Madras High Court
M/S.Grt Jewellers (India) Pvt. Ltd vs The Deputy Commissioner Of Income Tax on 11 March, 2024
Author: C.Saravanan
Bench: C.Saravanan
W.P.No.13139 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 16.11.2023
Pronounced on 11.03.2024
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.13139 of 2023
and
W.M.P.Nos.12895 and 12896 of 2023
M/s.GRT Jewellers (India) Pvt. Ltd.,
Represented by its Director,
Mr.G.R.Ananthapadmanabhan,
No.138, Usman Road, T.Nagar,
Chennai – 600 017. ... Petitioner
Vs
The Deputy Commissioner of Income Tax,
Central Circle 3(3) Chennai,
Room No.7, Ground Floor,
Investigation Wing Building,
46,M.G.Road,
Chennai – 600 034. ... Respondent
Prayer: Petition filed under Article 226 of the Constitution of India to issue a
Writ of Certiorari to call for the records in PAN:AAACR3582R and quash the
impugned order u/s.143(3) read with Section 153C of the Income Tax Act,
1961 in ITBA/AST/M/153C/2022-23/1051819145(1) dated 31.03.2023
passed by the respondent for the Assessment Year 2015-2016.
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W.P.No.13139 of 2023
For Petitioner : Mr.J.D.Mistri,
learned Senior Counsel
for Mr.R.Sivaraman
For Respondent : Mr.A.P.Srinivas,
learned Senior Standing Counsel
and
Mr.A.N.R.Jayaprathap,
learned Junior Standing Counsel
ORDER
The petitioner has challenged the Impugned Order dated 31.03.2023 passed by the respondent under Section 143(3) read with 153C of the Income Tax Act, 1961 (herein after referred to as IT Act, 1961) for the Assessment Year 2015-2016 (relevant financial year 2014-2015).
2. By the Impugned Order, the Assessing Officer has added a sum of Rs.299,21,80,940/- towards the taxable income of the petitioner as “undisclosed income”.
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3. I have considered the arguments advanced by the learned Senior Counsel for the petitioner and the learned Senior Standing Counsel for the respondent.
4. The petitioner had filed a regular return of income under Section 139 of the IT Act, 1961 on 28.11.2015 for the assessment year 2015-2016.
5. In the returns filed by the petitioner, the petitioner had declared a gross income of Rs.165,86,34,375/- and claimed a deduction under Chapter VI-A of Rs.2,44,62,403/-. Thus, the net taxable income declared by the petitioner for the purpose of payment of tax was arrived at Rs.163,41,71,970/-. On the aforesaid amount the petitioner offered a total tax of Rs.56,66,92,704/-.
6. The assessment was completed under Section 143(3) of the IT Act, 1961 on 28.12.2017. The assessment was sought to be reopened by issuance of notice under Section 148 of the IT Act, 1961 on 30.03.2021.
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7. Meanwhile, a search proceedings had been initiated against M/s.Mohanlal Jewellers (P) Ltd (hereinafter referred to as searched person) under Section 132 of the IT Act, 1961 on 10.11.2020 in their secret office located at No.16/5, 3rd Floor, Swami Thiru Nilagandanayanar Street near Jain Temple, Kondithope, Chennai – 600 001.
8. Search proceedings lead to recording of statement of one Shri.Rajendra Kothari, the Accountant of “searched person” and Shri.Suresh Khatri, the Director of “searched person” under Section 131 and 132(4) of the Income Tax Act as detailed below:-
S.No Section of Shri. Rajendra Shri. Suresh Shri. G.R. Income Tax Kothari Khatri Ananthapadmanabhan Applicable (Accountant) (Director) 1 Section 132(4) 10.11.2020 11.11.2020 - 2 Section 131 24.11.2020 23.03.2021 11.03.2021 4/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023
9. The statements have led to several collateral proceedings against not only the “searched person” but also against the petitioner and others whose case were heard along with the petitioner. This order is confined to the assessment year 2015-2016. Rest of the cases relate to proceedings for the assessment year 2017-2018 to 2021-2022 of the petitioner and others. They are being disposed separately by a separate order today.
10. The Assessing Officer of the petitioner and the “searched person” are one and the same. The Assessing Officer has issued two separate satisfaction notes under Section 153C of the IT Act, 1961 on 19.03.2022 both in the capacity of the Assessing Officer of the “searched person”viz., M/s.Mohanlal Jewellers (P) Ltd and in the capacity of the “other person” viz., the petitioner herein under Section 153C of the IT Act, 1961.
11. The statements reveal that the said Rajendra Kothari the Accountant of “searched person” was maintaining accounts in the secret office of the “searched person” at Kondithope and was maintaining a parallel account of the transactions with various persons including petitioner.
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12. Based on the statement obtained under Section 131 & 132(4) of the IT Act, 1961 from Shri.Rajendra Kothari and Shri. Suresh Khatri, it was concluded that the petitioner had evaded tax for the assessment year 2017- 2018 to 2021-2022.
13. The satisfaction note issued to the “searched person” and the petitioner reads as under:-
“4. On Investigation of the "J-Pack" software, there are group of ledgers found under the heading "TTT" in the J - Pack Software. There are several ledgers grouped under this head. On verifying, it was found that ledgers grouped under "TTT"contains huge cash transaction running into several thousand crores.
On Investigation of the said "TTT" group, it is found that certain ledgers named "AYYA" and "ANAND"are maintained. Shri. Rajendra Kothari, vide his sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020, has identified the above ledgersbelong to the transactions of Shri. G. Rajendran (Chairman of GRT group) and M/s. GRT Jewellers (P) Ltd.
Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020 from Shri. Rajendra Kothari is reproduced as under:-
6/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 "4. Please explain the list of parties mentioned under the head "TTT" in the listprovided by you (taken from J-Pack).
Ans. Sir.AYYA (Rajendran) and Anand (Ornaments account) refers to GRT Jewellers.…..” Further Shri. Rajendra Kothari, vide his sworn statement recorded u/s.131 of Income tax Act, 1961 dated 24.11.2020 has stated that ledger named "Anand" refers toGRT Jewellery.
Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 24.11.2020 from Shri. Rajendra Kothari is reproduced as under:
"5. Please provide the details of "Anand" ledger. Please identify the person.
Ans. Sir. Anand refers to GRT Jewellers. It is an ornament transaction account. I'm providing summary of complete transactions of both Anand and Ayya for your reference. Ayya account is for bullion transactions. Added as Annexure
-8."
On confronting the same, Shri. Suresh Khatri, vide his sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 23.03.2021admitted that the above ledgers i.e. "AYYA" and "ANAND" have been maintained by him for the business transactions in the J-pack software.
5. The consolidation of the details maintained under the ledgers"AYYA" and "ANAND"In "TTT" group is tabulated as under respectively:
7/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 Group ANAND Ledger/Year Receipt Issued Metal Cash Metal Cash Gross Net Gross Net 2015-2016 0 0 0 3266.24 3368.37 0 2016-2017 1924042.05 1818052.79 359512158 1843232.18 1742835.38 355642158 2017-2018 2102768.19 1985910.59 183118669 2178525.1 2057096.68 186988669 2018-2019 2162325.57 2046728.38 494761110 2166530.86 2050138.25 477213538 2019-2020 2244718.68 2128101.01 1174361454 2243113.61 2126218.53 944102211 2020-2021 1009647.93 954947.9 1243802567 1043470.5 983203.30 772748719 Total 9443501.93 8933740.67 3455555958 9478138.45 8962860.24 2736695295 Group AYYA Ledger/Year Receipt Issued Metal Cash Metal Cash Gross Net Gross Net 2015-2016 0 0 0 0 0 0 2016-2017 0 0 0 0 0 0 2017-2018 0 0 0 0 0 0 2018-2019 530760.41 526979.44 989231272 322705.89 320918.8 954231272 2019-2020 212680.9 212680.9 1407810554 300735.42 298741.54 1405660554 2020-2021 175377.76 175377.76 992374090 155576.13 155576.13 1008024090 Total 918819.07 915038.1 3389415916 779017.44 775236.47 3367915016 The consolidation of all the above ledgers is tabulated as under
Groups Total Receipt Issued Metal Cash Metal Cash Gross Net Gross Net Anand 9443501.93 8933740.67 3455555958 9478138.45 8962860.24 2736695295 Ayya 918819.07 915038.1 3389415916 779017.44 775236.47 3367915916 Total 10362321 9848778.77 6844971874 10257155.89 9738096.71 6104611211 8/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023
6. It is seen from the consolidation of the above ledgers tabulated as above that they had given gold (Gross:
10362321.00 grams and Net:9848778.77 grams) and cash Rs.684,49,71,874/- to Shri.Suresh Khatri. Moreover, Gross of gold about 3257155.97 grams andnet gold 9738093.71 grams were received back from Shri.Suresh Khatri during the FYs. 2016-17 to 2020-21 (upto 09.11.2020).
7. It is also noticed that Shri. Suresh Khatri had been maintaining a ledger named “MC Khata” in the said J.Pack software for recording receipts and payments made in respect of making charges. In this regard, during the course of post search proceedings, Shri.Rajendra Kothari was asked to explain the ledger maintained under the name "MC Khata". Shri. Rajendra Kothari, vide sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 26.11.2020 stated that MC khata account is maintained for recording charges paid to various parties. These charges are made through banking channel and booked as expense in the books of accounts. However, these making charges are received back in cash. Further, Shri. Rajendra Kothari has stated that M/s. Mohanlal Jewellers accommodate the making charges expense for other partles. GRT is the majorparty who was booking bogus making charges with M/s. Mohanlal Jewellers Pvt. Ltd.
Relevant extract of the sworn statement recorded u/s. 131 of Income tax Act, 1961 dated 26.11.2020 from Shri. Rajendra Kothari is reproduced as under:
"3. Please provide the details of "MC Khata" ledger grouped under "Others".
Ans. Sir. MC Khata account is maintained for recording making charges paid to various parties. These charges are made through banking channel and booked as expenses in the books of accounts.
9/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 However, these charges are paid through banking channel and received back as cash. These are just bogus expenses. Alos, Mohanlal Jewellers also accommodate making charges expenses for other parties. GRT is the major party who are doing bogus making charges booking with Mohanlal Jewellers......."
8. After examination, I am satisfied that the ledger accounts maintained by M/s.Mohanlal Jewellers (P) Ltd. in the specialized software “J Pack” representing sale & purchase of gold along with cash transactions as discussed above pertains to M/s.GRT Jewellers India (P) Ltd. and the information relates to unaccounted transactions of M/s.GRT Jewellers India (P) Ltd and has a bearing on the determination of the total income of the assessee M/s.GRT Jewellers India (P) Ltd.
9. Therefore, I am satisfied that M/s.GRT Jewellers India (P) Ltd. is covered under Section 153C of the Income Tax Act, 1961. Accordingly, notices u/s.153C of the act are issued for A.Ys2015-16 to 2020-21.”
14. After a notice under Section 148 of the IT Act, 1961 was issued for the assessment year 2015-2016 on 30.03.2021, a notice under Section 143(2) of the IT Act, 1961 was issued on 11.02.2022 to the Petitioner. Thereafter, a notice under Section 153C of the IT Act, 1961 was issued to the petitioner on 20.03.2022 for the years of 2015-2016 to 2021-2022 when already a proceeding under Section 148 was initiated on 30.03.2021 against the petitioner and was pending.
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15. In view of the said notice dated 20.03.2022 issued to the petitioner under Section 153C of the IT Act, 1961, the proceedings initiated under Section 148 of the IT Act, 1961 for the assessment year 2015-2016 vide notice dated 30.3.2021 stood unabated in accordance with Section 153C of the IT Act, 1961 under a mistaken notion.
16. The proceedings have thereafter culminated in the Impugned Order dated 31.03.2023 for the assessment year 2015-2016. Separate Orders have been passed for the rest of the Assessment Years with which are not conerned in this Writ Petition.
17. A Reading of the Impugned Order and the satisfaction note issued by the Assessing Officer both in the capacity of the Assessing Officer of the “searched person” and in the capacity of the Assessing Officer of the “other person” i.e., the petitioner herein, indicate that the information gathered by the Department were only for the financial year 2015-2016 to 2020-2021 and not for the financial year 2014-2015 / assessment year 2015-2016. Relevant Portion of the Satisfaction reads as under:-
11/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 “Certain Pendrives were found and seized vide annexure ANN/PV/RK/ED/S from the residential premises of Shri. Rajendra Kothari located at No. 18/2, 2nd Floor, Lawyer Chinnathambi Street, Kondithope, Chennai- 600 001. Further Shri. Rajendra Kothari in his statement recorded u/s 132(4) of Income Tax Act, 1961 dated 10.11.2020, stated that the “J pack” software tool in thePendrives contain accounts data for the FYs. 2016-17 to 2019-20. Further the accounts data for FY 2020-21 is available in the red SandiskPendrive inside a black laptop bag which was handed over to Shri. Kishore Khatri through Sarvan (an employee in M/s. MJPL).”
18. There are no documents to show any transaction between the petitioner and the “searched person” during the previous year 2014-2015 (assessment year 2015-2016). Therefore, on this count invocation of Section 153C of the IT Act, 1961 against the petitioner for the assessment year 2015- 2016 cannot be countenanced.
19. There are also no records available with the Department to conclude that for the relevant assessment year viz., 2015-2016, there were any incriminating transactions between the “searched person” and the petitioner which warranted proceedings under Section 153C of the IT Act, 1961.
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20. The provisions of Section 153A and 153C of the IT Act, 1961 are intended and directed against the ‘searched person’ and the ‘other person’ like the petitioner respectively. As far as Section 153A of the IT Act, 1961 is concerned, in case any proceeding for assessment or reassessment is pending on the date of issuance of a notice under Section 153C of the IT Act, 1961 such proceedings will abate and such assessment has to be completed under Section 153A read with limitation prescribed under Section 153B of the IT Act, 1961. This position has also been explained by the Delhi High Court in Delhi High Court in Commissioner of Income-tax vs. Anil Kumar Bhatia, [2013] 352 ITR 493 (Delhi), to which I shall refer a little later.
21. In CIT Vs. Calcutta Knitwears, (2014) 6 SCC 444, it was phrased as under:-
39.Further, Section 158-BE(2)(b) only 40.In the lead case, the assessing officer provides for the period of limitation for had prepared a satisfaction note on completion of block assessment under 15-7-2005 though the assessment Section 158-BD in case of the person proceedings in the case of a searched other than the searched person as two person, namely, S.K. Bhatia were years from the end of the month in completed on 30-3-2005. As we have which the notice under this Chapter was already noticed, the Tribunal and the served on such other person in respect High Court are of the opinion that of search carried on after 1-1-1997. The since the satisfaction note was said section thus, neither provides for prepared after the proceedings were nor imposes any restrictions or completed by the assessing officer 13/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 conditions on the period of limitation under Section 158-BC of the Act for preparation of the satisfaction note which is contrary to the provisions of under Section 158-BD and consequent Section 158-BD read with Section issuance of notice to the other person. 158-BE(2)(b) and therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple language employed by the legislature under Section 158-BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158-
BC. Further, the interpretation placed by the courts below by reading into the plain language of Section 158- BE(2)(b) such as to extend the period of limitation to recording of satisfaction note would run counter to the avowed object of introduction of the Chapter to provide for cost-
effective, efficient and expeditious completion of search assessments and avoiding or reducing long-drawn proceedings.
41.In the result, we hold that for the purpose of Section 158-BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages:-
1. at the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act;
2. along with the assessment proceedings under Section 158-BC of the Act; and
3. immediately after the assessment proceedings are completed under Section 158-BC of the Act of the searched person.14/41
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22. This view was also accepted by the Board in its Circular No. 24/2015 dated 31st December, 2015. The Delhi High Court in Commissioner of Income-tax vs. Anil Kumar Bhatia, [2013] 352 ITR 493 (Delhi) has elegantly explained the changes brought to the Income Tax with effect from 01.06.2003 which reads as under:-
“The Guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of the satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the other person is one and the same then also he is required to record his satisfaction as has been held by the Courts”
23. Scope of Section 153A, B & C of the IT Act, 1961 has been explained lucidly in Commissioner of Income-tax vs. Anil Kumar Bhatia, [2013] 352 ITR 493 (Delhi). The deem was rendered in the context of Section 153A of the IT Act, 1961. The relevant portion of the decision in Commissioner of Income-tax vs. Anil Kumar Bhatia, [2013] 352 ITR 493 (Delhi) reads as under:-15/41
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17.We now proceed to discuss the correctness of the conclusion of the Tribunal that the Assessing Officer had wrongly invoked section 153A of the Act. This section was introduced into the Act by the Finance Act, 2003, with effect from June 1, 2003, along with sections 153B and 153C.
Section 153A provides for "assessment in case of search or requisition". It runs as follows:
"153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall:-
a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 ;
b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment 16/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub- section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section(1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.
Explanation.—For the removal of doubts, it is hereby declared that—
(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section ;
(ii)in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as 17/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 applicable to such assessment year."
18. The three sections introduced with effect from June 1, 2003, replaced the "Post Search Block Assessment Scheme"
in respect of any search under section 132 or requisition under section 132A made after May 31, 2003. In Circular No. 7 of 2003, dated September 5, 2003, reported in [2003] 263 ITR(St.) 62, 106, the new Scheme was explained by the Central Board of Direct Taxes in the following manner:
The special procedure for assessment of search cases under Chapter XIV-B be abolished:
The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed.
The Finance Act, 2003, has provided that the provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after May 31, 2003, by inserting a new section 158BI in the Income-tax Act.
Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition.18/41
https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after May 31, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A.
The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.
The new section 153B provides for the time limit for completion of search assessments. It provides that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling 19/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 within six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed.
This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed.
It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any court ; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub- section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being re-heard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub- section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is 20/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly.
The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.
An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals).
Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections.These amendments will take effect from June 1, 2003."
19.Prior to, the introduction of these three sections, Chapter XIV-B of the Act took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as "block assessment" because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the 21/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 date on which the search was conducted was also included in what was known as "block period". Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below section 158BA(2). After the introduction of the group of sections, namely, sections 153A to 153C, the single block assessment concept was given a go-by. Under the new section 153A, in a case where a search is initiated under section 132 or requisition of books of account, documents or assets is made under section 132A after May 31, 2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under section 153A and the new scheme provided for, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place.
20. Under the provisions of section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the 22/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under section 153A, however, the Assessing Officer has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.
21. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) of theAct. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of section 153A opens. The time-limit within which the notice under section 148 can be issued, as provided in section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under section 148 has also been excluded in a case covered by section 153A. The time-limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stops having been pulled out, the Assessing Officer under section 153A has been entrusted with the duty of 23/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 bringing to tax the total income of an assessee whose case is covered by section 153A, by even making reassessments without any fetters, if need be.
22. Now, there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of section 153A says that such proceedings "shall abate". The reason is not far to seek. Under section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the "total income" of the assessee in whose case a search or requisition has been initiated. Obviously, there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs, namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub- section (1) of section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment 24/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.
23. In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in paragraph 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were processed under section 143(1)(a) of the Act, the provisions of section 153A cannot be invoked. The Assessing Officer has the power under section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, 25/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 notwithstanding that the assessee filed returns before the date of search which stood processed under section 143(1)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and the arguments before the Departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee's premises, except one unsigned undertaking for loan. Again, in paragraph 10 of its order, while dealing with the assessee's contention against the addition of Rs. 1,50,000 being unexplained loan given to Mohini Sharma, the Tribunal has stated that it has analyzed "the subject document carefully, recovered from search"
suggesting that the document was recovered during the search from the assessee. The Tribunal has even proceeded to delete the addition of Rs. 1,50,000 as well as the notional interest on the merits, holding that the document was unsigned, that Mohini Sharma was not examined by the Income-tax authorities and there was no corroboration of the unsigned document. If it is not in dispute that the document was found in the course of the search of the assessee, then section 153A is triggered. Once the section is triggered, it appears mandatory for the Assessing Officer to issue notices under section 153A calling upon the assessee to file returns for the six assessment years prior to the year in which the search took place. There are contradictions in the order of the Tribunal. We are unable to appreciate how the Tribunal can say in paragraph 9.6 that no material was found during the search and at the same time in paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly 26/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 contain the loan transaction with Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.
24. The Hon’ble Supreme Court in the case of Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd, [2023] 454 ITR 212, held that in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the IT Act, 1961.
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25. However, the completed/unabated assessments can be re-opened by the Assessing Officer in exercise of powers under Sections 147/148 of the IT Act, 1961 subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the IT Act, 1961 and those powers are saved.
26. The law has been summarized in Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd, [2023] 454 ITR 212 as under:-
“14. In view of the above and for the reasons stated above, it is concluded as under: -
i. that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under Section 153A;
ii. all pending assessments/reassessments shall stand abated;
iii. in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would 28/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv. in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.”
27. Therefore, the proceedings initiated under Section 148 of the IT Act, 1961 on 30.03.2021 could abate in view of the notice issued under 29/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 Section 153C of the IT Act, 1961 on 20.03.2022, if there incriminating material for relevant Assessment Year.
28. Section 153A of the IT Act, 1961 was introduced along with Section 153B and 153C of the IT Act, 1961 and deleted the special procedure for assessment of search cases under Chapter XIV-B of the IT Act, 1961.
29. As far as the ‘other person’ like the petitioner who was issued a notice under Section 153C of the IT Act, 1961 is concerned, there is no specific provision that would abate pending proceedings. However, as per Sub-clause (2) to Section 153C of the IT Act, 1961, the Assessing Officer has to issue notice and reassess the total income in the manner proceeded in Section 153A of the IT Act, 1961.
30. As per Section 153(C)(1) of the IT Act, 1961, wherever the Assessing Officer of the “searched person” and the “other person” (like the petitioner herein) is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of the other person like the petitioner, the Assessing Officer can proceed to 30/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 issue notices for six assessment years immediately preceding the assessment year relating to the previous year in which the search was conducted or requisition was made for the relevant Assessment Year or years referred to Section 153(A) of IT Act, 1961. However, an exception is provided under Proviso to Section 153(C)(1) of the IT Act, 1961.
31. Proviso to Section 153C(1) of the IT Act, 1961 reads as follows:-
[Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in Section 153-A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person][and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of Section 153-A, 31/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-
section (1) of Section 153-A]:] [Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under Section 132-A in the second proviso to[sub-
section (1) of Section 153-A] shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:]
32. Thus, as per proviso to section 153C(1) of the IT Act, 1961 limitation is from the date of receiving the books of accounts or documents or assets seized or requisitioned to the Assessing Officer having the jurisdiction over the “other person” viz., the petitioner.
33. If the limitation prescribed as per the main provision is construed, the Assessing Officer can issue a notice for the Assessment Year from 10.11.2020, herein the date of search at the premises of the “searched person”.
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34. If the proviso is applied, six years is to be construed from the date of receipt of Books of Account, documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over the other person like the petitioner herein, in which case the proceeding under Section 153(C) of the IT Act, 1962 can be initiated only up to the assessment year 2015-2016.
35. Such Assessment proceeding has to be completed in accordance with the 3rd proviso of Section 153B of the IT Act, 1961.
Provided also that in the case where the last of the authorisations for search under Section 132 or for requisition under Section 132-A was executed during the financial year commencing on or after the 1st day of April, 2019,—
(i) the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted;
(ii)the period of limitation for making the assessment or reassessment in case of other person referred to in Section 153-C, shall be the period of twelve months from the end of the financial year in which the last of the authorisations for search under Section 132 or 33/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 for requisition under Section 132-A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under Section 153-C to the Assessing Officer having jurisdiction over such other person, whichever is later:
36. Impliedly, all the pending proceedings for the years for which notices under Section 153C of the IT Act, 1961 can be issued will abate.
37. Therefore, the proceedings initiated against the Petitioner under Section 148 of the IT Act, 1961 on 30.01.2021would have abated. The date of Satisfaction Note and the Date of Handing over of the document would coincide as the Assessing Officer of both “searched person” and “other person” is one and the same. When the notice was issued on 20.03.2022 under Section 153C of the IT Act, 1961, the date of satisfaction note of “searched person” and the “other person” petitioner herein would be the same date i.e., 19.03.2022. The six preceding Assessment Years from that date would be from 2016-2017 to 2021-2022.
38. The Delhi High Court in SSP Aviation Limited vs. Deputy 34/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 Commissioner of Income-tax, [2012] 346 ITR 177 (Delhi), has held as under:-
“14…..
However, in the case of the other person, which in the present case is the Petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date.”
39. This view has been affirmed by the Hon’ble Supreme Court recently in Commissioner of Income-tax-14vs. Jasjit Singh, [2023] 155 taxmann.com 155 (SC).Where it was held as under:-
“9. It is evident on a plain interpretation of Section 153C(1) that the parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153C(1)] is confined in its application to the question of abatement.
10. This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which 35/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 SSP Aviation adopted, the A.O. seized of the materials – of the search party, under Section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third partyassessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.
11. For the foregoing reasons, the Court finds no merit in these appeals, they are accordingly dismissed, without order on costs.”
40. Therefore, the Impugned Order passed by the Assessing Officer under Section 153C read with Section 143(3) of the IT Act, 1961 is liable to be quashed. However, the proceedings pending under Section 148 of the IT Act, 1961 which stood abated on account of the notice issued under Section 153Cof the IT Act, 1961 dated 20.03.2022 cannot be said to have abated. It will stand revived.
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41. Incorrect trajectory of the proceedings under Section 153C of the IT Act, 1961 on 20.03.2022 which has culminated in the Impugned Order dated 31.03.2023 obviously could not abate the proceeding which was initiated under Section 148 of the IT Act, 1961. Therefore, while quashing this impugned order passed under Section 153C read with Section 143(3) of the IT Act, 1961 dated 31.03.2023, the reassessment proceedings initiated under Section 148 of the IT Act, 1961 has to be completed.
42. The reassessment proceedings initiated under Section 148 of the IT Act, 1961 is therefore directed to be completed in the manner known to laws in accordance with Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd, [2023] 454 ITR 212 iv. in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by 37/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved
43. In the light of the above observation, the Impugned Order dated 31.03.2023 stands quashed. However, there shall be a direction to the respondent to complete the reassessment proceeding initiated under Section 148 of the IT Act, 196l strictly in accordance within the timelines provided under Section 153 (2) of the IT Act, 1961 in terms of the decision of the Hon'ble Supreme Court in Principal Commissioner of Income-tax, Central-
3 vs. Abhisar Buildwell (P.) Ltd, (2023) 454 ITR 212 excluding the time between the initiation of the proceedings under Section 153C of the IT Act, 1961 on 20.03.20224 till the date of receipt of the certified copy of this order.
The time between the initiation of the proceedings under Section 153C of the IT Act, 1961 shall stand excluded for completing the Assessment under Section 147 read with Section 143(3) of the IT Act, 1961.
44. The writ petition stands disposed of with the above observation and direction. No costs. Consequently, connected miscellaneous petitions are closed.
38/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 11.03.2024 Neutral Citation: Yes/No Internet: Yes/No Speaking/Non-speaking Order krk/rgm To The Deputy Commissioner of Income Tax, Central Circle 3(3) Chennai, Room No.7, Ground Floor, Investigation Wing Building, 46, M.G.Road, Chennai – 600 034.
39/41https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 C.SARAVANAN, J.
krk/rgm Pre-Delivery Order in W.P.No.13139 of 2023 40/41 https://www.mhc.tn.gov.in/judis W.P.No.13139 of 2023 and W.M.P.Nos.12895 and 12896 of 2023 11.03.2024 41/41 https://www.mhc.tn.gov.in/judis