9911796707
TMI Blog2025 (4) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... TA.No.1322/ Hyd./2024 for the assessment year 2017-2018 as the "lead" appeal. Both the parties are agreed that the decision taken in appeal for the assessment year 2017-2018, be applicable for the remaining appeals for the assessment years 2017-2018 and 2018-2019. ITA.No.1322/Hyd./2024 - A.Y. 2017-2018 : 2. The assessee has raised the following grounds in the instant appeal : 1. "The order of the Learned Principal Commissioner of Income Tax u/s 263 of the Income Tax Act, 1961 is erroneous on the facts of the case and contrary to the provisions of law. 2. The Ld. Principal CIT erred in law in invoking the provisions of section 263 of the Act to revise the assessment order passed u/s 153C of the Act, though the powers of revision u/s 263 do not extend to such assessment order passed with the prior approval of the JCIT u/s 153D of the Act. 3. The Ld. Principal CIT erred in law in setting aside the approval given by the JCIT u/s 153D of the Act though such approval does not constitute an order passed under the Act which could be a subject matter of revision u/s 263 of the Act 4. The order of revision u/s 263 is without jurisdiction and unsustainable in law, as the base assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-2021, the Assessing Officer made addition of Rs. 5,01,83,750/- in the case of MSN Institute of Medical Sciences Pvt Ltd Rs. 4,27,87,500/- in the case of Prathima Eggsel Pvt Ltd Rs. 4,90,08,750/- in the case of Prathima Resorts & Restaurants Pvt Ltd and Rs. 2,40,11,250/- in the case of Spark Vidyut Pvt Ltd. u/sec.69 of the Act towards unexplained investment represented by payment of onmoney in cash for purchase of lands at Rangareddyguda. The assessments u/s 153C in respect of A.Ys 2017-2018 and 2018-2019 were completed accepting the returned loss. 4. The addition made u/sec.69 of the Act in the assessment orders for A.Y 2020-21 in the cases of the four appellants was deleted by the CIT(A) vide appellate orders dated 28.06.2024 on the reasoning that the said addition is not based on any incriminating material unearthed during the search for the concerned assessment year. The CIT(A) made an observation in the appellate order that the AO may take appropriate action based on the evidences seized and statements recorded u/sec.132(4) in appropriate hands in appropriate years. 5. Subsequently, the PCIT issued show-cause notices u/sec.263 of the Act for A.Ys 2017-18 and 2018-19 on 23.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the said assessment orders passed u/sec.153C and the approvals accorded by the JCIT u/sec.153D for the said assessment orders in the cases of the four appellants are not only erroneous but also prejudicial to the interests of revenue. And, therefore, the learned PCIT set-aside the assessment orders passed by the Assessing Officer u/sec.153C of the Act for the A.Ys 2017- 18 and 2018-19 in the cases of the four appellants to the file of the Assessing Officer and the corresponding approvals u/sec.153D to the file of the JCIT for the purpose of assessing the unexplained investment towards purchase of lands at Rangareddyguda u/sec.69 r.w.s 115BBE of the Income Tax Act, 1961 in the said assessment years. 6. Aggrieved by the order of the learned PCIT, the assessee is now in appeal before the Tribunal. 7. During the course of hearing, CA MV Prasad, Learned Counsel for the Assessee, submitted his arguments on two counts i.e., (i) when an assessment order passed u/sec.153C with the prior approval of JCIT u/sec.153D, revisionary powers of PCIT u/sec.263 of the Act are unsustainable in law and (ii) In absence of a valid satisfaction note, assumption of jurisdiction u/sec.153C by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction by the Assessing Officer u/sec.153C of the Act is bad in law and unsustainable. He submitted that the satisfaction notes in the cases of three appellants i.e Prathima Eggsel Pvt Ltd, Prathima Resorts & Restaurants Pvt Ltd and Spark Vidyut Pvt Ltd are identically worded. In the satisfaction notes of the said three cases, the AO made discussion regarding the issues of stated sale consideration in the registered sale deeds being less than the stamp duty value within the meaning of section 56(2)(x) and on-money payments made in cash in respect of lands purchased at Rangareddyguda during the previous year relevant to A.Y 2020-21 by the said assessee's. The AO made the said discussion with reference to the seized material and sworn statements u/sec.132(4) relevant to the said issues and he arrived at the conclusion that income u/sec.56(2)(x) and on-money payments that were made during the A.Y 2020-21 for purchase of lands at Rangareddyguda need to be brought to tax in the hands of the said assessee's for the A.Y 2020-21. Based on the said discussion, the AO recorded his satisfaction that the seized material has a bearing on the determination of total income of the said assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and co-related the seized material that has a bearing on the determination of the total income of the appellants for all the assessment years for which such satisfaction is purported to have been arrived at, barring one assessment year. The satisfaction recorded by the Assessing Officer in a sweeping manner for all the six assessment years from A.Y 2015-16 to A.Y 2021- 22 without co-relating the seized material to each of the assessment years involved in the said period does not constitute a legally valid satisfaction for the assessment years for which such co-relation has not been brought out in the satisfaction note and consequently, the assumption of jurisdiction u/sec.153C for the impugned assessment years is bad in law and unsustainable. He submitted that without such co-relation, it cannot be regarded that the seized material has a bearing on the determination of total income for the said assessment years, which is a jurisdictional fact and sine qua non for issue of notice u/s 153C for the said assessment years. In the absence of bringing out co-relation of the seized material with the total income of A.Ys 2017-18 and 2018-19, the satisfaction recorded by the AO for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT v. Sinhgad Technical Education Society and Hon'ble Delhi High Court in the case of Saksham Commodities Ltd v. ITO (supra). He accordingly submitted that in absence of satisfaction note recorded by the Assessing Officer regarding identification and co-relation of the seized material to the concerned assessment years in order to establish the fact that the seized material has a bearing on the determination of the total income for the said assessment years, assumption of jurisdiction u/sec.153C of the Act is not legally valid. He accordingly stressed on the point that since the satisfaction notes recorded by the AO in the cases of the four appellants have not brought out the co-relation of the seized material with the determination of total income of A.Ys 2017-18 and 2018-19, it follows from the application of the aforementioned settled law to the said fact that the assumption of jurisdiction u/sec.153C by the Assessing Officer for the said assessment years is bad in law and that, the consequential assessment orders passed u/sec.153C for the said assessment years are ab initio void in the absence of valid jurisdiction to pass the said orders. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the factual situation prevalent in the case of the three appellants. The said legal maxim has been a cornerstone in legal proceedings, signifying that actions based on an unlawful foundation are inherently invalid. In support of this contention, the Learned Counsel for the Assessee relied on the judgment of the Hon'ble Goa Bench of Bombay High Court in the case of Gigabyte Technology (India) Pvt Ltd v. CIT in Tax Appeal Nos.77 and 78 of 2015. A copy of the said judgment of is furnished at Page Nos.293 to 305 of PB-1. Further, the Learned Counsel for the Assessee placed reliance on the decision of the Hon'ble ITAT, Mumbai in the case of Westlife Development Ltd v. Pr.CIT [2017] 88 taxmann.com 439 (Mumbai) wherein it has been held that since the original assessment order was null and void in the eyes of law as the same was passed upon a non-existing entity, the CIT could not have assumed jurisdiction under the law to make revision of a non-est order. The Hon'ble Tribunal therefore held that the impugned order passed u/sec.263 by the CIT is also a nullity in the eyes of law and the same is accordingly quashed. Copy of the said order is placed on record at Page N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the fulfilment of these conditions and satisfaction note is recorded by him regarding the same. The said jurisdictional requirements for issue of notices u/s 153C are required to be strictly construed. The satisfaction of the Assessing Officer regarding the fulfilment of the jurisdictional conditions is sine qua non for the issue of notices u/sec.153C and the notices issued and assessments made u/sec.153C without such satisfaction of the AO are bad in law. The Learned Counsel for the Assessee further drew the attention of the Bench with regard to the provisions of the Act prescribes that the satisfaction for assuming jurisdiction u/sec.153C should be that of the AO and no other authority including the higher authorities such as JCIT, PCIT etc. has been vested with the said power. The provisions of section 263 of the Act do not provide for revising the "satisfaction note" recorded by the Assessing Officer, which is completely different and distinct in its nature from the order passed by the Assessing Officer. Hence, the appellant submits that the satisfaction note recorded by the Assessing Officer for enabling him to assume jurisdiction to issue notices u/sec.153C is final an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfaction note, since the same would amount to re-writing the satisfaction note by the PCIT which is not legally permissible as submitted earlier. 12. The Learned CIT-DR Shri B Bala Krishna, on the other hand, relied on the orders of the PCIT and submitted that the statute did not explicitly made it clear that if an assessment order passed by the Assessing Officer with the approval of JCIT u/sec.153D of the Act, cannot be revised by the PCIT in exercise of his revisionary powers u/sec.263 of the Act. He, therefore, submitted that the order of PCIT passed u/sec.263 of the Act is in accordance with law and should be upheld. Further, since the income chargeable to tax has escaped assessment and as per the seized material the income pertains to the previous assessment years, the learned PCIT has rightly exercised his revisional powers u/sec.263 of the Act and the orders of the PCIT should be upheld as the assessment orders passed by the Assessing Officer are not only erroneous but also prejudicial to the interest of the revenue. He accordingly submitted that the order of the PCIT is in accordance with law and, therefore, he submitted that the order of the PCIT should be upheld in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized material in light of the statement of Shri Anirudh Reddy, the on-money for payment of purchase of land has been assessed for some other assessment years which renders the assessment order passed by the Assessing Officer erroneous and prejudicial to the interest of revenue. Therefore, he submitted that, there is no merit in the arguments advanced by the Learned Counsel for the Assessee that, in absence of valid satisfaction note for the assessment year in question, the assessment order becomes void abinitio and liable to be quashed and consequently, the PCIT cannot revise assessment order which is illegal by exercising his revisional powers u/sec.263 of the Act is contrary to law and cannot be accepted. Therefore, he submitted that grounds taken by the assessee on this regard should be rejected. 14. We have heard both the parties, perused the material on record and the orders of the authorities below. The PCIT has invoked his jurisdiction u/sec.263 of the Act and set-aside the assessment order dated 27.11.2024 passed by the Assessing Officer u/sec.153C of the Act on the ground that the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. 15. The provisions of sec.263 of the Income Tax Act, 1961 deals with revision powers of the Principal CIT and as per the said provisions, if the PCIT satisfies that the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue, then the assessment order passed by the Assessing Officer can be revised. But, in order to invoke the provisions of sec.263 of the Act, the PCIT should satisfy that the twin conditions provided under the Act are satisfied i.e., (1) order of the Assessing Officer is erroneous and further (2) It is prejudicial to the interest of revenue. Unless the PCIT makes-out a case that twin conditions mentioned therein are satisfied, the PCIT cannot assume his revisionary jurisdiction and revise the assessment order passed by the Assessing Officer in terms of sec.263 of the Act. 16. In light of the above factual and legal background, if we examine the order passed by the PCIT u/sec.263 of the Act, we have to understand whether the PCIT has arrived at a correct conclusion on the basis of material available on record which warrants revisional jurisdiction and set-aside the assessment order passed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n note recorded by the Assessing Officer for initiation of proceedings u/sec.153C of the Act and also the assessment order passed by the Assessing Officer for the assessment years 2020-2021 and 2021-2022. 17. It is well settled principles of law that any assessment orders passed by the Assessing Officer u/sec.153C for any assessment years are void ab initio in absence of valid assumption of jurisdiction u/sec.153C by the Assessing Officer and that the assessment orders which are ab initio void cannot be subjected to revision u/sec.263 of the Act, because if any order is illegal, then same cannot legalised by the higher authority. In the present case, the Assessing Officer failed to identify and co-relate the seized material which is relevant for determination of total income for the impugned assessment years 2017-2018 and 2018- 2019 in the case of all the four assessee's under appeals while recording the "satisfaction note" and in absence of such valid satisfaction note, assumption of jurisdiction by the Assessing Officer u/sec.153C of the Act is bad in law and unsustainable. We have gone through the satisfaction notes in the cases of three appellants i.e Prathima Eggsel Pvt Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the total income of the assessee for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted i.e for A.Ys 2015-16 to 2021-22. However, as could be seen from the satisfaction note, the AO did not make any discussion therein which enabled him to arrive at the said satisfaction for A.Ys 2015-16 to 2021-22 based on the identification and co-relation of the seized material that is relevant to each of the said assessment years, except A.Y 2015-16. Further, it may also be seen that there was no discussion at all by the Assessing Officer in the satisfaction note regarding the issue of on-money payments made for purchase of lands at Rangareddyguda. Therefore, from the perusal of the contents of the satisfaction notes recorded by the Assessing Officer in the case of all the four appellants, it is evident that, the Assessing Officer has not identified and co-related the seized material that has a bearing on the determination of the total income of the appellants for all the assessment years for which such satisfaction is purported to have been arrived at, barring one assessment year. The satisfaction recorded by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodities Ltd v. ITO [2024] 461 ITR 1 (Delhi) wherein the Hon'ble Delhi High Court held that there is a well settled distinction which the law recognizes between the existence of power and the exercise thereof and merely because section 153C confers jurisdiction upon the Assessing Officer to commence an exercise of assessment or reassessment for a block of years which are mentioned in that provision, same alone would not be sufficient to justify steps in that direction being taken, unless incriminating material so found is likely to have an impact on total income of a particular assessment year forming part of six assessment years immediately preceding assessment year pertaining to search year or for "relevant assessment years". Therefore, in absence of satisfaction note recorded by the Assessing Officer regarding identification and co-relation of the seized material to the concerned assessment years in order to establish the fact that the seized material has a bearing on the determination of the total income for the said assessment years, assumption of jurisdiction u/sec.153C of the Act is not legally valid. In the present cases, the satisfaction notes recorded by the AO in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or bad in law, such an order has no legal existence and consequently, no further action under the statute can be taken with regard to such a non-existing order including revision u/sec.263. The legal maxim "Sublato Fundamento Cadit Opus", which means that once the foundation is removed, the entire structure falls, is squarely applicable to the factual situation prevalent in the case of the three appellants. The said legal maxim has been a cornerstone in legal proceedings, signifying that actions based on an unlawful foundation are inherently invalid. Although, the assessee has not challenged the validity of assessment orders when they are passed, but in our considered view, there was no occasion for the assessee to challenge said orders, because the orders are not averse to the assessee at that point of time. Further, in our considered view, the assessee can challenge the validity of orders at the very first available opportunity and in our considered view, since the assessee has got an opportunity to question the validity of orders, it has rightly challenged the validity of orders in the present proceedings. Since the original assessment orders itself is invalid in absence of val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT on the said seized document for the purpose of revision of assessment orders u/sec.153C for A.Ys 2017-18 is misplaced and the same is untenable. Further, unlike assessments u/sec.153A in the case of searched persons where the issue of notices u/sec.153A for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted is automatic, the issue of notices u/sec.153C in the cases of a persons other than the searched person is contingent on the availability of seized material pertaining to or containing information relating to such other person and on such seized material being incriminating in nature in as much as it has a bearing on the determination of total income for the relevant assessment years. These conditions for issue of notices u/sec.153C are the jurisdictional conditions and notices u/sec.153C cannot be issued unless the Assessing Officer is satisfied regarding the fulfilment of these conditions and satisfaction note is recorded by him regarding the same. The said jurisdictional requirements for issue of notices u/s 153C are required to be strictly construed. The satisfaction of the Assessing Officer regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion regarding the seized material that has a bearing on the determination of the total income of the appellant for the said assessment years. Since the fulfilment of the jurisdictional condition to the said effect is not brought out in the satisfaction note of the Assessing Officer, the assumption of jurisdiction u/sec.153C by the Assessing Officer for the said assessment years is not lawful and the consequential notices issued and assessment orders passed for the said assessment years do not have validity in law. In the said facts and circumstances of the case, the PCIT is not empowered to revise such assessment orders by relying on seized documents in respect of which the Assessing Officer did not record any satisfaction in the satisfaction note, since the same would amount to re-writing the satisfaction note by the PCIT which is not legally permissible. 21. In the present case, going by the facts available on record, we find that there is no direct co-relation between the incriminating material found during the course of search qua the assessment years 2017-2018 and 2018- 2019 to allege that the documents found during the course of search belongs to or relates to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
