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TMI Blog2022 (2) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with section 143(3) of the Act is not sustainable. Once the assessment in itself is invalid then the same cannot be revised under the provisions of section 263. Whether the assessment framed under section 143(3) read with section 153C of the Act can be challenged in the proceedings under section 263? - The proceeding under section 263 is collateral proceeding to original. Thus the validity of the original assessment can be challenged along the proceeding of section 263 Whether the assessment framed by the AO under section 153C read with section 143(3) of the Act is barred by limitation as provided under the provisions of section 153B? - The time-limit for completing the assessment in the case of other person shall be either two years from the end of the financial year in which the last of the authorisations for search under section 132 of the Act was executed or one year from the end of the financial year in which books of accounts or documents seized handed over under section 153C of the Act to the AO having jurisdiction over such other person whichever is later. The position of the law is unambiguous and there is no mention that in the case of common AO of the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been filed at the instance of the Assessee against the separate orders of the Learned Principal Commissioner of Income Tax, Ahmedabad, arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2009-2010 to 2014-15. 2. The issue raised by the assessee is common in all the appeals filed by it in the different assessment years. Therefore these are clubbed together for the purpose of adjudication and convenience. For the purpose of the order, the facts stated in the ITA NO. 134/AHD/2021 for A.Y. 2009-10 are adopted. 2.1 The assessee has raised the following grounds of appeal: 1. The Ld. POT (Central), Ahmedabad ( the PCIT ) has grossly erred on facts and in law in invoking jurisdiction u/s 263 of the Act and has further erred in directing the AO to pass a fresh assessment order in accordance with law and facts of the case 2. The Ld. PCIT has grossly erred on facts and in law in passing order u/s 263 of the Income Tax Act, 1961 ignoring the fact that the assessments completed in the cases identical to the case of the of the appellant were quashed by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been assessed at lesser income if the assessment was made in accordance with the show-cause notice. 7. The aforesaid grounds are without prejudice to each other and appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the grounds of appeal. 3. The only issue raised by the assessee is that the Ld. Pr. CIT erred in holding that the assessment order framed u/s 153C of the Act r.w.s 143(3) of the Act as erroneous in so far prejudicial to the interest of Revenue. 4. The necessary facts of the case are that the assessee in the present case is a private limited company and it has filed its return of income declaring total income of ₹ 52,80,181/- from the source of interest on the loans and advances. There was a search action u/s 132 of the Act in the case of Venus Group at various premises. As a result of search the documents pertaining to the assesse were found and therefore proceedings u/s 153C of the Act were initiated on 08/05/2015. Consequently, the assessment was completed u/s 143(3) r.w.s. 153C of the Act, vide order dated 28/12/2017 by accepting the income declared by the assessee in the return of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of income declared by the assessee in the return of income. 4.3 However, the Ld. Pr. CIT was of the view that the provision of the Act requires to tax the income on year to year basis but not on cumulative basis. As such, there should have been the addition of peak amount of the bank balance for the accommodation entries reflected in the bank account and commission thereon besides interest income declared by the assessee in each year. Accordingly, subsequent to the completion of the assessment the learned CIT issued the notice under section 263 of the Act proposing to revise the assessment framed by the AO by issuing a notice u/s 263 of the Act, dated 09/03/2020 for the reasons elaborated above. 4.4 The assessee in response to show cause notice submitted that the peak amount of addition as proposed by the AO was already added to the total income of the assessee in the case of Shri Ashok Sunderdas Vaswani. The AO of Shri Ashok Sunderdas Vaswani was also the AO of the assessee. Thus if the AO would have made the addition to the total income of the assessee by adopting the peak credit theory, the same would have been amounted to the double addition. Thus, the AO has tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of search proceedings and therefore there cannot be any addition in the proceedings u/s 153C of the Act. 5. However, the Ld. Pr. CIT dis-regarded the contention of the assessee and held that the assessment framed by the AO u/s 153C r.w.s. 143(3)of the Act, as erroneous in so far prejudicial to the interest of Revenue by observing as under: 6. Decision:- I have carefully and thoroughly gone through the submissions of the assessee. The contentions of the assessee stated in its reply are not acceptable due to the following reasons;- 6.1. There are several transactions recorded in the seized documents including the unaccounted cash book seized from Terrace of Crystal Arcade C,G. Road, Ahmedabad with the noting as 'Against EC' and from the correlation of the bank statements and the transactions recorded in the seized unaccounted cash book and supporting cash vouchers, various beneficiaries h?.ve been identified who have transacted in unaccounted cash while dealing with the entities of Venus Group. The assessee company is also involved in providing accommodation entries through the Venus group. Cash has been received and paid by Vaswani group and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed u/s. 143(3) r.w.s 153C of the I T Acton 28.12.2017 for the A.Y.2009-10 with the direction to the AO to pass afresh assessment order in accordance with law and facts of the case after examining the particulars as mentioned earlier and giving the assessee a reasonable opportunity of being heard. 6. Being aggrieved by the order of the Ld. Pr. CIT the assessee is in appeal before us. 7. The Ld. AR before us filed a paper book running from pages 1 to 108 and submitted that the proceedings u/s 153C of the Act, can be initiated in the case of search carried out prior to 01/06/2015 if any money, bullion, jewelry and other valuable article or thing or books of accounts or documents seized or requisitioned belongs to or belong to a person other than the person referred to in section 153A of the Act. In the present case the search was initiated on 10/03/2015 and therefore it was mandatory for initiating the proceedings u/s 153C of the Act, only in a situation where the document of incriminating nature were found belonging to the assessee. 8. However, the AO in the case on hand while recording the satisfaction has categorically mentioned that the documents found during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. Admittedly, the search was conducted at the third party dated 10/03/2015 i.e. prior to amendment brought u/s 153C of the Act i.e. 01/06/2015. Under the old provision, proceedings u/s 153C of the Act, can only be initiated if any incriminating document found belonging to the assessee during the search carried out under section 132 of the Act at the premises of the 3rd party. However, in this connection we find that the AO in his satisfaction recorded has given categorical finding that the documents found pertain to the assessee. For this purpose, the relevant extract of the satisfaction is reproduced as under: In view of above facts as mentioned in [he Annexure B I am satisfied that [he above mentioned documents seized from the from the premises (i) Terrace of Crystal Arcade, N:r. Navrangpura Telephone Exchange. CG. Road. Ahmedabad (ii) 901. Sapphire Complex. Opp. Ratnam, C. G. Road. Ahmedabad (iii) G-9. Gold Souk, B/h. Sapphire I Complex. Opp. Ratnam. C. G. Road, Ahmedabad and (iv) 501, Sapphire Complex. Kr. Cargo Motors, C. G. Road. Ahmedabad and during the course of search and post search enquires also various documents were found to relates to/pertains to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or the documents found belong to other person prior to 1.6.2015. and the AO of the searched person was satisfied that such documents disclosed undisclosed income. The documents belonged to the appellants considered under this compartment of the arguments were not found, rather certain information relating to the assessees were found to be embedded in these documents, but prior to 1.6.2015, jurisdiction under section 153C cannot be invoked on the basis of such information. Therefore, we allow this preliminary ground of appeal raised by these 43 appellants (assessees) and quash all these assessment orders passed in the appeals mentioned at serial no.l to 43 of the cause title of this order. Thus al! the appeals of the assessee are partly allowed whereas the Revenue's appeal are dismissed. 13.2 In view of the above we hold that the assessment framed under section 153C read with section 143(3) of the Act is not sustainable. Once the assessment in itself is invalid then the same cannot be revised under the provisions of section 263 of the Act. 13.3 At this juncture, a question also arises to our mind whether the assessment framed under section 143(3) read with sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed : Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or one year from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: 13.5 The above provisions requires that the time-limit for completing the assessment in the case of other person shall be either two years from the end of the financial year in which the last of the authorisations for search under section 132 of the Act was executed or one year from the end of the financial year in which b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the AO has chosen to tax the income of the assessee declared in the return of income. Thus the view taken by the AO was one of the possible view and therefore the same cannot be disturbed in the proceedings under section 263 of the Act. In holding so we draw support and guidance from the judgment of Hon ble Supreme court in case of Malabar Industrial Co. Ltd. vs. CIT reported in 243 ITR 83 where it was held as under: The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. 13.8 We also draw support and guidance from judgment of Hon ble Supreme Court in case of CIT vs. Kw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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