Income Tax Appellate Tribunal - Delhi
Amol Awasthi, New Delhi vs Dcit, Central Circle-1, New Delhi on 13 September, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D" DELHI
BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT
AND
SHRI M BALAGANESH, ACCOUNTANT MEMBER
ITA Nos.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024
Assessment Years: 2011-12, 2012-13, 2013-14, 2014-15,
2015-16, 2016-17 & 2018-19
Amol Awasthi, Vs. DCIT, Central Circle-I
C/o Vinod Kumar Bindal & New Delhi
Co.
Chartered Accountants
Shiv Sushil Bhawan
D-219, Vivek Vihar, Phase-I
New Delhi
TAN/PAN: AACPA8416E
(Appellant) (Respondent)
Assessee by: Shri Vinod Kumar Bindal, AR
Ms. Rinky Sharma, ITP
Respondent by: Shri Vijay B Vasanta, CIT-DR
Date of hearing: 03 07 2024
Date of pronouncement: 13 09 2024
ORDER
PER BENCH:
These are bunch of seven appeals filed by the assessee challenging the final assessment orders passed under Section 144C and 153C r.w. section 143(3) of the Income Tax Act, 1961, in pursuance to the directions of learned Dispute Resolution Panel (DRP) pertaining to assessment years 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2018-19.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 2
2. In the memor andum of appeal, the assessee has raised m ultiple grounds, more or less, common in all the assessment years. The grounds raised can be divided into two categories. The fir st category contains grounds on merits, whereas, the second category containing grounds on legal issues challenging the validity of the proceedings initiated under Section 153C of the Act and the assessment orders passed in pursuance thereof. Since facts involved in all these appeals are more or less identical, for the sake of brevity we take up ITA No.1342/Del/2024 pertaining to A.Y. 2011-12 as the lead appeal and discuss fac ts obtaining there from.
3. Briefly stated, the assessee is a Non Resident Indian (NRI) individual, being a resident of Dubai in United Arab Emirates (UAE). As discussed by the Assessing Officer (AO), a search was conducted by the Deputy Director of Income Tax, [DDIT)-Investigation, Unit 7(3) on Sanjay Jain and others on 30.06.2019. During the search and seizure operation, incriminating evidence in the form of mail and chat comm unication was found r evealing that Shri Pankaj Jain and his brother Shri Sanjay Jain, in connivance with some other persons, nam ely, Shr i Udai ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 3 Shankar Awasthi, his son Shri Amol Awasthi, Shri Parvinder Singh Gahlaut, his son Shri Vivek Gahlaut, Shri Amrendra Dhari Singh were working with close proximity to I ndian Potash Limited (IPL) and Indian Farmers Fertilizer Co-operative Organization (IFFCO) and have been influencing the fair price/market price at which f ertilizer/fertilizer products ar e procured by them and other Indian consumers. He observed that various incr im inating chats between Shri Udai Shankar Awasthi, Managing Director of IFFCO, Shri Parvinder Singh Gahlaut, Managing Director of IPL and Shri Sanjay Jain showed manipulation of fertilizer prices. Since, the assessee was also covered under the said search and seizure operation, proceedings under Section 153A of the Act were initiated against the assessee.
4. In course of such proceedings, the AO also sought information from FT & TR to corroborate the information found/gathered in pursuance of search and seizure operation. However, as observed by t he AO, during the pendency of proceedings initiated under Section 153A of the Act, he received information from another AO that on 30.06.2019, another search and seizure operat ion under ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 4 Section 132 of the Act was also conducted in case of Shri Rajeev Saxena, allegedly, a Dubai based middleman who facilitates r eceipt of kick-backs by Indians in offshore accounts and ultimately channelizes them to India through his connection with Indian entities to whom payments were used to be made sans any economic or business rationale.
5. After examining the evidences found in the search of Shri Rajeev Saxena and perusing the satisfaction note prepared by the AO in his case, the AO of the assessee was of the view that such material and satisfaction note needs to be considered along with material found as a result of search and seizur e operation conducted on Shri Sanjay Jain and others. Thus, the AO held that the proceedings initiated under Section 153A, having abated, needs to be dropped and fr esh proceedings under Section 153C needs to be initiated against the ass essee. Thus, he initiated proceedings under Section 153C of the Act against the assessee.
6. Subsequently, he received some more information from another AO having jur isdiction over search cases related to Alankit group, where search and seizure ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 5 operation was conducted on 18.10. 2019. Thus, he was of the view that all these materials have to be taken into consideration while framing the assessment of the assessee. In the course of assessment proceedings, the AO examined the mail and chat communication found during the search and seizure operation in the case of Shri Sanjay Jain and noticed that the exchange of such mail/chat communication was between Shri Sanjay Jain and Shri P.S. Gahlaut. On examination of such material, he found that, though, certain foreign suppliers were willing to supply fertilizers directly to Indian market, however, Shri Sanjay Jain and Shr i Gahlaut were not willing for direct supply to Indian market, which would have been a better deal and at a more competitive price.
On the contrary, the major buyers in the Indian market viz., IPL and IFFCO pref er to buy fertilizers from foreign suppliers indirectly through interm ediaries only for the purpose of keeping certain amount of profit as commission. This resulted in escalation of price of the fertilizer. He obser ved that the mails and chats revealed that Shri Sanjay Jain and his associate in collusion with the supplier s and Indian buyers manipulate the fertilizer ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 6 business in India. Such modus operandi was adopted to artificially inflate the price of fertilizer for making significant profit through commission. In this context, he also relied upon the statement recorded from Shri Sanjay Jain by the Enforcement Directorate (ED).
7. Thus, he observed that the seized material clearly revealed the role of Shri Pankaj Jain and Shri Sanjay Jain and their associate Shri A.D. Singh in the fertilizer trade sector in India. He obser ved that given the ir significant influence and proximity with the foreign suppliers as well as Shri U.S. Awasthi and Shri P.S. Gahlaut, Shri Sanjay Jain and his associates are instrumental in getting contracts for their foreign suppliers and getting part of their commission income as well as commission income of Shri U.S. Awasthi and Shri P.S. Gahlaut which were routed through Dubai based entities to avoid tax in India.
8. Proceeding further, he ventured into examining the information/material seized in the course of search and seizure operation conducted in case of Shri Rajeev Saxena. From the information available, he found that the Indian fertilizer market is dominate d by IPL and IFFCO.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 7 Vario us foreign suppliers engaged in manufacturing and trading of potash fertiliz ers, have increased the competition to tap the lucr ative Indian market. For achieving their objective, the foreign com panies took the help of their Indian agents, Shri Sanjay Jain, Shri A.D. Singh and others to secure the supply in Indian market.
Thus, to align IFFCO and IPL, t he major buyers of fertilizers, towards the supplies, Shri Sanjay jain and his associate were engaged to secure deal from IFFCO and IPL. In this context, he observed that Shri Rajeev Saxena, an I ndian citizen based in Dubai and running an accountancy firm, has received huge unaccounted funds from various companies on behalf of his clients. From the statement recorded under Section 132(4) of the Act from Rajeev Saxena, it was found that money was received from certain foreign fertilizer companies, viz., M/s.
Uralkali in accounts of his entities were actually commission income arising out of imports made by IFFCO and IPL from Uralkali. From the statement recorded, he further found that in or der to secure the supply contracts from Indian buyers, extra amount over and above the agreed commission amount was paid by the various ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 8 foreign fertilizer companies, which was routed to the beneficiar ies' account namely Shri Amol Awasthi, Shri Pankaj Jain and Shri Vivek Gahlaut through the entities controlled by Shri Rajeev Saxena. He observed that the whole arrangement was done to get the fertilizer business with IFFCO and IPL. Shri Rajeev Saxena acted as a conduit to pass the commission income on account of im port of fertilizer made by IFFCO and IPL. He observed that all the entities created by Shri Rajeev Saxena to pass the said comm ission are paper companies and no services were provided by them in lieu of money received.
According to the AO, Shri Rajeev Saxena is the key person in the business cycle of IFFCO and IPL.
9. From the ledger of assessee appearing in the books of Shri Rajeev Saxena, which according to the AO is a seized material, it was found that commission income has been received by the assessee through various entities in Dubai controlled by the assessee. However, he observed that such commission income was received by the assessee only as a pass through entity as it was ultimately passed onto Shri Udai Shankar Awasthi. In this context, he exhaustively referr ed to statement ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 9 recor ded from Shri Rajeev Saxena. Thus, based on such information and material, the AO ultimately concluded that the comm ission income has been received in the accounts of various entities controlled by the assessee as a pass through entity for ultimate benefit of Shr i Udai Shankar Awasthi and Shr i Parvinder Singh Gahlaut.
Thus, he held that since the assessee is a mere pass through e ntity, addition of commission income has to be made on protective basis at the hands of the assessee.
Wher eas, it has to be made on substantive basis at the hands of Shri Udai Shankar Awasthi (assesee's father).
Accordingly, he framed the draft assessment orders making addition of commission income of various amounts in different assessment years, on protective basis. Against the draft assessment orders so passed, assessee raised objections before learned DRP. Howev er, le arned DRP did not entertain the objections raised by the assessee.
10. Before us, Shri Vinod Kumar Bindal, learned counsel appearing for the assessee made exhaustive submissions.
In addition, he also filed a written synopsis running into 21 pages, which is reproduced below:-
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 10 "The impugn ed assessment orders are illegal because.
(i) being only protective additions in an assessmen t order pass ed af ter initiating assessm ent proceed ings u/s 153C of the Act th at too u/s 69A of the Act not applic abl e;
(ii) as sessm ent order passed u/ s 153C r.w.ss.
143(3)/144C of the Ac t and no t r.w.ss. 153A/144C of the Act;
(iii) the assessee being a Non-Resident under the In come- tax Act and c annot at all be assessed in respec t of his alleged overseas income though the said income is not at all adm itted;
(iv) the assessee cannot be assessed for any in come, though not admi tted, alleged by the revenue to h ave bee n earned or received overseas for which no services at al l we re rendered in Ind ia or could at all be assumed to have been rendered in Indi a becau se the allege d amoun t rece ived as commission / service charges from an overseas supplier was received overse as in respect supplies ef fected from overseas;
(v) igno rin g the mand atory Article 22 of th e DT AA with UAE of Indian government and no such income can be otherwise assessed und er the Income -tax Act, 1961 in India as adm ittedly the assessee was a permanen t residen t of UA E and N on-Resident under the Incom e-tax Act, 1961;
(vi) no assessment order can be passe d u /s 153C of the Act wh ich just author izes an AO to assume jurisdic ti on to pass an assessment order u/s 153A of th e Act and no t to pass an y assessment order th erein;
(vii) the section 153C of the A ct is nowhere men tio ned in the sec tion 246A of the A ct against which an appeal c an be f iled to the CIT(A) and theref ore, is no t at appe al able provision and only u/s 246A(1) (ba) of the A ct sectio n 153A of the Ac t, except an or der passed as pe r DRP d irections, has bee n m entioned as appeal able order;
(viii) s ince, the L egislature c ategorically direc ted that an assessment order after a search action u/s 132 of th e Act mus t be passed in ac cordance with the pr ovision u/s 153A of the Ac t, even in the c ase of a pe rson no t se arched where th e assessmen t proceedings were in itiate d u/s ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 11 153C of the Act,
(ix) any o rder pas sed u/s 153C of the Ac t is not at all an assessment order and c annot be put into ef fect being nullity and void ab initio;
x) ( as the dr af t assessment order passed on 31/03 /202 3 is a void ab initio order con taining n ot only approv al of the Addl . CIT u/s 153D of the Act but was also accompanied with a proper notice of demand, computation of s heet e tc. whic h coul d not be issu ed till the fin al assessment order was pas sed af ter proc eed ings u/s 1 44C of the Act.
2. The impugned assessment pr oceedings i nitiated by the AO u/s 153C of th e Act for is suing notices u/s 153A of the Act is bad in law because :
(i) it is b ased on a void ab initio satisf ac tion no te rec orded u/s 153C of the Act by the AO of the appell an t on 29/09/2021, f or 11 assessment years whe reas ev en as per the AO, the alleged incr imin atin g inform atio n was only f or the 7 AYs and even otherwise the AO could no t assume jurisd iction f or any of th e AY pr ior to the AY 2013-14 as the e xtended bac kward per iod of 10 ye ars expire d then u/s 153C of the Ac t.
(ii) it lacks application of mind as per th e sp ec ified provisions of the law th at such proceedings could on ly be initiated for the AYs for which th e alleged incrimin ating information was f ound and the same c anno t be ac cepted as legal in any manner, even f or the AYs where there coul d be some alleged incr iminating inf orm ation besides many o ther reasons as the law d oes not permit to legalise a satisf ac tion note par tially;
(iii) in such case only the issue required to be con sidered was whether th e received m aterial allegedly seize d from Mr Raj iv Saxena had any bearing on the income of the assessee and not the irrelevant/ alien m ate rial dragged in;
(iv) in dr awing satisf action based upon th e alle ged s eized electronic rec ord without f irst considering its admiss ibility u/s 65 B of the Indian Evidence Act r/ w sec tion 2 (1)( t) of the Inform ation Technology Ac t an d sec tio n 132 (iib) of Ac t not before the AO;
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 12
(v) sim ul taneous satisfac tion in the c ase of f ath er of assessee as well as in case of the assessee on the basis of the s ame seized materi al for the very sam e amoun ts.
3. The imp ugned assessmen t order, based upo n an illegal draft order i s bad in law and against settled law as:
(i) the impugned addi tions ar e no t bas ed on any incriminating material seized in a se arch e lsewhere including Rajiv Saxena and could not h ave been made even on merits on protective basis;
(ii) referring to some later search on ano th er as sessee in these proceed ings without in iti ating fresh procee dings u/s 153C of the Act by ab ating the earlier procee ding s-
initiated u/s 153 C of the A ct;
(iii) by relying on the impugn ed statement of Mr Rajiv Saxena sol ely based u pon hearsay and vague belief and not upon h is direct kn owledge; (iv) agains t the f ac ts narr ated by o ther persons searched then ; an d
(iv) when copies of all th e statements were not given to the assessee and no cross examin ation of the s aid p ersons was gr anted though specif ic ally deman ded during the assessment proceedings.
4. The order of the DRP lacks D IN and is time b arred becau se of the proceedings undertaken u/s 144C of the Act, bu t wh ich GsOA are not pressed.
Void ab ini tio S atisf ac tio n n otes u/s 153C of th e Ac t
5. Ho wever, at the threshol d the assessee su bmits by relying jud gment of the Hon'ble ju risdic tion al Delhi High Cour t in the case of PC IT vs Ojjus Medicare (P) Ltd and others [2024] 161 taxmann.com 160 (Delh i) [DoD:
03/04/2024] wherein it h as been c ategorically stat ed in para 86 onwards, p artic ul arl y in the table given in par a 90 therein th at where a satisf action no te u/s 153C of the Act was recorded at a d ate f alling within the FY 2021-2 2 (as is her e recorded on 10/06/2021), being a date relevant to the AY 2022-23, then the te n y ears per iod backwards for the purpose of initiating proceed ings u/s 153C of the Act would com mence from the AY 2013-14.
Ther efore, the impugned proceedings for the AYs bef ore AY 2013-14 here i.e. for the two AY s 20 11-12 and 2012-1 3 we re il leg ally initiated and void ab initio. The s ame must ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 13 be quas hed, th ough the impugned satisf ac tion no te perse is void as the same was recorded without application of mind by the A O.
6. The impugned satisf ac tion note on the assessee, is base d on a satisf ac tion note m ade u/s 153C of th e Act, sent by the AO of Rajiv S axena being the DC IT, Centr al Circle- 20, New Delhi and not of Jains be ing th e AO of the assessee also being the DC IT, Central Circle-1, Ne w Delhi. The AO has placed his reliance in the impu gned satisf ac tion no te recorded to initiate procee dings u/s 153C of th e Ac t on the income- tax searche s conducted o n Jain s, A D Sing h but also ref erring to th e sear ches conducted on Mr R ajiv S axena, all these persons were se arched on 30/06/2019 under separate se arch warran ts and not joint search warran ts at diff erent premis es and also on the Alankit Grou p wh o was se arched on 19/10/2019 much later than a date when Jains/S axen a we re se arched . No assessmen t proceeding s were undertaken based on the mater ial ref erred to in the se arc h conducted on Mr Alok Agg ar wal of Al ankit Group and no satisf ac tion has been recorded in the case of the assess ee base d on any incriminatin g material found in the se arches conducted on Jai ns bu t whic h has only b een mentioned in the opening par as of impugned asses sme nt orde r as a re ason of the impugned assessment procee din gs though as per the impugned satisfac tion note u/s 153C of the Ac t date d 29/0 9/2021 dr awn by the AO, C en tr al Circle 1 Ne w Delhi of the assessee, the same is solely based o n the corresp onding satisfac tion note u/s 153€ of the Ac t rece ived f rom the AO, Central Circle 20 Ne w Delh i assessing Rajiv Saxen a and no separ ate s atisf ac tion no te u/s 153C of the Act based on th e income- tax se arches on Jain s on 30/06/2 019 as well Alank it o n 1 9/10/2 019 was ever prepared by th eir respec tive AOs v is a v is the assessee nor given to the assessee besides there is reference only to the search on Mr Rajiv Saxen a. T he law requires that f or each sep ar ate search warran t, se parate satisf ac tion note u/s 153C of the A ct mu st b e prepar ed by the r espective AOs of the searched person for the mate rial se ized from eac h of them and al so by the A O of the person not se arched on receipt of each such satisf action note. In f act, no materi al f ound or s tatements re corded th ere in can be used in these proc eedings f or which a se par ate legal procedure h as been l aid down by the S tatute.
7. Thus, the satisf action notes an d th e consequent no tices issued u/s 153C of the Act were in relation to the se arch ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 14 on Rajiv S axena as is clearly mentioned in the two satisf ac tions notes provided by the AO and in all the notices/ SCN. Th e seizure/ inf ormation collec ted dur ing another searc h on S anjay Jain, A D Singh and Alankit Group is gr ossly irrel evan t to the impug ned p roc eedi ngs at all as separ ate notice u/s 153C of the Act was to be issued on the basis of satisf ac tion notes received from the AOs of the other persons by ab ating the pending assessment proc eed ings initiated earl ier u/s 153 C of the Act, a procedu re specific ally codif ied f or the purpose. Since, the impugned satisf action note was prepared af ter consider ing impermissible an d irrelevan t mater ial, the said s atisf ac tion note is vitiated as influence of irre levan t canno t b e determined ther ein. It is tri te law that wh en irrelevant material has been tak en in to consideration, entire pro ceed ing is vitiated as held in Ascu Arc h Timber Pro te ction Ltd 2004 taxman n.com 14 08 (SC), Dh irajlal Girdharilal Vs. CIT 26 ITR 736 ( SC), S agar Enterpr is es (2002) 1 24 Taxm an 641 (Guj), Ind ian Me tals And Ferro Allo ys Limited Vs UO I 195 ITR 539 ( Or i), Choithr am Begraj Lalv aney Vs CIT 197 ITR 302 (Bom). Thus, the impugned satisf ac tion note is illegal ab initio and the consequent al l assessment order s in appeal need to be qu ashed.
No such add ition u/s 69A of the A ct is permissible
8. Further, no ad dition u/s 69A of the A ct could be made as the said section is not applic able here. The AO h as also incorre ctly appl ied the provisions of the section 69A of the Act which are appl icabl e only if and if, any und isc losed move abl e asset e.g. money , bullion, je we llery or other valuable ar tic le is found (physically at th e time of s earch ) in a f inanci al year. Thus, the said sec tion is not appl icable in respec t of any book en try or infor matio n abou t any incom e in any year which was no t found in the f orm of any physical asset during the co urse of a se arc h or other wise. Th us, the impugned ad dition mad e by non- appl ication of m ind and appreciation of the l aw m ust be deleted.
Il le gal assessment order p assed u/s 153C r. w.s. 143(3) of the Act (sec tion 144C of the Ac t is a directive pro vision and does not affect the sec tion of an assessment order)
9. The assessment order passed u/s 153C r. w.s. 143(3)/144C of the Ac t on 31/03/202 3 is vo id ab initio becau se no assessment order c an be p assed u/s 153C of the Ac t which is only a m achin er y prov ision to as sume ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 15 jurisd iction to initiate assessment pro ceedin gs in consequence to an income-tax se arch an d no t a subs tan tive provision to m ak e an assessmen t wh ich is only the sec tion 153A of th e A ct in purs uance to an income- tax search, as has been specif ical ly held by the Hon'ble Apex Court in V ikr am Sujitkum ar Bhatia ( 2023 ) 149 taxmann.com 123 (SC) (par as 4.7, 5. 2 and 10. 6 of the judgment). Th e Hon'ble Apex C ourt in Calcu tta Knitwe ar (2014) 3 62 ITR 673 (SC) while analyz ing the s ectio n 158BD of the Ac t which is sim ilar to the sec tion 153C of the Ac t held th at the said provision is a m ach iner y provision. Thus, the assessee subm its that an asse ssment orde r in pursu ance to an assessment proceedings- initiated u/s 153C of the Act can only be passe d u/s 15 3A of the Act r. w. s. 153C of the Ac t and not u/s 143 (3) r.w.s. 153C of the Act. The relevant provisions of the above three section s are as below:
Sect ion 143(3) in th e Act (3) On the d ay specif ied in the notice issued under sub-
section (2), or as soon af ter wards as m ay be, af ter hear ing such evidence as the assessee m ay produce an d such other evidence as the Assessing Officer m ay require on. specif ied points, and af ter taking into account al l re levan t material which he h as gathered, the Ass ess ing Of ficer shall, by an order in writing, m ake an assessment of the to tal inc ome or l oss of the assessee, and de te rmine the sum p ayable by him or refund of any amou nt due to h im on the basis of such assessment:
Sect ion 153A in the Act 153A. Assessment in case of search or requis ition.
(1) No twithstanding any thing con taine d in sectio n 139, section 147, sec tion 148, section 149, sec tio n 151 and section 153, in the c ase of a person whe re a search is initiated under section 13 2 or books of acco unt, other docu men ts or an y assets are requisitioned under section 132A af ter the 31st day of M ay, 2003 but on or before the 31st day of Marc h, 2021, the Assessing Of ficer shall-
(a) issue notice to such person requiring him to furnis h within such period, as m ay be specified in the notice, the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 16 re turn of income in respect of each as sessme nt ye ar f alling with in six assessment years an d f or the relevan t assessment year or ye ars referred to in c lause (b), in th e prescribed form and ver if ied in the prescribed m anner and se tting for th such other par tic ulars as may be prescribed and the provisions of this Ac t shall, so f ar as may be, appl y accordingly as if such r eturn were a return requ ired to be furnished u nder section 139;
(b) assess or reassess the to tal income of six assessmen t year s immediately preced ing the assessme nt year re levan t to the previous year in wh ich such search is con duc ted or requisition is m ade and for the relevan t ass essment ye ar or ye ars.
Provided th at the Assessin g Off icer s hal l ass ess or re assess the total income in respect of e ach assessmen t year falling within such six assessmen t ye ars and f or the relevant assessmen t year or years:
..................... ..
Provided also th at no notice for asses sme nt or re assessment sh all be issued by the A sse ssing Off icer for the rel ev an t assessment year or y ears unless-
(a) the Assessing Off icer h as in his posse ssion b oo ks of ac co unt or other documen ts or evidence which reve al th at the inc ome, represented in the form of as se t, whic h has escaped assessment am ounts to or is likely to amou nt to f if ty lakh ru pees or more in the relevan t assessment ye ar or in aggregate in the relevant assessment years;
(b) the income referred to in cl ause (a) or p art thereo f has escaped assessmen t f or such year or years; and
(c) the sear ch under sec tion 132 is initiated or requisitio n under sec tion 132A is made on or af ter the Is t day of April, 2017.
..................... ..
Expl anation 2. For the purposes of the f our th pro viso, "asset" shall include immovable p roperty being l and or buil ding or both, shares and sec ur ities, loans and advances, deposits in bank acc ount.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 17 ..................... .....
Expl anation. For the r emoval of doubts, it is here by decl ared that,-
(1) s ave as otherwise provided in this sec tion, s ectio n 153B and section 153C, all other prov isions of thi s Act shall appl y to the assessm ent m ade under this section;
(ii) in an assessment or reassessment m ade in respec t of an as sessment year under this sec tion, the tax sh all be chargeable at the rate or r ates as applicable to suc h assessment year.
Sect ion 153C in the Act 153C. Assessment of incom e of any other person.
(1) No twithstanding any thing con taine d in sectio n 139, section 147, sec tion 148. section 149, sec tio n 151 and section 153, where the Assessing Officer is satisf ied that-
(a) any money, bullion, jewellery or othe r valuab le ar ticle or th ing, seized or requisitioned, belongs to ; or
(b) any books of account or documen ts, seized or requisitioned , pertains or p er tain to, or any informatio n contained therein, rel ates to, a pers on other than the person ref erred to in sec tio n 1534, then, the books of accoun t or documents or asse ts, seized or requisitioned shall be h anded ove r to the Assessing Of ficer having jur isd iction over such oth er person and that Asse ssing Off icer shall proceed again st each such other person and issue notice and assess o r reas ses s the income of the other person in accordance with the provisions of sec tion 1534, if , th at Assess ing Of ficer is satisf ied th at the books of account or documents or asse ts se ized or requisition ed h ave a be aring on the determ ination of the total income of such oth er person for six assessment ye ars immed iately preced ing the assessment ye ar relevan t to the previous ye ar in whic h se arch is conduc ted or requisi tion is m ade and fo r the relevant assessment ye ar or years ref erre d to in sub- section (1) of section 1 534:
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 18 Provided that in case of su ch other person, the ref erence to the date of initiation of the sear ch u nder sec tion 132 or making of requisition under sec tion 132A in th e second proviso to sub-section (1) of section 153A s hall be construed as referenc e to the date of rece iv ing the books of acco un t or documents or assets seized o r requis itioned by the Assessing Of fic er havin g jurisdic tion over such other p erson:
..................... .................. ...
(2) Where books of account or documents or assets s eized or req uis i tioned as referred to in sub-s ec tion ( 1) has or have been received by the Assessing Off ic er having jurisd iction over such other person af ter the du e d ate for f urnishing the return of income f or the assess men t year relevant to the previous year in which se arch is cond ucted under sec tion 132 or requisition is made under sectio n 132A and in respect of such assessment ye ar-
(a) no re turn of income has been f urnished by such other person and no notice und er sub -section (1) of sectio n 14 2 has bee n issu ed to him, or
(b) a return of income has been f urnishe d by suc h other person but no notice under sub-section (2) of section 14 3 has been served an d l imitation of serving th e notice under sub- section ( 2) of section 143 has expired, or
(c) assessmen t or reassessment, if any, has been made.
before the date of rec eiving the bo oks of ac co unt or docu men ts or assets seized or requisi tio ned by the Asse ssing Off icer having jurisdiction over such other person, such Assessing Of ficer shall issu e the no tice and assess or re assess to tal income of such o ther per son of such assessment year in the m anner provided in s ectio n 153A.
..................... ..
10. Thus, on perusal of the above s ections, it is unamb iguously clear th at the sec tion 153C of the Act specif ical ly ref ers to an assessmen t of income, after the said section 153C of the Act h as been put in to f orce, in ac co rdance wi th the provisions of the sec tion 153A of the Act and there is no m en tion at all of the sec tion 143(3) of ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 19 the A ct despite the fac t that u/s 153C(2 ) of the Act as abov e, there is a specif ic ref erence to a no tice u/s 1 43(2 ) of the Ac t and al so to a notic e u/s 142(1) of the Ac t. The Legislature in its wisdom has deliberate ly n ot mentioned the provisions of the section 143(3) of the A ct u/s 1 53C of the Act for assessment applic abil ity bu t has spec if ically mand ate d to com plete an assessment in accord an ce with the prov isions of the section 153A of the Act bec ause the section s 153A to 153D of the Ac t are spec ial non obstan te provisions legislated to compl ete assessmen t of income in consequence to an income-tax search or r equisition and we re s imul taneously introduced by the Finan ce Ac t, 200 3 w.e.f . 01/06/2003.
11. Further, it c an also be seen th at the sec tion 1 43(3) of the Act, mentions that the assessing of fic er shall by an orde r in wri ting make an assessmen t of the total income or loss of the assessee. S imil arly, the se ction 153A(1)(b) of the Act states the assessin g officer shall asse ss or re assess the total income of the six ye ars immed iately preceding the assessmen t year..... .. and f or the relevan t assessment year under this sec tion. There af ter, the first proviso u/s 153A of th e Ac t al so man date s th at the Asse ssing Off icer shall assess or reassess the to tal income in respec t of each assessmen t year f alling wi thin such s ix assessment years and for the re levan t assessment year or years.
12. Thus, wh en two separ ate specif ic provision s are mentioned to make an assessment of th e total i ncome, then the AO has to adopt the provi sion s which have been specif ical ly man dated u/s 153A of the Ac t by the Legislature for search rel ated assessmen ts . The AO does not have any power even with the consent of the ass essee to make an assessment in any section other than the section 153A of the Ac t rel ating to assessment proceed ings in consequence to an income-tax search which is a code in itself and has to be mandator ily ap plied in assessmen t proceedings post search becau se the s ections 15 3A to 153D are non-obstan te provisions broug ht in to the s tatu te f or the specific purpose of assessments in consequence to an income- tax searc h. Had it been not so, then the provisions of the section s 14 7 and 148 of the Ac t as ex isted e ar lier an d wh ich have been broug ht b ack into the statute w.e.f. 01/04/2021 were suf ficien t to take care of the assessments in consequence to an income-tax s earch. The Le gislature in its wisdom c arved out special provisions for such assessments w. e.f. 01/06/2003 til l ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 20 31/03/2021 u/s 153A to 153D of the Ac t.
13. The assessee relies on the judgmen t of the Hon'ble Supreme Cour t in Kan war Singh Saini vs High Court of Delhi (2012) 4 SCC 307 reconf irmed b y the Hon'ble Supreme Cou rt as 2023-TIOL-65-SC- IT in the case of PC IT vs S. S. Con Build Pvt L td where the Hon' ble juris dic tional Delhi High Court took the sam e view reported as 2022- T IOL-656-H C-DEL- IT th at the jur isdiction is th e functio n solely of the L egisl ature and to make an assessmen t under the par ticular provision of the Ac t also a jurisd ictional aspect and earlier also in the case of Sinhgad Technical Ed ucation Soc iety 2017-T IOL-3 09-SC- IT in p ara 18 therein.
14. Further, i t would also be seen th at to m ake an assessment in pursuanc e to a search wheth er o n the person searc hed or not searched but who se incrimin ating material was f ou nd, th e Legisl ature in its wis do m had also mandatorily provided u/s 15 3A of the Ac t its elf to issue a notice to the assessee to f ile a re turn of inc ome as may be prescribed and th en to proceed to m ake an assessment therein. Thus, even, no asse ssment of income can be made u/s 153A of the Ac t if no m and ato ry notice had be en issu ed therein. Similarly, there is no pro vision u/s 153 C of the Act to issue any notic e to f ile a return of income for assessment. Af ter recor ding a s atisfac tion u/s 153C of the Ac t, the AO has to m and atoril y issue a notice u/s 153A of the Act only as h as also been issu ed h ere on 29/09/2021. Just on a notice issued u/s 153C of the Ac t, no assessmen t post search c an be made. It just ref ers to reco rd a satisf action to ini tiate the assessmen t proceedings post an income-tax search elsewhe re as otherwise f or the n orm al course of assessment/ re assessment such provisions alread y exist u/s 14 2(1) of 148 of the Act. Thus, it is mandatory for an AO, af ter reco rding a satisf action u/s 153C of the Act, to ini tiate assessment proc eedings, to m and atoril y issue a n otic e u/s 153A of the Ac t seeking retu rn of incom e for th e par ticular per iod and then to proceed to m ake an assess ment onl y and only u/s 153A of the Ac t. There is no ambiguity in the language and the courts ar e bound to f ollow the mandate of the legislated jurisd ic tional issue as per the Hon'ble Apex Court in many judgm ents relied hereinabove . In f ac t, there is also no requ irement u/s 153A of the Ac t to issue any no tice u/s 143(2) of the A ct or similar to com mence ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 21 assessment proceedings in pur suance the reto as h as also been held in Ashok Ch addh a (2012) 20 tax m an n.com 387 (Del) by the Hon'ble jur isd ictional Delhi High Cour t, distinguish ing the legal requ irement of th e same wh ich did ex ist u/s 158BC of th e Ac t earl ier, prescribing pr ocedures of block assessments post searc h from 01/07/ 1995 til l 31/05/2003 as below:
Sect ion 158BC in the Act 158BC. Procedur e for block assessment. - Where an y se arch h as been cond ucted und er section 132 or bo oks of ac co unt, o ther documents or assets are requis iti oned under section 132-A. in the case of any person, th en ,-
(a) the As sessin g Of ficer, shall-
(i) in resp ec t of searc h initiated or books of accoun ts or other documents or any assets requisitioned af ter the 30th day of June, 1995 but before the 1st d ay of January, 1997, ser ve a notice to such person requiring h im to f urnish with in such tim e not being less than f if tee n day s;
(ii) in respec t of search initiated or bo oks of accounts or other documen ts or an y assets requis itioned on o r af ter the 1s t d ay of Janu ary, 1997, serve a notice to such person requiring him to furnish wit hin such time not being less th an fif teen days but not m ore than for ty-f iv e days, as m ay be specified in the notice a retu rn in the prescribed form and verif ied in the sam e manner as a re turn under cl ause ( i) of sub-section (1 ) of sec tio n 142, se tting forth his total income inc luding th e und isclosed income f or the block period:
Provided th at no notice under section 1 48 is requ ired to be issued for the purpose of proceeding under th is Chapter:
Provided further that a person who has furn ished a return under this cl ause shall not be entitled to file a re vised re turn;
(a) the Assessing Off ice r shall pr oceed to de te rmin e the und isclosed income of the bloc k period in the m anner l aid down in sec tion 158-B B and the provisions of sec tio n 142, sub- sections (2) and (3) of section 143, sec tion 144 and section 145 shall, so f ar as may be, apply:
(b) the Assessing Off icer, on determ ination of the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 22 und isclosed income of the block period in accord ance with this Chapter, sh all pass an ord er of assess ment and determ ine the tax pay able by him on the basis o f such assessment:
(c) the assets seized und er section 132 or requis itioned under section 132-A shal l be dealt with in ac cordance with the provision s of section 132-B .
15. Thus , the r equiremen t to seek a return of income u/s 153A of the Ac t has been specif ically m andated th erein, overriding the provisions of sec tion 142( 1) of the Act whic h otherwise authorizes the assessing off icer to cal l for a re turn of income to m ake an assessmen t u/s 143 of the Act. The provisions of the section 142(1)(1) are s im ilar to the clause (a) u/s 153A(1) of the Act which is as below:
142. Inquiry bef ore assessment.
(1) Fo r the purpose of m aking an asse ssm ent under th is Act, the Assessing Off icer may serve o n any person who has made a return under section 115WD o r s ection 139 or in whose case th e time allowed u nder su b-section (1) of section 139 f or f urnishing the retu rn has exp ired a notice requiring him , on a d ate to be therein specif ied.-
(i) where such person has not made a re tu rn within the time allo wed un der sub- sec tion (1) of sec tio n 139 or before the en d of the relev an t assessmen t ye ar, to furn ish a return of his inc ome or the income of any other pers on in resp ec t of wh ich he is assessable under this Act, in the prescribed form and ver if ied in the prescribed m anner and se tting forth such oth er p ar ticu lar s as m ay be pres cr ibed, or
16. T hus, while enac ting special provisions for incom e-tax assessment in pursuan ce to an inc ome -tax s earch, provisions of the sec tio ns 142 and 14 3 of the Act were specif ical ly excl uded from application bes ides the requirement of the section 139 of the Ac t to f ile a re turn of income as the same have been specific ally provided u/s 153A of the Act and also the procedures of assessm ent / re assessment in pursuance to an income-tax search where incriminating material was f ou nd wh ich was earlier provided u/s 148 of the Ac t for issuing a no tice of an y ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 23 escaped income. All such assessmen t/ reassessmen t procedures f or the assessment, in pursuanc e to an in come- tax se arch, were excluded and thereaf te r m andate d u/s 153A to 153D of the A ct.
17. It is also sta ted th at the section 153C of the Act is nowhere mentioned in th e section 246A of the Ac t agains t whic h an appeal can be filed to the C IT(A) and theref ore, is not at appealable provision. Only u/s 24 6A(1)(b a) of the Act the sec tion 153A of th e Act, except an o rder pass ed as per DRP directions, h as been m entio ned as appe alable orde r. Thus, the legislature in an unam biguous l anguage mand ate d the procedu re to assess an in come post se arc h any where while making con sequential amendmen ts in the law. Theref ore, it was m and atory for an ass essing of ficer to p ass an assessmen t order u/s 153A of the Act only in an ass essment proceeding-in iti ate d u /s 153C of the Act and not u/s 143(3) of the A ct wh ich is v oid ab ini tio .
18. This is also supported from the f ac t that in te rms of the sec tion 153D of the Ac t, the m andato ry prior approval f rom the Joint /Addl. C IT is requir ed f or e ach assessmen t year separ ately for an assessmen t order p assed u/s 153A(1)(b) of the Act an d n ot f or an ass essmen t order pass ed u/s 153C of the A ct. The said section 153D of the Act is as bel ow:
Prior approval n ecessary f or assessmen t in cases of se arch or requisition.
153D. No order of assessment or reassessment sh all be pass ed by an Assessing Off icer b elow th e rank of Joint Commissioner in respect of each assessmen t year ref erred to in clause (b) of sub-section (1 ) of section 15 3A or the assessment year referred to in cl ause (b) of sub-section (1 ) of sec tion 153B, except wi th the prior approval of the Joint Commissioner:
Provided that nothing c on tained in this sec tion s hall appl y where the assessment or reassessmen t order, as the c ase may be, is requir ed to be passed by the Ass essing Of ficer with the prior approv al of the Principal Commiss ioner or Commissioner under sub-section (12) of s ection 144BA.
Protective addition in proceedings-initiated u/s 153C of the Act based on an ill egal satis faction note therein
19. There is also no provision in the Act which pre scribes ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 24 to pass any assessmen t order by making add itions on pro te ctive b asis in an assessmen t-proc eedings in iti ate d in purs uance to a notice issued u/s 153C of the A ct and thus , the same is void ab initio and beyond the m andate of the legisl ature. Theref ore, c annot be uph eld .
20. The legislature in its worthy wisdom has sp ec ificall y mand ate d in the section 153C of the A ct th at whe re the AO is s atisf ied
(a)....................................
(b) any books of account or documen ts, seized or ac quisitioned , pertains or pertain to, or any infor matio n contained therein, rel ates to, a pers on other than the person ref erred to in sec tio n 1534, then, the books of accoun t or documents or asse ts, seized or requisitioned shall be h anded ove r to the Assessing Of ficer having jurisdiction over su ch other person an d the Asse ssing Off icer shall proceed again st each such other person and issue notice and assess o r reas ses s the income of the other person in accordance with the provisions of section 153A, if . that Assess ing Off icer is satisf ied th at the books of account or documents or asse ts se ized or requisition ed h ave a be aring on the determ ination of the total income of such oth er person for six assessment ye ars immed iately preced ing the assessment ye ar relevan t to the previous ye ar in whic h se arch is conduc ted or requisi tion is m ade and fo r the relevant assessment ye ar or years ref erre d to in sub- section (1) of section 1534 having jurisdiction over such other p erson
21. Thus, it is cl ear th at the l egislature, in an unamb iguous l angu age, has m and ated th at f irs tly the AO of the person searched must be satisf ied th at th e al leged incriminating information rel ates to a person (specif ic person by nam e) other th an th e person searc hed. T hus, it is c lear th at the first satisf action abou t the mate rial se ized must be wi th regard to a particul ar person an d not many persons or alternative per sons in respect o f the same inf orm ation. Th is is also bec ause the said AO has to iden tif y the parti cul ar person out of the entire p opulation on th e ear th to remit the materi al seized to the AO of the said par ticular person, otherwise where the same would be sent by him. It is a mandatory exercise th ough may mammoth bu t was legislated in th e Statu te and the said AO was duty bound to iden tif y a par ticular person for ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 25 f ur ther ac tion. The same cannot at all be for more th an one person for the same amount.
22. However, interestingly here, on pe rus al o f the impugne d satisf action note d ated 23/09/2021 rec orded by the AO of Mr Raj iv S axen a, the perso n se arched in the case of the assessee an d also on perus al of a se parate satisf ac tion note d ated 25/09/2021 recorded in th e case of Mr Ud ai Shanker Awas thi, the father of the as sessee, sent by the same AO of Mr Rajiv Saxen a, the se arched person, it would be seen th at the en tire conten t is iden tic al and with ou t stating who is the ac tual benef iciary as two satisf action notes for the sam e amounts and tr ansactions wer e recorded in the c ase of both the persons .
23. If the AO of the searched person was s atisfied o n 23/09/2021 on perusal of the m ater ial se ized th at those very inform ation seized was relev ant to initiate assessment proceedings u/s 153C of the Ac t on the assessee then how the very AO, just 2 d ays the reaf te r, coul d arrive at another satisf ac tion on the same mate rial on 25/ 09/2021 that th e material seized re lates to Shr i Udai Shanker Awasthi, the f ather of the assess ee. The lette rs sen t by the said AO ar e abso lutely identic al, verb atim . This itself shows that t he AO of the se arched person was d ef initely not sure to whom o ut of the two persons , th e sam e belonged to and proves the con tentio n of the assessee that no m aterial seized at all was seized by the revenue anywh er e so as to incriminate the assessee nor his f ather Mr U S A wasth i. In terestingly to make a mockery of the l aw, there is n o men tion also of any protective assessmen t of any income in any of the two satisf ac tion n otes on th e said f acts/am oun ts and/or that a s imilar satisf action has alr ead y been recorded tw o d ays earlier on the same m aterial and same amount in the c ase of the assessee.
24. Further, interes tingl y the AO of the assessee, who is also th e AO of Mr U dai Shanker Awas thi, f ather of the assessee, recorded two separ ate satisf action notes at h is end simultaneously on 2 9/09/2 021, the same d ay, on the same set of identical information, where the Perf orm a and the Annexure A there to are completely iden tic al til l par a 12 and exc ept a few sentences in the closing paras changed to suit the requiremen ts on f acts. Th is prov es th at still at the same time with the sam e pen s tro ke, the AO of the assessee and his father, cou ld not decide to ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 26 whom the s aid income belonged to out of the two persons.
25. Th e concluding par agr aph in bo th the cas es are iden tic al as reproduced below:
Mentioned in the satisfaction note of the as sessee Amol Aw ast hi "17. Af ter c aref ul analysis of seized d ocumen ts and provisions of sec tion 153C of the Ac t, I am satisf ied th at the above docum ents rel ates to S h. Amol A was thi who is assessed wi th DCIT, CC-01, N ew Delhi and m ay have a bear ing on his Income. Therefore, I am s atisfied th at Sh.
Amol Awasthi is covered under Sec tion 153C of the In come Tax Act, 1961. Accordingly, notices u/s 153C of the L.T. Ac t, 1961 are issued for AY s 2010-11 to A Y 2020-21."
Mentioned in the sa tisfaction note of Mr Udai Shanker Aw asth i, the father- of the ass essee "16. Af ter c aref ul analysis of seized d ocumen ts and provisions of sec tion 153C of the Ac t, I am satisf ied th at the above documents relates to Sh. Ud ai Shanker A was th i who is assessed with DC IT, CC-01, Ne w Delhi an d m ay have a be aring on his Income. Therefore, I am satisfied th at Sh. Ud ai Shanker Awasthi is covered under Sectio n 153C of the Income Tax Act, 1961. According ly, no tices u/s 15 3C of the I. T. Ac t, 1961 are be ing issued f or AYs 2011-12 to AY 20 20-21."
26. This clearl y indic ates th at b oth the AOs was not sure as to whom the alleged inf ormation mu ch less the und isclosed income belonged to.
27. It must also be appreciated that th e p rovisions of the section 153C of the Ac t are more drac onian and hav e to be appl ied s tric tly as h as been mand ated by the law with no ifs an d buts. There c an be no doub t th at the s ame income canno t be assessed in two h ands of the two dif ferent assessees, par ticularly when the same is based on seized incriminating material wh er e there can be no question of any pro tec tive ad dition.
28. Th us, on perusal of the en tir e sectio n 153C of th e Act, it would be seen that th e legislature h as used only the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 27 wo rd "such other person" which means a s pec ific perso n and no t more th an one for the sam e m aterial and income. Ther efore, any assessment m ad e on prote ctive b asis perse is vo id ab initio and m ust be quashed. In teres tingl y the AO has also not mentioned as to what incrimin ating material, the A O was havin g in the conclu ding par a of the satisf ac tion note to m ake the ad dition in the c ase of the assessee. One of th e m atters going to the roo t of the issue is whe ther any amount received overseas c an be said to ac cr ue to an NR I in Ind ia who has no bus iness / profession/ employment in Ind ia and who has take n abso lutely no part in sale /purch ase/ price f ixation of the f ertiliser's tr ansactions by the concerned seller/ buyer where none had even al leged that the N R I was ever a party to the im pugned tr ansactions. Fur ther, i t is also brought to th e notice that as per the satisf ac tio n no te date d 29/09/2021, the AO contend s in the concl usion th at "m ay have beari ng on his incom e" where as the section 153C of the Act requires "h ave a bear ing on total income"
whic h is def inite. Thus, th e invocation of the s trict s ectio n 153C of the Ac t for reopen ing an ass ess men t has to be base d on specif ic evidence, n ot on pre ponder an ce of prob abil ities o therwise the presum ption u/s 132(4) would hold good that the same pertained to the person se ar ched .
No incriminating material seized anywh ere to ins tig ate the provisions of the section 153C of the Ac t or to m ake any addition therein
29. Fur ther, add ition in a case of asses sme nt procee ding s- initiated u/s 153C of the Act is pos sible wher e the proceedings ar e initiated only and only on th e b asis of incriminating material found as a surprise and then seized during a searc h on another person and th is p ropo sitio n has been uphel d by the Hon'ble Supreme Cour t in DC IT v U. K. P aints (Overseas) Ltd. [2023] 150 taxm an n.com 108 (SC) and PC IT v Abhisar Buildwell ( P.) Ltd. [202 3] 14 9 taxm ann.com 399 (SC). It is also submi tted th at without f irst de termining wh at was seized/its nature if at all and how was it incriminatin g to the asses see , th e impugned additions have been m ade on surmises.
30. The DRP also ad mitted in p ara (g) page 6 of its direc tiv e order the con ten tion of the app ell ant th at a se arch operation conduc ted h as a surprise element an d then a long story has been mentioned therein. Here, the Reve nue m iser ab ly f ailed to show that the alleged information was seized in a surprise sear ch. All the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 28 state ments of R ajiv S axena clearl y prove th at nothin g was se ized and nothi ng as well was f ound in his co mp uters se ized by the Revenue. This is c learly m ention ed i n his state ments and has al so been ad mitted by the DRP th at on instructions of the Author ised Officer , S axena was coll ec ting piecem eal information f rom his office in Dubai th at too by tam pering, as desired by the revenue of ficer then, the original information th ere, and n ot in the form in whic h the sam e was m ain tained in the regular c ou rse of ac co unting in the books. The alleged inf orm ation handed over to the reven ue off icer were some state ments made / drawn on some Excel sheets or otherwis e, definitely prep ared on the instructions of the revenue off ice r and then h anded over to the reven ue officer. Thus, the same was never seiz ed an d nor is par t of the regul ar books of ac co unt m ain tained in Dubai to which the rev enue off icers never had any ac cess in any m ann er an d we re al ways at the sole mercy of Saxena. All the information give n by Saxena was created to suit the Revenue with no indepen den t corr obor ative materi al av ail able ag ains t the assessee in any m anner nor giv en by him . Any information, if any collec ted / gathered pos t se arc h through the FT & TR Division of the Min istry of Finance, Governm ent of India also h as n o meaning as noth ing is mentioned in the assessment order nor was ever conf ronted to th e assessee. Rather, the same has been state d f irs t time in the assessmen t orde r wi th n o ad verse specif ic averment proving th at nothi ng ad verse was f ound. The story written by the DRP in th at par a is of no purpose as the assessee has nothing to disprove the al leged information as th ere was no inf orm ation with the Reven ue whic h was found to proceed u /s 153C of the Ac t as the same is completely an illeg al-proceedings. The alle gatio n of the DRP is completely basel ess rather far from the tru th on record as no such inf orm ation was ever main tained by Rajiv Saxena nor was ever detected in an y surprise ac tion. This tampered information was prepared in Dubai on the specif ic d irection s of the Au th orise d Officers of the revenue since he was brought to In dia without any lap top or such inform atio n in January 201 9 by the ED and dur ing the course of enquiries before the search and th en in the se arch on him from 30/06/2019 when R aj iv S axen a coll ec ted the same f rom Dubai office on email an d th en handed over to the authorized of ficer thereaf ter with no supporting evid ence. Nowhere the Revenue h as shown the f lo w of the alleged f unds in the b ank accou nts of the assessee.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 29
31. The averment of the AO th at during the se arch oper atio n on S axen a, it was found that these comp anies did not ren der / provide any services in lieu of th e money and the tr ansactions are not sup por ted with any evidence in any manner is vague on fac ts. Fac tu ally, no thing was f ound during the search on S axena. Ho wever, th e alleged information / evidenc e f ound rather handed over by Rajiv Saxena to the reven ue officer clearly sho wed invoices raised b y R ajiv S axen a's diff eren t comp an ies on Uralkal i Gibr al tar who had never su pplied any material to Indian Potash L td ( IPL). The MoP (roc k potash f er tilize r) was supplied by Uralkali, Russia to IPL an d th e said compan ies are two independent comp anies in two indepen den t countries.
32. In para (b) page 8 of the ord er of the DRP, it has been alleged that some unaccounted commission was due to illegal invol vem ent of Mr Udai Shan ker A was th i, thoug h not adm itted otherwise also, then how co uld it be come income of his son in Dub ai who was never a par ty to an y such de al, merely on presumption of the AO. This otherwise shows the allegation of the AO tho ugh not admi tted yet that the funds of his father we re p arked with him which per se d id no t become his income in an y manner. It is impor tan t to appreciate that no person ever admi tted to have g iven any payment to as sessee including the f athe r of the assessee. No cross ex amin atio n was given des pite specific d em and. All the statem ents / copies of the ac counting statements submitted by S axena do not corroborate the allegations of the rev en ue. S ax en a was repe ate dly m aking false statem ents bes ides c hang ing / shif ting his stan ds on pr actically all the issues. Nothing was f ound d uring the search and whatev er was purporte dly seized in the search was vol untarily produced and h anded over by Saxen a af ter obtain ing the same from his Dubai office and was tem pered inf ormation.
33. There must had been some eff ort by th e assessee to earn any income the Ind ian territory. Any windf all or gif ted amount by an yone else mu ch less the paren t in Dubai c an by no stretc h of imagin ation becomes tax able in India. It is also very interesting to note th at in the impugne d entire material al leged to have been seize d from Saxena, there is no wh isper at al l in any manner about or of Mr Ud ai Shan ker Awasthi. No alleged paper has any reference to him. Further, even Saxena also cate gorically state d in his statement recorded by the ED th at h e h ad never me t Mr Udai Shankar A wasthi nor had ever spoke n ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 30 to him. He, on query form the off icer, just mad e h is guess on the connection of the assessee with J ains pro bably becau se of relationship of the assessee with Mr Udai Sh anker Awas thi, whic h c ann ot be a re ason to consider the unproven rem ittance by Saxena as income of the assessee or h is f ather Mr Ud ai Shan ker A was th i in assessment proceedings-initiated u/s 153 C of th e Act in their cases without any m aterial seized which could be cl aim ed to have been found in a surpr ise check. The jurisd iction to apply the said prov ision is s tr ic tl y restricted to the material seiz ed in an income- tax search elsewhe re and neither on any information av ailable through an y o ther source or on he arsay or on gue ss.
34. The DR P also states that it h as been gathered by the panel th at in Jan uary 2019, R ajiv Saxena was deported f rom Dubai and broug ht by ED to India in rel ation to high profile corrup tion c ases like Augusta Westland , VV IP Chopper money laund ering case. Initial ly R aj iv S axen a was be ing c alled to the Investigation Unit of the Income Tax dep artm en t to record his stat emen t u/s 13 1 of the Act. During recording of statem en ts, he su bmi tte d data as supporting d ocuments. Subsequen tly, in order to procure the entire data, in its authentic f orm, a se arc h and se izure oper atio n was conducted on him on 30. 06.2019. Simultan eously oper ation was also lau nched other connec ted persons, San jay Jain & others. During recording of statements, the d ata which had been given by Rajiv Saxena prior to the search operation, was recovered from 2 lap tops during the search operation, whic h n ot only au thenticated the inform ation before the depar tment but also gav e it a more complete f orm. Therefore, the f act of the m atter is that not onl y d ata was subm itted by Rajiv Saxena before the depar tment, it was al so recovered during search operation and m any sear ch oper ations em an ated f rom the d ata recovered from the s aid l aptops. Prior to the search operation, during s earch oper ation, in pos t se arch enquir ies, dur ing assessmen t proceed ing, from the data c alled from other cou ntr ies through FT & TR references etc., time and again it has co me to lig ht that Shri Rajiv S axena was functioning as an in ternational entry op erator, was engaged in dubious d eals, and f acil itated m oney laundering for Indian c lients based in India and abroad. A ssessee h as rightly pointed o ut th at he has been changing his statem ents, bu t th at does not affec t the data that was recovered and au thentic ate d with backward / forward l inkages f or all his clients inc luding the assessee whereas the f act is that there is no such ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 31 information much less any evidence. The entire av ermen t is not mor e th an a surmise and conjecture.
35. Thus, when the income- tax depar tmen t h ad alread y come in possession of the said m ate rial wi thout an y se arch and if the said inf orm ation was very mu ch found in those laptops seized ther eaf ter, it cann ot be s aid th at the said information was seized and was f ou nd dur ing the course of a searc h so as to trigger action u/s 153C of the Act where the fundamental condition is to have the same during the course of sear ch and any inform ation al re ady in possession of the revenue c annot le ad to any such ac tion. Fur ther, since the same was c ollected f rom h is Dubai of fice on emails to be given to th e revenue off icers those were necessarily to be in those lap tops. Som ething whic h the R evenue had wi th it in this manner c anno t be considered seized.
36. It is also an admitted f ac t that the ED has subm itted before the Hon'ble Delhi High Cou rt in its appl ication dated 18/10/2019, already submitted dur ing the proceedings before the DRP at PB p age nos. 20 92 to 2095 that Rajiv Saxena h ad been reg ularly subm itting f abricated, forged, f alse p apers / evidence bef ore the government au thorities to mislead the au thorities. Th is appl ication was filed af ter the alleged facad e of the income- tax search by 03/07/2019 h ad alr ead y bee n created by the revenue, then how could suc h informatio n given by him in such a cloudy and suspic iou s manner be considered reliable and in fac t wo rthy of an y consider ation.
37. Undispu tedly, nothing was found in the hotel ro om of Saxena at the time of search. The very state men t of Rajiv Saxena itself records th at every documen t/ detailed were produced by him which clear ly demo nstr ates b eyond doub t and any apprehension th at those were not at found by th e search par ty. Please refer to: Ans. 5: C opy of pass por t, ch art of com pan ies etc. p rod uced m ar ked as Exh ibit 1, Ans. 9: Agreement with Midas e tc. produced and the s ame 'I h ave been made par t of Annexure 1', An swers 10-11-12 and 31 etc. A very importan t f ac t is clear from the above that th e said inform ation was not at all found and se ized but was provided by R aj iv S axen a on the direc tio ns of the revenue of ficers given ear lier af ter coll ec ting those details from his Dubai off ice before ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 32 reco rding of th e said s tatement as the reven ue off icers never stated in any ques tion therein th at we h ave found or some similar words bu t were al ways dem anding to provide the infor mation and very impor tan tly n ot a reply. Further, Saxena categorical ly stated th at he h ad c ollected the s am e from h is Dub ai of fice in the l ast 2-3 d ays as f ar as possible, reference Answer 33,35.36.37. Ans wer to Ques tion 64 was" I am providing some of the details whic h have be en obtain ed and the sam e have been seiz ed...
38. Th e Table on p ara 45 page 31 of the A sse ssment orde r- serial numbers 10 to 13 ' to be iden tif ied' an d serial numbers 53 to 55. 57, 60 to 61 on subsequent p ages with narr ation 'detail s awaited' leaves not an io ta of do ubt th at the entire seizure cum production was a dram a enac ted under some inhuman pressure of the agencie s. It also buttresses the submission that the impu gned d ata entered on this Lenovo Laptop and other d igital d evices was not at all maintained in the nor mal course of busine ss by Rajiv Saxena but was migr ated from some source unde r control/ influence of the search p arty.
39. The AO f alsely stated th at the assessee wa s the beneficiary o wner of Rare E arth whereas f actuall y the assessee was nowhere held to be benef iciary o wn er of Rare E ar th in any m anner. This company be longs to Jains or someone else but not to the assessee as has been admi tted by al l persons in their statem en ts as is mentioned in the impugned assessm ent order also.
40. It is un disputed fac t th at Saxena was ex tr adite d from Dubai in pecul iar circumstances all of sudden , then Saxena can not be in possession of any valu ables or importan t d oc uments at the time of deportatio n. Af ter depo rtation, he was s taying in hotel wi th his wif e. The Inves tigation Win g of the income-tax depar tment thereaf ter reco rded his statements u/s 131(1A) of the Act on 05/05/2019 and 23/06/2019 as has be en referred in the questio ns nos. 65 and 13 of his statemen t dated 03/07/2019 by the inc ome-tax dep artmen t (co pies of those s tatem ents not provided to the ass essee despite of repe ate d requests), when the income tax authoritie s had alre ady recorded statements and impound ed documents, these can not be considered as incr im inating m ate rial reco ver ed in sear ch at hotel. When no scope of an y secret chambers / c oncealed places in a hotel ro om e xis ted, the very purp ose of the alleged searc h at a ho tel room was simply to exercise pressure and to m ake him volun tarily ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 33 hand over document after ob tainin g from h is Dubai staff as h as been mentioned in the above s tatement and th is se arch in a hotel room for 86 hours with one DD IT , one AD IT, Four Inspec tors, two panchas, Digital experts, Saxena and h is wife Mrs Shivani could mak e S axena state th at sun rises in the wes t. No evidentiary value for such a state ment under pressure, especially when cro ss ex amination was not provided.
41. Such voluntar ily produced docu ments c annot at all be treated as 'seized' und er sec tion 13 2 of the Ac t. Mr. Saxena was not in possession of these documen ts at the time of search nor these were avai lable in the ho tel room and thus , no question of any seizure within the prov isions of the section 132 of the Act arises. As held in Lax mipat Chor aria [1971] 82 ITR 306 (C alcutta) approved by the Hon'ble Apex Cour t in C IT v Tarsem Kum ar [1986] 161 ITR 505 (SC) "The expression used here for the recovery of the possession is " seizure". Seizu re is again an expre ssio n whic h implies a forcible ex action or taking possession f rom either the owner or one who has th e possess io n and who is un wil ling to p ar t with possession." Kind ref erence to Bafna Textiles [1975] 98 ITR 1 (Karnatak a) 7 G.M. Ag adi (197 3) 2 MysLJ, 1973 32 STC 243 K ar.
No add ition in th e hand s of a Non-resident under the Act alleging income received overseas
42. The assessee und isputedly is a Non -Residen t u nder the Income-tax Ac t for the last 20 years and thus, c anno t at all be assessed in respec t of his all eged overseas income though th e said income is not at all adm itted as per the revenue who h as just presumed the s ame to be his income earned with his business conne ction in India though no evidence has been brought on record. Merely, the f ather of the assessee h as been Man aging Director of IFFCO who al so did n ot purchase an y ro ck Mo P from Ur alkal i Russia, is no reason to presume the s ame . Thus, the assessee cannot be assessed for any in come, thoug h not admitted, al leged by the revenue to have been ear ned or r eceived over seas f or wh ich no se rvices at all were rendered in Ind ia or coul d at all be assumed to h ave been rendered in India because the alleged amou nt rece ived as commission / service c harges f rom an o ver seas supplier was received overseas in respec t supp lies ef fected from overseas. F urth er, th e m and atory Article 22 of the DTAA with UAE of Indian government is appl icab le and no such income c an be otherwise assessed under the Incom e-tax ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 34 Act, 1961 in India as admitted ly the assessee was a perm anent resident of UAE and Non-Residen t under the Inco me- tax Ac t, 1961;
Sec tion 65B of the Indian E vid ence Act for digi tal d ata and evidenti ary value of other inf orm ation given by Rajiv Saxena from time to time to the revenue
43. It is submitted th at purity of data on digital devices have to be main tained as provided in the CBDT's Digital Evidence Investigation M anual, a M anu al to guide th e field officer s in the matter of collection, handling and utilizatio n of digital eviden ces. The Chapter 6 prescrib es SOP for f orens ic collection of dig ital evidences and adm ittedly those were no t ad hered to.
44. NO DOCUMENT IS PROVED -Not a s ing le documen t produced by S axena throu gh his Dubai office h as been proved as is required u nder Evid ence Act, in the sense th at conten ts are proved with the orig inal books / vouchers, cer tified bank statements etc. K ind reference is drawn to Mohammed Yusuf and Anr. Vs D. And Anr. O n 14 th July, 1961 Equival en t citations: A IR 19 68 Bom 112 (1966) 68 Bom LR 228, ILR 196 6 B om 420.......
45. It h as been held in Prak ash Cotton Mills P vt. Ltd . A IR 1982 Bom 387 that the contents or the tr uthfu lness of the contents of a documen t c an be proved only by the execu tor of the document. The Supreme C ourt in M ad an Mohan Singh v. R ajni Kan t (2 010) 9 SCC 209 ex amined various pronouncements of the Supreme Court and held th at "13. In State of Bih ar & Ors. V s. R adh a Kr is hn a Singh & Ors. AIR 1983 SC 684, this Court deal t with a sim ilar contention and held as under: - "Admis sibil ity of a docu men t is one thing and i ts prob ativ e val ue quite another these two aspec ts c arinot be combined. A docu men t may be ad missib le and yet m ay no t c arry any convic tion and weight of its probative v alue m ay be nil.
46. UNSIGNED DO CUMENTS VA LUE LESS Fur ther, i t is also an adm itted position th at various state ments/documen ts/exhibits were called by S axe n a f rom his Dubai Office d uring the course of se arches bu t these are unsigned by the auth or . It is establ ished law th at unsigned documents have little ev identiary v alue. Unle ss signed by au thor, ver aci ty canno t be vetted by the party against whom these unsigned documents are used ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 35 as h as been held in HASSAN AL I KHAN 2015-T IO L-2063- IT AT-MUM approved by the Bomb ay Hig h Co urt in 2019- T IOL-464-H C-MUM- IT.
47. Thus, the impugned assessment ord er pas sed u/ss 153C/144C/143(3) of the Act must be qu ashe d as illegal and void ab initio."
11. Propositions put forward by learned counsel for the assessee can be summarized as under:
Proposition 1 - The initiation of proceedings and completion of assessme nt under Section 153C of the Act is void ab initio as the AO had powers to initiate t he proceedings under Section 153C of the Act for a block of 10 asses sment years prior to the Financial Year 2021-22 corresponding to A.Y. 2022-23. Therefore, initiation of proceedings and completion of assessment under Section 153C of the Act for A.Y. 2011-12 and A.Y. 2012-13 are void ab initio. The decision relied upon in the case of PCIT vs. Ojjus Medicare Pvt. Ltd & O thers, (2024) 161 taxm ann.com 160 (Delhi).
Proposition 2 - The additions made are not based on any incr im inating material seized in a search that too on protective basis.
Proposition 3 - the additions could not have been made under Section 69A of the Act. The ld. counsel submitted ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 36 that provisions of Section 69A are applicable only if any undisclosed movable asset, money, bullion, jewellery is found in possession of the assessee, therefore, the Section 69A is not applicable in respect of book entr y or information about any incom e in any year which was not found in the form of any physical asset during the course of search or otherwise.
Proposition 4 - The AO could not have passed the assessment order under Section 153C r.w. Section 144(3) of the Act. The ld. counsel submitted that as per the scheme of the Act, the AO can only assume jurisdiction to initiate assessment proceedings in consequence to a search and seizur e operation in the cases of another person under Section 153C of the Act. However, the substantive provision to make an assessment is Section 153 of the Act. Proceeding further, he submitted that though the AO can initiate the assessment proceedings under Section 153C of the Act. However, he has to complete the assessment under Section 153A. Drawing our attention to Section 153C of the Act, he submitted that the provisions itself makes it clear that assessment has to be made in terms of Section 153A of the Act. He ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 37 further submitted that for this r eason Section 153 ref ers only to Section 153A. He submitted that even Section 246A of the Act provides for an appeal against an assessment or der passed under Section 153A of the Act and not under Section 153C of the Act. He fur ther submitted when the AO proceeds under Section 153C r.w.
Section 153A of the Act, there is no need for him to make an assessment under Section 143(3). Thus, he submitted that the AO having not completed the assessm ent under Section 153A of the Act, the assessment order is void ab initio. Decisions relied upon in the case of ITO vs. Vikram Sujit Kum ar Bhatia, (2023) 149 taxmann.com 123 (SC); CIT vs. Calcu tta Knitwear (2014) 362 ITR 673 (SC). He submitted that when two separate specific provisions are me ntioned to make an assessment, the AO has to adopt the provisions which have been specifically mandated under Section 153A of the Act by the legislature for search r elated assessments. The AO does not have any power even with the consent of the assessee to make an assessment in any section other than the Section 153A of the Act relating to assessm ent proceedings in consequence to an income tax search which is a code in ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 38 it self and has to be mandatorily applied in assessment proceedings post search because Sections 153A to 153D are overriding provision starting with non obstan te clause brought to the statute for a specific purpose for assessment in consequence to search and seizure operation. He submitted that when the registration in his wisdom has mandator ily provided for assessment under Section 153A of the Act, the AO should have completed the assessment under the said provision and not under Section 153C of the Act. In this context, he relied upon the following decisions:
Kanwar Singh Saini vs. High Court of Delhi (2012) 4 SCC 307 PCIT vs. S.S. Con Build Pvt. Ltd., 2022-TIOL-656- HC-DEL-IT CIT vs. Sinhgad Technical Education Society, 2017- TIOL-309-SC-I T;
Ashok Chaddha vs. ITO, (2012) 20 taxmann.com 387 (Del) Proposition 5 - Based on same material satisfaction note could not have been recorded in respect of two different persons, Shri Udai Shankar Awasthi and Shri Amol Awasthi Proposition 6 - In absence of any incriminating mat erial, ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 39 proceedings under Section 153C could not have been initiated. The decision relied upon in the case of DCIT vs. U.K. Paints (Overseas) L td., (2023) 150 taxmann.com 108 (SC) and PCIT vs. Abhisar Buildwell (P) Ltd. (2023) 149 taxm ann.com 399 (SC).
Proposition 7 - No addition can be made at the hands of the non-resident in respect of alleged income received overseas as taxability of non-resident has to be governed under the treaty provisions.
Proposition 8 - No addition can be made based on adverse material including statements of 3rd parties without confronting them before the assessee and align opportunity of cross examination.
12. Learned Departmental representat ive subm itted, though, in case of the assessee, proceedings were initially initiated under section 153A of the Act as a result of search and seizure operation conducted in case of the assessee, however, subsequently, information was received from the Assessing Officer of another searched person relating to incriminating material pertaining to assessee. He submitted, since, the assessment ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 40 proceedings initiated under section 153A of the Act abated as a result of the recording of satisfaction under section 153C of the Act in respect of the assessee, the Assessing Off icer dropped the proceedings initiated under section 153A of the Act and initiated the proceedings under section 153C of the Act. He submitted, since, the Assessing Officer is empowered to initiate the assessment proceedings under section 153C of the Act in respect of a person, other than the sear ched persons, he has rightly invoked such power. He submitted, section 153C of the Act is machinery provisions provided for assessment of a person, other than the searched persons, however, the procedure to be followed for such assessment is as prescribed under section 153A of the Act. Therefore, there is no need for the Assessing Officer to pass the assessment order under section 153A of the Act. He further submitted that in course of searc h and seizure operation in case of Sh. Rajeev Saxena, various incr im inating materials were seized, which revealed undisclosed income of the assessee. He submitted, merely because the satisfaction notes recor ded in r espect of two different persons referred to same incr iminating mat erial, ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 41 it will not invalidate the proceedings as per the requirement of section 153C of the Act. It is sufficient for the Assessing Officer to note in the satisfaction note that document seized from searched person belong to other persons. He submitted, the document seized m ay belong to more than one persons. Therefore, based on such document, the Assessing Officer can initiate proceedings under section 153C of the Act in respect of more than one persons. In support of such contention, he relied upon the decision of the Hon'ble Gujarat High Court in case of Bhagwandas Rupchand Parwani Vs. ACIT, [2024] 160 taxmann.com 7(Gujarat). He submitt ed, se ction 153C also does not require r ecording of separate satisfaction note for each assessment year, for which, proc eedings under section 153C were initiated. He submitted, a composite satisfact ion note can be recorded referring to t he details of mater ials gathered in cour se of search pertaining to assessment year forming part of block as a whole. For such proposition, he relied upon a decision of Hon'ble Delhi High Court in case of Indian National Congress Vs. Deputy Commissioner of Income-tax, [2024] 160 taxmann.com 606 (Delhi). Opposing contention of learned ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 42 counsel for the assessee that exce pt statement recorded from some third parties, such as, Sh. Rajeev Saxena and without any other incriminating materials, proceedings under section 153C of the Act were initiated. Learned Departmental Representative subm itted that based on statement recorded under section 132(4) of the Act, proceedings under section 153C can be initiated. In support, he relied upon a decision of the Hon'ble Delhi High Court in case of PCIT Vs. Nau Nidh Overseas Pvt.
Ltd., [2017] 88 taxmann.com 665 (Delhi).
13. As regards the contention of the assessee that the addition could not have been made under section 69A of the Act, learned Departmental Representative subm itted, as per sect ion 110 of the Evidence Act, a person found in possession of anything, the onus of proving that he is not the owner is on the person from whose possess ion the thing was recovered. He submitted, though, Evidence Act is not strictly applicable to the tax proceedings, however, the tax authorities are not prevented from invoking the principles of Evidence Act. He subm itted, since, Sh. Rajiv Saxena, the searched person, had categorically stated that commission income has been transferred to the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 43 account of the entities controlled by the assessee, addition under section 69A was justified. In support of such cont ention, he relied upo n a decision of the Hon'ble Supreme Cour t in case of Chuharmal Vs. CIT, 1988 AIR 1384 (SC).
14. Thus, he submitted, not only the proceedings have been validly initiated under section 153C of the Act, but the additions made under sect ion 69A of the Act are also valid.
15. We have carefully consider ed rival submiss ions in the light of decisions relied upon and perused materials placed on record. The first issue which arises for consideration is what can be the block of 10 years for which the Assessing Officer could have assumed jurisdiction under section 153C of the Act. At the time of hearing, learned counsel for the assessee has placed befor e us the relevant facts concerning this issue and has taken us through various materials placed in the paper-
books, including the satisfaction notes re corded by the Assessing Officer of the sear ched person as well as by the Assessing Officer of the assessee. As discussed earlier, though, based on a sear ch and seizure operation carried ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 44 out on the assessee, proceedings under section 153A were initiated earlier, however, subsequently, based on the satisfact ion note r ecorded by the AO of Sh. Rajeev Saxena, a person searched under section 132 of the Act, proceedings under section 153C were initiated against the assessee. Whereas, proceedings earlier initiated under section 153A were dropped.
16. Thus, the fulcrum of the proceedings initiated under section 153C of the Act against the assessee is the satisfact ion note recorded by the Assess ing Officer of searched person, Sh. Rajiv Saxena. This is so because, though, the Assessing Officer has also referred to a search and seizure operation conducted in case of Alankit group, however, the satisfaction note based on which proceedings under section 153C were initiated against the assessee, do not refer to any incr iminating/seized materials found in the said search and seizure operation.
On a reading of the satisfaction note recorded in case of searched person, namely, Sh. Rajiv Saxena, it is observed that it was recor ded by the Assessing Officer on 23.09.2021. Through this satisfaction note, the Assessing Officer of the searched person, viz., Sh. Rajiv Saxena, ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 45 sent the seized mat erials to the Assessing Officer of the assessee.
17. After receiving the seized materials and satisfaction note from the Assessing Officer of the searche d person, the Assessing Officer of the assessee recorded his satisfact ion note under section 153C of the Act on 29.09.2021. Thus, both the satisfaction notes, viz., satisfact ion note of the Assessing Officer of the searched persons as well as the satisfaction note of the assessee were recorded in financial year 2021-22 corresponding to assessment year 2022-23. Section 153C read with section 153A as existed prior to its amendment by Finance Act, 2017 provided for reopening of assessment/assessments for a block of six assessment years imm ediately preceding the assessment year, wherein, the search and seizure operation was carried out. However, the proviso to section 153C carves out a distinction regarding what should be the date of search in case of a person other than the searched person. As per the said provision, in case of a person other than the searched person, the date of search would be reckoned to be the date on which the Assessing Officer of the other person receives the seized materials ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 46 or records the satisfaction note under section 153C of the Act. However, by virtue of the amendment made to section 153A and 153C by Finance Act, 2017, the relevant assessment year was defined to include a block of 10 assessment years beginning with the assessment year, wherein, search and seizure operation was carried out and 9 preceding assessment years.
18. Admittedly, in the facts of the present appeals, the search and seizure operatio n was carried out on a date posterior to the amendment brought to section 153A read with section 153C of the Act by virtue of Finance Act, 2017. Therefore, the amended provisions of section 153C read with section 153A would be applicable. Hence, the relevant assessment year would constitute a block of 10 assessment years comprising of the assessment year, wherein, the search and seizure operation has taken place and preceding 9 assessm ent year s. However, in case of a person other than the searched person, the date of search would be r eckoned to be the date on which the Assessing Officer received seized material and recorded satisfact ion in terms with section 153C of the Act. Since, the asse ssee is not the searched person but the other ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 47 person, the date of search would be reckoned to be the date on which the Assessing Officer of the assessee received the seized m aterial and recor ded satisfaction.
19. Undisputedly, the materials placed on record clearly demonstrate that the Assessing Officer of t he assessee has recorded the satisfaction note under section 153C of the Act on 29.09.2021 falling in Financial Year 2021-22 corresponding to assessment year 2022-23. Therefore, the relevant assessment year for the pur po se of computing 10 year block has to be reckoned from assessment year 2022-23 till assessment year 2013-14. I n other words, the block of 10 assessment years for the purpose of section 153C would be assessment years 2013-14 to 2022-23. Hence, the Assessing Officer could have assumed jurisdiction under section 153C of the Act for the afor esaid block of 10 assessment years and not beyond that. Whereas, in the facts of the present appeals, the Assessing Officer has gone beyond the block of 10 assessment years and instituted proceedings under section 153C of the Act in respect of assessment years 2011-12 and 2012-13, as well. This, in our view, is against the statutory mandate.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 48
20. While considering identical issue in case of PCIT vs. Ojjus Medicare Pvt. Ltd. & Ors. [2024] 161 taxmann.com 160 (Delhi), the Hon'ble Jurisdictional High Court has held as under:
"G. COMPUTATION OF THE SIX AND TEN YEAR BLOCK IN THE PRESENT BATCH OF WRIT PETITIONS
86. In the present batch, List I pertains to writ petitions which have Satisfaction Notes recorded or Section 153C notices issued between the period 01 April 2021 to 31 March 2022. Undisputedly, the First Proviso to Section 153C, and which has been consistently recognized to also embody the commencement point for reckoning the six or the ten AYs', shifts the relevant date from the date of initiation of search or a requisition made to the date of receipt of books of account or documents and assets seized by the jurisdictional AO of the non-searched person. Consequently, the block of six or ten AYs' would have to be reckoned bearing the aforesaid date in mind. Although in the present batch of writ petitions, the date of actual handing over has not been explicitly mentioned in a majority of the writ petitions, learned counsels for respective sides had addressed submissions based on the assumption that it would be the date of issuance of the Satisfaction Note by the AO of the non-searched person and in the case of non- availability of such a note, the date of issuance of the Section 153C notices which would be pertinent for the purposes of the First Proviso to Section 153C.
87. Assuming, therefore, that the handover of material gathered in the course of the search and pertaining to the non- searched person occurred between 01 April 2021 to 31 March 2022, the same would essentially constitute FY 2021-22 as being the previous year of search for the purposes of the non- searched entity. As a necessary corollary, the relevant AY would become AY 2022-23. AY 2022-23 would thus constitute the starting point for the purposes of identifying the six years which are spoken of in Section 153C. The six AYs' are envisaged to be those which immediately precede the AY so identified with reference to the previous year of search. It would thus lead us to conclude that it would be the six AYs' immediately preceding AY 2022-23 which could have formed the basis for initiation of action under Section 153C.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 49 Consequently, and reckoned backward, the six relevant AYs' would be:-
Computation of the six-year block period No. of as provided under section 153C of the Act years AY 2021-22 1 AY 2020-21 2 AY 2019-20 3 AY 2018-19 4 AY 2017-18 5 AY 2016-17 6 Computation of the six-year block No. of years period as provided under Section 153C of the Act Consequently, AY 2021-22 would become the first of the six preceding AYs' and would as per the table set out hereinabove terminate at AY 2016-17.
88. Section 153A replicates the basis on which the six AYs' are to be identified and computed with the solitary distinction being that in the case of the searched person, the six AYs' are liable to be computed from the AY pertaining to the FY in which the search was conducted. The starting point for the purposes of identifying the six AYs' in the case of Section 153A would thus turn upon the year of search as opposed to the handover of material which is spoken of in the First Proviso to Section 153C. If one were to therefore assume that a search took place on a person between 01 April 2021 to 31 March 2022, the pertinent AY would become AY 2022-23 and the corresponding six AYs' would be as follows:-
Computation of the six-year block period No. Of as provided under section 153C of the Act years AY 2021-22 1 AY 2020-21 2 AY 2019-20 3 AY 2018-19 4 AY 2017-18 5 AY 2016-17 6
89. That takes us then to the issue of identifying the "relevant assessment year" for the purposes of computing the ten year block. Explanation 1 to Section 153A specifies the manner in which the entire ten AY period is to be computed. While the computation of six AYs' follows the position as enunciated and identified above, Explanation 1 prescribes that the ten AYs' would have to be computed from the end of the AY relevant to ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 50 the FY in which the search was conducted or requisition made. The ten AY period consequently is to be reckoned from the end of the AY pertaining to the previous year in which the search was conducted as distinct from the preceding year which is spoken of in the case of the six relevant AYs'.
90. Viewed in that light, and while keeping the period of 01 April 2021 to 31 March 2022 as the constant, the relevant AY would be AY 2022-23. The ten AYs' would have to be computed from 31 March 2023 with the said date indubitably constituting the end of the AY relevant to the previous year of search. Viewed in light of the above, the block period of 10 AYs' would be as follows:-
Computation of the ten- No. of
year block period as years
provided under section
153C read with Section
153A of the Act
AY 2022-23 1
AY 2021-22 2
AY 2020-21 3
AY 2019-20 4
AY 2018-19 5
AY 2017-18 6
AY 2016-17 7
AY 2015-16 8
AY 2014-15 9
AY 2013-14 10
91. Tested on the aforesaid precepts, it would be manifest that AY 2022-23 would form the first year of the block of ten AYs' and with the maximum period of ten AYs' terminating in AY 2013-14. We, in this regard also bear in consideration the following instructive passages as appearing in the decision handed down by a learned Judge of the Madras High Court in A.R. Safiullah. We deem it appropriate to extract the following paragraphs from that decision:-
"9. Explanation-I is clear as to the manner of computation of the ten assessment years. It clearly and firmly fixes the starting point. It is the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. There cannot be any doubt that since search was made in this case on 10.04.2018, the assessment year is 2019-20. The end of the assessment year 2019-20 is 31.03.2020. The ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 51 computation of ten years has to run backwards from the said date ie., 31.03.2020. The first year will of course be the search assessment year itself. In that event, the ten assessment years will be as follows :
1st Year 2019-20 2nd Year 2019-20 3rd Year 2017-18 4th Year 2016-17 5th Year 2015-16 6th Year 2014-15 7th Year 2013-14 8th Year 2012-13 9th Year 2011-12 10th Year 2010-11
The case on hand pertains to AY 2009-10. It is obviously beyond the ten year outer ceiling limit prescribed by the statute. The terminal point is the tenth year calculated from the end of the assessment year relevant to the previous year in which search is conducted. The long arm of the law can go up to this terminal point and not one day beyond. When the statute is clear and admits of no ambiguity, it has to be strictly construed and there is no scope for looking to the explanatory notes appended to statute or circular issued by the department.
10. In the case on hand, the statute has prescribed one mode of computing the six years and another mode for computing the ten years. Section 153A(1)(b) states that the assessing officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which search is conducted. Applying this yardstick, the six years would go up to 2013-14. The search assessment year, namely, 2019-20 has to be excluded. This is because, the statute talks of the six years preceding the search assessment year. But, while computing the ten assessment years, the starting point has to be the end of the search assessment year. In other words, search assessment year has to be including in the latter case. It is not for me to fathom the wisdom of the parliament. I cannot assume that the amendment introduced by the Finance Act, 2017 intended to bring in four more years over and above the six years already provided within the scope of the provision. When the law has prescribed a particular length, it is not for the court to ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 52 stretch it. Plasticity is the new mantra in neuroscience, thanks to the teachings of Norman Doidge. It implies that contrary to settled wisdom, even brain structure can be changed. But not so when it comes to a provision in a taxing statute that is free of ambiguity. Such a provision cannot be elastically construed.
11. One other contention urged by the standing counsel has to be dealt with. It is pointed out that the petitioner has invoked the writ jurisdiction at the notice stage. Since the petitioner has demonstrated that the subject assessment year lies beyond the ambit of the provision, the respondent has no jurisdiction to issue the impugned notice. Once lack of jurisdiction has been established, the maintainability of the writ petition cannot be in doubt."
In our considered opinion, the decision in A.R. Safiullah correctly expounds the legal position and the interpretation liable to be accorded to the identification of the ten AYs' which are spoken of in Sections 153A and 153C.
92. List II, forming part of this batch pertains to cases where Satisfaction Notes of the AO of the non-searched person were drawn between the period 01 April 2022 to 31 March 2023 and 01 April 2023 to 31 March 2024. Tested on the principles enunciated by us in the preceding passages of this judgment, we come to the conclusion that the relevant six AYs' would comprise the following years, when computed for the period 01 April 2022 to 31 March 2023:-
Computation of the six- No. of
year block period as years
provided under section
153C of the Act
AY 2022-23 1
AY 2021-22 2
AY 2020-21 3
AY 2019-20 4
AY 2018-19 5
AY 2017-18 6
93. The relevant block of six AYs' when computed for the period of 01 April 2023 to 31 March 2024 would be the following:
Computation of the six- No. of
year block period as years
provided under section
153C of the Act
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 53 AY 2023-24 1 AY 2022-23 2 AY 2021-22 3 AY 2020-21 4 AY 2019-20 5 AY 2018-19 6
94. Similarly, and in light of what has been held by us hereinabove, the relevant block of ten AYs' when computed for the period 01 April 2022 - 31 March 2023, and where the Satisfaction Note was drawn by the AO of the non-searched person between those two dates, would be as under:-
Computation of the ten- No. of
year block period as years
provided under section
153C read with Section
153A of the Act
AY 2023-24 1
AY 2022-23 2
AY 2021-22 3
AY 2020-21 4
AY 2019-20 5
AY 2018-19 6
AY 2017-18 7
AY 2016-17 8
AY 2015-16 9
AY 2014-15 10
95. The relevant block of ten AYs' when computed for the period 01 April 2023 - 31 March 2024, with the date of the Satisfaction Note drawn by the AO of the non-searched person falling within that period, would come to be identified as under:
Computation of the ten- No. of
year block period as years
provided under section
153C read with Section
153A of the Act
AY 2024-25 1
AY 2023-24 2
AY 2022-23 3
AY 2021-22 4
AY 2020-21 5
AY 2019-20 6
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 54 AY 2018-19 7 AY 2017-18 8 AY 2016-17 9 AY 2015-16 10
96. To recall, the petitions forming part of List I pertain to AYs' 2010-11, 2011-12 and 2012-13. So far as the aforenoted writ petitions are concerned, undisputedly AY 2010-11, 2011-12 and 2012-13 fall beyond the maximum period of ten AYs'. Since the ten AYs', when computed from the end of AY 2022- 23 would terminate upon AY 2013-14, AYs' 2010-11, 2011-12 and 2012-13 would clearly fall outside the block period of ten AYs' and cannot legally or justifiably be reopened under Section 153C read with Section 153A of the Act.
97. Proceeding then to List II, we find that the petitions placed in that list pertain to cases where the hand over occurred in FYs 2022-23 and 2023-24. Consequently, the relevant AYs' would be AY 2023-24 and AY 2024-25 respectively. In light of the principles enunciated by us and which explain how the period of six and ten AYs' is liable to be computed, the reopening of assessments pertaining to AYs' 2010-11, 2011- 12, 2012-13 and 2013-14 would clearly fall beyond the ambit of ten AYs' as provided under Section 153C read with Section 153A. We note in this behalf that all of the writ petitions forming part of List II pertain to the aforenoted AYs' 2010-11, 2011-12, 2012-13 and 2013-14
98. We are therefore of the opinion that the Section 153C notices issued against the writ petitioners placed in List I and insofar as they pertain to AYs' 2010-11, 2011-12 and 2012-13 would not sustain being beyond the "relevant assessment year" which could have possibly formed the basis for initiation of action under that provision. Similarly, the Section 153C notices impugned by the writ petitioners placed in List II and insofar as they pertain to AYs' 2010-11, 2011-12, 2012-13 and 2013-14 and which have been found to fall outside the net of "relevant assessment year", being the ten year block, would be liable to be set aside on this score alone."
21. Thus, keeping in view the ratio laid down by Hon'ble Jurisdictional High Court reproduced above, since, ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 55 assessment years 2011-12 and 2012-13 fall outside the net of relevant assessment year, being the block of 10 years, the assumption of jurisdiction under section 153C of the Act is unsustainable. Hence, the assessment orders passed in consequence thereof have to be declared as void. That being the legal position, we hold that the assessment orders passed under section 153C of the Act for assessm ent years 2011-12 and 2012-13 are legally unsustainable, hence, quashed.
22. Having held so, we can move to the other contentions put forward by the assessee. It is the case of the assessee that the disputed additions are not based on any incr iminating materials found as a re sult of search and seizure operation. It has further been submitted that since no undisclosed movable assets, viz., cash, bullion, je wellery, cash etc. were recovered from the possession of the assessee, no addition could have been made under section 69A of the Act based on certain book entries made by a thir d party, which was not found from the possession of the assessee. As f ound from the materials on recor d, initially a search and seizure operation was conducted in case of Sh. Sanjay Jain, his br other Sh.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 56 Pankaj Jain. Simultaneously, a search and seizure operation was also conducted in case of assessee's father, Sh. Uday Shankar Awast hi, which continued till 03.07.2019. Even though, the assessee was not physically present in India and was a resident of Dubai, however, he was also covered under the said search and seizure operation.
23. It is the allegation of the Assessing Officer that in course of search and seizure operation in case of Sh.
Sanjay Jain, certain email and chat communication between various parties wer e recovered, however, from the subsequent factual discussions made in the assessment order r elating to such email and chat communications, it appears that those are between Sh.
Sanjay Jain, Sh. Pankaj Jain and Sh. A. S. Gehlot, the Managing Director of Indian Potash Limited (IPL). There is nothing in the observations of the Assessing Officer to show that any of these em ail/chat communications recovered during the search and seizure operation in case of Sh. Sanjay Jain were with Sh. Uday Shankar Awasthi or assessee. This must be the reason for which the Assessing Officer has not only dropped the proceedings ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 57 under section 153A of the Act in case of the assessee but in the entire assessment order he has not referred to any incr im inating/seized mater ial found from the possession of Sh. Sanjay Jain/Sh. Pankaj Jain to im plicate assessee's father or the assessee.
24. Basis of entire addition is primarily the statement recor ded from Sh. Rajeev Saxena and other inf ormation furnished by him to the Authorised Officer, including the alleged ledger copy, though, apparently a statement pertaining to the assessee was compiled to handover to the Authorised Officer. Therefore, it is quite clear that the assessment orders in case of the assessee are based on the materials handed over in the search and seizure operation carried out in case of Sh. Rajeev Saxena.
25. It is the allegation of the Assessing Officer that as per the statement recorded from Sh. Rajiv Saxena, the commission income received from various foreign parties selling fertilizer to IFFCO/IPL were transferred to beneficiar ies' accounts held in the name of various entities controlled by the assessee. However, the Assessing Officer has not made any discussion, whatsoever, in the assessment order s regarding ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 58 assessee's relationship/role in the entities in whose bank accounts the alleged commission income was transferred for onward transmission to India. Though, the Assessing Officer has alleged that the entities are under the control of the assessee, however, such fact has not been demonstrated through cogent evide nce. It is also quite surprising to note that, though, the commission income has not directly com e to the assessee or credited to assessee's individual account, but, as alleged, has been credited in the bank accounts standing in the name of various entities in Dubai, however, the Assessing Officer has not made any effort to find out the real identity of the entities and their promot ers. It further appear s that no proceeding has been initiated against those entities, though, as per the Assessing Officer's own version, the commission income was transferred to the accounts of these entities, allegedly, controlled by the assessee.
Though, the Assessing Officer has m entioned that information was received thro ugh FT &TR, however, what is the nature of such information and its relevancy with the assessee, has not been discussed by him.
26. A careful reading of the entire assessment order ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 59 would re veal that the Assessing Officer has made assessment primarily relying upon the statement recor ded from Sh. Rajiv Saxena and the materials furnished by him at the time of search or during post search proceeding. At this stage, it will be material to note that the said search and seizure operation was carried out at a hotel room where Sh. Rajiv Saxena was staying after his extradition to India. It is rele vant to observe, though, assessment has been made primarily relying upon the statement recorded from Sh. Rajeev Saxena, however, no opportunity of cross-examination was given to the assessee.
27. In fact, repeated request by the assessee for perm itting him to cross-exam ine Sh. Rajeev Saxena has fallen into deaf ears and ultimately rejected. Cross-
examination of Sh. Rajeev Saxena was of paramount im portance, considering his misleading statements, unreliability and fraudulent activities, which has been exposed by Enf orceme nt Direct orate (ED) in the form of an affidavit before the Hon'ble Courts. The ED has clearly stated that due to his prevaricating stand and unreliability, the statements recorded from Sh. Rajiv ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 60 Saxena cannot be relied upon. Thus, in our view, utilization of statem ent of Sh. Rajiv Saxena and ev idences furnished by him adversely against the assessee without perm itting him to cross-exam ine Sh. Rajiv Saxena, whose statement was strongly relied upon by the Assessing Officer to make the assessment, is in gross violation of Rules of Natural Justice, hence, cannot be countenanced.
Therefore, as per the ratio laid down by Hon'ble Supr eme Court in case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II (2015, 62 taxmann.com 3 SC), the addition made without following the Principles of Natural Justice is unsustainable.
28. Even otherwise also, at more than one place in the assessment or der, the Assessing Officer has specifically and categor ically stated that the assessee is merely a pass-through entity and the real beneficiary is someone else in India. The Assessing Officer has also observed that the commission incom e has ultimately been transferred to the real beneficiary in India. That being the factual finding of the Assessing Officer himself, in our view, no addition under section 69A could have been made at the hands of the assessee even on protective ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 61 basis.
29. Pertinently, in the statement recorded in cour se of search and seizure operation, Sh. Rajiv Saxena has repeatedly stated that the commission from Uralkali was received in the accounts of the entities controlled by him and thereafter transferred to three sets of beneficiaries.
The fir st beneficiary being entitie s controlled by Sh.
Pankaj Jain; the second set of beneficiary is entity controlled and managed by assessee and the third set of beneficiar y is entities held and controlled by Sh. Vivek Gehlot, s/o Sh. Parvinder Singh Gahlaut, MD of IPL.
These observations have been made by the Assessing Officer in paragraph 51 of the assessm ent order. Thus, as could be seen from the afor esaid observations, the alleged commission income came directly to the entities controlled by Sh. Rajeev Saxena and thereafter, as alleged, were tr ansferr ed to entities controlled by various beneficiar ies. Thus, it is very much clear that even as per the statem ent of Sh. Rajeev Saxena, alleged commission did not com e directly to the assessee.
30. The identity of t he entities allegedly controlled by the assessee has not been disclosed by the Assessing ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 62 Officer. Who are the promoters of those entities have not been discovered. Even, what is assessee's relationship and stake in the said entities have not been disc ussed at all. Though, the Assessing Officer has observed that information has been collected through FT&TR, however, what is the nature of such information and whether such information contained the details of entities, which received the alleged commission income and their relationship with the assessee have not been established.
If the Assessing Officer had in his possession specific information in relation to the identity and status of the entities receiving comm ission from the entities controlled by Sh. Rajiv Saxena, he should have identified such entities and initiated proceedings under section 153C read with section 153A of the Act against them. It appears, without undertaking any exercise to ide ntify the entities, who according to Sh. Rajeev Saxena had received the commission income from entities controlled by him, has picked up the assessee as a soft target to make the addition.
31. A reading of the assessment order would reveal that though the Assessing Officer at more than one place has ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 63 stated that commission income has come to the assessee through entities controlled by him, however, he has contradicted himself by saying that the assessee is merely a pass-through entity and not the real beneficiary. This is the specific reason, why the Assessing Off icer has made the additions on protective basis. In other words, the Assessing Officer was more or less convinced that the income does not belong to one of the two assessees at whose hands additions were made. Even though, the Assessing Officer has alleged that the commission is meant for the real beneficiaries in India, however, he has failed to establish the money trail. The Assessing Officer has not brought on r ecord any material to even demonstrate that the alleged commis sion received in the accounts of the entities allegedly controlled by the assessee have been transf erred to India in any manner and if so, to which accounts they have been transferred and such accounts wer e controlled by whom. Nothing in this regard has been discussed by the Assessing Officer in the assessment order.
32. It is relevant to note that in the assessment order as well as in DRP's directions, it has been obser ved that the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 64 statement given by Sh. Rajiv Saxena and ev idences furnished by him regarding receipt of commission has been corroborated through the evidences collected in course of search on Mr. A.D. Singh, Mr. Sanjay Jain and Alankit group. However, not only the statement recorded from Sh. A.D. Singh and Sh. Sanjay Jain were retracted within a short time, but they do not reveal any direct link either with the assessee or Sh. Uday Shankar Awasthi.
Insofar as the search on Alankit group is concerned, the Assessing Officer has not even recorded a satisfaction note qua the said search and seizure operation. These facts clearly reveal that no incriminating materials concerning the assessee were found in course of such search and seizure operation. Even, the assessment order s demonstrate such fact, as, while making additions, the only evidences relied upon by the Assessing Officer are the statement recorded from Sh. Rajeev Saxena and som e other documents furnished by him including the so called ledger in the name of the assessee appearing in his books of account, though, no such books of account were found during the search on Sh. Rajiv Saxena. Thus, it is telltale that no direct evidence was available in the record ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 65 of the Assessing Officer to establish that the assessee received commission income from Uralkali either directly or through intermediaries.
33. At this stage, it would be apposite to look into the satisfact ion note recorded by the Assessing Officer of Sh.
Rajiv Saxena as well as the Assessing Officer of the assessee and Sh. Uday Shankar Awasthi. On a perusal of the said satisfaction notes, it is observed that the Assessing Officer of Sh. Rajiv Saxena has pr im arily relied upon the statement recorded from Sh. Rajiv Saxena and certain documents recovered from him or submitted by him. The concer ned authority after analyzing the documents has recorded that such documents and information may have a bearing on the income of the assessee. After receiving the satisfaction note and the seized docum ents from the Assessing Off icer of the searched person, the Assessing Officer of the assessee recor ded a satisfaction note stating that the seized documents relate to the assessee and may have a bearing on his income. Accor dingly, he issued notice under section 153C of the Act. Interestingly, the Assessing Officer of Sh. Uday Shankar Awasthi recorded verbatim ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 66 identical satisfaction note stating that the ve ry same documents related to Sh. Uday Shankar Awasthi and may have a bearing on his income.
34. It is further relevant to note that the Assessing Officer who recorded satisfaction note for initiating proceedings under section 153C of the Act in case of the assessee and Sh. Uday Shankar Awasthi is the same person. The aforesaid facts reveal that the Assessing Officer, while initiating proceedings under section 153C of the Act was hims elf not sure, whether the seized documents belong/pertain to the assessee or Sh. Uday Shankar Awast hi and whether such documents would have a direct bearing on the income of either the assessee or Sh. Uday Shankar Awasthi. Since, the Assessing Officer was ambivalent as to whether the seized materials belong/per tain to the assessee or Sh. Uday Shankar Awasthi, he was not certain whether such information/document would have a direct bearing on the income of either the asses see or Sh. Uday Shankar Awasthi. That is why, the Assessing Officer has stated that such information/docum ents 'MAY' (emphasis by us) have a bearing on the income of the assessee or Sh. Uday ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 67 Shankar Awasthi. In fact, such uncertainty in the mind of the Assessing Officer has percolated into the assessment proceedings and while framing assessment under section 153C of the Act in case of t he assessee, as, he was doubtful as to whether the assessee is the real beneficiar y of the alleged commission income found from the information/documents seized from Sh. Rajeev Saxena. At this stage, we must observe, learned Departmental Representative has relied upon a judicial precedent to submit that identical satisfaction note can be made in case of two persons. However, on careful examination we have found that the said decision refers to satisfaction notes recorded by the Assessing Officers of searched per son and non searched person and not by Assessing officers of two non searched persons.
35. In f act, to put it sim ply, the Assessing Officer has recor ded a finding of fact that the assessee is not the real owner of the income and only a pass-through entity.
Thus, when the Assessing Officer was him self not sur e as to whether the information/seized docum ent reveal any of undisclosed income of the assessee and when he himself has expressed the view that the assessee is merely a ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 68 pass-through entity, he could not have assumed jurisdiction under section 153C of the Act at all.
Inasmuch as, proceedings under section 153C of the Act could not have been initiated for merely making protective additions.
36. Thus, in our considered opinion, the satisfaction note r ecorded by the Assessing Officer, while assuming jurisdiction under section 153C of the Act, is mechanical without making any inquiry or investigation and by merely relying upon the statement recorded from Sh.
Rajeev Saxena and the information/document submitted by him and such information also fails to meet the test of a seizure. Each and every material found and seized from the searched person cannot be consider ed to be incr im inating material to initiate proceedings under section 153C of the Act in respect of a non-searched person unless the seized information/material would have a direct bearing on the income of the non-searched person. In the facts of the present case, the very action of the Assessing Officer in treating the assessee as a pass-
through entity and making protective addition proves that the information/seized material received from the ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 69 Assessing Officer of the searched person cannot be considered as incriminating m ater ial to implicate the assessee. Thus, in our view, not only the addition made under section 69A of the Act on protective basis is unsustainable, but the proceeding initiated under section 153C of the Act itself is wit hout jurisdiction.
37. One more issue which has been raised before us by the assessee is regarding the completion of assessment under section 153C read with section 143(3) of the Act. It is the say of the assessee that though the Assessing Officer can initiate proceedings in case of non-searched person under section 153C of the Act, however, he has to pass the assessment or der under section 153A read with section 153C of the Act.
38. In the context of these submissions of assessee, on perusal of the satisfactio n note recorded under section 153C of the Act, the no tice issued under section 153C of the Act and t he final assessment order, we have noted that the Assessing Officer has nowhere referred to section 153A of the Act. After carefully considering the submissions of learned counsel for the assessee, we find som e merit in them. On a conjoint r eading of section ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 70 153A, 153C and 153D of the Act, it becomes clear that in case of non-searched persons, the Assessing Officer has to initiate assessm ent proceedings under section 153C of the Act. However, after initiating the proceedings, he has to assess or reassess the income of the non-searched person in accor dance with the provisions of section 153A of the Act. W hile consider ing somewhat similar issue, the Hon'ble Delhi High Court in case of I ndian National Congress Vs. DCIT, [2024] 160 taxmann.com 606 (Del) has observed as under:
"16. It must at the outset be noted that the Satisfaction Note which has been drawn in unambiguous terms, and more particularly in paragraph 140 thereof, recites that the AO was satisfied that this was a fit case for initiating proceedings under Section 153C read with Section 153A of the Act for AY 2014-15 to AY 2020-21. There is thus an explicit reference not only to Section 153A but also to the block of ten assessment years which were proposed to be made subject matter of the impugned proceedings. The submission, therefore, that Section 153A was not invoked is untenable."
39. In case of M/s. Nilesh Bharani Vs. DCIT, ITA No. 612/Mum/2020, dated 28.03.2020, the Coordinate Bench analyzing the provisions contained under section 153C and 153A of the Act has held as under:
"55. Thus, on a bare perusal of the plain language of the above explanation in respect of the amendment introduced in the section 153C of the Act w.e.f. 01/06/2015, we find that it ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 71 mandates that in case any information is found during the course of any search anywhere in respect of a person not searched, then for the purpose of reassessment of income on the basis of the same, it can only be considered by taking recourse to the provisions of the section 153C to make a reassessment of income u/s 153A of the Act and not under section 148 of the Act to make an assessment u/s 147 of the Act.
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64. The law as culled out from these amendments and as we have understood, the revenue officer can initiate the proceedings under section 147 or u/s 153C Firstly, in case, where some material is received from the AO of another person, the AO of the assessee verifies it from the information on his record of the assessee, determines its character whether incriminating or not and being an escaped income, then records a satisfaction by way of reasonsin different circumstances; u/s 148 of the Act, issues a notice u/s 148 of the Act to file a return of income and then makes a reassessment u/s 147 Secondly, in the case of the person searched, after the search, the AO of the person searched transmits the relevant information as found by the revenue which even relates to another person not searched to the AO of the non-searched person who thereafter conducts his proceedings under sameof the Act. I .T . A . No . 6 1 2 / M u m / 2 0 2 0 Mr. Nilesh Bharani procedure, i.e., the AO of the said assessee verifies it from the information on his record, determines its character, whether incriminating or not and being an escaped income, then records satisfaction by way of a note u/s 153C of the Act, issues a notice u/s 153C to file a return of income for reassessment, then he makes an assessment / reassessment of such income u/s 153A of the Act.
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85. Further, it is also not disputed that as per the order of the CIT (A) in this case, the Revenue came in possession of the said information in some searches carried out by the Investigation Unit on the brokers / operators of the listed scrip DB International (Stockbrokers) Ltd. Further, as noted by AO in his reasons recorded in para 2 of reasons that, this ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 72 information surfaced from the search of M/s Evergreen Enterprises, so all the more it was an information pertaining to the assessee found during the course of search of a person covered u/s 153A. On perusal of the provisions of the section 153C of the Act, it is apparent that after the amendment w.e.f. 01/06/2015 therein, if the AO of the person not searched comes into possession of any information, which may not be the books of account but by way of any other document pertaining to or any information contained therein relating to the assessee not searched, then the only course available with the AO of the said non-searched person is to only proceed by recording a satisfaction u/s 153C of the Act to make a reassessment of income u/s 153A of the Act even for an extended assessment year after 31/03/2017.
86. During the course of hearing of this appeal, the above facts were not at all disputed by the CIT DR, because the CIT (A) has mentioned those very explicitly in his appellate order.
It has also been observed that when an amendment in the section 153C of the Act was made by the law makers therein w.e.f. 01/06/2015, changing applicability of the provisions of the said section, no simultaneous corresponding amendment in any manner was made u/s 153A of the Act. It has also been noted that whenever amendments were made in the section 153C of the Act on other occasions, then simultaneous amendments were also made u/s 153A of the Act to make applicability of the both the provisions harmonious for the period to which these two non-obstante sections applied. For example, in the years 2003 and 2017, substantial amendments were made in the search assessment provisions and applicability of dates of those amendments were specifically inserted therein for the searches conducted after 31/05/2003 and 31/03/2017 respectively.
87. However, while amending the provisions of the section 153C of the Act applicable w.e.f. 01/06/2015 there was no reference at all that the same is to be applied only in respect of the searches conducted after 31/05/2015 as has been specifically provided therein by the legislature on two other occasions as above. Thus, the provisions of the section 153C of the Act have to be seen by the AO as on the date when he receives the material from the AO of the person searched may be at any date and then apply accordingly. Therefore, it is also held that application of the provisions of the section 153C of the Act will be compulsory for all the assessment years extendable up to 10 years in the case of a non-searched person as is compulsorily for the assessee ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 73 searched till 31/03/2021, even for the searches conducted prior to 01/06/2015 where the AO of the person not searched receives the alleged incriminating information after 31/5/2015.
88. However, in the case of a person not searched, the AO is permitted to issue the said notice u/s 153C r.w.s. 153A of the Act, only for the assessment year for which any definite incriminating information was found during the course of search for any of the preceding 6 assessment years. But for the extended 4 relevant assessment years therein, the said notice u/s 153C of the Act can be issued only when the incriminating material points escapement of income backed by an undisclosed asset of Rs 50 lakh and above and the said incriminating may not be the seized material in physical form belonging / pertaining to the assessee not searched.
89. Further, since the section 153C of the Act begins with a non- obstante wording overriding the application of the sections 147/148/149/151 of the Act, the AO is legally bound to take recourse to section 153C of the Act only in case of receipt of any information about any undisclosed income in any material found/ seized during the course of search in the premises of some other assessee. This is a jurisdictional fact which needs to be strictly adhered to and any lapse on jurisdictional issue cannot validate the action.
90. Even for the sake of argument, we do not go by the proposition that no such intimation can be passed on or given by the Investigation Unit of the income-tax department to the AO of the person not searched as the sole domain for remitting the said information to the said AO is only with the AO of the person searched as discussed above in terms of section 13(9A); but then also, if the information has otherwise been received by the AO of the person not searched from the Investigation Unit or any other AO which has come into the knowledge of the Revenue in a search conducted, then in that case, the only course available to the AO of the person not searched is to take recourse to the provisions of the section 153C of the Act for any assessment or reassessment of the said amount. Any proceedings initiated based on the said information u/s 148 of the Act cannot be held to be legal as it will be beyond the codified provisions of the law. Because, the legislature has mandated assumption of jurisdiction in such cases to assess or reassess any alleged undisclosed income found during the course of search anywhere under section 153C of the Act, by carving out non-obstante clause for applicability of section 147 and other sections.
ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 74
91. We have already observed in our earlier paragraphs that the entire procedure to make an assessment or reassessment of income of the alleged escaped income either u/s 148 or section 153C of the Act practically is the same except the jurisdiction and root cause which are different. The legislature has specifically carved out scope of assessment / reassessment of income of a person not searched of such alleged escaped income based on some incriminating information found during a search on some other person searched by taking recourse to the section 153C of the Act. The AO has not been empowered to extend the scope of an assessment/ reassessment u/s 153A read with the section 153C of the Act beyond the alleged incriminating material found during the course of search in the case of some other person, because assessment / reassessment in such case is specifically restricted to the income based on the said incriminating information only. Whereas, in the proceedings initiated u/s 148 of the Act, the AO may extend the scope of the assessment / reassessment on other amounts also if any information about those is on his record over and above the alleged escaped income as per the reasons recorded. The purpose of restriction of assessment for amount of income by taking recourse to the provisions u/s 153C of the Act to alleged incriminating material and not on suspicion has been upheld by the Hon‟ble Supreme Court in the case of Sinhgad Technical Education Society (supra).
92. Accordingly, we hold that any incriminating information of any undisclosed income of the person not searched which was found during the course of a search having taken place up to 31/03/2021 on some other assessee, can only be taken into consideration for an assessment / reassessment in the hands of the said person not searched through the domain of the section 153C of the Act. Thus, any assessment / reassessment proceedings-initiated u/s 148 of the Act in respect of the said incriminating information found during the course of a search up to 31/03/2021 on some other assessee is illegal and is ab initio as the same can be considered only by taking recourse to the provisions of the section 153C r.w.s. 153A of the Act. Thus, the assessment of the said amount of LTCG, which was claimed to be exempt u/s 10(38) of the Act by the assessee, made u/s 147 of the Act is beyond the scope of section 147, albeit it can be roped in only u/s 153C.
93. If on overall appreciation of the scheme of assessment / reassessment of income after the income-tax searches on the assessee searched and also for the persons not searched based on detection of some incriminating information during ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 75 the said searches conducted upto 31/03/2021, the following legal course of action is open for the AOs, which can be summed up, in the following manner:
(i) It is mandatory for the AO of the person searched to make an assessment / reassessment of income of the said assessee u/s 153A of the Act for the 6 assessment years prior to the date of search and also for the extended 4 relevant assessment years, subject to fulfillment of the prescribed conditions for the same, on the basis of an income-tax search conducted on him.
(ii) However, in the assessment / reassessment orders passed within the scope of section 153A of the Act, the AO cannot consider any undisclosed income detected by way of an incriminating information pertaining / relating to the said assessee, during an income-tax search conducted in the premises of some other assessee(s), even conducted at the same time or in some connected matter. In such a case where AO gets any information or material about any assessee from the search of some other person, he can, make assessment of the undisclosed income/ amount emanating from such information or material for the assessment / re assessment vide separate assessment / reassessment orders to be passed u/s 153A by taking recourse to the provisions of the section 153C of the Act. Because the cause of action for the said incriminating information for different amounts had originated in different search(es) in the different premises of other assessees and for the same, the mandatory route legislated u/s 153C of the Act must be followed.
(iii) Further, an assessee can also be assessed multiple times u/s 153C r.w.s 153A of the Act, despite having already been assessed u/s 153A of Act on the basis of an income-tax search in his premises, where the incriminating information has been received u/s 153C of the Act by the AOs of the searched person as well as of the person not searched, which information originates in different searches at different times on different persons as well."
40. Viewed in the context of observations m ade by the Hon'ble Jurisdictional High Court and the Coordinate Bench in the decisions referred to above, the Assessing ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 76 Officer assuming jurisdiction under section 153C of the Act in case of a non-searched person, though has power to initiate proceedings under section 153C of the Act upon rece ipt of incriminating material from the Assessing Officer of the searched person, however, he has to complete the assessment under section 153C read with section 153A of the Act. An assessment order passed in any other manner, in our view, may not m uster judicial scrutiny.
41. Thus, on overall consideration of facts and materials on record and keeping in view the principles laid down in the judicial precedents cited before us by both the parties we hold that not only the additions are unsustainable, but, the assumption of jurisdiction under section 153C of the Act, itself, is invalid. We order accor dingly.
42. In view of our decision above, we do not intend to dwell upo n some other propositions advanced before us by learned counsel for the assessee including the proposition relating to applicability of DTAA, as, they are of mere academic inter est.
43. In the result, appeals are allowed, as indicated ITAs No.1342, 1343, 1344, 1345, 1346, 1347 & 1348/DEL/2024 77 above.
Order pronounced in the open Court on 13th September, 2024.
Sd/- Sd/-
[M. BALAGANESH] [SAKTIJIT DEY]
ACCOUNTANT MEMBER VICE PRESIDENT
DATED: 13th September, 2024
Prabhat/Rajesh, Sr. P.S
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar