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TMI Blog2021 (10) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year 2013-14 - A diary containing the rental income for the whole year was found during the search and seizure operation. The rent from nine rooms was noted in the aforesaid diary - The income recorded, in our view, is the full income of the year from the aforesaid property. Moreover, it is not necessary that all the rooms of the building will be occupied on all days during the entire year. Therefore, as per the incriminating material, the rental income for the year from the property in question was at ₹39,12,500/-. The assessee having one third share in the said property, the rental income from the said property would be ₹13,04,166/- upon which the assessee would be entitled to deduction at the rate of 30% u/s 24(1) of the Act. However, the assessee, for the AY 2013-14, has already offered an income of ₹28,07,259/- which is more than the income that can be arrived at from the incriminating documents. We find force in the contention of the Ld CIT(A). AR that the assessee had offered the income in lumpsum of ₹ 1,80,00000/- which was bifurcated on approximation basis and that the excess income offered in an year may be adjusted against the year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 021 - Sri Sanjay Garg, Judicial Member And Sri M.L. Meena, Accountant Member For the Assessee : Sh. Manish Tiwari, A/R For the Revenue : Sh. Manish Kanojia, JCIT ORDER PER BENCH: The captioned are a bunch of 14 appeals i.e. 7 appeals in case of each of the above named two assessees relating to Assessment Years (in short AY ) 2009-10 to 2015-16 in respect of assessments framed in the case of person other than the searched person u/s 153C of the Income Tax Act, 1961 (hereinafter the Act ). Since the facts for all the assessment years are identical and a common issue is involved, hence these appeals have been heard together and are being disposed off by this common order. 2. The brief facts are that a search and seizure operation u/s 132 of the Act was conducted on 03.04.2014 in the case of one Rupa Singh Ors. Group. During the course of search and seizure operation various assessees of the group were covered for search seizure action u/s 132 also survey action u/s 133A of the Act. From the seized documents it revealed that the co-owners of the following premises namely A) 24/1, Masjid Bari Street, Kolkata-700006 B) 142, Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 in the case of Bharat Singh. In this appeal, the assessee has taken the following grounds of appeal: 1) For the order of the Appeal is arbitrary, illegal, bad- in- law unnatural justice. 2) That the enhancement of rental income by ₹ 26,69,472/-is without any basis and bad-inlaw. 3) That the declared income by the Appellant of rent ₹ 17,84,086/- should have been accepted by the learned Assessing Officer. 4) That the id. C.I.T.(A) -1 Kolkata dismissed the Appeal case is without any basis of law. 5) That the Appellant craves leave to alter, add, to amend the grounds of Appeal at the time of hearing. 4.1. Apart from this, the assessee has also taken the following additional grounds of appeal: 1. That on the facts and in the circumstances of the case, the initiation of proceeding u/s 153C is erroneous and bad in law. 2. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred inconfirming the action of A.O. who has travelled beyond his jurisdictional limit contemplated in section 153C of the Act to estimate the rental income since the issue did not emanate from incriminating materials found in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of a person, other than the searched person, to the Assessing Officer would be subsequent to the date of the search. This, would be contrary to the scheme of section 153C(1), which construes the date of receipt of assets and documents by the Assessing Officer 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 Assessing Officer of the searched person assumes possession of seized assets / documents on search of the assessee; the seized assets / documents belonging to a person other than a searched person come into possession of the Assessing Officer of that person only after the Assessing Officer of the searched person is satisfied that the assets / documents do not belong to the searched person. Thus, the date on which the Assessing Officer of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of section 153A of the Act. Therefore, the contention that in any view of the matter, assessment for assessment year 2003- 04 and 2004-05 were outside the scope of section 153C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in this case) or any information contained therein relates to the other person (third party, the assessee in this case), then the AO of the searched person has to prepare a satisfaction note that during the search u/s. 132 of the Act of a person (Mani Group in this case), the search team has found/ un-earthed money, bullion, jewellery or valuable articles or things, which were seized and the AO has found that among the such seized material, certain specific valuable article or thing belongs to a third party (other person as referred in section 153C of the Act who was not searched and in this case, the assessee) or books of account or documents seized contained information, pertained or relates to that of the other person (third party in this case the assessee), and for recording such a satisfaction note the AO of the searched person has to segregate the seized material of the other person (third party in this case the assessee) from that of the searched person (Mani Group); and then the AO of the searched person should examine the seized material and should be able to satisfy himself that the segregated seized assets belong to the third party (in this case that of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of the first proviso to section 153C by operation of law reference to the date of initiation of the search u/s. 132 of the Act or making of requisition u/s. 132A of the Act in the second proviso to sub-section (1) of section 153A shall be considered as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. For this, we rely on the decision of the Hon'ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391 (Delhi), wherein the Hon'ble Delhi High Court held as under: 1. As discussed hereinbefore, once the AO of the searched person is satisfied that the seized assets / documents belong to another person and the said assets / documents have been transferred to the AO of such other person, the proceedings for assessment / reassessment of income of the other person has to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the notice to furnish returns of income in respect of six assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO can establish document-wise (or asset wise) correlation between what has been seized from the 'Searched person'- and - how the same is incriminating in nature qua each of the assessment years in question for which jurisdiction u/s. 153C is sought to be invoked for the 'other Person'- then the notice issued under section 153C to the assessee qua the said assessment year would be without the satisfying the jurisdictional fact required to invoke section 153C of the Act. Now in the instant case, the satisfaction note was written by the AO on 03.10.2016 so the related assessment year which will be covered u/s 153C would be as below: Assessment Year Section 2017-18 Search year - 143(3) 2016-17 153C 2015-16 153C 2014-15 153C 2013-14 153C 2012-13 153C 2011-12 153C So fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be relevant to reproduce here the relevant provisions of Section 153C of the Act as applicable for the assessment year under consideration: 153C. 3[(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 other 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 over to the Assessing Officer having jurisdiction over such other person 3a[and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied 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 the relevant assessment year or years referred to in sub-section (1) of section 153A\:] 4[Provided that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n over such other person. As per the law settled by the Hon ble Delhi High Court in the case of RRJ Securities Ltd. (supra), in case, the AO of the searched person and the other person in respect of whom the seized documents have been found, is the same AO, then it would be the date of recording of satisfaction u/s 153C of the Act for the purpose of constituting the date of initiation of search and therefore, the year of recording of satisfaction would be the searched year and six years prior to the searched year will be re-opened for the purpose of assessment u/s 153C of the Act. In view of the decision of the Hon ble Delhi High Court in the case of RRJ Securities Ltd.(supra), the relevant six assessment years will be AY 2016-17 to AY 2011-12. Therefore, the assessment framed u/s 153C of the Act for the AY 2010-11 and AY 2009-10 will be beyond jurisdiction and hence, null and void. 7.2. Further, in this case, the searched year will be taken i.e. AY 2017-18. However, the assessee before us is not in appeal in relation to the assessment framed for the searched AY 2017-18. Therefore, no adjudication is given in respect of AY 2017-18. 7.3. Now, in respect of the other assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta), the Hon ble Calcutta High Court expressed the following views: We are in agreement with the views of the Karnataka High Court that incriminating material is a pre-requisite requisite before power could have been exercised under section 153C read with section 153A. In the case before us, the asses assessing sing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. Further Calcutta High Court in the case of PCIT VS. Salasar Stock Broking Ltd. (HAT No. 264 of 2016 dated 24.08.2016 expressed its decision as under: In this case, the Honourable High Court observed that the Ld. ITAT, Kolkata was of the opinion that the assessing officer had no jurisdiction u/s 153A of the IT. Act to reopen the concluded cases when the search seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above submissions of the ld. Counsel for the assessee is that the seized incriminating materials have to pertain to the assessment year in question and that the AO is not supposed to make assessment on the basis of estimation or on the basis of appreciation of material other than the seized material in respect of completed/unabated assessments u/s 153A/153C of the Act in respect of years prior to the searched year. We find that the issue has now been settled by the Hon ble Supreme Court of India in the case of CIT vs. Singhad Technical Education Society vide order dated 29.08.2017 passed in Civil Appeal No. 11080 of 2017 [Arising out of SLP (C) No. 25257 of 2015]. The Hon ble Supreme Court has held as under: 13) Mr. Jehangir D. Mistri, learned senior counsel appearing for the assessee, countered the aforesaid submissions. He argued that the Tribunal was right in permitting the assessee to raise the issue regarding validity of notice under Section 153C of the Act when it was ex facie found that such a notice was time barred and, therefore, it was a jurisdictional ground which could be raised by the assessee. Coming to the merits of that ground, learned senior counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment. 16) In these appeals, qua the aforesaid four Assessment Years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. 17) First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. 18) The ITAT permitted this additional ground by giving a reason that it was a jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment framed u/s 153C of the Act in this case is without jurisdiction and therefore, the same is bad in law. Further, no incriminating material was found for the assessment years AY 2009-10 and AY 2010-11. Therefore, as per the decision of the Hon ble Supreme Court, the notices issued u/s 153C of the Act in these appeals as well as consequent assessments framed u/s 153C of the Act are not sustainable in the eyes of law and the same are accordingly quashed. Assessment Years 2011-12 2012-13 9. The ld. Counsel for the assessee has made the following submissions: At the time of passing of assessment order u/s 153C/143(3) dated 15.12.2016, the AO made addition of ₹ 39,36,135/- in respect of the rental income of the four properties. In respect of each property the AO furnished the same reason for addition the same is furnished here: As the figures of rent for this building pertaining to AY 2011-12 was not available in the seized books of account, the most logical way to estimate the same is to determine the figure of rent for AY 2013-14 for which the data was available and then to allow a reduction for the possibility of lower rent realized in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting material was found for the assessment years under consideration also. Therefore, in the light of the decision of the Hon ble Supreme Court in the case of Singhad Technical Education Society(supra), assessment framed u/s 153C of the Act in this case is also bad in law. The same is accordingly set aside. Assessment Year 2013-14 10. In respect of the AY 2013-14, the ld. Counsel for the assessee has made the following submissions: Again in this case for AY 2013-14 the AO made addition of ₹ 57,24,357/- in respect of the rental income of the appellant from four properties as stated in the first para of this submission. Though there was substantial addition but no incriminating materials were seized in respect of properties except for the property mentioned at SI. No. (A) at fist para of this submission. But in respect of other 3 properties no incriminating materials were seized. In respect of property at 24/1, Masjid Bari Street, Kolkata-700006 incriminating materials were seized in respect of 9 rooms only. But on estimate basis without any incriminating materials the AO estimated the rental income from other eighteen rooms of that property. Similarly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 70,000/-. Statements of tenants were also recorded who stated that the rent is around ₹ 40,000/-. Shri laxman Bag, cook of the building, during the course of search stated that around 27 rooms are given out on rent. Even Shri Jagdish Prasad Singh had also stated in his statement that the same number of rooms have been rented out. There are however, diaries/documents pertaining to collection of rent from the rooms of the aforementioned buildings which were found, inventorised and seized, The assessee was asked to explain contents of the pages of the seized books vide notice issued u/s 142(1) but no comment was offered. Even during the course of hearing, the Ld. A/R did not offer any comments. However, the exercise book bearing ID Mark- BB-13, contains the details of rent collected from 9 rooms. Details of rent collected as per documents (BB-13) seized shows that during the financial year 2012-13, for the property at 24/1, Masjid Bari Street, the total rent collected for the year was ₹ 39,12,500/-. For the sake of convenience the relevant synopsis of the book identified as BB-13 (which is a part of the appraisal report at page 42) is reproduced below: BB-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40000 40000 40000 40000 40000 40000 40000 40000 298000 298000 305500 330000 330000 330000 326000 336000 331000 2884500 Rent collection from 24/1, Masjid Bari for 2013 Month/entry no. January February March Total 1 35000 40000 40000 2 40000 40000 40000 3 41000 41000 41000 4 35000 35000 40000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If that be so, why presume some percentage taking any figure under the sky. Under the circumstances you are requested to please treat the fact as fact and thus accept that 18 rooms remain vacant as is shown in the book seized BB/13 and don t presume rent for other 18 vacant rooms, in the course of the search various tenant were questioned by the concern officers which is on record. He could have very easily enquired about the vacant 18 rooms, which would have clarified and confirmed the vacant of others 18 rooms. I once again reiterate that vacant 18 rooms be allowed and presumed addition for the same may please be dropped. 11. We find force in the contention of the ld. Counsel for the assessee that the entire income from the aforesaid building was noted down in the seized diary and there was no presumption that some other document/diary would have been maintained in respect of the remaining rooms. The income recorded, in our view, is the full income of the year from the aforesaid property. Moreover, it is not necessary that all the rooms of the building will be occupied on all days during the entire year. Therefore, as per the incriminating material, the rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Though, the AO has placed reliance to making addition in the hands of appellant but no links has been established between seized documents and appellant. The action of AO is purely arbitrary and on hypothetical basis. Therefore, the addition cannot be sustained and must be deleted. In respect of all the three properties, the AO presented the same reason mentioned at page 6, 3rd para of the assessment order which is reproduced here: From the above it is seen that extrapolating the available details for the whole year, the total rent receipt works out to an amount of 83,04,000/-. The assessee s share at 1/6 of the rent receipt is estimated to amount of ₹ 13,84,000/-. Thus, total rent estimated for these three premises are (56,02,500 + 13,84,000 + 12,01,700) = 81,88,200/-. Accordingly a reduction of ₹ 16,37,640/- is being allowed. Hence total rent assessed is (1,35,45,700/- - 16,37,640/-) = 1,19,08,060/-. Addition on account of gross rent amounting to ₹ 87,63,571/- (1,19,08,060/- - 31,44,489/-) is being made in this case. So from the own admission of the AO it is clear that no incriminating material was seized and the addition was on estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, no notice u/s 153C was issued by the AO and hence the assessment order is bad in law. The facts and merit of addition of this year is similar to AY 2011-12 on the basis of same grounds as discussed in details in AY 2011-12. The addition of ₹ 83,86,274/- should be deleted. Again in this case the actual date of search is 03.04.2014, so the AO considered the AY 2015-16 as the search year. But actually considering the date of satisfaction note is 03.10.2016 the search year should be AY 2017-18 for the 153C proceedings. So, the AY 2015-16 is a block year only and the AY 2015-16 is also an unabated one. As the AY 2015-16 is an unabated one, so at the re-opening stage only search related issues and documents can be considered. In course of search and seizure operation no incriminating materials were found and seized, so the addition on the basis of finding in respect of AY 2015-16 has no basis. 13.1. The AY 2015-16 in this case, is the preceding year to the searched year. Therefore, the assessment year should have been framed u/s 153C of the Act by way of re-opening of the assessment. However, in this case, admittedly no notice u/s 153C of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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