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TMI Blog2024 (4) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... hich exclude the application of provisions of section 147 and 148 of the Act. Also decided in MR. NILESH BHARANI VERSUS DCIT CC - 4 (1) MUMBAI [ 2023 (3) TMI 200 - ITAT MUMBAI] assessment order passed u/s 147 of the Act on 30/12/2018 is illegal and void ab initio and same is hereby quashed, having been passed on incorrect provision, ignoring the mandatory non-obstante sections 153A / 153C of the Act, as here in this case, jurisdiction to assess and pass the assessment order was under sections 153A / 153C. Thus as in the present case the assessment was framed u/s 143(3) r.w.s. 147 of the Act based on the incriminating material found in the course of search in a third party. We hold that the assessment made u/s 143(3) r.w.s. 147 of the Act is void ab initio - Assessee appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the person searched as per the relevant search warrants / panchnama, (c) name of the persons who actually deposed against the appellant about the impugned additions as accommodation entries, (d) contents of the statements of the said deponents, (e) the actual material found in the alleged search which was adverse to the appellant. (ii) because it is a case where the impugned assessment order is based on some incriminating material / information found during the course of search (iii) because during the relevant period a separate procedure to make an assessment / reassessment of income based on some seized material found in the premises of a third person existed in the statue u/s 153C r.w.s. 153A of the Act. (iv) in absence of the actual facts, it cannot be determined whether the impugned reassessment was to be framed u/s 148 of the Act or by taking recourse to the section 153C of the Act as the said two sections operate under different circumstances though based on some information found in the search. It is prayed that since the above facts need to be brought on record which go to the root of the legality of the impugned assessment order, the above additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31.10.2023. 6. Ld. DR strongly supported the orders of the authorities below. 7. Heard rival submissions. Assessee a private limited company filed its return of income on 09.10.2010 declaring income of Rs. 1,21,60,004/-. The assessment was completed u/s 143(3) of the Act on 15.03.2013 accepting the income returned by the assessee. Subsequently, notice u/s 148 of the Act was issued for reopening the assessment based on the search conducted on 14.09.2010 by the Investigation Unit of the Income Tax Department on Jain Bros. namely Mr. S.K. Jain and Mr. V.K. Jain, wherein the Department found certain incriminating materials and recorded statements of Jain Bros. Based on the statements recorded and incriminating material found in the course of search conducted on 14.09.2010 in the case of Jain Bros. the assessment of the assessee was completed u/s 143(3) r.w.s. 147/148 of the Act making an addition of Rs. 1,54,02,000/- u/s 68/69A/69C of the Act. In the additional and legal grounds the assessee challenges the assessment made u/s 143(3) r.w.s. 147 of the Act on the ground that since the assessment was made based on the incriminating materials found in the course of search conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily relied information received from the Investigation Wing, assessment record of the case, assessment record of Jain Brothers and then material on record having direct bearing on the present proceeding to disbelieve the evidences furnished by the assessee in the Form of PAN, Income Tax Return etc of the Investor Company. 8.1 It comes up from the order of ld. AO in para 10.3 that regarding the claim of assessee that assessment of investee companies has been completed u/s 153A on return income was also one of the explanations of assessee but the same was not considered by the Ld. AO observing that the same has no bearing on the merits of transactions. 9. The CIT(A) has dealt with the issue that reopening of the assessment u/s 148 on the basis of incriminating material found in the search of the third party is erroneous and provisions of Section 153C alone could be applied to the exclusion of Section 147 and 148 of the Act. In this context his observations have been recorded in para 7.3 as follow: "7.3 It has been further pleaded by appellant that there was search proceedings u/s 132(1) of the Act in the case of S. K. Jain Group, on the basis of which, the proceedings in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. In the case in hand a thorough examination of the reasons for reopening and the manner in which the ld. AO has relied the incriminating evidences and materials allegedly recovered in the hands of S.K.Jain and the intermediary that only go to show that Ld. AO has fallen in error in invoking powers of Section 147/148 in the absence of reasons of satisfaction being drawn u/s 153C by the Assessing Officer of the searched person. 12. It will be appropriate to reproduce para 11.2 of assessment order below and to conclude that the aforesaid observations of this bench make the assessment order void ab initio: "11.2 It is indeed surprising to note that the assessee has made unsuccessful efforts to prove, that these transactions were genuine. It is quite possible that the assessee could have succeeded in its scheme but for the search in the case of Jain Brothers where complete evidence of scheme of tax evasion used by the assessee were seized. The incriminating seized documents are self-speaking and give graphic picture of the modus operandi adopted by the parties involved. It is quite disturbing to note the ease with which the assessee has been conducting its affair by launder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entries amounting to Rs. 25 lacs in FY 2008-09 from S.K. Jain Group of Companies and specifically from M/s Shalini Holding Ltd. in the garb of share application money on 30.08.2008. On the basis of this information found during the search, AO issued notice u/s. 148 of the Act dated 8.3.2016 after recording the reasons in writing and after obtaining sanction u/s. 151(1) of the Act from PCIT, Delhi-6, New Delhi which was served upon the assessee on 10.3.2016 by speed post. In response to the same, assessee filed a letter dated 06.4.2016 wherein it was submitted that the original return filed earlier may be treated as returned filed in response to the notice u/s. 148 of the Act. The Assessing Officer issued notice u/s. 143(2) of the Act and u/s. 142(1) of the Act alongwith questionnaire to the assessee. In response to the same, assessee appeared and filed required documentary evidences and answer the query raised by the AO, but the AO did not agree with the explanation given by the assessee and finally made the addition u/s. 68 of the Act of Rs. 25 lacs as discussed in para 15 of the assessment order and completed the assessment at Rs. 28,23,720/- u/s 147/148 read with section 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C ought to have been applied by the revenue instead of 147, as the former provisions are non-obstantive provisions and exclude the operations of section 147 of the Act. On this issue, he relied upon the various orders passed by the ITAT, Delhi Benches including the ITAT, SMC, Delhi Bench decision dated 08.08.2017 passed in ITA No. 1500 & 1501/Del/2017 (AY 2007-08) in the cases of Sushil Gaur vs. ITO, Ward 2(3), Ghaziabad and Shelly Agarwal. Vs. ITO, Ward 2(3), Ghaziabad, which was passed by the undersigned by respectfully following the various orders mentioned in para no. 8 of the order at page no. 7 to 9 of the order. For the sake of convenience, the relevant para no. 8 is reproduced as under:- "8. I have heard both the parties and perused the records, especially the impugned order as well as the Paper Book. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), I find that in that case as in the present case before me, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the aforesaid paragraphs and I am of the view that this issue has already been adjudicated and decided in favour of the assessee by holding that on the basis of incriminating material found, once reassessment proceedings was initiated on the basis of incriminating material found in the search of 3rd party then the provisions of section 153C of the I.T. Act were applicable which exclude the application of section 147 and 148 of the I.T. Act and notice u/s. 148 of the Act and proceeding u/s. 147 are illegal and void ab initio. Therefore,, respectfully following the aforesaid order of the Tribunal dated 08.08.2017, the reassessment in question is accordingly quashed. Since I have already quashed the reassessment, there is no need to adjudicate the other grounds. Ld. DR has not brought to my notice any contrary decision on exactly similar facts and circumstances of the case mentioned in para no. 8 of the Tribunal order dated 08.08.2017, as reproduced above. Therefore, there is no help can be given to the revenue on the issues mentioned in the written submissions by the Ld. DR." 12. On finding parity in the facts of the case in hand with the facts of Naval Oil and Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 153C of the Act to alleged incriminating material and not on suspicion has been upheld by the Hon_ble Supreme Court in the case of Sinhgad Technical Education Society (supra). 92. Accordingly, we hold that any incriminating information of any undisclosed income of the person not searched which was found during the course of a search having taken place up to 31/03/2021 on some other assessee, can only be taken into consideration for an ITA No. 612 / Mum / 2020 Mr. Nilesh Bharani assessment / reassessment in the hands of the said person not searched through the domain of the section 153C of the Act. Thus, any assessment / reassessment proceedings-initiated u/s 148 of the Act in respect of the said incriminating information found during the course of a search up to 31/03/2021 on some other assessee is illegal and is ab initio as the same can be considered only by taking recourse to the provisions of the section 153C r.w.s. 153A of the Act. Thus, the assessment of the said amount of LTCG, which was claimed to be exempt u/s 10(38) of the Act by the assessee, made u/s 147 of the Act is beyond the scope of section 147, albeit it can be roped in only u/s 153C. 93. If on overall appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153A and u/s 153C only. Ergo, on all the above legal grounds and issues raised by the assessee here are the jurisdictional issue and goes to the threshold of the validity of the assessment proceedings, which in our opinion has not been validly assumed. If the jurisdiction has not been correctly assumed, then the entire consequent assessment proceedings also become illegal. Accordingly, the assessee succeeds here on the above two legal issues / pleas raised by him resulting into cancellation of the assessment order in this appeal. 95. In conclusion, we hold that the assessment order passed u/s 147 of the Act on 30/12/2018 is illegal and void ab initio and same is hereby quashed, having been passed on incorrect provision, ignoring the mandatory non-obstante sections 153A / 153C of the Act, as here in this case, jurisdiction to assess and pass the assessment order was under sections 153A / 153C. Since, the assessment order has been quashed; the grounds of appeal of the assessee on merits are not being adjudicated as they have become academic." 10. Respectfully following the above said decisions, since in the present case the assessment was framed u/s 143(3) r.w.s. 147 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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