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TMI Blog2019 (1) TMI 1993X X X X Extracts X X X X X X X X Extracts X X X X ..... ad in law as reasons for issue of notice under section 153 A of the Act have not been given and the appellant has reasons to believe that the same has not been recorded and consequently the assessment is bad in law. The appellant submits that mandatory conditions to assume jurisdiction is to record reasons and in the absence of the same the assessment is bad in law and liable to be cancelled. 4. The authorities below are not justified in law in disallowing the business loss of Rs. 14,379/- as claimed by the appellant under the facts and circumstances of the case. 5. The appellant denies himself in law to be liable to be taxed under section 2(22)(e) of the Act under the facts and circumstances of the case. 6. The authorities below are not justified in making the additions of Rs.14,70,383/- as deemed dividend u/s.2(22)(e) of the Act on the facts and circumstances of the case. 7. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 8. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity." 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has not proved that the search has not been conducted and hence the CIT(A) held that the assumption of jurisdiction is valid in law and both the grounds of the appellant were dismissed. 2.3. In this regard we wish to state that it is not that every time that search has been conducted that the provisions of section 153 A springs up. There are other conditions like it should be a valid search, incriminating materials should exist out of the valid search, and the inference of liability has to be recorded. These are mandatory conditions. Our submission is that these have not been complied with. 2.4. It is stated that as could be seen from the order of assessment passed under section 143[3] r.w.s. 153A of the Act dated 31/12/2007 there are no additions or disallowances made by the learned assessing officer based on any incriminating materials which were found or seized during the course of search conducted on the appellant under section 132 of the Act. 2.5. The contention of the appellant is that any assessments subsequent to search framed under section 143[3] r.w.s. 153A of the Act has to be necessarily based on the evidence found and seized during the course of search o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be seized. Under section 153A, the satisfaction regarding an inference of liability must be recorded. The Assessing Officer has to issue notice to the assessee i.e. the person searched...................................In such a case, the Assessing Officer has to issue notice to assessee or reassess income of the other person under section 153A of the Act. Thus, the fact that search has been conducted would not justify issuance of notice under section 153A. It is only during a valid search when certain incriminating materials are detected, notice could be issued. It may be noted that the above decision of the jurisdictional high court is direct on the point and the finding of the CIT(A) that once search has been conducted jurisdiction to issue notice under section 153 A springs up is not correct and contrary to the ruling as stated above of the jurisdictional high court. Admittedly no incriminating materials are seized and thus the provisions of section 153 A is not attracted and the assessments framed consequently is liable to be cancelled. 2.8. It is further stated in the said judgment as follows at ; 50. Chapter XIV-B which deals with special procedure for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating materials are found and seized during the course of a valid search then and then only notice under section 153A of the Act can be issued. 2.10. In the instant case as could be seen from the order of assessment passed under section 143[3] r.w.s. 153A of the Act, the additions made by the learned assessing officer to the income reported by the appellant are not based upon any incriminating materials found or seized during the course of search. Since, the assessments under section 153A are for bringing to tax the undisclosed income hence, if no incriminating based on which no additions are made then the provisions of section 153A and more so the notice under section 153A of the Act cannot be issued. It is also relevant to submit that in the instant case the appellant had filed his original return of income before the search which is clearly borne on record. 2.11. The revenue contended that the facts of the IBC knowledge park case is that it deals with section 153 C provisions and hence cannot be applied to the present case. We seek your honors indulgence in the plain reading of section 153 C where it is clearly stated that............ assess and reassess the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid despite there being no satisfaction recorded that the documents found during the search on 17.06.2008 were incriminating in nature and prima facie represented undisclosed income? (c) Whether the Tribunal was justified in rejecting the contention of the appellant that proceedings under Section 153C ought to be initiated only for assessment years in respect of which the documents were found during the search? (d) Whether the Tribunal was correct in upholding the validity of the order under Section 153C of the Act for the assessment year 2005-06 despite there being no pending assessment as on the date of search and the documents not revealing any undisclosed income?" 7. From the substantial question of law raised before Hon'ble Karnataka High Court in this appeal filed by the assessee before Hon'ble Karnataka High Court as reproduced above, it is seen that in that case, the issue raised was regarding initiation of proceedings and the consequent order passed u/s. 153C of IT Act as to whether the same is valid or not. In the present case, as per the assessment order, it is seen that search u/s. 132 was conducted in the business premises of the company M/s. Anriya Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 17[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 rules18 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... searched person also, notice has to be issued by the AO to the other person u/s. 153A of IT Act although such AO gets the jurisdiction u/s. 153C of IT Act. Now we also reproduce the provisions of section 153A of IT Act which are as under. "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing 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 9 [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.] (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted and requirement is made. Hence it is seen that for issuing notice u/s. 153A in the case of a person other than the searched person, the AO issuing such notice has to record satisfaction that books of accounts or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. But in the case of searched person, there is no such requirement prescribed u/s. 153A of IT Act. Since even in the case of a person other than the searched person, notice has to be issued by AO to such other person u/s. 153A of IT Act and hence, the reference to the provisions of section 153A by Hon'ble Karnataka High Court in this judgment cannot be construed as relevant to determine the validity of assessment proceedings initiated in the case of a searched person because in that case, issue in dispute was in respect of person other than the searched person. Hence in our considered opinion, this judgment of Hon'ble Karnataka High Court is not applicable in the facts of present case. 10. Now we examine the applicability of two judgments of Hon'ble Delhi High Court cited by ld. AR of assessee rendered in the case of CIT vs. Kabul Chawla (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in this judgment of Hon'ble Delhi High Court, it comes out that the assessment was already completed u/s. 143(3) and also u/s. 147 r.w.s. 143(3) of IT Act. Hence it can be safely presumed that on the date of search, assessment proceedings were not pending. Whereas we have seen that in the present case, the assessment proceedings were pending because the return of income was filed by the assessee on 30.07.2005 and the search was conducted on 30.09.2005 and hence, because of these differences in facts, in our considered opinion this judgment of Hon'ble Delhi High Court is also not applicable in the present case. 12. From the above discussion, we have seen that none of the judgments cited by ld. AR of assessee is rending any help to assessee in the facts of present case. In fact, in the present case, the return of income was filed by the assessee on 30.07.2005 and the search took place on 30.09.2005. As per the second proviso to section 153A of IT Act, assessment or reassessment proceedings if any relating to any Assessment Year falling within the period of six Assessment Years pending on the date of initiation of the search shall abate. Hence if the income for Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his basis that the assessee has not carried on any business activity in his individual capacity as proprietor of M/s. Rakha Builders and Developers. Hence, on this issue, we find no infirmity in the orders of authorities below. Accordingly Ground no. 4 is also rejected. 16. Now we take up and decide ground no. 5 and 6 raised by the assessee. These grounds are regarding addition made by the AO u/s. 2(22) (e) of IT Act of Rs. 14,70,383/- and Rs. 47,47,546/- as per paras 7 and 10 of the assessment order. Regarding this issue, it was submitted that paras 5 to 5.4 of synopsis are relevant which are regarding this issue. The ld. DR of revenue supported the orders of authorities below. 17. We have considered the rival submissions. We find that this is the claim of the assessee that impugned payment was made by that company to the assessee in the exigencies of the business. We find that the same argument was raised by the assessee before CIT (A) also and after considering these arguments, this issue was decided by CIT (A) as per Para no. 2.5.3 of his order. This Para is reproduced herein below for ready reference. "2.5.3 The above argument of the appellant are not found acceptable in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reads as under:- " For the purposes of this Chapter, the expression "dividends" shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-section (e) thereof". (ii) The question of main provision prevails over the explanation does not arise because the entire chapter XII-D was introduced by the Finance Act 1997. The intention of the Legislature by putting the explanation to the chapter was clear that the provision of the chapter XII-D shall not be applicable to the deemed dividends under section 2(22)(e) of the Income Tax Act. (iii) The Circular No.7 of 2003 issued by the CBDT on which the reliance has been placed by the appellant is not applicable to the case of the deemed dividend under section.2(22)(e) of the Income Tax Act, para.no.58 of the Circular clarify the additional income tax in respect of the amount of dividend declared, distributed or paid under subsection (1) of section.115O of the Income Tax Act. Here the question is not of the taxability of the dividend as envisaged in section.115O but in regard to the deemed dividend which have been excluded from the purview of section 115O by inserting an explanation t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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