Income Tax Appellate Tribunal - Indore
Acit (Central)-Ii, Bhopal , Bhopal vs Asnani Builders And Developers ... on 12 June, 2024
आयकर अपीलीय अिधकरण, इं दौर ायपीठ, इं दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER
AND
SHRI B.M. BIYANI, ACCOUNTANT MEMBER
IT(SS)A No. 82/Ind/2023
Assessment Year: 2012-13
ACIT (Central)-II, M/s Asnani Builders and
Bhopal Developers Limited,
509, 5th Floor,
बनाम/ Corporate Zone,
Vs. Aashima Mall,
Hoshangabad Road,
Bhopal
(Revenue /Appellant) (Assessee /Respondent)
PAN: AAFCA5950K
Revenue by Shri Ram Kumar Yadav, CIT DR
Assessee by Shri Hitesh Chimnani, CA & AR
Date of Hearing 15.05.2024
Date of Pronouncement 12.06.2024
आदे श / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 25.10.2023 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal ["CIT(A)"] which in turn arises out of assessment-order dated 28.09.2021 passed by learned ACIT, Central-II, Bhopal ["AO"] u/s 153C r.w.s. 143(3) of Income-tax Act, 1961 ["the Act"] for Assessment-Year ["AY"] 2012-13, the revenue has filed this appeal.
Page 1 of 27ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
2. The background facts leading to present appeal are such that the assessee is a company engaged in real estate business. A search u/s 132 was conducted on one 'Asnani Group' on 16.05.2018 comprising of M/s Amrit Homes Private Limited (AHPL) and M/s Amrit Colonizers Private Limited (ACPL). There was no search on assessee. However, pursuant to the search on 'Asnani Group', assessments of assessee have been framed u/s 153C r.w.s. 153A(1)/143(3) for 6 years (AYs 2013-14 to 2018-19) and for extended 4 years (AYs 2009-10 to 2012-13). Presently, we are concerned with AY 2012-13 which is one of the extended 4 years. The AO completed assessment of AY 2012-13 after making an addition of Rs. 3,70,53,568/-.
Aggrieved, the assessee carried matter in first-appeal, raised grievances on jurisdictional illegality as well as on merit and succeeded. Now, the revenue is aggrieved by order of CIT(A) and has come before us in next appeal.
3. The grounds raised by revenue are as under:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,70,53,568/-?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,70,53,568/- holding that the AO was not justified in assuming jurisdiction over the extended assessment years of search-period in view of Explanation 2 to 4th proviso to section 153A(1) and deciding that AO has made addition on account of unexplained income u/s 69A of the Act and no addition on account of "undisclosed asset" has been made?
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,70,53,568/- holding that the AO was not justified in assuming jurisdiction over the extended assessment years of search period in view of Explanation 2 to 4th proviso to section 153A(1) and deciding that AO has made addition on account of unexplained income u/s 69A of the Act and no addition on account of "undisclosed asset" has been made, without appreciating, amongst other aspects, that :Page 2 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
a) Explanation 2 to 4th proviso to section 153A(1) does not provide 'exhaustive' list of "asset" but merely provides list of illustrative items of "asset" ?
b) Without prejudice to the above, share of assessee in cash income of JV (i.e. assessee's share in the cash receipts from sale of property on 'Pebble Bay' Project, which is a real estate project) is indeed an asset which can be put to business use and is normally actually recorded on the asset side of the balance sheet?
c) Without prejudice to the above, section 69A itself treats money/cash at par with other assets ("bullion, jewellery or other valuable article")?
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,70,53,568/- on the ground that the relevant seized document (page no. 36 of LPS-7) does not conclusively prove that amounts were handed over to the assessee by either Shri Dileep Gupta or by AHPL/ACPL or any amount of alleged cash was received by the assessee?
5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,70,53,568/- on the ground that the relevant seized document (page no.36 of LPS-7) does not conclusively prove that amounts were handed over to the assessee by either Shri Dileep Gupta or by AHPL/ACPL or any amount of alleged cash was received by the assessee, ignoring, amongst other aspects, that:
(a) the seized documents are corroborated from the statement of Shri Dileep Gupta recorded u/s 131 on 26.04.2018 (extract of which is reproduced by the AO on page-4 of the assessment order)?
(b) calculation of assessee's share in the cash receipts from Pebble Bay Project has been discussed in detail on page 15 & 16 of the assessment-
order according to which assessee's share of cash receipts comes to Rs. 3,70,53,568/- in A.Y. 2012-13?
(c) statement of Shri Dileep Kumar Gupta (page 4 of the AO) shows clearly admission of the fact of huge cash receipts in respect of the relevant JV project in which assessee has a sizable share (page 15 of AO)?
(d) Seized documents depicted at pages 11,12,13 of the AO clearly show receipt of cash by other JV partners from the marketing company M/s. DG Homes and Realty Pvt. Ltd, in which Shri Dileep Gupta is a Director, and therefore there is enough evidence that the JV partners have received cash generated from the 'Pebble Bay' Project?"
4. We first take up Ground No. 2 and 3 which are legal grounds and deal with the illegality of assessment-proceeding undertaken by AO. In these grounds, the precise controversy is whether or not the AO has committed illegality in extending jurisdiction beyond 6th year and thereby making assessment for AY 2012-13 under consideration?Page 3 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
5. In order to decide this controversy, we need to take note of some relevant and concrete facts. The assessee was a land owner and M/s AHPL & ACPL were developers. The assessee (alongwith two other land owners) entered into a "Joint Venture Agreement (JVA)" with M/s AHPL & ACPL for development of a project named "Pebble Bay" on assessee's land (and on other owners' land). The JVA was on 'revenue sharing' basis. The department conducted two distinct searches, namely (i) the first search on 12.01.2018 on Shri Dilip Kumar Gupta / a business concern of Shri Dilip Gupta named "DG Homes & Realty Pvt. Ltd. (DGHPL)" and (ii) the second search on 16.05.2018 on "Asnani Group" comprising of AHPL & ACPL. Shri Dileep Gupta/DGHPL was a marketing agent of AHPL & ACPL. During first search on Shri Dileep Gupta/DGHPL, the authorities seized a laptop containing certain MS Excel Sheets and documents marked as "LPS-01" and "LPS-02" which revealed that Shri Dileep Gupta/DGHPL made unaccounted collections from customers against booking/sale of 'Pebble Bay' project.
Thereafter, during second search on 'Asnani Group', "LPS-7-Page no. 1 to 6"
were seized from Shri Subham Gupta and "LPS-01 and LPS-02" were seized from Shri Dinesh Goswami. Shri Dileep Gupta was confronted with the seized material and his statements were recorded u/s 131 of the Act wherein he admitted that cash was collected in lieu of sale of houses of 'Pebble Bay' project and the same was handed over to the directors of M/s AHPL & ACPL. Based thereon, a view was framed that the assessee would have also received its share from M/s AHPL & ACPL. Therefore, a Page 4 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 satisfaction note u/s 153C dated 28.06.2021 (Page 21-22 of Paper-Book) was made by AO assuming jurisdiction for extended four years (AYs 2009-10 to 2012-13) beyond normal period of six years (AYs 2013-14 to 2018-19) for assessment u/s 153A(1) by recording thus "..... I am satisfied that on the basis of documents discussed above, It is clear that in the case of the assessee there is income exceeding Rs. 50,00,000/- in aggregate (during the assessment-year 2009-10 to 2012-13) has not been brought to tax." The satisfaction note was provided to assessee on 12.07.2021. The assessee filed objection to AO on 14.07.2021 (Page 23-28 of Paper-Book) on several grounds one of which was such that there was no escaped income in the form of asset and therefore the condition laid down in 4th Proviso to section 153A(1) is not satisfied. However, the AO turned down assessee's objection and passed assessment-order.
6. Before proceeding further, it is imperative to refer the provision of 153A(1) which reads as under:
"153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151and 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 and for the relevant assessment year or 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;Page 5 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
(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 and for the relevant assessment year or years :
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years:
XXX (2nd proviso and 3rd proviso are not reproduced being irrelevant) Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless--
(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and
(c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.
Explanation 1.--For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.
Explanation 2.--For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account."
7. In the above provision, we have emphasized the portion relating to extended jurisdiction for an immediate reference. On a plain reading of same, it can be observed that the Explanation 1 defines the term "relevant assessment-year" as an assessment year beyond preceding six assessment-
years and the AY 2012-13 under consideration in present case is a 'relevant assessment year' for which both sides agree and there is no dispute. Then, Page 6 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 the 4th proviso prescribes that no notice for assessment or reassessment shall be issued by the AO for the relevant assessment year unless the AO has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, has escaped assessment. For this purpose, the term "asset" is defined in Explanation 2 as including immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.
8. It is noteworthy that the provision of extended jurisdiction beyond preceding six years was not there in original section 153A(1), it was subsequently brought by Finance Act, 2017. At that time, the "Memorandum explaining the provisions in Finance Bill, 2017"
explained the rationale of amendment as under:
"Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and 153C The existing provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub- section (2) of section 143 or section 148 or section 153A or section 153C of the Income- tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly.
In view of the various representations received from stakeholders citing genuine hardships if the said provision is made applicable, it is proposed to omit clause (c) of section 197 of the Finance Act, 2016.
This amendment will take effect retrospectively from lst June, 2016.
However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating to search assessments be amended to provide that notice under the said section can be issued for an assessment Page 7 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 year or years beyond the sixth assessment year already provided upto the tenth assessment year if--
(i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year);
(ii) such income escaping assessment is represented in the form of asset;
(iii) the income escaping assessment or part thereof relates to such year or years.
It is however proposed that the amended provisions of section 153A shall apply where search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.
It is also proposed to consequentially amend section 153C to provide a reference to the relevant assessment year or years as referred to in section 153A.
These amendments will take effect from lst April, 2017."
9. Subsequently, the CBDT also issued following Circular No. 2/2018:
"80. Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendments to section 153A and 153C.
"80.1 The provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the AO and provisions of the said Act shall apply accordingly.
80.2 In view of the various representations received from stakeholders, section 197 of the Finance Act, 2016, has been amended so as to omit clause (c) of the said section.
80.3 Applicability: This amendment takes effect retrospectively from 1st June, 2016.
80.4 However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including section 132A cases) and the same is represented in the form of undisclosed investment in any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if -
(i) the AO has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year Page 8 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 or in aggregate in the relevant four assessment years (falling beyond the sixth year);
(ii) such income escaping assessment is represented in the form of asset;
(iii) the income escaping assessment or part thereof relates to such year or years.
80.5 Applicability: The amended provisions of section 153A of the Income-tax Act shall apply where search u/s 132 of the Income-tax Act is initiated or requisition u/s 132A of the Income-tax Act is made on or after the 1st day of April, 2017.
80.6 Section 153C of the Income-tax Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income-tax Act.
80.7 Applicability: These amendments take effect from 1st April, 2017."
10. Thus, the verdict of Proviso 4th to section 153A is very much clear that the extended jurisdiction shall apply only where the escaped income is represented in the form of asset. The Memorandum as well as CBDT Circular makes it further clear that the same shall apply 'where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset'.
11. Having understood the legal provision, we now turn to the order passed by CIT(A) which is impugned in present appeal:
"3.1.1 I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The appellant through its written submission has vehemently challenged the arbitrary approach of the AO by stating that the ld AO erred in opening assessment proceedings for AYs 2011-12 & 2012-13, beyond six years, in absence of any undisclosed asset. Search and seizure operation in the case of Shri Dileep Gupta was carried out on 12.01.2018. Another search proceedings was carried out in the case of Asnani Group on 16.05.2018. During the course of search proceedings in the case of Shri Dileep Gupta, one laptop was found and seized as LS-1, wherein, as per ld AO, systematic and meticulous records were found in 7 MS-Excel worksheet. However, during the course of search proceedings in the case of Asnani Group page no 1-6 of LPS-7 were found from premises of Shri Shubham Gupta and LPS-01 & LPS-02 were found from possession of Shri Dinesh Goswami. The ld AO on perusal of entire seized material observed that Shri Dileep Gupta had received cash on sale of houses in a JV project of appellant and AHPL & ACPL in the name and style of 'Pebble Bay'. The ld AO on the basis of seized Page 9 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 material drawn a conclusion that the cash portion was handed over by Shri Dileep Gupta to ACPL & AHPL and AHPL & ACPL were in Joint Venture agreement with appellant, therefore, the cash portion would also be handed over to appellant in ratio of their JV agreement. Considering, the supra facts, proceedings u/s 153C were initiated in the case of appellant after recording satisfaction note on 28.06.2021. Further, the ld AO vide the said satisfaction note has held that conditions laid down under 4th proviso to section 153A r.w.s 153C of the Act have been fulfilled and was having in possession of various incriminating documents representing escapement of income represented in form of asset which are forming part of balance sheet in more than Rs. 50 lakhs in the relevant AYs. Accordingly, the AO assumed jurisdiction in respect of 7th to 10th assessment year. Consequently, notice u/s 153C of the Act was issued for AYs 2009-10 to 2018-19 i.e. for ten assessment years within the meaning of Explanation 2 to 4th proviso of section 153A(1) r.w.s 153C of the Act.
3.1.2 Before moving forward, it is important to discuss provisions of section 153A r.w.s 153C of the Act. It is noted that until the insertion of Section 153A of the Act by the Finance Act, 2003, if any person was searched u/s. 132 of the Act, upto 31.05.2003, that person had to undergo the block assessment as per Chapter XIVB (special procedure for assessment of search cases) u/s 158BB of the Act; and thereafter, if, an assessee undergoes search u/s 132 of the Act, w.e.f 01.06.2003, the AO is empowered to issue notice u/s 153A of the Act to searched persons u/s 132 of the Act, for six assessment years preceding the searched assessment year and u/s 153C in the case of person whose document are found and seized from the premises of searched person. In the instant case, search proceedings u/s 132 of the Act were carried out in the case of Shri Dileep Gupta on 12.01.2018 and in the case of Asnani Group on 16.05.2018. The ld AO after recording satisfaction initiated proceedings u/s 153C in the case of appellant. Thus, ordinarily, the AO was well within his jurisdiction to issue notices u/s 153C of the Act in respect of six (6) assessment years preceding the year in which seized material pertaining to appellant was handed over to the jurisdictional Assessing Officer. Therefore, in terms thereof, the AO was competent to issue notices u/s 153C r.w.s 153A of the Act for the AYs 2013- 14 to 2018-19. However, w.e.f 01.04.2017 fourth proviso was inserted by the Finance Act, 2017 in section 153A (1) of the Act, enabling an Assessing Officer of a searched person to issue notices u/s 153C r.w.s 153A of the Act for 'relevant assessment year or years' in terms of Explanation 1 of the fourth proviso to Section 153A(1) of the Act i.e. assessment years beyond the six (6) assessment years till tenth (10) assessment year preceding the searched assessment year (i.e. 7th to 10th AY's preceding the searched AY), provided that the essential conditions specified therein are satisfied. The relevant extract of provisions of section 153A(1) of the Act, as applicable to the present case is being reproduced below:
"Assessment in case of search or requisition 153A.
(1) Notwithstanding anything contained in sec139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated u/s132 or books of account, other documents or any assets are requisitioned u/s132A after the 31-5-03, the AO shall-
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the ROI in respect of each AY falling within 6 AYs (and for the relevant AY or 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 this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished u/s139;
(b) assess or reassess the total income of 6 AYs immediately preceding the AY relevant to the PY in which such search is conducted or requisition is made (and for the relevant AY or years:
Provided that the AO shall assess or reassess the total income in respect of each AY falling within such 6 AYs (and for the relevant AY or years:
Provided further that assessment or reassessment, if any, relating to any AY falling within the period of 6 AYs (and for the relevant AY or years) referred to in this (sub-sec) pending on Page 10 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 the date of initiation of the search u/s132 or making of requisition u/s132A, as the case may be, shall abate:
Provided also that the Central Govt. may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the AO shall not be required to issue notice for assessing or reassessing the total income for 6 AYs immediately preceding the AY relevant to the PY in which search is conducted or requisition is made (and for the relevant AY or years):
Provided also that no notice for assessment or reassessment shall be issued by the AO for the relevant AY or years unless-
(a) the AO has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs or more in the relevant AY or in aggregate in the relevant AYs;
(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and
(c) the search u/s132 is initiated or requisition u/s132A is made on or after the 1-4-17.
Expl.-1.- For the purposes of this sub-sec, the expression "relevant AY" shall mean an AY preceding the AY relevant to the PY in which search is conducted or requisition is made which falls beyond 6 AYs but not later than 10 AYs from the end of the AY relevant to the PY in which search is conducted or requisition is made.
Expl.-2.- For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.
(2) If any proceeding initiated or any order of assessment or reassessment made u/s 153A(1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sec153(1), the assessment or reassessment relating to any AY which has abated under the second proviso to sub-sec (1), shall stand revived with effect from the date of receipt of the order of such annulment by the (Pr.CIT or) CIT: Provided that such revival shall cease to have effect, if such order of annulment is set aside.
Expl.- For the removal of doubts, it is hereby declared that,-
(i) save as otherwise provided in this sec, sec153B and sec153C, all other this Act shall apply to the assessment made under this sec;
(ii) in an assessment or reassessment made in respect of an AY under this sec, the tax shall be chargeable at the rate or rates as applicable to such AY."
From specific reading of fourth proviso to Section 153A(1) of the Act, it can be seen that the jurisdiction u/s. 153C r.w.s 153A of the Act has been extended from seventh to tenth year, however, prohibits the AO to issue the notice u/s. 153C r.w.s 153A of the Act, unless the condition precedent therein is satisfied. The expression used is "no notice for assessment or reassessment shall be issued by the AO for the relevant AY/AYs"; and the relevant AY/AYs has been explained by the aid of Explanation-1 appended to it (7th-10th AY's preceding the searched year). Therefore, it is noteworthy that the fourth proviso to section 153A(1) bars the AO to issue notice u/s 153C r.w.s 153A of the Act for the assessment or reassessment of the 7th - 10th AY's unless he has in his possession evidence/material which revealed that income represented in the form of asset valued Rs. 50 lakhs or more has escaped assessment. So, the AO, in order to assume jurisdiction for the extended period (i.e. 7th to 10th AY Page 11 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 preceding the searched year) should have material in his possession regarding income represented in the form of 'asset' valued Rs. 50 Lakhs or more which has escaped assessment, which will only enable the AO to assume jurisdiction u/s. 153C r.w.s 153A of the Act to issue notice for these extended AYs. For the definition of asset referring to 4th proviso to section 153A of the Act, Explanation 2 was also inserted w.e.f 01.04.2017. As per Explanation 2 to the 4th proviso to section 153A(1), the asset shall include (i) immovable property being land or building or both, (ii) shares & securities, (iii) loans & advances and (iv) deposits in bank account. Thus, in nutshell, the AO can assume jurisdiction of cases for 7th year to 10th if he/she has in possession any books of account or other documents or evidence which reveal that the income representing asset defined in Expl-2 amounting Rs. 50 lakhs or more in single year or in aggregate in all the assessment years.
3.1.3 Before parting on the subject issue, the only fact needed to be examined is whether the AO was in possession of any asset being in the nature of (i) immovable property being land or building or both, (ii) shares & securities, (iii) loans & advances and (iv) deposits in bank account as defined in Explanation-2nd to 4th proviso to section 153A(1) by virtue of which he can assume jurisdiction for 7th to 10th assessment year. In the instant case, the AO has given following reasons to assume jurisdiction for 7th to 10th AYs:-
During the course of assessment proceedings, Sh. Vishan Asnani, Director of M/s Asnani Builders & Developers, attended the office and submitted ratio of Joint venture in "Pebble Bay Project", A Joint venture project between Amrit Colonisers Pvt. Ltd, Amrit Homes Pvt. Ltd. &Asnani Builders and Developers, between the land owners and developers. Based on this document, it is found that Asnani Builders at Developers Ltd. has its share as under-
Project Phase Share of M/s Asnani builders & Developers
Pebble Bay, Phase-I (Duplex) 33%
Pebble Bay, Phase-I (Flats) 27%
Pebble Bay, Phase-II 19%
Further, on the basis of incriminating documents found and seized during the search of "Asnani Group" a list of unaccounted receipt of cash in "Pebble Bay Project" is prepared, which is as per enclosed chart (Annexure-A). As per this chart, cash component received during F.Y. 2010-11 and F.Y. 2011-12 is Rs. 15,13,37,650/- total share of J.V. Partners in M/s Amrit Colonisers Pvt. Ltd and Rs. 2,19,70,000/- in M/s Amrit Homes Pvt. Ltd.
As the share of cash component in the hands of assessee is 4,54,01,295/- in respect of J.V. with M/s Amrit Colonisers Pvt. Ltd On calculating the share of M/s Asnani Builders & Developers in F.Y. 2010-11 & F.Y. 2011-12, it is observed that cash component in the hand of M/s M/s Amrit Colonisers Pvt. Ltd (Phase-1 Duplex @ 33%, Phase-1, Flats @ 27%) and Rs 41,74,300/- in M/s Amit Homes Pvt. Ltd. (@ 19%) exceeds Rs. 50 Lakh, and land of M/sAsnanı Builders & Developers Ltd. has been used to create real estate assets Ratio of Joint Venture Project phase Amrit Coloniser Asnani Builders Bhargavi Deepti Asnani pvt ltd & Developers keshwani Pebble bay Phase-1 61% 33% 3% 3% (Duplex) Pebble bay Phase-1 67% 27% 3% 3% (Flat) Pebble bay Phase-2 77% 19% 2% 2% M/s ACPL Particulars FY10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15- FY 16- FY 17- Page 12 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 16 17 18 Plot no 19679750 7321550 22770000 7150000 1750000 3500000 - 275000 update PB-1 Plot no 20365756 35862644 50925334 1252773 1712635 369969 - -
update
PB-1
down
Flat - 2214000 9470500 5338000 3150000 1938000 1340000 -
update
PB-1
Total 40045506 111292144 83165834 13740273 6612635 2657969 1340000 275000
Less - 730620 3125265 1761540 14039500 639540 442200 -
landlord
share flat
@ 33%
Less 15617747 42540476 28741180 3276886 1350428 280788 - 107250
landlord
share
Duplex
@39%
Total 15617747 43271096 31866445 5018426 2389928 920328 442200 107250
landlord
share
Developer 24427759 68021048 51299189 8701847 4222707 1737641 897800 167750
share
M/s AHPL
Particulars FY10- FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16- FY 17-18
11 17
Plot no - 2000000 12620800 1700000 5620000 5200000 - -
update PB-II
Plot no - 11970000 54162000 10500000 7400000 - - -
update PB-
III
Flat update - - - 2500000 - - - -
PB-1V
Flat update - - 500000 10000000 5000000 - - -
PB-V
Total - 21970000 67282800 24700000 18020000 5200000 - -
Less - 460000 2902734 391000 1292600 1196000 - -
landlord
share PB-II
@ 23%
Less - 4193700 11374020 2205000 155400 - - -
landlord
share PB-III
@ 21%
Less - - - 525000 - - - -
landlord
share PB-IV
@ 21%
Less - -- 120000 2400000 1200000 - - -
landlord
share PB-V
@ 24%
Total - 4653700 14396804 5521000 4046600 1196000 - -
landlord
share
Developer - 17316300 52885996 19179000 13973400 4004000 - -
share
In view of the above, I am satisfied that on the basis of documents discussed above, It is clear that in the case of the assessee there is income exceeding Rs. 50,00,000/- in aggregate (during Page 13 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 the assessment year 2009-10 to 2012-13) has not been brought to tax. Therefore, I am of the view that as per the provision of section 153A of the Act, scrutiny is necessary in respect of the extended period of A.Y. 2009-10 to 2012-13, which fall beyond 6 years from the end of the Assessment years, relevant to the previous year in which search is conducted.
It is apparent from the above that the AO has formed a belief that the appellant would also have received cash from Shri Dileep Gupta against sale of houses in 'Pebble bay' project. On perusal of assessment order, I find that the ld AO has basically relied upon page no 36 of LPS-7 which was found and seized from the premises of Shri Shubham Gupta, employee of M/s AHPL. The said loose for ready reference is reproduced hereunder:-
Page 14 of 27ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 On perusal of the seized loose paper, I find that it only mentions amounts in coded format, the dates of alleged cash payments is completely missing, the details of actual amount paid, project wise amount paid to appellant are completely missing. The only name of the appellant was mentioned as '39% of Asnani builders to return back to ACPL outstanding 5817786'. The only inference which can be drawn is that a certain amount was returned back to ACPL by Asnani Builders. Thus, it cannot be Page 15 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 conclusively held that amounts were handed over to appellant by either Shri Dileep Gupta or by AHPL/ACPL or any amount of alleged cash was received by appellant. On perusal of written submission, it has been transpired that the appellant before AO during assessment proceedings has raised objections against invocation of extended period of 7th to 10th year on 11.06.2021 which is as under:-
"We say that we have been provided copy of satisfaction note for reopening of the case of the assessee for the AY 2009-10 to AY 2012-13. Notices u/s 153C of the Income Tax Act, 1961 dated 12/07/2021 for the above assessment years have also been served upon the assessee- company.
On the instructions of the management of the above named assessee- company, we prefer preliminary objections to above said satisfaction note & further proceedings u/s 153C for the AY 2009-10 to AY 2012-13 as under:
1. At the outset, it is submitted that the invocation of provisions of Section 153C for the extended period i.e. AY 2009-10 to AY 2012-13 and issuance of notices u/s 153C for the above said assessment years is bad in law and without jurisdiction.
2. On careful perusal of the above said satisfaction note, it is seen that the proceedings u/s 153C of the Act for extended period were initiated against the assessee company on the strength of following documents/material:
a. Alleged incriminating documents containing unaccounted receipts found and seized during the search of 'Asnani Group' pertaining to various phases of 'Pebble Bay Project'. b. A Chart [referred as Annexure-A] forming part of satisfaction note prepared on the basis of above said alleged incriminating documents found and seized. c. An undetailed narration in the above said satisfaction note about creation of assets in the hands of the assessee company in form of land.
3. On perusal of above said documents, it is apparent that the name of the assessee company is not mentioned anywhere in the alleged incriminating documents. Further, the above said alleged documents do not suggest that 'alleged cash receipts' (if any) was ever been received by or on behalf of the assessee company. Further, these alleged documents neither pertain/belong to the assessee company nor have been seized from any premise of the assessee-company/its directors.
4. It is also relevant that management/directors of the assessee- company were never confronted with the above said alleged documents nor any opportunity to cross-examine the relevant persons was ever provided to the assessee-company. In the interest of justice and fair play, we hereby request to provide the opportunity to cross-examine above persons before proceeding further in the case of the assessee company.
5. The above said satisfaction note suffers from basic legal defect in view of following facts: a. Quantification of escaped income in the hands of the assessee- company and its year wise details are not mentioned anywhere in the satisfaction note. b. However, on perusal of above said alleged documents, it is apparent that any of the above document do not contain/suggest that any unaccounted money was ever been received by the assessee Company.
6. In view of provisions contained in section 153C(1)(b), document wise correlation of the seized document with the 'other person referred in section 153C' (in the present case, the assessee company] is sine qua non for reopening of the case of such 'other person' u/s 153C of the Act. There are various landmark judicial pronouncements in which the above legal position was supported. One such landmark judgment of Hon'ble Apex Court was pronounced in the case of Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 [SC].Page 16 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
7. In the above referred satisfaction note, it is stated that during the FY 2010-11 & FY 2011- 12, a sum totaling to Rs. 4,54,01,295/- was received as 'cash component' by the assessee company which has escaped assessment. Further, the assessee company had used this 'cash component' to create real estate assets. In this regard, it is submitted that the above contention stated in the satisfaction note is erroneous and baseless in view of the following facts: a. As stated in earlier paras of this reply, there is no evidence regarding receipt of alleged 'cash component' by the assessee company in relevant period. Thus, the opinion regarding 'escapement of income' was based only on suspicion.
b. No undisclosed asset [whether real estate asset or otherwise] wasfound during/after search proceedings. Thus, the findings recorded in 'satisfaction note' regarding 'use of alleged cash component in creating real estate asset' is not correct and is based on mere suspicion, conjecture and surmise.
8. Here, it is relevant to quote the relevant statutory provisions which are as under: "153C. (1) [Notwithstanding anything contained in section 139, section 147, section 148, section 149 section 151 and section 153, where the Assessing Officer is satisfied that,- 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 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, 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 153A] :)"
"Fourth proviso to section 153A(1) read as under.
Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless-
(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and Explanation 1.-For the purposes of this sub-section, the expression "relevant assessment year"
shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.]"
On careful perusal of above statutory provisions, it is evident that:
a. Before resorting to above provisions, the AO must have definite and cogent material in his possession that the income for relevant year/years aggregating to fifty lakh rupees or more has escaped assessment. Meaning thereby, that the above provisions cannot be invoked on mere suspicion of escapement of income in relevant years, or for the verification of entries in books of accounts of earlier years.Page 17 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 b. That escaped income should be represented in the form of an asset [being immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account).
The law makers [legislature] in their wisdom have meaningfully inserted the word 'escaped income represented in the form of an asset' in the statutory provision. It implies that if any incriminating material is in possession of the AO which signifies escapement of income, there must be evidences of corresponding asset being created out of escaped income. Now, the question arises whether these provisions could be resorted to for verification of genuineness of entries in the books of accounts of earlier relevant years on the strength of information from Investigation Wing. The answer is 'NO' because in such situation, the AO do not have definite and cogent material in his possession to signify escapement of income unless due verification of entries of books of accounts of earlier year is made in the assessment proceedings. The statutory provisions referred above do not allow the AO to issue notice u/s 153C merely on suspicion or merely for verification purpose.
9. In the present case of the assessee-company, (i) There is no iota of evidence in the satisfaction note that the alleged cash component was received by the assessee company during the relevant period and such cash component was represented in the form of an asset
(ii) From the language of the satisfaction note, it is apparent that the invocation of section 153C to the extended period was merely based on suspicion.
10. In view of above discussion, it is crystal clear that the above said invocation of provisions of section 153C to the extended period being for AY 2009-10 to AY 2012-13 is bad in law being without jurisdiction.
In view of aforesaid, it is humbly prayed that your honor may kindly be pleased to decide preliminary objection as made herein above before proceeding further in the case of the assessee company."
The appellant vide its objection has mentioned that in the said seized documents the name of the appellant is completely missing and these does not suggest that any alleged cash receipts was received by appellant or was received on behalf of appellant. The impunged document does not belong to appellant and were also never confronted with the management of the appellant company. Hence, the above reasons for invocation of extended period holds no ground in given set of facts and circumstances. The appellant also contended that as per Explanation-2 of fourth proviso to section 153A(1) of the Act, there was no iota of evidence in satisfaction note that escaped income was represented in form of an asset. Therefore, the invocation of section 153C r.w.s 153A to extended period was merely based on suspicion and without jurisdiction. The appellant also made request before the AO to drop the proceedings for extended period or dispose of the objections raised by speaking order.
The AO vide letter dated 22.09.2021 had disposed off primary objections raised by the appellant. For ready reference the same is reproduced hereunder:-
Vide letter furnished in this office on 22/06/2021, the assessee had raised objection to reopening of the case u/s 153C for the AY 2013-14 to AY 2019-20. Further, vide letter furnished in this office on 14/07/2021, the assessee had raised objection to reopening of the case u/s 153C for the extended period being AY 2009- 10 to AY 2012-13. The aforesaid objections are being disposed of as under:
"1. The assessee had contended that the name of the assessee company is not mentioned in the incriminating documents. It is further contended that the incriminating documents do not suggest that 'alleged cash receipts (if any) was ever received by or on behalf of the assessee company.
The objection of the assessee is not tenable in view of the page no. 36 of LPS-07 seized from the residence of Shri Shubham Gupta wherein the common account and share of the assessee company is duly mentioned.Page 18 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13
2. It is contended by the assessee that the opportunity of cross examination of the persons from whom the incriminating documents were found and seized.
Incriminating documents have been found and seized from the employees and offices of M/s Amrit Homes Pvt Ltd [AHPL] and Amrit Colonisers Pvt. Ltd. [ACPL] who are the JV partners and developer of the assessee company. Since, there is close business relationship between the assessee company and AHPL/ACPL, there is no necessity of affording opportunity of cross examination.
3. The assessee had contended that the invocation of provisions of Section 153C for the extended period is bad in law and without jurisdiction.
The invocation of section 153C for the extended period is in accordance with the relevant provisions of the law as amended by Finance Act, 2017 since the income escaped assessment [on the strength of incriminating documents found and seized] amount to fifty lakh rupees or more in aggregate in relevant years.
With the above comments, objections of the assessee to the satisfaction notes recorded u/s 153C dated 10/03/2021 & 28/06/2021 for the AY 2009-10 to AY 2019-20 are hereby rejected. It is also hereby clarified that with this reply to the assessee, no further objection on the discussed issues will be entertained by this office.
Considering the above, the AO made additions on account of unexplained income u/s 69A of the Act by assuming jurisdiction, for 7th to 10th year, as per 4th proviso to section 153A(1)."
3.1.4 During appellate proceedings, the appellant reiterated the submission made/objection raised before the AO. It further submitted that the AO can assume jurisdiction for 7th to 10th AYs as provided in Expl. 2 to 4th proviso to sec 153A(1) of the Act only in a situation when he has evidence in his possession revealing that income valued Rs. 50 lakhs or more represented in form of asset has escaped assessment. Therefore, this jurisdictional fact should be present to assume jurisdiction for issuing notice u/s 153C r.w.s 153A of the Act for period beyond sixth assessment year upto tenth assessment year. Here, the AO has made additions on account of unexplained money u/s 69A qua which no concrete evidence was found which could have direct nexus of receipts of alleged cash by the appellant and generating undisclosed asset. Hence, jurisdictional fact is absent. In support of this proposition, the appellant has relied upon the decision of Hon'ble Apex Court in the case of Arun Kumar & others (2006) 12 SC 121 wherein it has been held that if the jurisdictional fact does not exist, the court, authority or officer cannot act. The appellant has relied upon the decision of Hon'ble ITAT, Gauhati in the case of Goldstone Cement Ltd, ITA Nos 126 to 131/Gau/2020 order dated 10.12.2021 wherein addition of share capital pertaining to 7th to 10th AYs has been deleted as jurisdictional fact, as per Expl 2 to 4th proviso to section 153A(1) of the Act, was absent. The order of Hon'ble ITAT was also affirmed by Hon'ble High Court of Guwahati vide order in ITA No 7, 9 & 10 of 2022 dated 29.09.2023. Though, the decision of Hon'ble ITAT Guwahati was in context of Share application money and u/s 153A, however, the ratio laid down in the said judgment was on absence of jurisdictional fact viz. undisclosed asset within meaning of forth proviso to section 153A. 3.1.5 As evident from the above discussion, the AO has presumed that the appellant would have received cash component on sale of houses in its project 'Pebble bay' in the nature of undisclosed asset and has escaped assessment. The entire addition has been made on sheer assumption and presumption basis and having no co-relation with any iota of seized material. None of the items on the basis of which the AO assumed jurisdiction u/s.153A(1) of Act for extended period or additions made in the AYs under consideration falls under the following categories of asset as provided in Explanation.2 to 4th proviso of the section 153A(1) of the Act:
(i) Immovable property being land or building or both.
(ii) Shares and securities.
(iii) Loans and advances.
(iv) Deposits in the bank account.Page 19 of 27
ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 As per rudimentary accounting concept, 'debit' denotes 'assets' and 'credit' denotes 'liability'. An asset represents an economic resource, either immovable or movable, having value, such as immovable property viz., land or building, investment held in shares and securities, loans & advances given and deposits in bank account. On the other hand, 'Liability' includes items such as share capital, reserves, loans obtained (secured as well as unsecured) etc. which cannot be characterized or classified as 'Asset'. Hon'ble ITAT Gauhati has dealt with this issue in detail in ITA Nos 126 to 131/Gau/2020 in the case of Goldstone Cements Ltd (order dated 10.12.2021). Relevant paras are reproduced hereunder:-
"8.12 It is a rudimentary accounting concept, that "debit" denotes "asset" and "credit"
denotes "liability". An asset represents an economic resource, either immovable or movable, having value, such as immovable property viz., land or building, investment held in shares and securities, loans & advances given and deposits in bank account. On the other hand, 'Liability' includes items such as share capital, reserves, loans obtained (secured as well as unsecured) etc. which cannot be characterized or classified as 'Asset'. Similarly, items of 'expenses' or revenues in form of 'sales' / 'turnover' does not constitute 'asset'. This can be illustrated in the following manner ('Asset' below falls within the ambit of the fourth proviso to Section 153A of the Act):
Profit & Loss Account Particulars (Debit) Particulars (Credit) Expenses Revenues Balance Sheet Liabilities (Credit) Assets (Debit) Share Capital/ Reserves/ Immoveable Property/ Loans & Advances/ Loan/ Current Liabilities Shares/ Bank Balance 8.13 The above view of ours get bolstered from reading of Explanation 2 appended to the fourth proviso, which defines 'asset', for the purpose of fourth proviso to Section 153A,to include i) immovable property, ii) shares and securities , iii) loans and advances & iv) Deposit in bank. Hence, where search action u/s 132 of the Act reveals that, (i) the assessee owns an undisclosed immovable property, or (ii) information has been gathered which shows that the assessee had given loans or advances outside the regular books or (iii) search has revealed unaccounted investments held by assessee in shares & securities, which do not form part of regular books of accounts or (iv) if undisclosed bank accounts having deposits, have been found in the course of search, pertaining to the 7th-10th AY preceding the search; then having in his possession this jurisdictional fact, the AO may assume jurisdiction under the fourth proviso to Section 153A of the Act for the relevant seventh to tenth assessment year preceding the searched assessment year. Hence, the most important aspect is that, these 'assets' must have been found to be undisclosed or unaccounted, in the regular books of account maintained by the assessee, and discovered during the course of search, which otherwise would not have seen the light of the day but for the search, resulting in escapement of income.
8.14 As per our discussion, is to be kept in mind that, the term 'deposits in bank account' has to be considered with the term 'asset'. The term 'deposits in bank account' and 'asset' are to be understood in their cognate sense, as it takes their colour from each other, i.e., the more general is restricted to a sense analogous to the less general. Hence, the term 'deposits in bank account' denotes discovery of an 'asset' in the form undisclosed bank deposits, say fixed deposit bank a/c, savings deposit bank a/c, foreign deposit bank a/c etc. which is found to Page 20 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 have escaped assessment in the 7th-10th AY preceding the search. It does not suggest or include any or all credits in bank accounts, which is disclosed and forms part of the regular books of accounts. To say, if any credits in a regular bank account, like sale proceeds/ loan / share capital etc. is found to be unexplained, then it may be a case of discovery of undisclosed 'income' / 'cash credit' but it does not suggest discovery of an undisclosed 'asset' by the Revenue so as to bring it within the teeth of the fourth proviso to Section 153A of the Act for invoking jurisdiction u/s 153A for the extended period.
8.15 Hence, from the above discussion, it is thus clear that Section 153A of the Act can be invoked only if the AO comes to a positive conclusion that he has in his possession documents or information revealing an undisclosed asset of the assessee qua the assessment year (7th to 10th) which is valued Rs. 50 lakhs or more. This, in our judgment is a foundational, fundamental or jurisdictional fact."
Thus, the AO can assume jurisdiction as per Expl 2 to 4th proviso to section 153A(1) r.w.s 153C of the Act over the cases of 7th to 10th year only when during the course of search proceedings u/s 132 of the Act in the case of any third party it is found that any unexplained immovable property was owned by the assessee or unexplained loans and advances given by the assessee or unexplained investment was made by the assessee in shares and securities, or unexplained deposits in bank account were made. Here, income, represented in form of asset, which has escaped assessment denotes the unexplained assets recorded in the books of account or undisclosed assets not recorded in the books of account. Also, to clarify that if any income which does not form part of books of account is found to be unexplained, then it may be a case of discovery of unexplained income/cash credit but it does not suggest discovery of an undisclosed asset. Undisclosed asset valued Rs. 50 lakhs or more has to be discovered during search and seizure proceedings pertaining to 7th to 10th year for assuming jurisdiction u/s 153A r.w.s 153C. Except the asset, other items of income viz. liability/credit, unexplained expenditure etc. has not been included in Explanation 2 to 4th proviso of section 153A. Meaning thereby, on the basis of unexplained cash credit/liability, the AO cannot assumed jurisdiction u/s 153C r.w.s 153A for the 7th to 10th assessment year. Hon'ble ITAT Gauhati in the case of Goldstone Cement Ltd (Supra) in para 8.11 has held that "......since the parliament has used expression 'income in the form of asset' and the definition of asset has been spelled out in the fourth proviso, this itself necessarily implies that the liability/items falling in the left side of the Balance Sheet stands excluded. For this view of ours, we rely on the legal Maxim for interpretation "Expressio Unius Est Exlcusio Alterius" which principle states that, express mention of one is the exclusion of other and this maxim has been accepted by the Hon'ble Supreme Court in GVK Industries Ltd. Vs. ITO [197 Taxman 337] (Constitution bench of 5 Supreme Court Judges). By express mention of 'Assets' and definition given to it specifically, it is implied that the Parliament silently excluded the items of 'revenue', 'expenditure' & 'liabilities' from its jurisdictional fact for invoking/assumption /usurpation of jurisdiction u/s. 153A of the Act for the seventh to tenth assessment year preceding the searched assessment year." The said order has also been affirmed by Hon'ble Gauhati High Court vide order in ITA No 07, 09 & 10 of 2022 dated 29.09.2023.
In the present case, the AO has made addition of Rs. 1,32,15,017/- in AY 2011-12 and Rs. 3,70,53,568/- in AY 2012-13 on account of unexplained income u/s 69A of the Act and no addition on account of undisclosed asset has been made in the body of assessment order. As evident from the above discussion and decision of Hon'ble ITAT Gauhati in the case of Goldstone Cement Ltd (Supra) the alleged unexplained income is not an 'asset' within the meaning of Explanation 2 to 4th proviso of section 153A of the Act. It is also evident that the AO was not in possession of any evidence representing undisclosed asset valued at Rs. 50 lakhs or more. Hence, facts relating to assuming jurisdiction as per Explanation- 2 to 4th proviso of section 153A(1) of the Act are absent in the case under consideration. The appellant has also placed reliance upon the decision of Hon'ble ITAT, Gauhati in the case of Goldstone Cement Ltd (Supra) wherein addition of share capital pertaining to 7th to 10 th AYs have been deleted as jurisdictional fact, as per Explanation-2 to 4th proviso of section 153A(1) of the Act, was absent. Through the issue in hand pertain to alleged unexplained cash income, however, the ratio in the supra decision is squarely applicable in the instant case. Respectfully, following the above decisions and discussion made herein above, I find that the AO was not justified in assuming jurisdiction over the extended assessment years of search period i.e 7th to 9th year and making impugned additions.
Page 21 of 27ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 3.1.6 Accordingly, the additions of Rs. 1,32,15,017/- in AY 2011-12 and Rs. 3,70,53,568/- in AY 2012-13 on account of unexplained income u/s 69A are not in accordance with 4th proviso to section 153A(1) read with Explanation 1 & 2 of the Act and thus, legally cannot be sustained. Therefore, the above additions are, hereby, deleted. Therefore, appeal on this ground is allowed."
12. Thus, the CIT(A) has firstly analysed that the AO can extend jurisdiction beyond 6th years upto 10th year only if there is 'income represented in the form of asset' for which 'asset' is defined to include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. Thereafter, he has analysed the facts of assessee's case at length and observed that in the present case of assessee, the AO has made addition on account of unexplained income and no addition on account of undisclosed asset has been made.
Accordingly, he has concluded that the condition prescribed in 4th proviso to section 153A(1) is not satisfied. Finally, he has concluded that the AO was not justified in assuming jurisdiction over extended period.
13. Before us, Ld. DR for revenue has filed following Written-Submission to attack the order of CIT(A):
1. The assessee vide its first contention, has challenged the jurisdiction for framing assessment u/s 153C of the Act for the extended period i.e. beyond six years from the year of search. The assessee has submitted that the provisions of the section 153C read with fourth proviso to section 153A(1) of the Act provides for a mandatory condition 'escapement of income' of Rs. 50 lakhs or more represented in the form of asset for invocation of extended period.
1.1 In this regard kind attention of the Hon'ble Bench is invited to the definition of 'asset' as provided in Explanation 2 to 4 th proviso of s. 153A(1) of the Act. For a ready reference, the definition is being reproduced herein below:-
"Explanation 2 - For the purpose of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account."
3.2.1 In view of the above, it is submitted that the term "asset" in Explanation 2 to Section 153A(1) of the Act should be construed as illustrative rather than Page 22 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 exhaustive. This interpretation is supported by principles of statutory interpretation, legislative intent, and relevant judicial precedents.
3.2.2 That, on statutory interpretation, it is sub mitted that the cardinal rule of statutory interpretation dictates that where the legislature employs general words following specific and particular words, the general words should be construed to be of the same genus or species as the specific and particular words, unless there is a clear indication to the contrary. In the context of the Section 153A(1), the term "asset" is preceded by specific items such as "immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account". This clearly indicates that the term "asset" is intended to encompass items akin to those explicitly mentioned, implying an illustrative rather than exhaustive list.
3.2.3 The legislative intent behind the scheme of the assessment under the provisions of section 153A/153C of the Act is to provide the AO with broad powers to assess or reassess the total income of the assessee in whose case a search is carried out or in case of an assessee, in respect of which an incriminating document has been found and seized during the course of the search in any other person. This broad mandate requires an expansive interpretation of "asset" to include all forms of undisclosed income, thus supporting the objective of comprehensive tax enforcement and anti-evasion measures.
3.2.4 The provisions of section 69A of the Act treats unexplained money or cash at par with other assets such as bullion, jewellery and valuable articles clearly indicates that the legislature considers money or cash to be on an equal footing with other forms of assets when it comes to undisclosed income. Therefore, undisclosed cash receipts such as those noted on the seized loose papers, should be treated similarly under the provisions of the Section s 153A and 153C, reinforcing that the term "asset" includes such undisclosed cash receipts.
3.2.5 The Hon'ble Apex Court in the case of CIT vs. Singad Technical Education Society (2017) 397 ITR 344 (S.C.) (although not directly addressing Explanation 2) has provided a broad interpretation of "documents" or "assets" found during search assessments, indicating that the term should be construed widely to ensure all forms of undisclosed income are captured.
3.2.6 In light of the principles of statutory interpretation, legislative intent, and judicial precedents, it is respectfully submitted that the term "asset" in Explanation 2 to Section 153A(1) should be interpreted as illustrative rather than exhaustive. Such an interpretation aligns with the objective of the Income- tax Act to ensure effective enforcement of tax laws and deter tax evasion.
3.2.7 In view of discussion made in above paras, the term "asset" should be construed as illustrative, it would include the amount of undisclosed cash receipts found noted on the seized loose papers. Therefore, the AO was justified in invoking the provisions of section 153C of the Act and framing the assessment in the case of the assessee for the extended period."
14. Per contra, Ld. AR for assessee made forceful submissions to defend the order passed by CIT(A). The arguments raised by Ld. AR are in line with Page 23 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 the findings and observations made by the CIT(A), therefore we do not wish to repeat the same for the sake of brevity.
15. We have considered rival submissions of both sides and perused the orders of lower-authorities as well as the documents held in Paper-Book to which our attention has been drawn. The controversy before us is very specific i.e. whether the AO was legally justified in exercising jurisdiction for AY 2012-13 or not? So far as legal position is concerned, it is very clear from provision of 4th proviso to section 153A(1) that the AO can issue notice for assessment only to assessee or re-assessee the escaped income in the form asset. The Memorandum to Finance Bill, 2017 and CBDT Circular No. 2/2018 further says that the notice can be issued beyond sixth year only where 'tangible evidences are found during a search or seizure and the same is represented in the form of undisclosed investment in any asset'. Now, in this legal scenario, when we look into the facts of present case, we find that the AO has made addition on the basis that the assessee would have received its share in the unaccounted collections made by AHPL & ACPL from buyers. Thus, there is no 'asset' or 'investment in asset' found by authorities and there is no addition made by AO on the basis of 'asset' or 'investment in asset'. The whole addition is on account of presumed receipt of revenue-share from AHPL & ACPL which can only be an unrecorded revenue/sale of business. The CIT(A) has, therefore, passed a vehement order observing that there is no addition on account of any undisclosed asset and hence the condition laid down in 4th proviso to section 153A(1) is Page 24 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 not satisfied. In arriving this conclusion, the CIT(A) has rightly relied upon the decision of ITAT, Gauhati in Goldstone Cement Ltd. ITA Nos. 126 to 131/Gau/2020 order dated 10.12.2021 (upheld by Hon'ble Gauhati High Court in ITA No. 07, 09 & 10 of 2022 dated 29.09.2023) holding that any sale proceed / loan / share capital, etc. found unexplained, may be a case of discovery of undisclosed income/cash credit but it does not suggest discovery of any 'asset' by Revenue so as to bring it within the teeth of fourth proviso to section 153A for invoking jurisdiction u/s 153A for the extended period. Ld. DR for revenue, in his Written-Submission re-produced above, has firstly mentioned that the definition of "asset" is inclusive and not exhaustive and thereafter gone to project that the legislative intent behind section 153A is to provide the AO with broader powers to assessee or reassess the total income of the assessee in whose case a search is carried out and this broad mandate requires interpretation of "asset" as including "all forms of undisclosed income". So far as the point raised by Ld. DR that the term "asset" has inclusive definition and not exhaustive, we agree without any hesitation. But we are afraid to accept that the "asset" would include "all forms of undisclosed income". To be specific to the assessee's present case, Hon'ble Gauhati High Court has already accepted that unexplained sale-proceed cannot be treated as discovery of any 'asset' for the purpose of 4th proviso to section 153A(1). To the same effect is the view taken by Hon'ble Madras High Court in IDFC Ltd. Vs. DCIT, W.P. Nos.
Page 25 of 27ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 23284 & 22737 of 2022 order dated 15.09.2023, while interpreting an identical provision in section 149, the relevant paras of order are as under:
"52. Additionally, the validity of the impugned proceedings have also to be tested on the anvil of the statutory condition in section 149 that the officer has in his possession, 'books of accounts or other documents or evidence which reveal that income chargeable to tax, presented in the form of an asset' has escaped assessment.
This additional requirement flows from the reason that the notices have been issued beyond three years from the end of the relevant assessment years. In the present case, the petitioner argues that there is no such asset.
53. Per contra, the submission of the revenue is that the suppressed income/wrong claim of disallowances, will constitute an asset. The submission does not appeal for the reason that what the revenue has in this case are only the books of accounts and material furnished by the petitioner at the time of original assessment and there is no mention anywhere in the impugned proceedings about an 'asset' representing the income that is alleged to have escaped."
16. In view of above discussions, we do not find any infirmity, perversity or fallacy in the order of CIT(A) holding that in present case, the AO was not justified in assuming jurisdiction over extended assessment year. Therefore, we find no reason to interfere with the order of CIT(A) on this issue, the Page 26 of 27 ACIT, (Central)-II, Bhopal vs. M/s Asnani Builders and Developers Limited, Bhopal IT(SS)A No. 82/Ind/2023 - AY 2012-13 same is hereby upheld. Consequently, Ground No. 2 and 3 raised by revenue are dismissed.
17. Since we have dismissed legal grounds raised by revenue as a consequence of which the assessment proceeding undertaken by AO stands illegal, we need not adjudicate other grounds which are on merit. Those grounds have become academic at present and kept open.
18. Resultantly, this appeal is dismissed.
Order pronounced in open court on 12.06.2024.
Sd/- sd/-
(VIJAY PAL RAO) (B.M. BIYANI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore
िदनां क /Dated : 12.06.2024
CPU/Sr. PS
Copies to: (1) The appellant
(2) The respondent
(3) CIT
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
UE COPY
Assistant Registrar
Income Tax Appellate Tribunal
Indore Bench, Indore
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