. The earlier assessment order was passed only on 31.12.2016. The argument of the petitioners' counsel is that for reasons best known to the department, reassessment proceedings were not allowed to abate in terms of Second Proviso to Section 153A(1) of the Act. Instead they were allowed to continue and taken to its logical conclusion. Therefore according to him, a concluded assessment cannot be reopened on the strength of alleged incriminating material that was seized well before the conclusion of the re-assessment proceedings. 6. The learned counsel appearing for the petitioners further contended that these aspects constitute a jurisdictional fact. If the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing 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 and for the relevant assessment year or 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 reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) 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 prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 292(Gujarat) (Principal Commissioner of Income-tax-4 V. Saumya Construction (P.) Ltd.,) also held that if no incriminating material was found during search, no addition can be made on the basis of the material collected after search. The sheet anchor of the petitioner's counsel rests on the decision of the Hon'ble Supreme Court reported in (2017) 84 taxmann.com 290(SC) (Commissioner of Income-tax-III, Pune V. Sinhgad Technical Education Society). In the said case, the Hon'ble Supreme Court while quashing the notice issued under Section 153C of the Act held that the incriminating material must pertain to the assessment years in question and if the documents seized do not establish any co-relation, document-wise, with the assessment years, action cannot be taken. It was further held that this requirement under Section 153 C of the Act is essential for assessment under the provision and it becomes a jurisdictional fact. The Hon'ble Division Bench of Delhi High Court reiterated position laid down in Kabul Chawla case and Saumya Construction case in Principal Commissioner of Income Tax (Central)-2 V. Index Securities (P.) Ltd.,) ((2017) 86 taxmann.com 84(Delhi), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue that this proviso is worded in an imperative language. The petitioner Dr.S.Gurushankar was the searched person. M/s.S.R.Trust was the connected person. In September 2014, Dr.S.Gurushankar was the Managing Trustee of M/s.S.R.Trust. Search under Section 132 had been again conducted in September 2016. If the assessees wanted to invoke the Second Proviso, they could have filed a memo or an application seeking abatement of the first search assessment proceedings before the assessment officer. They did not do so. They allowed the assessment officer to pass final assessment order on 31.12.2016. In any event, the proviso will only affect the first search assessment and it cannot have any bearing on the Second search assessment. 14. It must be noted that after the conclusion of the first search, the petitioners were not at all in the radar of the department. When the money laundering activities of C.P.Anbunathan and C.Giridharan were investigated, their operations with the MMHRC came to light. It was that which triggered the search operation of Dr.S.Gurushankar and his Personal Assistant Sachithananth. On 12.09.2016, a bunch of documents were seized from the premises of Sachithananth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the conclusion that the materials seized by the department incriminate the petitioners herein, notices issued to Dr.S.Gurushankar for six assessment years have to necessarily be sustained. Of course, one other contention of the petitioners' counsel deserves to be considered. The petitioners' claim that nothing was seized from the residence of Dr.S.Gurushankar. The material was seized only from the residence of Sachithananth. Sachithananth was not an assessee. But this argument has to be stated only to be rejected. Sachithananth is not someone who is alien to the transaction. He is the Personal Assistant to Dr.S.Gurushankar. Dr.S.Gurushankar is none other than the Managing Trustee of M/s.S.R.Trust which runs MMHRC. Therefore, the possession of incriminating material by Sachithananth can certainly be attributed to both the petitioners herein. The principle of constructive possession can very well be applied to the case on hand. If such an approach is not adopted, then it will be very easy for an assessee to evade the provisions of the Act by utilizing the services of third parties. In a case arising under the Prevention of Corruption Act, the Hon'ble Supreme Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial conditions and that small changes in these initial conditions can result in big effects. The flapping of butterfly in Toronto can cause a typhoon in Tokyo. Correspondence between the two is revealed only with the benefit of hindsight. It is true that while taking action under Section 153C of the Act, the assessments can be reopened only for the period that correspond to the seized material. The question of correspondence with the assessment period has to be borne in mind when final order is passed. At the initial stage, the correspondence cannot be formulated with precision. Things may appear fuzzy at the beginning. Only an enquiry can unearth the entire truth. At the initial stage, certain leeway has to be given to the authorities. The statute itself prescribes the ceiling limit. The long arm of the department cannot extend beyond a point. I am therefore of the view that it would be against public interest to abort the efforts taken by the department to unearth the escaped income. 18. Thus, looked at from any angle, I have to hold that initiation of the impugned action cannot be said to be without basis. They are grounded on solid material. In fact, immediately after the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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