IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘B’: NEW DELHI
BEFORE SHRI G.D.AGRAWAL, VICE PRESIDENT AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA No.1344/Del/2012
Assessment Year: 2004-05
M/s DSL Properties (P) Ltd.,
6/3, East Patel Nagar,
New Delhi – 110 060.
PAN: AABCD9629E.
(Appellant)
Vs.
Deputy Commissioner of
Income Tax,
Central Circle-8,
New Delhi.
(Respondent)
Appellant by: Shri R.S.Singhvi, CA.
Respondent by: Dr.Sudha Kumari, CIT-DR.
ORDER
PER G.D.AGRAWAL, VP:
This appeal by the assessee is directed against the order of learned CIT(A)-XXXII, New Delhi dated 23rd February, 2012 for the AY 2004-05.
2. Ground No.1 of the assessee’s appeal reads as under:-
“1(i) That CIT(A) has erred in confirming order passed u/s 153C read with sec. 153A even though same was illegal and without jurisdiction.
(ii) That impugned proceedings were not in accordance with limitation in terms of provisions of sec. 153C of the Income Tax Act, 1961 and as such assessment order is not sustainable under the law.
(iii) That lower authorities have failed to appreciate that allegation about seized material during the course of search is without any factual and legal basis and even otherwise, there being no requisite satisfaction and as such there is no legal basis to assume jurisdiction u/s 153C.
(iv) That alleged proceedings are merely on the basis of change of opinion in respect of same set of facts which are already part of record and as such provisions of sec. 153C/153A are not relevant and applicable.
(v) That even otherwise, in the absence of any assessment being pending on the date of initiation of proceedings u/s. 153C, it is not open to assume jurisdiction u/s. 153C read with sec. 153A of the Income Tax Act, 1961.”
3. At the time of hearing before us, the learned counsel for the assessee argued at length. He stated that there was search at Chaurasia Group of cases. However, there was no search operation at the premises of the assessee company. The Assessing Officer took action under Section 153C read with Section 153A of the Income-tax Act, 1961 by issuing notice on 21st June, 2010. He stated that notice under Section 153C was issued on the basis of photocopy of the profit & loss account and balance sheet of the assessee company found from the premises of director/shareholder of the assessee company. That the search has taken place on 29th April, 2008 while the assessee has filed the return for AY 2004-05 i.e. the year under appeal on 22nd September, 2004 in which the audited profit & loss account and balance sheet was duly furnished. That what was found from the shareholder/director was only the photocopy of the audited profit & loss account and balance sheet while the original was already furnished by the assessee. That on these facts, it cannot be said that the photocopy of the profit & loss account and balance sheet is the document belonging to the assessee found and seized from some other person. That the photocopy of the balance sheet was given by the company to its director/shareholder and, therefore, it was belonging to such director/shareholder. Moreover, when the said profit & loss account and balance sheet is already furnished with the return of income and the income had been disclosed as per such profit & loss account and balance sheet, admittedly, there is no undisclosed income as per such profit & loss account and balance sheet. Therefore, such profit & loss account and balance sheet cannot be said to be incriminating document on the basis of which action under Section 153C can be taken. In support of this contention, he relied upon the decision of ITAT in the case of Sinhgad Technical Education Society Vs. ACIT in ITA Nos.114 to 117/PN/10.
4. The learned counsel further stated that if a search takes place at the premises of a Chartered Accountant from whom copies of the balance sheets of all his clients would be found, whether action under Section 153C can be taken in the case of all of his clients. He gave another example that the profit & loss account and balance sheet are supplied by every listed company to its shareholders alongwith the notice of the AGM. Suppose, from any person, the audited balance sheet of Reliance Industries or Tata Motors is found, can action under Section 153C can be taken in their case. He further submitted that the satisfaction under Section 153C is to be recorded by the Assessing Officer of the person searched and then he alongwith the satisfaction note should forward the copy of the seized document to the Assessing Officer of the person to whom such document belongs. That in this case, from the photocopy of the satisfaction note furnished by the DR, it is evident that the satisfaction note does not indicate the designation of the Assessing Officer who recorded the satisfaction. There are only signatures of somebody without any name and designation. From a perusal of the satisfaction note, it is evident that it is recorded by the Assessing Officer of the assessee and not the Assessing Officer of the person searched. Therefore, such satisfaction recorded by the Assessing Officer of the assessee for taking up action under Section 153C in this case cannot be said to be a valid satisfaction.
5. The learned counsel further submitted that the issue of notice under Section 153C is barred by limitation. He stated that the search has taken place at the Chaurasia Group of companies on 29th April, 2008. However, the alleged satisfaction note on the basis of which action under Section 153C is taken is dated 21st June, 2010. That as per proviso to Section 153C, for taking action under Section 153C, the date of search would be substituted by the date of receiving the books of account or the documents or the asset seized by the Assessing Officer having jurisdiction over such other person. Though the Revenue has not given any specific date on which the document was received by the Assessing Officer of the assessee from the Assessing Officer of the person searched, but, from the papers produced by the Revenue, it is evident that the satisfaction note under Section 153C is recorded on 21st June, 2010 and notice under Section 153C is also issued on the same date. Therefore, in the absence of any evidence to the contrary, it is to be assumed that on the same date i.e. 21st June, 2010, material has been handed over by the Assessing Officer of the person searched to the Assessing Officer of the assessee. Then, the year of search would be 2010-11 i.e. AY 2011-12 and six earlier assessment years would be 2005-06 to 2010-11. The Assessing Officer has issued notice under Section 153C for AY 2004-05 which is clearly barred by limitation. In support of this contention, the learned counsel relied upon the decision of ITAT Ahmedabad Bench in the case of Vijay Kumar Vimawal Vs. ACIT – 34 SOT 34 (Ahm).
6. In view of the above, it is contended by the learned counsel that the conditions for issue of notice under Section 153C are not fulfilled and secondly, the notice issued is barred by limitation. Therefore, the same should be quashed.
7. Learned DR, on the other hand, fairly admitted that the original satisfaction note is not available in the file. However, photocopy of the satisfaction note is available. The same is submitted by him. He stated that the Officer who signed the satisfaction note is Shri Jeetendra Kumar who is ACIT, Central Circle-8, New Delhi. He stated that Shri Jeetendra Kumar is the Assessing Officer of the person searched by virtue of the order under Section 127 dated 10th
September, 2009 passed by the CIT, Delhi-IV. That the same person is the Assessing Officer of the assessee. Therefore, he was already in the possession of the seized material and, the contention of the learned counsel, that the seized material was received only on 21st June, 2010 for the purpose of counting the period for which notice under Section 153C can be issued, cannot be accepted. He further submitted that the scheme of Section 153C is not similar to Section 158BD. The Assessing Officer has recorded proper satisfaction for taking action under Section 153C read with Section 153A, copy of which is already placed before the Bench, therefore, the issue of notice under Section 153C for AY 2004-05 was valid as well as within time limit permissible under Section 153C. The same should be upheld. In this regard, he also relied upon the order of learned CIT(A).
8. We have carefully considered the arguments of both the sides and perused the material placed before us. Section 153C of the Income-tax Act, 1961 reads as under:-
“153C. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:].”
9. From the above, it is evident that action under Section 153C can be taken in respect of any other person than the person searched if the Assessing Officer of the person searched is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents belong to a person other than the person searched. In such circumstances, he shall hand over to the Assessing Officer of such other person money, bullion, jewellery or other valuable article or thing or books of account or documents. Thereafter, the Assessing Officer of such other person shall proceed against the said person to assess or reassess his income in accordance with the provisions of Section 153A.
Therefore, recording of satisfaction by the Assessing Officer of the person searched that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to the person other than the person searched is a sine qua non for initiating action under Section 153C. This interpretation of Section 153C by us is supported by the decision of Hon’ble Apex Court in the case of Manish Maheshwari Vs. ACIT and Another – (2007) 289 ITR 341 (SC) wherein their Lordships at page 348 held as under:-
“The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent wherefor are: (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person.
The conditions precedent for invoking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act.”
10. It was contended by the learned DR that Sections 158BD and153C have different language, therefore, any judicial precedent with reference to Section 158BD would not be applicable to Section 153C.
To appreciate the contention of the learned DR, let us compare the language of Section 153C and Section 158BD. Section 153C has already been reproduced above in paragraph No.8. Section 158BD reads as under:-
“158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed [under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly.”
11. We find that Hon’ble Gujarat High Court, in the case of CIT Vs. Meghmani Organics Limited vide Tax Appeal No.2077 of 2009 compared the language of Section 153C and Section 158BD at internal page 6 of their order held as under:-
“Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153-A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under Section 158BD if the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he shall proceed against such other person under section 158BC.”
12. From the above and also from the comparison of language of Sections 153C and 158BD, we find that the condition for recording satisfaction by the Assessing Officer of the person searched is present in both the cases. In Section 158BD, the Assessing Officer of the person searched is to be satisfied that any undisclosed income belong to any person other than the person searched, while, in the case of Section 153C, the Assessing Officer of the person searched is to be satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents belong to a person other than the person searched. Thereafter, the subsequent procedure in both Sections 158BD and 153C is the same, i.e., the Assessing Officer of the person searched has to hand over the books of account, documents o
asset seized to the Assessing Officer having jurisdiction over such other person and thereafter, the Assessing Officer of such other person has to proceed to assess such other person. Thus, the basic condition of recording the satisfaction by the Assessing Officer of the person searched as well as handing over of books of account, other documents or assets seized to the Assessing Officer of such other person is present in both the Sections. To that extent, the decision of Hon’ble Apex Court in the case of Manish Maheshwari (supra) would be squarely applicable while interpreting Section 153C.
13. In the above legal background, let us now examine the facts of the assessee’s case so as to find out whether the notice issued under Section 153C is valid.
14. During the course of hearing, learned DR was directed to produce the satisfaction note recorded under Section 153C. Learned DR fairly admitted that the original satisfaction note is not traceable but only photocopy of the said satisfaction note is available. He produced the photocopy of the satisfaction note, copy of which is annexed herewith as Annexure “A”.
15. From a perusal of the said satisfaction note, it is evident that this paper does not indicate in whose case this satisfaction was recorded and who is the officer recording the satisfaction. There is no mention of name of the assessee. There is no mention of the name of the Assessing Officer and no seal of the Assessing Officer. In the satisfaction note, the Assessing Officer has mentioned the name of various assessees who have been covered for search and seizure action under Section 132(1). The number of such assessees are eight.
Now, during the search of whose premises it was found, is not mentioned. The last line of the satisfaction note reads “I am satisfied that the above documents belong to M/s DSL Properties Pvt.Ltd. and thus its case is being taken up for assessment under section 153C of the Income Tax Act 1961.” A plain reading of the above sentence indicates that it is recorded by the Assessing Officer who is taking action under Section 153C. Thus, it seems that the satisfaction note is recorded by the Assessing Officer of the assessee. This inference is fortified from the fact that on the very same date, i.e., 21st June, 2010, the notice under Section 153C is issued by the same person. The learned CIT-DR also stated that the satisfaction note was recorded by Shri Jeetendra Kumar, ACIT, Circle-8, who issued notice under Section 153C read with Section 153A. However, he tried to justify the action of the Revenue on the ground that after the order under Section 127 of the Income-tax Act by the CIT, Delhi-IV, the jurisdiction of the person searched as well as the assessee both were centralized with the ACIT, Central Circle-8. He also stated that since the Assessing Officer of both the persons was the same, there was no question of handing over and taking over of the documents. We are unable to agree with this view of the learned DR. If the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money, bullion, jewellery or other valuable article or thing or books of account or documents belong to the person other than the person searched. Then, the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice under Section 153A read with Section 153C. The Assessing Officer of the person searched and such other person may be the same but these are two different assessees and, therefore, the Assessing Officer has to carry out the dual exercise, first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment proceedings of the person searched. After recording such satisfaction note in the file of the person searched, the same is to be placed in the file of such other person. Then, in his capacity as the Assessing Officer of such other person, he should take cognizance of such satisfaction note and thereafter issue notice under Section 158BC. In this case, this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out. On the other hand, the Assessing Officer recorded the satisfaction in the case of such other person which does not satisfy the condition of assuming jurisdiction under Section 153C. Moreover, no original satisfaction note is available on record. The photocopy of the satisfaction note produced before us does not bear name of any assessee, name of the Assessing Officer or any seal of the Assessing Officer. Therefore, the above satisfaction note cannot be said to be a valid satisfaction note within the meaning of Section 153C.
16. Apart from above, we find that jurisdiction under Section 153C has been assumed only on the basis that during the course of search of one of the persons of Chaurasia Group, the photocopy of the audited profit & loss account and balance sheet of the assessee for the FY 2003-04 relevant to AY 2004-05 was found. It is not in dispute that the assessee had filed the return for AY 2004-05 on 22nd September, 2004 alongwith the original copy of the audited profit & loss account and balance sheet. Search had taken place on 29th April, 2008 while the return of income alongwith the original profit & loss account and balance sheet was already filed more than three and a half years before the date of search. In the remand report dated 30th January, 2011, the Assessing Officer has also not disputed the above fact but he tried to justify action under Section 153C on the ground that for issue of notice under Section 153C, it is not necessary that the document found and seized should be of incriminating nature.
17. At the time of hearing before us, the learned counsel for the assessee has vehemently contended that the photocopy of the audited profit & loss account and balance sheet was belonging to the shareholder/director from whom the same was found and not to the assessee. We agree with this contention of the learned counsel. When a company supplies photocopy of its profit & loss account and balance sheet to its shareholders/directors, such photocopy of the profit & loss account and balance sheet belong to such shareholder/director and not to the assessee company. If the argument of the Revenue is accepted, then, if, during the course of search of any person the photocopy of the profit & loss account/balance sheet of any listed company, say, Reliance Industries, Tata Motors or Bajaj Auto is found, then, as per the interpretation of Section 153C by the Department, the Assessing Officer would be entitled to take action under Section 153C in the case of such listed company. That interpretation would lead to absurd results. Therefore, we hold that the underlying condition for invoking the jurisdiction under Section 153C is not satisfied in the case of the assessee.
18. The learned counsel for the assessee has also argued that the issue of notice under Section 153C is barred by limitation as per proviso to Section 153C. He stated that as per the Revenue, the satisfaction for initiating proceedings under Section 153C was recorded on 21st June, 2010 and notice under Section 153C was also issued on 21st June, 2010. Thus, obviously, the seized paper was handed over to the Assessing Officer of such other person on 21st June, 2010. Now, as per proviso to Section 153C, the date of search is to be substituted by the date of receiving the books of account or documents or assets seized. Accordingly, the assessment can be reopened of the preceding six years than 21st June, 2010. They would be AY 2005-06 to 2010-11.
The Revenue has reopened assessment for AY 2004-05 which is clearly barred by limitation. The learned DR has contended that since in this case the Assessing Officer of the person searched and the Assessing Officer of such other person was the same, there is no question of
handing over and taking over of the document, therefore, for the purpose of limitation, the date of search would be relevant and not the date of initiation of proceedings under Section 153C.
19. We have carefully considered the rival submissions. Proviso to Section 153C reads as under:-
“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:].”
20. The above proviso refers to second proviso to sub-section (1) of Section 153A. That Section 153A(1) and its first and second provisos read as under:-
“153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under
section 132A after the 31st day of May, 2003, the Assessing Officer shall –
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:.”
21. From the above, it is evident that as per clause (b) of sub-section (1) of Section 153A and second proviso, the Assessing Officer can be issue notice for assessment or reassessment of total six assessment years immediately preceding the assessment year relevant to previous year in which search is conducted. As per proviso to Section 153C, the date of search is to be substituted by the date of receiving the books of account or documents or assets seized by the Assessing Officer having jurisdiction over such other person. Learned DR has stated that since the Assessing Officer of the person searched and the Assessing Officer of such other person was the same, no handing over or taking over of the document was required. That Section 153C(1) and its proviso have to be read together in a harmonious manner. While interpreting Section 153C, we have already held that for initiating valid jurisdiction under Section 153C, even if the Assessing Officer of the person searched and the Assessing Officer of such other person is the same, he has to first record the satisfaction in the file of the person searched and thereafter, such note alongwith the seized document/books of account is to be placed in the file of such other person. The date on which this exercise is done would be considered as the date of receiving the books of account or document by the Assessing Officer having jurisdiction over such other person. Though while examining the facts of the assessee’s case we have arrived at the conclusion that no such exercise has been properly carried out and therefore initiation of proceedings under Section 153C itself is invalid, however, since both the parties have argued the issue of period of limitation also, we deem it proper to adjudicate the same. Since in this case satisfaction is recorded on 21st June, 2010 and notice under Section 153C is also issued on the same date, then only conclusion that can be drawn is that the Assessing Officer of such other person has taken over the possession of seized document on 21st June, 2010. Accordingly, as per Section 153(1), the Assessing Officer can issue the notice for the previous year in which search is conducted (for the purpose of Section 153C the document is handed over) and six assessment years preceding such assessment year. Now, in this case, the previous year in which the document is handed over is 1st April, 2010 to 31st March, 2011. The assessment year would be AY 2011-12. Six preceding previous years and relevant assessment year would be as under:-
Previous Year Assessment Year
1.4.2009 to 31.3.2010 2010-11
1.4.2008 to 31.3.2009 2009-10
1.4.2007 to 31.3.2008 2008-09
1.4.2006 to 31.3.2007 2007-08
1.4.2005 to 31.3.2006 2006-07
1.4.2004 to 31.3.2005 2005-06
22. The Assessing Officer has issued notice under Section 153C for AY 2004-05 which is clearly barred by limitation. Therefore, issue of notice under Section 153C issued by the Revenue cannot be sustained on both the above counts, i.e., it is legally not valid as conditions laid down under Section 153C has not been fulfilled and it is barred by limitation. In view of the above, we quash the notice issued under Section 153C and consequently, the assessment completed in pursuance to such notice, is also quashed.
23. Since we have quashed the assessment order itself, the additions challenged by the assessee by way of other grounds of appeal do not survive, and, therefore, do not require any adjudication.
24. In the result, the appeal of the assessee is allowed.
Decision pronounced in the open Court on 22nd March, 2013.
Sd/- Sd/-
(CHANDRA MOHAN GARG) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated: 22.03.2013
VK.
Copy forwarded to: -
1. Appellant: M/s DSL Properties (P) Ltd., 6/3, East Patel Nagar, New Delhi – 110 060.
2. Respondent: Deputy Commissioner of Income Tax, Central Circle-8, New Delhi.
3. CIT
4. CIT (A)
5. DR, ITAT
Assistant Registrar
