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TMI Blog2024 (1) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... of incriminating material noted by the AO in the satisfaction note - recording requisite satisfaction as per law - HELD THAT:- We are inclined to hold that the alleged incriminating material noted by the Assessing Officer in the satisfaction note had to pertain to assessment year under consideration and when the documentary evidence seized and relied by the Assessing Officer did not establish any co-relation, document wise with the any of assessment year under consideration then the notice u/s. 153C of the Act, and consequent assessment order passed u/s. 143(3) r.w.s. 153C of the Act deserve to be quashed. Therefore respectfully following the preposition rendered in the case of PCIT vs. Singhad Technical Education Society ( 2011 (4) TMI 871 - ITAT, PUNE ) notice u/s. 153C of the Act and all consequent proceedings and orders including impugned assessment order 30.12.2018 for AY 2012-13 are quashed. Accordingly, grounds no. 1 to 3 of assessee are allowed. - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND GIRISH AGRAWAL, ACCOUNTANT MEMBER For the Appellant : Dr. Rakesh Gupta, Adv. and Shri Somil Agarwal, Adv. For the Respondent : Shri H K Choudhary, CIT(DR) ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er were not complied with and hence the assessment order is bad, more so when there was no books of account and documents relating/pertaining to the assessee were found in search and that too for the year under consideration. 4. The ld. Counsel for the assessee submitted that the assessment proceedings initiated u/s 153C of the Act were bad in law, without jurisdiction and barred by limitation and, accordingly, the assessment proceedings initiated and the assessment order passed are liable to be quashed and the CIT(A) has grossly erred in not holding so. The ld. Counsel further submitted that the issuance of notice u/s 153C of the Act and recording of satisfaction are contrary to the provisions of law and, thus, the assessment proceedings and the assessment order passed u/s 153C r.w.s. 143(3) on the foundation of such invalid notice are liable to be quashed. The ld. Counsel placed vehement reliance on the order of the ITAT Delhi, D Bench in ITA No.204/Del/2021, order dated 28.02.2022 for AY 2011-12 and on another order dated 09.06.2021 in ITA No.203/Del/2021 for AY 2012-13 both in the case of Karina Airlines International Ltd. vs. ACIT and submitted that since the search was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to the present case. It was, therefore, submitted that grounds No.1 to 3 of the assessee may kindly be allowed and all proceedings and orders including the impugned assessment order dated 30.12.2018 for AY 2011-12 and all consequent proceedings and orders may kindly be quashed. He also reiterated that the AY 2011-12 does not fall within the block of six assessment years i.e., AYs 2012-13 to 2017-18, therefore, the grounds of the assessee may be allowed. 7. On careful consideration of the above rival submissions, first of all, we may point out that the applicability of amendment to sections 153A and 153C of the Act has been considered and adjudicated by the ITAT Delhi, D Bench, in the case of M/s Karina Airlines International Limited, vide order dated 28.02.2022 for AY 2011-12 by which it was held thus:- 8. We have considered rival submissions and perused the materials on record. For deciding the issue, following dates and events would have a crucial bearing: 1. 07.04.2016 - search and seizure operation under section 132 of the Act was conducted in case of Sh. Harvansh Chawla. 2. 29.03.2019 - The Assessing Officer of the searched person recorded sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the same set of assessment years for which assessment proceeding was initiated in case of searched person has to be initiated against the assessee. However, we do not find merit in the aforesaid submissions. The Explanatory Notes to the provisions of the Finance Act, 2017 issued by the Central Board of Direct Taxes (CBDT) through Circular No. 2/2018, dated 15 th February, 2018 explains the amendment made to the provisions of sections 153A and 153C of the Act as under: 80.4 However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including section 132A cases) and the same is represented in the form of undisclosed investment in any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 09.06.2021 for AY 2012-13 wherein under identical facts and circumstances, the coordinate Bench of the Tribunal has held as follows:- 9. We have gone through the record in the light of the submissions made on either side. Insofar as the facts are concerned there is no dispute. Search in the case of Harvesh Chawla took place on 7/4/2016, the satisfaction by the learned Assessing Officer of the searched person was recorded on 29/3/2019 and the seized material was handed over to the learned Assessing Officer of the assessee who had recorded his satisfaction on 15/9/2019. It is clear that the date of search had fallen in the A.Y. 2017-18 which is relevant for the case of the person searched; whereas the satisfaction recorded by the learned Assessing Officer of the searched person on 29/3/2019 had fallen in the assessment year 2019-20 in which case the immediately preceding 6 assessment years would be assessment years 2013-14 to 2018-19; and the date of satisfaction recorded by the learned Assessing Officer of the assessee on 15/5/2019 falls in the assessment year 2020-21 in which case the immediately preceding 6 assessment years would be the assessment years from 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . RRJ Securities Ltd. as reported in 380 ITR 612 in the context of Section 153C of the Act, wherein it was laid down as under: Further, the period of six years would also have to be reckoned with respect to the date of recording of satisfaction note - that is. 8 th September. 2010 -and not the date of search. 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153 A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings by virtue of Section 153C(1) of the Act would have to be in accordance with Section 153 A of the Act and the reference to the date of search would have to be construed as the reference to the date of 10 recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 569, wherein it has been held as under: 12. The decision in RRJ Securities Ltd. (supra) is categorical that under / Section 153C of the Act, the period of six years as regards the person other than the searched person would commence only from the year in which the satisfaction not is prepared by the AO of the searched person and a notice is issued pursuant thereto. The date of the Satisfaction Note is 21 st May, 2014 and the notice under Section 153C of the Act was issued on 23 rd July, 2014, The previous six AYs would therefore be from AY 2009-10 to AY 2014-15. This would therefore not include AYs 2007- 08 and 2008-09. 8. If we apply the ratio laid down by the Hon ble Jurisdictional High Court, in the present case, then the date of satisfaction, i.e., 25.09.2018 has to be reckoned as the date of reference from where six assessment years immediately preceding assessment years has to be construed and therefore, six preceding assessment years in this case shall be from Assessment Year 2012-13 to Assessment Year 2018-19. The instant Assessment Year, i.e., Assessment Year 2017-18 ergo would be covered in the earlier six assessment years where the assessments have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pikishan Arawal v. CIT as reported in 418 ITR 25 has also clarified that such an amendment is prospective after observing as under:- 19.19 It may be pertinent to note that vide CBDT Circular No. 2/2018 / dated 15.2.2018, it has been clarified that the amended provisions of section 153A of the Act shall apply where search under section 132 of the Act is initiated or requisition under section 132A of the Act is made on or after 1 st day of April, 2017. It is further stated therein that section 153C of the Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income-tax Act. It is also stated therein that the amendment will take effect from 1 st April, 2017. Therefore, even the CBDT, in the context of the amended provisions of section 153A of the Act, has clarified that it would apply when search or requisition is made after the date of the 13 amendment. Evidently, therefore, even the amended provisions of section 153C of the Act would apply when search or requisition is made after the amendment. 10. Similar amendments have been made from time to time in Section 153C and one of such amendment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C (11 of the Act did not apply to the search in the instant case. Therefore, the onus was on the Revenue to show that the incriminating material/documents recovered at the time of search 'belongs' to the Assessee, In other words, it is not enough for the Revenue to show that the documents either 'pertain' to the Assessee or contains information that 'relates to' the Assessee. 15. In the circumstances, we are of the considered opinion that since the date of search is 07.04.2016, the amendment brought by the Finance Act, 2017 would not be applicable and consequently the order of assessment dated 31.12.2019 passed u/s 153C r.w.s. 144 of the Act is bad and is liable to be quashed. We order accordingly. In view of our finding that the very assessment itself is bad being barred by limitation, adjudication of other grounds will only be academic and need not be resorted to. 10. At the very outset, we find it appropriate to adjudicate the legal contentions placed by ld. counsel as well as ld. CIT(DR) that what would be the reckoning date for calculating year of search and block of immediately previous six assessment year. The ld. counsel submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-12. Accordingly, grounds No.1 3 of the assessee are allowed. 12. In view of our conclusion recorded for grounds No.1 3 of the assessee in the earlier part of this order we also note that the ld. counsel of assessee as well as ld. CIT(DR) has not placed any submissions/arguments on the other grounds of assessee for AY 2011-12 therefore we don t deem it just and proper to adjudicate other grounds of assessee in absence of any submissions. 13. In the result ITA No. 1657/Del/2022 for AY 2011-12 of assessee is allowed in the manner as indicated above. ITA No. 1658 to 1661 1663/Del/2022 for AYs 2012-13 to 2016-17 14. The ld. CIT(DR) as well as ld. counsel of assessee agreed that except quantum of addition the facts circumstances and grounds of assessee in all five appeals are similar and thus the assessee has raised identically worded grounds in these appeals. For the sake of brevity and convenience we take up ITA NO. 1658/Del/2022 for AY 2012-13 as lead case wherein the assessee has raised following grounds of appeal. 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial as a result of search. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have quashed the impugned assessment order as the same was passed without there being requisite approval in terms of section 153D and in any case approval if any is mechanical without application of mind and is no approval in the eyes of law. 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961. 15. The contentions of ld. counsel of assessee for grounds no. 1 to 3 can be summarized on following points of arguments; (i) Satisfaction note does not correlate the seized document year wise and do not lead to the additions made in view of the following judicial decisions: CIT vs. Sinhgad Technical Education Society, (2017) 397 ITR 0344 (SC). (CLC 64-73) CIT vs. Sinhgad Technical Education Society, (2015) 378 ITR 0084 (Bom). (CLC 74-79) Sinhgad Technical Education Society vs. ACIT, (2011) 140 TTJ 0233 (Pune). (CLC 80-94) ii. Additions made in the assessment order are not based on seized materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order are not based on seized material which was not and incriminating material hence additions could not have been made u/s. 153C of the Act as per judgment of Hon ble Supreme Court in the case of DCIT vs. M/s U K Paints (supra) and PCIT vs. Abhisar Buildwell (supra). The ld. counsel vehemently pointed out that the jurisdictional issues has to be decided strictly on the basis of satisfaction note. He also contended that the Assessing Officer did not provided said seized material to the assessee and the same was provided by the ld. CIT(A) to the assessee. The ld. counsel also contended that the order sheet dated 12.12.2018 of Assessing Officer reveals that the Assessing Officer gave only one day time and show cause notice dated 28.12.2018 fixing the date of hearing for 29.12.2018 at 11.00 AM was served on the assessee on 29.12.2018 at 10.02 PM in the night which reveals that the assessee was not provided due opportunity to defend his case and the assessee was put to grave harassment. The ld. counsel also submitted that the assessee was not provided copies of the statement referred by the Assessing Officer in the assessment order which is also voilative to the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 29.12.2018 which shows unjustified approach of A.O. However, the ld. CIT(DR) opposed to the above submission but could not controvert factual position noted above. 22. From the order sheet entry of A.O. dated 12.12.2018 (PB-211), we note that the A.O. has asked several documents and details listed in the said entry providing only one day time. Similarly, the A.O. issued a showcause notice containing 15 pages wherein several statements have been reproduced, fixing the dates and time at 11.00 AM on next date 29.12.2018 which was served after said time of compliance at 10.02 PM (night) on 29.12.2018 through email (PB page no. 100). On being asked by the Bench above noted factual position discernable from copies of relevant order sheet entries and other notices email service proof alongwith other documents evidences has not been controverted by the Ld. CIT(DR). In view of above we safely conclude that the Assessing Officer did not provide copies of the statement relied by him and other points on which he wanted explanation of assessee as the notice dated 28.12.2018 calling compliance on 29.12.2018 at 11.00 AM was served belatedly in the night of at 10.02 PM on 29.12.2018. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and when the documentary evidence seized and relied by the Assessing Officer did not establish any co-relation, document wise with the any of assessment year under consideration then the notice u/s. 153C of the Act, and consequent assessment order passed u/s. 143(3) r.w.s. 153C of the Act deserve to be quashed. Therefore respectfully following the preposition rendered by Hon ble Supreme Court in the case of PCIT vs. Singhad Technical Education Society (supra) notice u/s. 153C of the Act and all consequent proceedings and orders including impugned assessment order 30.12.2018 for AY 2012-13 are quashed. Accordingly, grounds no. 1 to 3 of assessee are allowed. 25. Since as agreed by ld. representative of both the sides except quantum other facts and circumstances of all other four appeals are quite similar and identical to the appeal for AY 2012-13 therefore our conclusion drawn in the earlier part of this order for AY 2012-13 would apply mutatis mutandis to other four appeals from AY 2013-14 to 2017-18. Accordingly, grounds no. 1 to 3 of assessee in said four appeals are also allowed and notice u/s. 153C of the Act and all consequent proceedings and orders including assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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