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TMI Blog2025 (3) TMI 1473X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment orders of Ld AO and first appellate order of ld CIT-A are bad in law as entire asst, is framed without authority of law and ultra vires to provisions of the 1961 Act (income tax act, 1961) being without jurisdiction as it is mainly/chiefly based on stated material as emanating from search action u/s 132 on "other person", so it is framed in violation of mandate of special and specific provision of section 153C of 1961 Act 2. Total Violation of principle natural justice: That both the assessment orders of Ld AO and first appellate order of Id CITA are bad in law as entire asst. is framed in total violation of principle of natural justice for non confrontation of relied upon material (statements etc) and lack of cross examination being offered to assessee us pleaded at asst. and first appeal stage. 3. No incriminating material unearthed from assessee's own search action u/s 132: That both the assessment orders of Ld AO and first appellate order of Id CIT-A are bad in law as entire asst. is framed u/s 153A, without any requisite "incriminating material" being unearthed from assessee's own search u/s 132 of 1961 Act; 4. Wrongful sustenance by ld CIT-A of im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 6% unexplained expenditure of Rs 19,18,144/- u/s 69 of the Act. 5. Aggrieved by the order of the AO the assessee filed appeal before the CIT(A). The Ld. CIT(A) in his order dated 22-01-2018 sustained the additions and dismissed the appeal of the assessee. 6. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 7. The Ld. AR submitted that the addition has made on the statement of the third person Shri Pradeep Kumar Jindal. No incriminating material was found at the premises of the assessee. The Assessing Officer has made the assessment u/s 153A/ 143 (3) of the Act. He argued that the proceedings could not have been initiated u/s 153 A of the Act as the, documents found from the possession of third party could not have been held to be incriminating documents found from the premises of the assessee. Reliance has placed on the following decisions: (i) In the case of PCIT v. M3M India Holdings ITA No. 97/2023 the Hon'ble Punjab and Haryana Punjab & Haryana High Court held as under; "6. Learned counsel for the Revenue vehemently argued that during the search and seizure conducted with reference to another group of companies, a laptop of one Bina Shah wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm view that the factual aspects would not be examined in appeal but with the purpose to satisfy ourselves, ourselves, we asked the Department to place before us the warrants of authorization issued under Section 132 of the Act. 12. The original file containing satisfaction note for issue of consequential warrant of authorization and the satisfaction note prepared after search was also perused. It is noticed that there were two warrants of authorization issued under Section 132 of the Act by the Principal Director of Income Tax (Inv.), Chandigarh. One is for partners Bansant Bansal, Roop Kumar Bansal, Pankaj Bansal, Smt. Smt. Anita Bansal, Smt. Abha Bansal and M/s M3M India Holdings Private Limited dated 16.07.2016 at the address C-13, 13, Sushant Lok, Phase-1, Phase 1, Gurgaon and the other one issued on the same day is for Bansant Bansal, Roop Kumar Bansal, Pankaj Bansal, Smt. Anita Bansal, ansal, Smt. Abha Bansal and M/s M3M India Holdings (Firm) at 106 106-A, Tower-1, DLF Aralias, DLF Golflinks, Gurugram. Thus, the name of the firm assessee is mentioned in the warrants at (Global 3rd Floor) 106-A, Tower- 1, DLF Aralias, DLF Golflinks, Gurugram, which is not the registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see belongs to the Lad group of companies and is engaged in the business of extraction and trading of iron ore. A search was conducted under Section 132 of the IT Act in the Lad group on 26.10.2007. The assessee filed its return of income for AY 2008-09 declaring a total income of Rs. 55,96,22,255/-. A notice under section 143 (2) as also Section 142(1) of the IT Act was issued, consequent to which vide Assessment Order dated 31.12.2009 the Assessing Officer assessed the taxable income as Rs. 115,89,54,044/- and the balance tax payable at Rs. 44,31,32,567/-". 9. The Hon'ble Karnataka High Court in ITA No. 23 of 2020 in the case of Pr. CIT Vs. M/s. VSL Mining Company Pvt. Ltd. held as under: - "11. It is forthcoming that the assessee has specifically raised additional grounds before the Tribunal by contending that the AO has not followed the procedure as envisaged under section 153C of the IT Act and that the additions made in regular assessment proceedings are required to be deleted. While considering the said contentions, the Tribunal has held as follows : 7.6.1 We have carefully considered the legal arguments/contentions put forth by both parties. The facts not in dispute ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seized materials are received by the AO. 7.6.4 In the case on hand, we find that there was a search under section 132 of the Act in the case of the assessee on 26.10.2007. After the regular assessments proceedings under section 143(3) of the Act were taken up by the assessee and during the pendency thereof; the AO received material / information from the AO of Shri. Manoj Kumar Jain. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 143 of the Act in the case of the assessee before the AO would abate on the date the AO received the seized material from the AO of Shri. Manoj Kumar Jain and fresh proceedings under section 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information / materials, the AO did not assume jurisdiction under section 153C of the Act, but rather chose to use the said materials/information for making additions in the impugned order of assessment for Assessment Year 2008-09 concluded under section 143(3) of the Act. The AO has discussed these additions in the order of assessment under the caption "Unaccounted Transactions with Shri. Manoj Kumar Jain". The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . " 12. It is relevant to note that Chapter VI of the IT Act contemplates the procedure for assessment, wherein various stipulations are provided in terms of Sections 136 to 153 of the IT Act. Section 153A, 153B and 153C have been inserted by the Finance Act, 2003 w.e.f., 1.6.2003, which specifically contemplates assessments in cases of search or requisition. Section 153A of the IT Act contains various stipulations with regard to the person searched and Section 153C of the IT Act contains various stipulations with regard to such other person, other than the person searched. 13. A coordinate Bench of this Court in the case of Dinakar Suvarna v. DCIT8 while considering an appeal of the assessee, in a fact situation wherein an assessment was re-opened under Section 147 of the IT Act based on a search conducted and the procedure under Section 153 of the IT Judgment dated 8.7.2022 passed in ITA No. 16/2015 Act was not followed was under consideration. It was held as follows: "10. Admittedly no proceedings were initiated under Section 153C of the Act. Thus, there is patent non- application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassesses the 'total income'. It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to." 15. In view of the settled position of law as noticed above, once material pursuant to a search is relied upon, the AO is required to follow the procedure as contemplated under Section 153A, 153B and 153C of the IT Act and it is impermissible for the AO to continue the regular assessment. 16. In view of the aforementioned, substantial question of law No. 2 is answered in favour of the assessee and against the Revenue. 10. The Ld counsel for assessee has submitted that the AO has made the addition on the untested and uncorroborated statement of Shri Pradeep Kumar Jindal without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) 2. Chuharmal v. Commissioner of Income Tax [1988] 38 taxman 190 (SC) 3. Nokia India (P) Ltd. v. Dep. Director of Income - tax, Circle -2(1), International Taxation, New Delhi 12. The above, mentioned decisions by Ld. DR do not help the revenue because the facts and circumstances of the instant case are different from the cited cases. 13. In the instant case no incriminating material was found from the assessee during the search and seizure proceedings and the material in form of statement of third person Shri Pradeep Kumar was relied based on some other search operation. Hence if at all such statement is sought to be relied upon against the assessee, then logically the Assessing Officer should have proceeded on the assessee under section 153 C of the Act and not under section 153A of the Act. Hence the addition made in assessee hands under section 153 A of the Act is deleted. 14. We have decided the legal issue raised by assessee in his favour of the assessee, hence rest grounds are not adjudicated at this stage and be keep them open. 15. In the result the appeal of the assessee is allowed. 16. With regard to appeals being ITA Nos. 5958/Del/2018, 5944/Del/2018, 5956/D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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