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TMI Blog2024 (11) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... husband on 23.11.2020. 2. Pursuant to a search and seizure operation relating to Mr. Ram Prasath Reddy, the seized materials, which are said to relate to the petitioner herein, were handed over to the jurisdictional assessing officer on 20.11.2021. Initially, pursuant to notices under section 153A of the Income-Tax Act, 1961 [the I-T Act], assessment orders in respect of assessment years 2018-19, 2019- 20 and 2020-21 were issued to the petitioner. Upon challenge, those assessment orders were quashed by common order dated 23.02.2023 by granting liberty to the respondent therein to proceed afresh against the petitioner in accordance with law. Thereafter, satisfaction notes were recorded on 24.02.2023, and notices under Section 153C of the I-T Act were also issued on the same date. Pursuant thereto, the impugned assessment orders were issued after a hearing on 09.03.2023. While the income returned by the assessee for assessment years 2015-16, 2016-17 and 2017-18 was accepted, additions were made in assessment years 2018-19, 2019-20 and 2020-21 on the basis of unexplained credits in the bank accounts. Counsel and their contentions 3. Oral arguments on behalf of the petitioner were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at clauses (a) and (b) of sub-section (1) of section 153B read with the third proviso thereto provide for a limitation period of 12 months from the end of the financial year in which the last of the authorizations for search under section 132 was executed. As regards a person to whom section 153C applies, he submitted that the limitation period is modified in clause (ii) of the third proviso as 12 months from the end of the financial year in which the last of the authorisations for search was executed or twelve months from the end of the financial year in which the seized assets were handed over to the assessing officer having jurisdiction, whichever is later. 7. If the seized materials had been handed over within 60 days from 02.01.2021, he submitted that the end of the financial year would be 31.03.2021 and, consequently, the limitation period would expire on 31.03.2022. On account of the seized materials being handed over about eight months beyond the 60 day time limit under section 132(9A), he submits that the respondents cannot be permitted to claim that the end of the relevant financial year is 31.03.2022 instead of 31.03.2021 and that, consequently, the time limit for compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ papers in W.P.No.18619 of 2023), 2019-20 (pages 28 to 44 of the writ papers in W.P.No.18623 of 2023) or 2020-21 (pages 28 to 44 of the writ papers in W.P.No.18610 of 2023) refer to any incriminating materials being found in the course of search. By further pointing out that the additions made with regard to the petitioner are in respect of credits in the bank account, learned counsel submitted that the panchnamas do not refer to the seizure of such bank statements. He also pointed out that the said bank statements were not referred to in the satisfaction notes. In support of the proposition that the jurisdiction under section 153C is confined to incriminating materials found in course of search or requisition, learned counsel relied on the judgment of the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P) Ltd. [2023] 454 ITR 212 (SC) (Abhisar Buildwell). 11. The third contention of learned counsel for the petitioner was that the satisfaction notes do not disclose as to how the seized materials would have an impact on the determination of income for the assessment years for which notices were issued under section 153C. After pointing out that the satisfaction notes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultation with the Principal CIT, Pondicherry or the DCIT, Central Circle-1(4), Chennai. Although this ground was not raised in the writ petition, by relying on the judgments of the Hon'ble Supreme Court in Arunachalam Pillai v. Southern Railways Ltd., AIR 1960 SC 1191, and Anil Kumar Gupta v. State of U.P. and Others, (1995) 5 SCC 173, learned counsel contended that a new jurisdictional ground can be raised even if not supported by pleadings. By further relying on the judgment of the Hon'ble Supreme Court in P.N.Eswara Iyer v. Registrar, Supreme Court of India, (1984) 4 SCC 680, he contended that a new plea cannot be rejected on technical grounds when the necessary facts are on record. By also relying on the judgment of the Supreme Court in Ajantha Industries v. CBDT, (1976) 102 ITR 281, he submitted that the transfer order cannot be construed as a purely administrative order since prejudice is being caused to the assessee as a result thereof. 14. The last contention of learned counsel was that the I-T Act does not create a charge on additions made under section 69 thereof in terms of section 115BBE. Since the additions are in respect of credits in bank statements, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Knitwears [2014] 362 ITR 673 (SC)(Calcutta Knitwears), in the context of erstwhile sections 153BC and 153 BD which are analogous to sections 153A and 153C, that it may be done at the time of initiation of proceedings against the searched person; along with assessment proceedings against the searched person; or immediately after the assessment proceedings are completed against the searched person. By also relying on the judgment of the Division Bench of the Gujarat High Court in Commissioner of Income-tax-II v. Bipinchandra Chimanlal Doshi [2017] 79 taxmann.com 21 (Gujarat), he pointed out that the Gujarat High Court held that Calcutta Knitwears does not lay down the absolute proposition that the failure to record the satisfaction note immediately after the assessment of the searched person was completed would vitiate proceedings. 17. Upon such satisfaction being recorded, he further submitted that section 153C provides that the assessment or reassessment of the income of the person (other than the searched person) should be carried out in accordance with the provisions of section 153A, which is the provision applicable to the searched person. According to learned senior standing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prejudice, by referring specifically to the satisfaction notes, he submitted that such satisfaction notes meet the requirements of section 153C because they record that the seized assets have a bearing on the determination of the total income of the petitioner for each assessment year forming the subject of these proceedings. He further contended, in this regard, that alleged insufficiency of reasons in the satisfaction notes cannot be a ground for interference under Article 226 of the Constitution. For this proposition, he relied on the judgment in Chandran Somasundaram v. Principal Commissioner of Income-tax [2023] 450 ITR 188 (Madras) (Chandran Somasundaram). 21. As regards the order under section 127 of the I-T Act, learned senior standing counsel contended that the assessee did not raise any objections to the transfer, which was intended to consolidate related assessments. He also pointed out that the affidavit and grounds do not contain any indication that the petitioner/assessee was objecting to the transfer. Since mixed questions of fact and law are involved in the transfer, he contended that the petitioner cannot be permitted to raise such ground without supporting plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), .... [(9-A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of subsection (1), the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132-A and 132-B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized or requisitioned have a bearing on the determination of the total income of such other person 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 : (emphasis added) 153B. Time limit for completion of assessment under section 153A. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment, - (a) in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment or reassessment in case of other person referred to in section 153C, shall be the period of twelve months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:" (emphasis added) 25. As discussed earlier, the last authorisation for search was executed in this case on 02.01.2021, which falls within financial year 2021-22. Since financial year 2021-22 is after the financial year commencing on 01.04.2019, the limitation period prescribed in the third proviso to sub-section (1), which is emphasised above in bold font, becomes applicable. As regards the person referred to in section 153C, the period of limitation is 12 months from the end of the financial year in which the last of the authorizations for search under section 132 was executed or 12 months from the end of the financial year in which the seized assets were handed over to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to hand over the seized materials to the jurisdictional assessing officer but not with regard to time limit. Besides, in the absence of any reference or link between section 132(9A) and sections 153A to 153C, such non-compliance cannot be construed as vitiating the subsequent assessment proceedings. 28. The assessment orders were then assailed on about three grounds relating to the satisfaction notes. Since these grounds are largely inter-related, they are dealt with collectively. The grounds were that the jurisdiction under section 153C is confined to materials seized during search; that the satisfaction notes do not record as to how the seized materials have a bearing on the determination of the income of the assessee; and that such satisfaction was not recorded in respect of each assessment year forming part of the block of six assessment years. As stated earlier and as is evident from the text of section 153C, the assessment under section 153C is required to be undertaken in accordance with the provisions of section 153A. Section 153A (1) provides, in relevant part, as under: "153A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions imposed in sub-section (1) of section 153C is that the jurisdictional assessing officer should be satisfied, upon receipt of the seized materials, that such material would have a bearing on the determination of the income of the assessee for the preceding six assessment years and the relevant assessment year(s). As regards such person, the proviso to section 153C(1) indicates that the reference to six preceding assessment years in the second proviso to section 153A(1) should be reckoned from the date of receipt of seized materials by the jurisdictional assessing officer rather than the date of initiation of search or requisition. Subject to the above caveat, the fallout of the deemed abatement is that de novo assessment or reassessment, as the case may be, becomes necessary once a notice is issued either under section 153A or section 153C. Otherwise, the income of the assessee in respect of pending assessments would remain unassessed. Reference may be made to the judgment of the Division Bench of the Delhi High Court in Anil Kumar Bhatia for an understanding of the block assessment scheme under section 153A and how it varies from the earlier scheme which enabled block asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be required to issue notice for assessing or reassessing the total income 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 as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated" In my view, this is a clear indication that, except to the extent expressly modified in section 153C, all the provisions of section 153A, including the block assessment and abatement of pending assessments, apply to the assessment or reassessment of persons referred to in section 153C subject to the caveat that the three conditions set out above in paragraph 31 are fulfilled. Whether all three conditions and, in particular, the third was satisfied warrants examination next. 33. In the cases at hand, separate satisfaction notes were recorded in respect of each assessment year. These satisfaction notes are in identical terms and contain, in relevant part, the following observations: "Considering all the above, the books of accounts and other electronic devises, incriminating documents seized from the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner's bank accounts formed the basis for additions made in three financial years. By taking into account the satisfaction threshold, context and the block assessment scheme, including the abatement of pending assessments, on balance, I conclude that there is no basis to hold that the seized materials had no bearing on the determination of the total income of the assessee or on the assessments. I also conclude that the satisfaction notes satisfy the requirements of section 153C(1). In this connection, except where there is patent inadequacy, I also concur with the contention of learned senior standing counsel, who relied on Chandran Somasundaram, that the sufficiency of reasons recorded in the satisfaction notes would not ordinarily be a basis for interference under Article 226. 36. The penultimate issue that falls for consideration is with regard to the order dated 01.03.2021 under section 127 of the I-T Act. Section 127 provides for the power of transfer. Such power is required to be exercised after giving the assessee a reasonable opportunity of being heard, wherever it is possible to do so. In all these cases, the transfer orders were issued after putting the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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