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TMI Blog2024 (4) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. In the case where search or requisition is made, the AO u/s 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. AO assumes jurisdiction to assess/reassess total income by passing separate order for each assessment. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed u/s 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A. Special procedure is prescribed under Section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the total income . As not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to. Supreme Court in the case of Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] while dealing with the provisions of Section 153A held that in case of absence of incriminating material seized during the search, the department is not remediless for reassessing the unabated assessment on the basis of material received from the other sources and can proceed u/s 148. The decision does not support the contentions raised that Section 148 is rendered redundant if Section 153C is to be resorted to in the facts of the present case. If the Department has chosen not to procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for initiating the proceedings. On 18.02.2022 the reasons were supplied. The objections filed on 01.03.2022 were rejected on 05.03.2022. ARGUMENTS OF PETITIONERS:- 4. Learned counsel for petitioner contented that basis of issuance of notice under Section 148 is the material seized during the search conducted on Ramesh Manihar Group (hereafter 'the Manihar Group'), the proceedings should have been initiated under Section 153C of the Act. Decisions of the Karnataka High Court in Sri Dinakara Suvarna Vs. Deputy Commissioner of Income Tax in Income Tax Appeal No.16/2015 on 08.07.2022 and the Bombay High Court in M/s. Aditi Constructions Vs. Deputy Commissioner of Income Tax & Ors. in Writ Petition No.783/2016 dated 04.05.2023 are relied upon. Submission is that Section 153C is a special provision dealing with the search cases and notice issued under Section 148 of the Act is without jurisdiction. CONTENTION OF RESPONDENTS:- 5. Per contra the enactment of Sections 153A to 153D does not eclipse Section 148 of the Act and even in search cases the Department can proceed under Section 148. Reliance is placed upon the decision of the Apex Court in Deputy Commissioner of Income Tax (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. 10. Finance Act, 2003 introduced Section 153A to 153D, laying down the special procedure for assessment in cases of search or requisition made on or after 1st June, 2003. Under the new provisions following deviations were made from the earlier regime:- (i) the assessment /reassessment of 'total income' was to be made for each of relevant preceding year by passing separate order for each assessment year, instead of initiation of parallel proceedings for the undisclosed and regular income. (ii) The concept of assessment for broken period i.e. from 1st April to the date when the search was conducted, was no longer there. (iii) The normal rates of the tax applicable in each year were to be applied. (iv) The pending assessment or reassessment proceedings, on date of initiating of search or requisition, abated. In case of annulment of the assessment/reassessment under Section 153A the abated assessment or reassessment revived. (v) The provisions of Section 153A to 153D brought within its ambit not only the cases of assessee on whom the search was conducted or requisition made but also assessee to whom the seized material related to or belonged to. 11. The Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years. Clause (b) provides that income or part of it referred to Clause (a) should have escaped the assessment for such year or years. Clause (c) provides that the search or requisition should have been initiated on or after 01.04.2017. Explanation (1) explains the relevant assessment year. Explanation (2) provides that the 'asset' in the fourth proviso shall be inclusive of immovable property, land or building or both, shares and securities, loans and advances, financial deposits in Bank. Sub-section (2) deals with eventuality of annulment of assessment or reassessment made under sub-Section (1), in appeal or other legal proceedings. In such event the abated assessment or reassessment shall stand revived with effect from the date of receipt of order of such annulment by the Commissioner. As per the proviso on setting aside of annulment order the revival shall cease. 15. Section 153B deals with time limit for completion of assessment under Section 153A. 16. The heading of Section 153C is Assessment of Income of any other person. Proceedings under Section 153C are notwithstanding provisions of Sections 139, 147, 148, 149, 151 & 153. On satisfaction of the AO dealing with sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 153A dealt with the following question. Para 11 is quoted:- "11. The question which is posed for consideration in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132A or not, i.e., whether any addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under Section 132 A of the Act, 1961 or not." 22. It was held that on a search or requisition of an assessee it is mandatory to issue notice under Section 153A for filing returns in respect of relevant preceding years. The AO assumes jurisdiction to assess or reassess 'total income' of the relevant preceding years. The pending assessment and reassessment abate by operation of the provision of Section 153A. The completed and unabated assessments could not be reopened in absence of an incriminating seized material relating to the concerned assessment years. The assessment and reassessment under Section 153A has to be of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment. 25. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A. 26. Special procedure is prescribed under Section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other sources. For Illustration:- An assessee had returned income of Rs.100, undisclosed income of Rs.200 is unearthed during search and there is information from annual information statement of non-disclosure of income of Rs.150/-. The AO under Section 153A and 153C shall pass order dealing with income of Rs.100+Rs.200+Rs.150, the total income being Rs.450/-. In cases where there is no unearthing of undisclosed income of Rs.200/-, the department can resort to proceeding under Section 147/148. 32. The argument that Section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the 'total income'. It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as placed upon the decision of the Bombay High Court in the case of M/s. Aditi Constructions (supra). The para-9 is quoted:- "9. We find that the jurisdictional conditions for invoking section 147 - 148 are not satisfied as there is no failure to disclose material facts fully and truly. It is not in dispute that by the letter dated 11th September 2015 (Exhibit H) the Petitioner have submitted all the particulars along with supporting documents to the Respondent No.1. Hence the reasons to believe and a presumption based on the statement of Shri Bhanwarlal Jain (a third party) in the course of a search, that the loans of the entities were bogus or accommodation entries was clearly dispelled. Moreover, the specific provisions of S. 153C would prevail over the general provisions of section 147 in the case of search on 3rd party." 40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed. However, the respondents shall be at liberty to proceed against the petitioners in accordance with law. 41. The first ground of challenge to initiation of proceedings under Section 148 is being accepted and there is no need to dilate upon other ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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