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TMI Blog2024 (1) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar, Accountant Member For the Assessees : Sh. Amit Goel, CA, Pranav Yadav, Adv., Nippun Mittal, CA Ms Anjali Jain, Adv. For the Revenue : Sh.Vizay B. Vasanta, CIT-DR Sanjay Kumar, Sr. DR ORDER PER BENCH: The present appeals by the Revenue and the Cross Objections by the assessee have been filed against the orders of ld. CIT(A)-XXVII, New Delhi. 2. The common grounds raised in ITA Nos. 3348 3353/Del/2015. In ITA No. 3348/Del/2015, following grounds have been raised by the Revenue: 1. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in holding that there is substantial force in the submission made by the appellant on the issue of initiating proceedings u/s 153C of Income Tax Act. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in holding that assessee company is not resident in terms of provisions under section 6(3)(ii) of the I.T. Act for the purpose of tax liability whereas on the basis of seized documents/e-mails and various statements of Sh. Ajay Kalsi/Sh. Anil Aggarwal, it has been established that control and management of the assessee company is situated wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153C of the Act for the assessment year under consideration as the proceedings initiated and the consequent assessment is barred by limitation. 4. On the facts and circumstances of the case, the learned A.O. has erred, both on facts and in law in passing the assessment order straightaway while ignoring the statutory provisions of Section 144C of the Act, in terms of which, the learned A.O. ought to have passed a draft assessment order in the case of an eligible company, i.e. a foreign company. 5. That the assessment framed without issuance of statutory notice under Section 143(2) of the Act after filing of the return is bad in law and therefore, liable to be quashed. 4. Heard the arguments of both the parties and perused the material available on record. 5. The COs pertaining to A.Y. 2007-08 and A.Y. 2012-13 are being dealt together. 6. The pertinent facts are as under: The date of search 22.03.2012 (A.Y. 2012-13) Date of recording of satisfaction u/s 153C 18.11.2013 (A.Y. 2014-15) It was argued that based on the date of recording of satisfaction, the Assessment made u/s 153C for the A.Y. 2007-08 are outside the scope of Section 153C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. 13. The first and foremost step for initiation of proceedings under Section 153C of the Act is for the AO of the searched person to be satisfied that the assets or documents seized belong to the Assessee (being a person other than the searched person). The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not belong to the person searched but to some other person and secondly, the seized documents/assets are handed over to the AO having jurisdiction over that person, that is, the person other than the one searched and to whom the seized documents/assets are said to belong. The relevant extract of the said decision is quoted below:- 6. On a plain reading of section 153C, it is evident that the Assessing Officer of the searched person must be 'satisfied' that, inter alia, any document seized or requisitioned 'belongs to' a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the pro visions of section 153A. Therefore, before a notice under section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of a satisfaction that the assets/documents seized belong to a person other than the person searched is necessarily the first step towards initiation of proceedings under Section 153C of the Act. In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched. 19. The Allahabad High Court in the case of Commissioner of income Tax v. Gopi Apartments: (2014) 360 ITR 411 has expressed a similar view in the following words:- 25. A bare perusal of the provision contained in Section 153C of the I.T. Act leaves no doubt that, as is provided under Section 158BD, where the Assessing Officer, while proceeding under Section 153A against a person who has been subjected to search and seizure under Section 132(1) or has been proceeded under Section 132A, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory. 20. Mention may also be made to the decision of the Madhya Pradesh High Court in Commissioner of Income Tax v. Mechmen: (2015) 60 taxmann.com 484 (Madhya Pradesh). In that case, the Court had explained that the fact that incidentally the AO is common at both stages would not extricate him from recording satisfaction at the respective stages. It was explained that since the satisfaction of the AO of a searched person that assets/documents seized belong to some other person is sine qua non to commencing proceedings under Section 153C of the Act in respect of such other person, the AO could not assume jurisdiction and transmit the items to another file concerning the person (other than the one searched) pending before him, before being satisfied that the seized assets/documents belonged to the other person. 21. 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of 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 case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 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 search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im 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 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 assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is 3made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re any assessment or reassessment has abated. 8. In SSP Aviation (supra) the High Court inter alia reasoned as follows: 14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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