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TMI Blog2022 (1) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. See cases BATTA YADAMMA [ 2018 (11) TMI 1694 - ITAT HYDERABAD] and SRI SURYADEVARA AVINASH [ 2019 (9) TMI 898 - ITAT HYDERABAD] . The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... earch and basis of initiation of proceedings u/s.147 of the Act was only the documents found during search. Other grounds raised by the assessee on the merits of the case. Since the jurisdictional issue is crucial to decide the validity of the assessment, we proceed to decide this issue first. 4. The brief facts relating to initiation of reassessment proceedings are, assessee filed its return of income on 29.09.2011 declaring total business income at Rs.(-) 40,202/-. The assessing officer initiated the reassessment proceedings by issue of notice u/s 148 and served the notice. The assessee was supplied with the reasons recorded u/s 148(2) of the Act, the same is given below: - "During the course of search proceedings at the residence of Shri Somanathan Nair at D-02, Vastu Shrusti CHS Ltd., Lodha Heritage, Bhopar Road, Desle Pada, Dombivaii (E), Thane a file Annexure A/1 containing loose papers numbered 1-49 were seized. On perusal of this loose papers especially page numbers 40 to 47 it Is observed that M/s. Lodha Construction P.Ltd. has taken cash loan from various parties as detailed herein under: - Sr.No. Name of the lender Date Amount Interest Rate 1. Mahendr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer proceeded to complete the reassessment on the basis of these documents and dealt with the merits on record. We observe from the record that the assessee first time raised the issue of jurisdiction before Ld.CIT(A) by raising grounds of appeal. We observe from the appellate order that Ld.CIT(A) recorded the various objections raised by the assessee on jurisdiction issue in his order, for the sake of brevity it is reproduced below: - "2.1 The Appellant is a Lodha group of companies which is a well known business house in the real estate business. A search action took place at Lodha Group on 10.01.2011 including various companies, residences of the directors and associates which inter alia included the residential premises of an individual namely Shri Somnath Nair (Nair), an employee of the Lodha group. In the course of search proceeding at the residence of Shri Nair fic. D/02, VastuShrusti CHS Ltd, Lodha Heritage, Bhopar Road, Desle Pada, Dombivali (east)] a file containing pages 1 - 49 were found and seized which at pages 40 to 47 includes loose papers showing the alleged cash loan taken by the Appellant (i.e. M/s. Lodha Construction Pvt. Ltd) from the following partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llion, 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 over to the Assessing Officer having jurisdiction over such other person 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. 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 jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d up to the date of the commencement of such search, and lay down the manner in which such income is to be computed. 65.2 The Finance Act, 2003 has provided that the provisions of this Chapter shall not apply where a Search its initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 by inserting a new section 158BJ in the Income-tax Act. 65.3 Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition. 65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of Six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. 65.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being reheard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under subsection (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment. or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly. 65.9 The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, documents / information belonging to whom (i.e. third party) have been found at the premises of the searched party. Section 153C of the Act also provides a mechanism whereby Assessing Officer of the searched party, after recording the satisfaction that the documents or assets seized belonging to third party has a bearing on determination of total income, shall assess or re-assess the total income of third party. 2.3.6 With reference to recording of satisfaction in the case of parties covered u/s 153C of the Act, the CBDT has issued an instruction dated 31.12.2015 bearing no 24/2015 wherein the CBDT has specified as under: "2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD, The Hon'ble Court held that the satisfaction note could be prepared at any of the following stages: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153C made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income u/s 153C r.w.s. 153A of the Act. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153C rw.s. 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 to reopen the assessment of year under consideration. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word 'shall' to begin with section 153C r.w.s. 153A, made it mandatory that the Assessing Officer shall issue notice u/s 153C, thereafter proceed to assess or reassess the total income, where seized materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erational part of these decisions are reproduced by the ITAT (Vizag) which is quoted as under: All cargo Global Logistics and ors vs DOT [137 ITD 287] "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, therefore, the AO has no option but to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order, the AO stated that notice u/s.148 of the Act dated 25.2.2013 was issued and served on the assessee, alongwith reasons for reopening. The AO further stated that during the course of search proceedings at the residence of Shri Somnath Nair, D-02, VastuShrusti CHS Ltd., Lodha Heritage, Bhopar Road, Dombivili (E); Thane, a file containing loose papers - page nos. 1 to 49 were seized and from this file it was gathered that Lodha Construction P. Ltd. had taken cash loans from several parties amounting to ₹ 3,75,00,000/-. Also, the above information of loan was not reflected in the return of income filed by the assessee for the year or in the accounts of the assessee. Under the circumstances, the AO had reason to believe that income has escaped assessment and therefore issued notice u/s. 148 as also after recording the reasons for reopening. The AO provided reasons for reopening vide letter dated 10.6.2013. In response, the assessee company, vide letter dated 15.07.2013 filed its objections to the reopening. The objections were disposed off by the AO vide order dated 30.12.2013 and held that this is a fit case for reopening. Accordingly, statutory notice u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The above case came up for hearing on 16.11.2021 before the Hon'ble Bench and was heard on that day. It was Assessee's appeal where the undersigned appeared as Sr. AR for the Revenue. In this regard, the undersigned would like to clarify one issue which has emphasized by the Ld. AR of the Assessee company with much vigour. It was highlighted by the AR that since 'Lodha Group' was before the Hon'ble Settlement Commission and was admitted, hence the AO did not have the jurisdiction to pass the order. It was also pointed out that ₹ 3.75 Crores, the main contentious issue in the appeal has also been considered by the Hon'ble Settlement Commission. 2. However, attention of the Hon'ble Members is drawn on Pg. Nos. 11 to 14 of the Paper-book submitted by the assesse on 02.11.2021 before the Bench. It contains the list of concerns before the Settlement Commission. The name of the Assessee company is missing there, which makes the defense argument weak. As far as matching the contentious amount it may be remembered that the 'Lodha Group' is a big group where 42 different entities are before the Hon'ble Settlement Commission and 'nearly matching' some figure through permutatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating documents were found with the search person belonging to the third party. Therefore in our view the finding of the CIT(A) is in accordance with law, as the proceeding should have been initiated under section 153C of the Act, as it were based on material found during the search from the premises of searched person other than assessee and not under section 148 of the Act. Further we are of the opinion that this issue raised by the parties is no more res integra as the coordinate bench in the matter of G. Koteshwara Rao v. DCIT [(2015) 64 taxmann.com 159] in para 11 to 14 has held as under : 11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non obstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice. The only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish the returns of income for each assessment years falling within the six assessment years immediately preceding the assessment year in which search or requisition is made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid period which includes disclosed and undisclosed income. Therefore, the 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 immedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A 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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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