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TMI Blog2024 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... d is legally unsustainable, and therefore, the very assumption of jurisdiction u/s 153C of the Act, in these AYs 2014-15 2016-17 are held to be bad in law and hence the consequent impugned assessment orders are null in the eyes of law. Addition/s impugned in unabated AYs 2014-15 2016-17 were not based on any incriminating material found in the course of search and therefore has urged that the same be deleted - It is by now well settled position in law that, in unabated assessments u/s 153C of the Act, the AO is empowered to only make those additions which are based on incriminating material found/unearthed during search. In support of this proposition, we gainfully refer to the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] . As noted that in the case of DCIT vs U.K. Paints (Overseas) Limited [ 2023 (5) TMI 373 - SC ORDER] has held that, in absence of any incriminating material which was found from the premise of the Searched party (i.e., searched person), no addition/s is permissible in an unabated assessment u/s 153C of the assessee (other person). Thus we hold that in the case of unabated assessments of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties. The AO of the searched person (M/s.Pothys Pvt. Ltd.) accordingly recorded his satisfaction on 10-09-2018 that the aforementioned seized material containing the details of on-monies paid on acquisition of properties had a bearing on the total income of the directors (appellants, in the present case). Pursuant thereto, the AO of the appellants is noted to have recorded satisfaction on 19-09-2018 i.e, AY 2019-20; and thereafter issued notices u/s. 153C of the Act dated 19- 09-2018 for the impugned AYs 2014-15 2016-17. 3. The AO in the course of assessment is noted to have identified properties which were acquired for a consideration lower than their assessable value for stamp duty purposes. All these properties were stated to be in the joint names of the above named appellants. The AO is accordingly noted to have referred the valuation of these properties to the valuation cell of the department on 21-12-2018. Since the fair market value determined by the DVO was higher than the actual purchase consideration, the AO invoked Section 56(2)(vii)(b) of the Act. The difference between the actual cost and the FMV was apportioned amongst the appellant directors and accordingly adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties in question belonged/pertained to M/s Pothys/M/s Pothys Pvt Ltd and that the unaccounted investment made in these properties had already been offered taxed in their hands before the Settlement Commission. The Ld. AR thus urged that the initiation of proceedings u/s. 153C of the Act and the consequent impugned orders were bad in law. 7. The Ld. AR further contended that, having regard to the first proviso to Section 153C of the Act, the deemed date of search was 10-09-2018 i.e., AY 2019-20, and on the said date, the income-tax assessments for both AYs 2014-15 2016-17 were not pending before AO and therefore assessments for both years were unabated. Taking us through the assessment orders, the Ld. AR showed that, there was no whisper of any incriminating material found in the course of search, in the impugned assessment orders, on the basis of which notional addition was made u/s. 56(2)(vii)(b) of the Act. The Ld. AR pointed out that, the fact that the addition was made u/s 56(2)(vii)(b) of the Act showed that, the AO had tacitly acknowledged that, the cash notings found in seized material, did not relate to the appellant and, for that reason, no addition by way of unaccounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain to, or any information contained therein, relates to a person other than the person referred to in section 153A. 12. So, from a co-joint reading of section 153A with 153C of the Act we note that, if during the search u/s. 132 of the Act, if it is found that any money, bullion, jewellery or other valuable articles or things seized or requisitioned belongs to or any books of account or documents seized or requisitioned pertains to or any information contained therein relates to other than the person searched u/s. 153A of the Act, then the AO of the searched person (Pothys Pvt Ltd, in this case) has to record his satisfaction that the money, bullion, jewellery or other valuable articles or things seized or requisitioned belongs to the other person (appellant, in this case); or any books of account or documents seized or requisitioned pertains to the other persons (appellant, in this case); or any information contained therein relates to the other person (appellant, in this case). And, for recording such a satisfaction note, the AO of the searched person has to segregate the seized material of the other person (appellant, in this case) from that of the searched person (M/sPothys Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia any document is found in the possession or control of any person in the course of a search, it may be presumed that such document belongs to such person (the searched person). The presumption as to asset, books of accounts, etc. is governed by section 292C(1)(i) of the Act which presumes that the same belong or belongs to the person from whom the said assets/documents were found during the course of search u/s. 132 or survey u/s. 133A of the Act. In other words, whenever an asset/document is found from a person who is being searched, the normal presumption is that the said asset/document belongs to that person. In order to deviate from such a statutory presumption, it is for the Assessing Officer to rebut that presumption, and come to a conclusion or 'satisfaction' that the asset/document in fact belongs/pertains/relates to somebody else (third party like appellant in this case). There must be some cogent material available which was unearthed during search with the Assessing Officer before he/she arrives at the satisfaction that the seized asset/document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical person in the eyes of law and therefore the conveyances for these properties were executed in the names of the partners for and on behalf of the partnership firm. Our attention in this regard was invited to Section 14 of the Partnership Act, 1932 which states that any property or interest therein acquired with the money belonging to the firm shall be deemed to have been acquired by the firm. Having regard to the foregoing facts and position of law, we find force in the contention of the Ld. AR that, these notings regarding the acquisition of immovable properties and cash monies paid in relation thereto, found in Annexure - ANN/SP/PPL/LS/S-2 pertained to the partnership firm, M/s Pothys and not the appellants before us. This fact is noted to have been admitted by Shri Balasubramaniam, key employee in his sworn statement recorded u/s 132(4) of the Act and also stood corroborated by the statement of Shri S Ramesh, Director of M/s Pothys Private Limited. 16. We also find that the searched persons, the partnership firm M/s.Pothys and the company M/s.Pothys Private Limited (which took over the business of the firm) had approached the Settlement Commission and offered their unaccount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in nature qua each of the assessment years in question for which jurisdiction u/s. 153C is sought to be invoked for the 'other Person' - then the notice issued under section 153C to the assessee qua the said assessment year would be without satisfying the jurisdictional fact required to invoke section 153C of the Act. We draw the attention in this regard to the following excerpts of the decision of the Hon'ble Supreme court in Sinhgad Technical Education Society's case (supra) , wherein their Lordship took note of the Hon'ble High Court's findings while confirming Tribunal s view, which is as under: 6. The tribunal has found that incriminating material seized and stated to be pertaining to all six assessment years did not establish any co-relation document-wise with the assessment year in question. In other words, the tribunal concluded that the present matter indicates that the issue of notice could be on the basis that there is specific incriminating information in possession of the Assessing Officer. It is in these circumstances that the tribunal found and as indicated in paragraph 8 of the impugned order that the revenue's assertion that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. 9. We are of the opinion that the tribunal's conclusion cannot be termed as perverse and given the above-noted factual background. None of these appeals raises any substantial question of law. They are accordingly dismissed. No costs. 20. And the aforesaid finding of Hon'ble High Court has been affirmed by the Hon'ble Supreme Court (supra) by observing as under:- 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any corelation, document-wise, with these four Assessment Years. Since this requirement under section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted upon the Pothys Group (searched person) on 18-10-2016 i.e., in AY 2017-18. The satisfaction note was however drawn out by the AO satisfying himself that the assets/documents found in the course of search belongs/pertains to the other person (third party i.e. the assessee/appellent in this case) only on 10-09-2018 i.e, AY 2019-20. Hence, by virtue of first proviso to section 153C of the Act, the said date i.e. 10-09-2018 had to be reckoned as the date of search for the purpose of the first proviso to Section 153C(1) of the Act for ascertaining the abatement of pending assessment or reassessment proceedings, which is mentioned in Section 153A(1) of the Act. Having regard to the said date, assessments of both AYs 2014-15 2016-17 were not pending before AO on date of search, so it were both unabated. By virtue of the second proviso to section 153A(1) of the Act, the assessments u/s. 153A/153C of the unabated AYs has to be essentially based on the documents unearthed during the course of search and seizure operations. 24. It is by now well settled position in law that, in unabated assessments u/s 153C of the Act, the AO is empowered to only make those additions which are based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Court. Hence, all these appeals deserve to the dismissed and are accordingly dismissed. 26. In light of the above judicial precedents, we hold that in the case of unabated assessments of an assessee, no addition is permissible in the order u/s 153C of the Act unless it is based on any incriminating material found during the course of search. Having regard to this legal position, we now revert back to the facts of the present case to ascertain whether the addition/s made u/s 56(2)(vii)(b) in the orders impugned in this appeal was based on or made with reference to any incriminating document found in the course of search. 27. Having perused the assessment orders, we note that there is no whisper/mention of any material leave alone any incriminating material seized during search to justify the addition in these unabated assessments, other than the valuation report of DVO, which evidently was obtained in the course of assessment and cannot be said to constitute incriminating material unearthed in the course of search. It is also not the case that the valuation exercise w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is found to be distinguishable as the said AY was an abated assessment year and the decision was rendered by this Tribunal on merits. Further, the above legal challenges were not raised before the Tribunal in that year and accordingly these legal aspects were never adjudicated upon. Hence, the said order does not have any binding precedence in the present case before us. 30. For the reasons set out in the preceding paragraphs and the judicial precedents discussed above, we are therefore of the considered view that there was no incriminating material/statement found in the course of search on the basis of which additions u/s 56(2)(vii)(b) of the Act could have been legally made in the unabated AYs 2014-15 and AY 2016-17. We accordingly direct the AO to delete the impugned addition/s made u/s. 56(2)(vii)(b) of the Act in the unabated AYs 2014-15 2016-17. 31. Since the facts and circumstances in the lead case of Shri S Pothiraj for AYs 2014-15 2016-17 are identical to the facts involved in the captioned appeals other five (5) appellants as well, the above detailed reasoning mutatis mutandis to delete the identical additions made in the respective unabated assessments of the other fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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