Document seized must not only be a ‘speaking one’ but also be prima facie ‘incriminating one’ for attracting sec. 153C
Sinhgad Technical Education Society vs. ACIT (ITAT Pune) -Though section 153C of the Income Tax Act confers jurisdiction if the Assessing Officer is ‘satisfied’ that ‘documents’ seized belong to a person other than the person referred to in section 153A so as to be able to assess that other person, the document must have prima facie incriminating information. The document seized must not only be a ‘speaking one’ but also be prima facie ‘incriminating one’ for attracting section 153C. If the impugned documents merely contain the notings of entries which are already recorded in the books of account or subjected to scrutiny of the AO in the past in regular assessment u/s 143(3) of the Act, such document cannot be said to be containing the incriminating information so as to confer jurisdiction u/s 153C.
FULL TEXT OF THE ITAT PUNE JUDGMENT IS AS FOLLOWS
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH ‘B’, PUNE
BEFORE SHRI I.C. SUDHIR AND
SHRI D. KARUNAKARA RAO
ITA Nos. 114 to 117/PN/10 (AYs 2000-01 to 2003-04)
Sinhgad Technical Education Society Vs. ACIT
Appellant by : Shri S. N Doshi
Respondent by: Shri A. S Singh, CIT DR
Per D. Karunakara Rao AM
These are four appeals filed by the assessee against the commonly dated but different orders of the CIT(A)-II, Pune. The grounds of appeal are more or less the same in these appeals and the additional ground raised by the assessee is common for all the four appeals. Therefore, all these appeals are clubbed. For the sake of convenience, the appeal for the AY 2000-01 is taken up and it is against the order of the CIT(A)-II, Pune dated 24/12/2009. Thus, the grounds in the appeal for the AY 2000-01 and the common additional ground raised by the assessee during the proceedings AY before us are as under:-
“Ground No. 1(a)
On the facts and in the circumstances of the case the order of CIT(A) is bad in law and invalid as he has not issued the mandatory notice as required by Sec. 251(2) ofthe Income Tax Act 1961, in order to enhance the assessment thereby making the appellant liable on the grounds different from those not considered by the Assessing Officer.
Ground No. 1(b)
On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the order of CIT(A) is bad in law and invalid as he has decided the appeal by considering the issues which are not mentioned in the assessment order- Ref CI Tvs Shapurji Palloji Mistri 44 I TR891(SC).
Ground No. 2(c)
On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the learned CI T(A) has erred in not appreciating the established legal position that his power of enhancement is restricted to the subject matter of assessment which has been considered expressly or by clear implication by the Assessing Officer. Refer CI T vs. Raj Bahadhur Hardutroi Motilal Chamaria -66 I TR443 (SC).
Ground No. 2
On the facts and in the circumstances of the case and without prejudice to Ground No. 1 the CI T(A) has erred in treating the acquisition of shares in cooperative bank for Rs. 49,750/- as in contravention of provision of section 13(1)(d)(i) of the Income Tax Act, 1961 disregarding the fact that this acquisition of share is neither the investment nor the deposit made out of the funds of the institution and such acquisition was necessary being a pre-condition for availing the loan from the said co-operative bank.
On the facts and in the circumstances of the case and without prejudice to ground no.. 1 to 3 the CI T(A) has erred sustaining the disallowances of Rs. 15,130/- u/s. 40A(3) and treating the revenue expenditure as capital expenditure.
Ground No. 4.
On the facts and in the circumstances of the case and without prejudice to Ground No.1 to 3 the CI T(A) has erred in treating the donations received towards trust corpus as revenue income. Denial of exemption u/s. 11 cannot change the basic and true nature of the receipt.
Ground No. 5
On the facts and in the circumstances of the case and without prejudice to the ground No. 1 to 3 the CI T(A) has erred in sustaining the addition of Rs. 4,43,012/- proposed and made by the special auditors by invoking the provisions of section 36(1)(va) ofthe Act on account ofdelay in payment ofemployees share ofprovident fund rws section 2(24).
Ground No. 6
On the facts and in the circumstances of the case and without prejudice to the ground No. 1 to 3 the CI T(A) has erred in sustaining that the disallowance of Rs. 51,505/- made on account of prior period expenditure disregarding the contention that these expenses materialized in the context of their liability in the year under consideration only.
Ground No. 7
On the facts and in the circumstances ofthe case and without prejudice to the Ground No. 1 to 3 the CI T(A) has erred in sustaining the disallowance of Rs. 50,000/- on account of donations paid.”
Additional Ground of appeal -
ITA NO 114 TO 117 FOR AY 2000-01 TO 2003-04
“On the facts and in the circumstances of the case, the order of the Assessing Officer passed under Section 143(3) r.w.s. 153C is bad in law in as much as he has failed to record and inform the necessary satisfaction as well as failed to provide the certificate true copies of the documents searched and seized in an action taken under section 132 on Shri M.N. Navale.
This ground is legal and goes to the root of the issue involved and therefore, appellant prays that this additional ground may kindly be admitted and disposed offon merit”
2. Briefly stated relevant facts of the case are that the assessee is an Educational Institution registered under Bombay Public Trust Act, 1950 & Societies Registration Act, 1860. It was also registered U/s 12A(a) of the Income Tax Act, 1961 since the A.Y. 1994-95. The search and seizure operation U/s. 132 was carried out in the case of Shri M.N. Navale on 20/07/05. Shri M.N. Navale is the President of the assessee Educational Society. In the course of search operation, the search party found and seized certain loose papers. Simultaneously, the survey action was conducted on the Institute. However, on the basis of the loose papers Bundle A-2 found with and seized from Shri M.N. Navale and the CIT issued the show Cause Notice stating that in view of the findings in the search operation, he had reason to believe that the notings in the said loose papers are in respect of Capitation Fees/ Donations and therefore, CIT proposed that the registration of the institution was to be cancelled on both the limbs namely the activity of the trust are not genuine and that these are not being carried on in accordance with the object of the trust. After hearing the assessee, the CIT cancelled the registration U/s. 12AA(3). This order of the CIT was challenged before the Honourble Income Tax Appellate Tribunal and the same was reversed on technical grounds ie the registration granted u/s 12A cannot be cancelled u/s 12AA(3) of the Act.
3. Coming to the search assessment proceedings of the Society, the AO issued the notice u/s. 153C of the Act after recording the reasons and the assessee field the return claiming the exemption U/s. 11 of the Act. In the course of Assessment Proceedings, the Assessing Officer made the reference for special Audit U/s. 142(2A) of the Act. In due course, the Special Auditor completed the audit. However, there is an allegation by the assessee that the Special Auditor conducted the audit totally in contrast to the terms and references made by the Assessing Officer for conducting the special audit. The Assessing Officer on the basis of the order of cancellation of registration held that the assessee has to be treated as AOP and it would not be entitled to the claim of exemption U/s. 11 of the Act. Assessing Officer assessed the income at Rs. 246,13,935/- as computed by Special Auditor.
4. Aggrieved with the above order of the AO, the assessee filed an appeal before the CIT(A) and made various submissions. CIT (A) allowed the appeal of the assessee partly. Aggrieved with the said decision of the CIT(A), the assessee filed the present appeal before us and made various submissions. Further, Ld Counsel raised an additional ground as narrated above and argued stating that the same is legal in nature and there is no need for any investigation in to the matter for deciding the same by the Tribunal. Some of them are extracted from the written submission of the assessee and the same are as under.
“1. In the paper book filed by the Department Representative on 31/08/2010, it is found that the satisfaction note is made on 18/4/2007. It is however not clear as to the Ward/ Circle of the Assessing Officer who has recorded this note. The satisfaction note has to be made by the Assessing Officer of the searched person i.e. Mr. M.N. Navale. On the date of search, Assessing Officer of M.N. Navale was ward 1(3) and of the appellant was circle -6, Pune.
2. Even though on 18/4/2007, when the satisfaction note is made and the Assessing Officer was one and the same both for Mr. M.N. Navale and the appellant, it is necessary to have the mention, in the satisfaction note a to who is the Assessing Officer i.e., the Ward/Circle. It is the ward/circle which gets the jurisdiction and not an individual who governs or administers the said ward/ circle.
3. This satisfaction note has not been provided to the appellant at any time in the course of assessment proceedings or thereafter till 31/8/2010 on which date the paper book is filed by the Department.
It is necessary for the Assessing Officer of the appellant to inform about the satisfaction so recorded as well as to provide the copies of the seized documents and the appellant must be given a reasonable opportunity to object to the same. Refer: Janki International 278 ITR 296.
This view is taken by Delhi High Court in the case of Janki International vs. UOI. Although it is k158Bd and 158BC, nonetheless natural justice demands that the assessee who is proceeded u/s. 153C must be provided with the copy of the satisfaction note as well as the certified copy of the document seized. (See Page No. 29)
Neither in the notice u/s. 153C, there is any mention about the satisfaction of the Assessing Officer. In the absence of such a satisfaction the assessment completed on the basis of such notice would be invalid. In this notice there is no mention of the specific papers etc, only the general statement is made. Neither the notice is enclosed with the satisfaction note.
4. As per the Satisfaction note it is clear that both the satisfaction note and notice u/s. 153C are dated 18/4/2007.
5. It is also not known as to the date on which this document belonging to the appellant were received by the Assessing Officer of the appellant. Search on 20/07/2005 on which date, Assessing Officer of searched person was ITO, Ward 1(3) and that of the appellant was ITO, Circle 6.
As the satisfaction note is made on 18/04/2007 and assuming the said date as the date of receiving the documents alleged to be belonging to the appellant the Assessing Officer of the appellant can issue the notice for six preceding assessment years. As the documents are received on 18/04/2007 relevant to the A.Y 2008-09, the Assessing Officer of the appellant can issue notices u/s. 153C for the A.Y’s 2002-03 to 2007-08.
In the case of the appellant notices u/s. 153C are issued for A.Y 2000-01 to 2001-02 which is not permissible, refer the judgement of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TT3 508. Copy enclosed. (See Page 31 of the paper Book – Ahamadabad Bench).
The assessment of A.Y 2003-04 has been completed u/s. 143(3) on 30/03/2006. Hence on the date relevant documents were received by the Assessing Officer i.e. 18/04/2007, this assessment was not pending and made u/s. 153(c) therefore is invalid.
6. The assessment has been made u/s. 153C r.w.s 143(3). In fact the assessment should have been made u/s. 153C r.w.s. 153A.
7. Neither the documents mentioned in the said satisfaction note stated to be belonging to the appellant have been provided to the appellant with due certification thereon.
8. In para 2 of the satisfaction note it is stated that as per panchanama dated 22/7/2005 the various pages mentioned at serial no.’s 1 to 9 belong to the appellant. We explain the nature of these pages as under:-
a. Pages No. 11 to 15 mentioned at Serial No. 1 to 5, the contents are in respect of the payments made by Shri M.N. Navale for purchase of certain property from one Shree Amir Mohidin Sheikh by issuing cheques from his personal bank account with Central Bank of India, STES Extension Counter. However Shri M.N. Navale has obtained the acknowledgment erroneously by using the printed management vouchers of STES. The fact however remains that these papers do not relate to the appellant. (See page No. 7 to 19 of this paper book)
b. Page No. 45 mentioned at Serial No. 6 is the copy of the letter dated 23/06/2001 written by the appellant’s college of Pharmacy to the Directorate of Technical Education, Mumbai. The contents do not suggest even remotedly that there could be any hidden income. The Fixed Deposit mentioned in the said letter are duly accounted in the regular books of accounts of the appellant. (See Page No. 20)
c. Page No. 35 mentioned at Serial No. 7 is a piece of paper bearing dated 25/06/2005 and it shows certain figures. It is a dumb paper and does not convey anything. (See Page No.21).
d. Page No. 50 mentioned at Serial No. 8 show the details of staff arrangements made by the appellant and explaining the admission process for the F.Y 2003-04. (See Page No. 22)
e. Page No. 54 mentioned at serial No. 8 is an extract of G.R. Dated 5/09/2003 issued by government of Maharashtra showing the names of new colleges of appellant for which permissions are granted. (See Page No. 23).
f. Pages No. 58 to 60 mentioned at serial No. 9 show the expenditure incurred by Shri M.N. Navale who hosted the party in Hotel Aurora on 29/08/2004 and the amount mentioned therein of Rs. 55811.94 is paid in cash by Shri M.N. Navale and the same has been debited to his Capital Account in his return of income (See Page No. 24 to 26)
None of these pages suggest prima-facie belief of hidden income. These papers re/ate to F.Y. 2004-05 that too of Shri M.N. Navale and none of these papers therefore are related to Financial Years 1999-00 to 2002-03 i.e. (AY. 2000-01 to 2003-04). Therefore on the basis of these documents pertaining to the F.Y. 2005-06 by any standard, there could be any suggestion that even prima-facie there is some hidden income in the Assessment Years 2000-01 to 2003-04, warranting issue of notice u/s. 153C. Therefore the Assessing Officer should not have proceeded mechanically in issuing the notices u/s. 153C.
9. Nothing is seized pertaining to A.Y 2000-01 to 2003-04 obviously there is no question of recording satisfaction note and forwarding those Seized materials to the assessing Office of the appellant.
In absence of any seizure of any asset, documents etc proceeding cannot be initiated against the appellant u/s. 153C(1) rws 153A refer P. Srinivas Naik vs. ACIT – 114 TT3 856 – Bangalore. (See Page No. 53).
10. Though the section 153C only requires the satisfaction to the effect that documents etc., seized belong to the connected person nonetheless it is necessary that seizure or requisition must be of such a character as to persuade the Assessing Officer to even reopen the closed assessments. Refer Delhi High Court judgement in the case of Saraya Ind. Ltd., vs. UOI – 216 CTR 257. Also refer the Supreme Court judgement in the case Mahesh Maheshwari 289 ITR 341 where the Apex Court has held that fiscal law should be constructed strictly. (See page No. 40 and 44)
The term “belong” implies something more than a casual connection and it involves the notion of continuity involving intimate connection over a period of time. Refer Bangalore ITAT Bench judgement in the case of P Shrinawas Naik Vs. Asst. CIT 114 TT3 856. (See Page No. 53).
11. Mere passing of the seized material by the Assessing Officer of the searched person does not amount to recording of requisite satisfaction and proceeding u/s. 153C(1) in such a case will be treated as without jurisdiction. Refer Nauvik Investment and Commercial Enterprise Ltd. Vs. DCIT- 5 DTR 479 – Delhi High Court. Copy enclosed (See page No. 58).
12. The issue of notice u/s. 153C(1) in the absence of the requirement of prima-facie belief that there could be some hidden income it would not be within the predominant object of assessing the undisclosed income for which section 153A and 153C are brought on statute.
13. It is true that section 153C(1) provides that on receiving the requisite satisfaction from the Assessing Officer, the Assessing Officer of the connected person “shall” proceed against the connected person for making the assessment or reassessment u/s. 153A. The word “shall” is indicative of enabling the Assessing Officer with the power to proceed against the connected person and that word is not indicative of a mandatory duty.
Submitted that the word “shall” should be interpreted as only directory. There is a logic to make this proposition. It is because certain documents belonging to the connected person are found with the searched person and if the Assessing Officer finds that the transactions mentioned in the seized material have already been duly disclosed by the connected person or duly recorded in the books of accounts regularly maintained, in that case it would be incorrect or unfair for the Assessing Officer to proceed against the connected person causing unnecessary inconvenience and trouble.
14. It is a known fact that in the course of search while effecting the seizure, the search officials need not have to find out whether the valuable document etc, belonging to the connected person are duly disclosed by him or otherwise and naturally these documents, valuables, etc., are also seized. Therefore mere act of seizure does not by itself lay the foundation for the reasonable prima-facie belief that there is some undisclosed income. The seizure must be of such a character as to persuade the Assessing Officer to even reopen the completed assessment – Sarya Industries vs. UOI – 216 CTR 25/306 ITR 189, (See page No. 40).
The tax law will be interpreted reasonable and inconsonance with justice, adopting a purposive approach to effectuate the legislative intention. Refer CIT Vs. Gwalior Rayon Silk Mfg. Co. Ltd.- Supreme Court – 196 ITR 149 and CIT Vs. Dodsal Ltd., – Bombay High Court – 218 CTR 430. (See Page No. 67 to 75 and Page No. 76 to 78).
The object behind section 153A and section 153C is undisputedly to being to tax undisclosed income and therefore where the Assessing Officer of the connected person is satisfied that the seized materials received by him does not prima-facie indicate the existence of undisclosed income he need not subject the connected person to needless inconvenience by initiating an action u/s. 153C rws 153A.
Such an action of the Assessing Officer would be contrary to the principle of natural justice and has been so held by the Supreme Court in several cases. Refer the judgement of Supreme Court in Sahara India (Firm) vs CIT 216 CTR 303. On the same analogy it will be logical and fair on the part of the Assessing Officer of the connected person to at least get himself satisfied that the transaction noted in the document are of such a nature suggesting non disclosure of income and for that purpose such Assessing Officer may call the connected person and ensure that whether those transactions are infact disclosed and accounted in the regular books of accounts or otherwise.”
5. On the other hand, Ld. DR for the Revenue argued stating that there exists the seizure of the various documents belonging to Sinhgad Technical Education Society (STES) from the premises of Mr Navale and those documents undoubtedly belong to the assessee and in such circumstances, requirement of the law as mentioned in section 153C of the Act are met and therefore, the A.O validly assumed jurisdiction u/s. 153C of the Income Tax Act. Further, as per the DR, there is no need for seizure of ‘any money, bullion, jewellery or other valuable articles or thing or books of account or documents’ with assessment year specificity. Ld DR is of the view that mere seizure of ‘any money, bullion, jewellery or other valuable articles or thing or books of account or documents’ belong to the person covered u/s 153C of the Act is sufficient for the AO to assume jurisdiction in respect of all the six years as per the proviso to section 153A of the Act and there is requirement of the law that there must exist seizure of any of the list mentioned above belonging to all six years before assuming jurisdiction u/s 153C of the Act. Further, Ld DR relied on the order of this bench in the case of Kumar & Company vide ITA no. 1020/PN/08 and others for the A.Y’s 2001-02 to 2003-04 dated 02-02-2010 for the proposition that the AO rightly assumed jurisdiction and he read out the contents of para 24 of some of the findings of the Tribunal.
6. During the time for rebuttal, Ld. Counsel relied on another order of the Tribunal in the case Kumar & Company vide ITA No. 463/PN/08 for the A.Y 2000-01 dated 02-02-2010 and read out para 25 of the said order for the proposition that the A.O cannot assume jurisdiction u/s. 153C unless the documents seized belong to the assessee must not only be a speaking one but also the prima facie incriminating one and the such incriminating material should pertain to the six assessment year attempted to be disturbed by issue of notice u/s. 153C of the Act. As per Ld counsel, the provisions of sec. 153C cannot be invoked automatically in respect of the six A.Y’s, unless there exists incriminating documents for all the six A.Ys and the provision of section 153C cannot be invoked based on the routine information or already accounted information disclosed to the department. Further, it is mentioned that unless some seized papers are available with incriminating document, settled and completed assessment should not be disturbed routinely and automatically merely for the reasons of the first proviso to sec. 153A of the Income Tax Act. Further, he reiterated the argument that considering the fact that the documents are received by the AO on 18/4/2007 relevant to the A.Y 2008-09, the Assessing Officer of the appellant can issue notices u/s. 153C for the A.Y’s 2002-03 to 2007-08 and the issue of notices u/s. 153C for A.Y 2000-01 to 2001-02 is not permissible as held in the judgment of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TT3 508. Further he reiterated that the assessment of A.Y 2003-04 was completed u/s. 143(3) on 30/03/2006. Hence on the date relevant documents were received by the Assessing Officer i.e. 18/04/2007, this assessment was not pending and made u/s. 153(c) therefore, the notice is invalid. Further also he summed up stating that the reasons recorded and the incriminating papers relate to the AY 2005-06 and none of these papers therefore are related to Financial Years 1999-00 to 2002-03 i.e. (AY. 2000-01 to 2003-04) and therefore, the notices issued in respect of the AYs upto 2003-04 should be quashed.
7. We have heard the parties and perused the orders of the revenue. Further, we have gone through the voluminous paper books, written submissions, plenty of citations filed by both the parties to advance their respective arguments. On consideration of the original grounds and the additional grounds, we find it relevant to consider the additional ground first as it relates to the legal issue and it goes into the root of the matter. It questions the validity of the notice issued issued u/s 153C of the Act for all the four AYs under consideration. The relevant discussion is given in the following paragraphs of this order.
8. Additional Ground: Invalid Notices U/s 153C: In this regard, we have perused the reasons recorded by the AO of the assessee. We find that there exists the reasons for issue of notice u/s 153C of the Act and it is an undisputed fact. We also find that they are common reasons for all six AYs including the four AYs under consideration. The Counsel for the assessee argued vehemently that AO issued notices u/s 153C simply relying on the contents of section 153A(1)(b) of the Act and also its first proviso ignoring various settled legal propositions ie the concluded assessments, which fall in the bunch of six AY, should not disturbed unless there exists incriminating material relevant for the said AYs or concluded assessments and such incriminating material should be of that nature it should not be a dumb documents. In this regard, the stand of the revenue is that the express provisions are clear on the proposition that the AO is empowered under the statute to ‘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..” (first proviso). Considering the contrary stands of the parties, without going into the merits of the additions, we have decided to adjudicate the legal issue ie additional ground and it involves the study the details of the reasons recorded by the AO based on which the AO issued the impugned notices u/s 153C of the Act for the impugned four AYs. For this purpose, we have extracted the relevant portion of the reasons and the same read as follows.
9. “Satisfaction Note for proceedings u/s 153C of the I T Act, 1961 in the case of M/s Sinhgad Technical Educational Society(STES), Pune………
“1) page 11 – this is voucher of SinhgadTechnical Education Society (STES) dt. 17-01-2004 for cheque payment of Rs. 2.80 lacs to Amir Moiddin Shaikh.
2) page 12 – this is voucher of STES dt. NIL for cheque payment of Rs. 1 lacs to Amir Moiddin Shaikh.
3) page no. 13- this is voucher of STES Dt. 30.01.2005 for cheque payment of Rs. 2 lacs to ShaikhAmir Shaikh.
4) page no. 14- this is voucher of STES dt. 27.09.2004 for cash payment of Rs. 1 lacs to ShakiAmir Shaikh
5) page no. 15- this is voucher of STES dt. NIL for cheque payment of Rs. 50,000/- to Shaikh Amir Shaikh.
6) pahe no. 45- this is an office copy of letter dt. 23.06.2007 written to director of DTE, Mumbai by Sinhgad College of Pharmacy, owned by STES.
Bundle no. A-2
7) page no. 35- there are the balances available to various institute of STES on or before 25.06.2005.
Bundle no. A-4
8) page no. 50 & 54 – these pages contains the details of staff arrangements made by the STES college of Engineering for admission process for F.Y. 2003-04.
9) page no. 58 to 60- these pages contain the details of expenses incurred by STES.”
From the above, it is demonstrated by the Ld Counsel that the items at sl no 1 to 5 above belongs to the AY 2004-05 or thereafter. Referring to the rest of the items at sl. 6 to 9 above, the Counsel mentioned the said documents seized are either recorded in the books of account or involves cheque transactions. Thus, he summed up stating that the documents in question are neither the incriminating ones nor unaccounted transactions of the assessee and nor they relate to the impugned four AYs. In such circumstances, the AO not only assumed jurisdiction invalidly but also erred in disturbing the settled and completed assessments. Accordingly, AO should not assume jurisdiction in respect of such AYs in the absence of any incriminating information or transactions specific to any of the impugned four AYs ie 2000-01 to 2003-04. The contrary argument from the side of the revenue is that the overall approach in matters of concealment by the group assesses and all the discoveries of the search on Mr Navale and it concerns, have to be taken into account while forming the satisfaction within the meaning of section 153C of the act. Considering the divergent views of the parties, we have examined the said satisfaction note very closely and found that the impugned reasons mentioned by the AO are silent in so far as any AY-Specific-Incriminating-Information (ASII) or others ie unaccounted or undisclosed or hidden information to the revenue by the assessee. In our opinion, the impugned satisfaction note is very general one for six years. It is surprising to note that the AO has narrated some information against the Mr Navale HUF, which is not relevant for the present assessee. In the process, the AO totally missed the requirements of the law ie only the AY with the pending assessments and the AY with the AY specific incriminating documents/ transactions or seized asset should only be reopened under the provisions of the first proviso to section 153A of the Act and not otherwise.
10. In this regard, we have perused various legal propositions. First, we have perused the decision of this Tribunal in the case of Kumar Company for the AY 2000-01 (supra) and para 26 of the M/s. Kumar and Company vide ITA No. 463/PN/08 for the A.Y 2000-01 and the same reads as follows:-
25. Thus, we find that the seized documents belong to the assessee by way of limited ownership and they are not dumb documents as advocated by the Ld Counsel for the reason mentioned above. However, they are not found to be incriminating documents for the A”2000-01.
The document may not be a dumb document and therefore a speaking one, but they must be the document with prima facie incriminating information too. Such incriminating nature of the seized document is an essential factor for switching on the proceeding u/s 153C. In other words, the document seized must not only be a speaking one’ but also be prima facie incriminating one’ for igniting the proceedings u/s153C. Unlike other AYs, there is nothing made out by the AO what is called incriminating for the current AY under consideration. When the impugned documents merely contains the notings of entries, which are already found place in the books of accounts or subjected to scrutiny ofthe AO in the past in regular assessment u/s 143(3) ofthe Act, such document cannot be said to be containing the incriminating information. What is the point in disturbing the settled assessment when the revenue does not have incriminating information for an AY and the information what is available is only routine one and when the AO merely makes an addition in the assessment u/s 153C based on change of opinion and when such additions are likely to be deleted in view of the settled nature ofthe issues? Income Tax provisions are not merely for the issue of notice u/s 153C but it is essentially for taxing the income of the person. What is point in issuing notice u/s 153C on flimsy grounds and finally tax nothing? Such proceedings only creates avoidable nuisance both to the over-burdened taxman and the much hazzled taxpayers. In the instant case, provisions of section 153C are invoked merely to apply the provisions of section 45(4) in this year, the issue which was already examined and concluded as inapplicable to the facts of the case. Such issue of notice is unwarranted and such reopening of the assessment for the AY2000-01 is uncalled for.
26. Therefore, the proceedings initiated u/s 153C is not valid in view of the decision in the case of LMJ International (supra). Under these circumstances, we are of the opinion, the AO has invalidly issued the notice u/s 153C for the AY 2000-01 on the wrong presumption that AO can assume jurisdictional in respect all the six A”s automatically even with out any incriminating documents in respect of the concluded issues too. Accordingly, the relevant grounds ofthe assessee are allowed.
12. From the above, it is our finding that the reasons recorded by the AO as extracted above do not contain anything incriminating for the AYs upto 2003-04. It is the settled position of the law based on the decision of the Tribunal in the case of LMJ International (supra) that the issue of notice under the provisions of the first proviso to section 153A(1) of the Act is not automatic and there is need for AY-Specific Incriminating Information (ASII) in the possession of the AO to be the fountain head for springing satisfaction to him that there exists some income or asset to be assessed in the hands of any other person, who are referred to in section 153C of the Act. Reason for this kind of interpretation was already given in para 25 and 26 of our order in the case of Kumar Company for the AY 2000- 01. In this regard, we posed question to ourselves if it is fair to reopen the assessment which is already concluded without any reason or logic thereby encroach on the rights of the tax payers? Should the AO be given unfettered or arbitrary powers to issue notice for the six AYs specified in the first proviso to section 153A(1) of the Act when the impugned assessments for the said six AYs are otherwise reached finality after due process of law. In our opinion, the answer is negative and it is in favour of the assessee. In any case, DR has not brought anything on record to demonstrate that the decisions given by the Tribunal in the case of LMJ International (supra) and M/s Kumar Company (supra) are not to be followed in this case. Our perusal of another order of the Tribunal in the case of M/s Kumar Company for the AY 2201 to 2003-04 vide ITA No 1020,1250,1021,1251,1022 & 1252/PN/2008, relied upon by the Ld DR is found distinguishable in so far as the existence of the incriminating document for the relevant AY is concerned. Whereas, in the instant case, first of all, there is no mention of any document in the said reasons relatable to the impugned four years and the incriminating nature of the same is out of question. Therefore, reliance of the DR on the said case is misplaced.
13. Further, we have examined various other judicial propositions mentioned by the Ld Counsel and some of them are reproduced as under.
1) Anil Kumar Bhatia & Ors. (2010) 1 ITR (Trib) 484 (Del)
Conclusion:- ‘In respect of an assessment under s. 153A, where processing returns under s. 143(1)(a) stood completed in respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made.”
2) Suncity Alloys (P) Ltd. (2009) 124 TTJ (Jd) 674
Conclusion: – ‘Assessments or reassessments made pursuant to notice under s. 153Aare not de novo assessment and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation ofaction under s. 132.”
3) Meghmani Organics Ltd. (2010) 129 TTI (Ahd) 255
Conclusion: – “Record maintained by a person for his own purpose though referable to the assessee cannot be said to be belonging to the assessee within the meaning of s. 153C. Further, where none of the assessments are pending on the date of action under s. 153C, such assessments do not abate.”
4) LM) International Ltd. (2008) 119 TTI (Kol) 214
Conclusion:- “Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed; items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect ofthe disallowed amounts in the search proceedings.”
5) Kailash Auto Finance Ltd. (2009) 32 SOT 80 (Luck)
Conclusion:- “Anotice under s. 148(1) can be issued even where notice under s. 143(2) has been pending and not closed. By processing the return and by issuing acknowledgment as token of accepting the return, the proceedings initiated by filing the return are terminated and no proceedings, therefore, remain pending.”
6) R.M.L. Mehrotra (2010) 320 ITR 403
Conclusion: – “Undisclosed income of the block period has to be determined on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the A.O and relatable to such evidence; AO cannot compute the income on the basis of best judgement.”
14. From the above, it is evident that the where nothing AY and assessee specific incriminating “money, jewellery or other valuable article or thing or books of account or documents”, the assessments for assessee years cannot be distributed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwise done in the regular assessment and of course, the pending assessments fall under exceptions. As stated by the Ld Counsel point no 9 of his note reproduced above, “nothing is seized pertaining to A.Y 2000-01 to 2003-04 obviously there is no question of recording satisfaction note. On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the AY 2000-01 to 2001-02 is impermissible in view of the judgment of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TT3 508.
Further, he also argued that the assessment of A.Y 2003-04 was actually completed u/s. 143(3) on 30/03/2006 ie prior to receipt of the impugned documents by the Assessing Officer on 18/04/2007, this assessment was not pending. Attending to these arguments of the counsel is superfluous and merely an academic exercise as we have upheld the applicability of the decision of the Tribunal in the case of LMJ International Ltd (supra) for the proposition that the
“where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed”
and other local decision cited above. Accordingly, the additional ground raised by the assessee for all the four appeals under consideration are allowed and in favour of the assessee.
15. As the additional ground for all the four years are allowed in favour of the assessee, we are of the considered opinion the adjudication of the grounds relating to the merits of the additions is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic.
16. In the result, all four appeals of the assessee are allowed. Order is pronounced in the open court on 28th January 2011.
(I.C. SUDHIR) (D.KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune dated the 28th January, 2011.