9911796707
TMI Blog2025 (4) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 assessment order passed u/s 153C itself is void ab initio and bad in law since the assumption of jurisdiction u/s 153C by the Assessing Officer is vitiated in the absence of recording of any valid satisfaction for the instant assessment year in the satisfaction note with reference to the specific seized material which has a bearing on the determination of total income for the said year. 5. On the facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angal by the appellant and other companies. The Assessing Officer stated that on perusal of the seized material vide page nos.5 to 22 of A/DVR/RES/01 which contains signed agreement of sale dated 11.06.2016 and other loose sheets for purchase of lands to an extent of ac.182.08 guntas for a consideration of Rs. 5,55,71,000/- and an amount of Rs. 1,60,00,000/- was paid towards the same consisting of payment of Rs. 80,00,000/- in cash on 25.05.2016 and payment of Rs. 80,00,000/- through RTGS on 10.06.2016. A post-dated cheque for Rs. 40 lakhs was also issued to the vendors. The Assessing Officer referred to the statement recorded from Shri D. Venugopal Reddy and more particularly, his reply to Q.No.9 of his statement dated 24.02.2021 and observed that, the agreement was entered into by Shri M. Srinivasa Reddy, brother of Shri M.S.N. Reddy, with the various vendors for purchase of ac.182.29 guntas of agricultural lands at a total consideration of Rs. 3,90,000/- per acre. He stated that registration of the lands has been completed for Ac.101.26 guntas in the names of the three appellant companies @ Rs. 1,00,000/- per acre and the balance consideration amounting to Rs. 1,53,33,750/- Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is free to take any action in pursuance of the observations of the Hon'ble Supreme Court in the case of U.K Paints (Overseas) Ltd (supra) that it will be open for the Revenue to initiate re-assessment proceedings in accordance with law and if it is permissible under the law. 6. Subsequently, the learned PCIT by exercising his revision powers u/sec.263 of the Act issued show cause notice dated 30.09.2024 u/sec.263 of the Act to the assessee on the ground that the assessee has made onmoney payment of Rs. 74,16,750/- towards purchase of agricultural lands which has neither been offered for taxation in assessment year 2019-2020 by the assessee nor the same was assessed to tax by the Assessing Officer u/sec.69 of the Act in the assessment year 2019-2020. In response to the said notice, the assessee filed his reply dated 18.11.2024. The learned PCIT after considering the submissions of the assessee and assessment order, noted that the assessment order passed by the Assessing Officer u/sec.143(3), r.w.s.153C on 28.03.2023 for assessment year 2019-2020 and the Order of approval u/sec.153D of the Act issued by the Joint Commissioner of Income-Tax, Central Range-2, Hyder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar in IT Appeal No.192 of 2000; Hon'ble Jharkhand High Court in the case of Pr. CIT vs. Padma Kumar Jain in Tax Appeal No.7 of 2021 and order of ITAT, Chennai Bench in the case of Saravana Global Holdings Ltd., vs. DCIT in ITA.No.1383 and 1384/ CHNY./2017 and placed the orders on record. He accordingly submitted that the orders of the PCIT passed u/sec.263 of the Act be set aside in respect of the assessment years under appeals. 9. The Learned Counsel for the Assessee further submitted that, as regards assessment orders passed by the Assessing Officer u/sec.153C for the assessment year 2019- 2020, is 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, Learned Counsel for the Assessee CA MV Prasad submitted that the Assessing Officer failed to identify and co-relate the seized material which is relevant for determination of total income for the impugned assessment year 2019-2020 in the case of all the three assessee's under appeals while recording the "satisfaction note" and in absence of such valid satisfaction note, assumption of jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants 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 the impugned assessment year 2019-2020 in respect of three assessee's without co-relating the seized material does not constitute a legally valid satisfaction for the impugned assessment year 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 year 2019-2020 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 impugned assessment year 2019-2020, the satisfaction recorded by the Assessing Officer for the impugned assessment year cannot be considered to be a bonafide and legally valid satisfaction. He, therefore, submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 three appellants have not brought out the co-relation of the seized material with the determination of total income for the impugned assessment year 2019-2020, 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 impugned assessment year 2019-2020 is bad in law and that, the consequential assessment orders passed u/sec.153C for the impugned assessment year 2019-2020 is ab initio void in the absence of valid jurisdiction to pass the said orders. The Learned Counsel for the Assessee accordingly submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.420/JPR/ 2024 wherein the Delhi Tribunal held that while exercising powers u/sec.263, the Commissioner cannot revise an assessment order which is non-est in the eye of law. Copies of orders of the Tribunal are placed on record at pages 312 to 323 of PB-1. The Learned Counsel for the Assessee accordingly submitted that the revision orders passed u/sec.263 of the Act by the PCIT for A.Ys 2019-20, which sought to revise the assessment orders passed u/sec.153C for the said assessment years which are void ab initio, may kindly be considered as bad in law and legally unsustainable. 12. The Learned Counsel for the Assessee CA MV Prasad further submitted that the PCIT was erred in law and on facts in placing reliance on seized material which is non-incriminating in nature for revising an order passed u/sec.153C of the Act. He submitted that in the absence of any incriminating information in the said seized document, the same does not constitute seized material that has a bearing on the determination of total income of the appellants for the impugned assessment year 2019-2020. Hence, the reliance placed by the PCIT on the said seized document for the purpose of revision of assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year are limited to the issues covered by the "satisfaction note" recorded by the Assessing Officer for the concerned assessment year based on the seized material having a bearing on the determination of total income for the concerned assessment year. If the assessment order u/sec.153C for an assessment year omits to bring to tax the income that is emerging from the seized material relied upon in the "satisfaction note" for the concerned assessment year, the PCIT would be justified in law in invoking the powers of revision u/sec.263 for the said assessment year, since the jurisdiction u/sec.153C has been lawfully assumed by the AO for making the said assessment. On the other hand, if the jurisdiction u/sec.153C has not been lawfully assumed by the Assessing Officer for a particular assessment year in the absence of drawing necessary satisfaction by him for the said year in the satisfaction note with reference to the seized material which has a bearing on the determination of total income for the said year, the PCIT has no legal powers to rewrite or modify the satisfaction note in order to render the assumption of jurisdiction by the AO as lawful which was otherwise unlawful. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the arguments of the Counsel for the Assessee that assessment order passed by the Assessing Officer with the approval of Addl. CIT u/sec.153D cannot be revised is devoid of merit and cannot be accepted. Learned CIT-DR further submitted that during the course of search incriminating material was found in the form of agreement to sale for purchase of land has been found and as per the said incriminating material, the assessee has agreed to purchase the land at a particular price, whereas, the final sale deed has been executed for a different amount. Further, another statement was found during the course of search which contains details of total payment made for purchase of land and payment in cash and cheque and when these incriminating documents were confronted to the assessee employees of the appellant company, they have agreed that there is on-money payment for purchase of land through Shri D. Venugopal Reddy Anirudh Reddy. The Department has recorded the statement from Shri D. Venugopal Reddy where he has clearly admitted to have received consideration in cash for sale of land at Kodangal. The said statement has been confronted to Shri MSN Reddy, Managing Director of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies on 24.02.2021 which clearly shows on-money payment for purchase of land by the appellant and other group companies. The PCIT further observed that, although, the Assessing Officer has assessed the on-money payment for purchase of land for assessment year 2018-2019, but, such assessment is based on the admission of Shri D. Venugopal Reddy and Shri MSN Reddy in the statement recorded u/sec.132(4) of the Act during the course of post-search investigation, but, not based on relevant incriminating material found during the course of search, more particularly, Annexure-A/DVR/RES/01 which contains the details of transfer of funds through RTGS and cheques on various dates for purchase of land. The said document further triggered the enquiry which reveals that the appellant company has paid cash to Shri J Anirudh Reddy through Shri Uday Kumar Reddy which is evident from the statement recorded from both of them u/sec.132(4) of the Act where they have clearly admitted to have received cash payments from the appellant group companies. Although, the evidences clearly shows payment of on-money for the assessment year 2019-2020, but, the Assessing Officer has erroneously considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Director. This fact is further strengthened by the statement recorded from Shri D. Venugopal Reddy, employee of MSN Group of companies and Shri J. Anirudh Reddy and Shri Uday Kumar Reddy who have involved in the procurement of land for appellant group companies from various sellers and both of them admitted to have received cash for payment of consideration to sellers. However, fact remains that it is important to ascertain, whether the material found during the course of search and relied upon by the PCIT which is pertains to on-money payment for purchase of land pertains to assessment year 2019-2020 as considered by the PCIT or 2017-2018 as considered by the Assessing Officer. The PCIT has relied upon Annexure-A/ DVR/RES/01 seized during the course of search operation in the case of Shri D. Venugopal Reddy and it's associated entities which contains details of payments through RTGS on various dates. The said documents does not contain any details of cash payment to any party. The Assessing Officer recorded satisfaction as required u/sec.153C of the Act before issuing notice u/sec.153C and observed that the material found during the course of search as a bearing on the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 Kodangal during the previous year relevant to A.Y 2017-2018 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 assessment year 2017-2018 for purchase of lands at Kodangal need to be brought to tax in the hands of the said assessee's for the A.Y 2017-2018. 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 assessee's for the A.Y 2017-2018. However, in the last paragraph of the satisfaction notes, the Assessing Officer stated that he is satisfied that the seized material relates to the assessee's and has a bearing on the determination of the total income of the assessee's for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted i.e., for assessment years 2015-2016 to 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC), wherein it was held that notices issued u/s 153C are not legally sustainable for the assessment years for which the seized documents mentioned in the satisfaction note do not establish any co-relation with the relevant assessment years. It was held that the notices issued u/s 153C are legally valid only for such assessment years for which the seized material adverted to in the satisfaction note pertains to. 19. Further, the issue of whether the Assessing Officer is bound to issue notice u/sec.153C for all the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted regardless of the existence of seized incriminating material for the concerned assessment years is no longer res integra ? In support of this contention, the Learned Counsel for the Assessee relied on the Judgment of Hon'ble Delhi High Court in the case of Saksham Commodities 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons recorded by the Assessing Officer for re-opening cannot be improved or substituted or supplemented at a later stage when subjected to judicial challenge and the issue of whether the AO had reasons to believe that the income has escaped assessment has to be adjudicated only with reference to the reasons actually recorded by the Assessing Officer before the issue of notice u/sec.148 without taking assistance from any external material. Therefore, in our considered view, the assumption of jurisdiction and issue of notice u/sec.153C in the case of the appellants for A.Y. 2019-2020 is bad in law and the consequent assessment orders passed u/sec.153C for the said assessment years as void ab initio. Further, once the assessment orders which are ab initio void, then said invalid orders cannot be subjected to revision u/sec.263 of the Act, because the revision powers can be exercised only in respect of such assessment orders which are legally valid. If an assessment order has been rendered non-est in the eyes of law 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 rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the PCIT for A.Y. 2019-2020, which sought to revise the assessment orders passed u/sec.153C for the said assessment years which are void ab initio, is bad in law and legally unsustainable. 20. Coming back to another aspect of the issue. The PCIT placed reliance on seized material recovered from Sri D. Venugopal Reddy, employee of MSN Group vide Annexure-A/DVR/RES at page nos.5 to 22 seized during the course of search operation, for revising an order passed u/sec.153C of the Act. We have considered relevant seized material which is available in paper book filed by the assessee and we find that said document contains details of land purchased at Kodangal Mandal including name of the vendor, khata no., survey no., extent of land, document no., and date of document, consideration paid as per document. Further, it also contains details of cash paid which was written by hand with signature for total extent of land purchased by the appellant companies. If we go by the said document and date of sale deed registered for purchase of lands at Kodangal, said purchases relates to or pertains to assessment year 2018-2019 only, but, not as considered by the learned PCIT for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination of total income of the appellants for the assessment year 2019-2020. Therefore, the reliance placed by the PCIT on the said seized document for the purpose of revision of assessment orders u/sec.153C for assessment year 2019-2020 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 req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul. In the case of the appellants for assessment year 2019-2020, the satisfaction note recorded by the AO does not contain any discussion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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