Initiation of proceedings u/s 153C based on documents impounded during survey u/s 133A is bad in law
Case Law Details
Sai Shraddha Enterprises Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that initiation of proceedings under section 153C of the Income Tax Act based on documents impounded during the course of survey under section 133A of the Income Tax Act is bad in law and unjustified as no such material were found during the course of search.
Facts- A search was carried out u/s. 132 of the Act and survey u/s. 133A of the Act was also carried out on 31st July, 2014 in Ameya Group of cases. The survey u/s. 133A of the Act was carried out and documents were impounded showing cash transactions belonging to the assessee.
On perusal of such impounded documents, it was seen that some of the papers belong to the assessee and having a bearing on the determination of total income of the assessee. The relevant assessment years were 2011-12 to 2014-15.
Accordingly, after recording the satisfaction note a notice u/s. 153C of the Act was issued on 30th September, 2015 by A.Y. 2009-10 to 2014-15. The assessee filed ROI u/s. 153C of the Act for all the years on 10th November, 2015 at ₹ nil. Subsequently, notice u/s. 143(2) of the Act was also issued and further notice u/s. 142(1) of the Act was also issued.
AO found that assessee has incurred cash expenditure which are recorded in the books of account of the assessee amounting to ₹7,11,07,000/- for A.Y. 2011-12, ₹77,75,000/- for A.Y. 2012-13, ₹1,38,87,500/- for A.Y. 2013-14 and ₹92,99,900/- for A.Y. 2014-15.
Accordingly, the addition u/s. 69C of the Act of ₹7,11,07,000/- was made for A.Y. 2011-12.
CIT(A) confirmed the additions. Being aggrieved, the present appeal is filed by the assessee.
Conclusion-
Held that additions made in the hands of the assessee were arising out of the documents impounded during the course of survey under Section 133A of the Act on 31st July, 2014. Thus, no material was found during the course of search based on which addition u/s 153C of the Act is made. Merely because search and survey are carried out simultaneously at several places, material found during the course of survey does not authorize the AO to make assessment u/s 153C of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
01. These are the four appeals filed by Sai Shraddha Enterprises (the assessee/ appellant) for A.Y. 2011-12 to 2014-15 against the assessment order passed under Section 143(3) read with section 153C of the Income-tax Act, 1961 (the Act), wherein the learned CIT (A) vide order dated 21st February, 2020, dismissed this appeal for all these years by common order dated 21st February, 2020.
02. Similar orders were passed for other three assessment years which are also under challenge.
03. In all these appeals, the assessee has raised an additional ground of appeal common to all four assessment years. The additional ground is as under:-
“On the facts in law, the learned Assessing Officer erred in invoking the provisions of Section 153(3) of the Income-tax Act, 1961 for framing the assessment under Section 143(3) read with section 153C of the Income-tax Act, 1961), inspite of the fact that the alleged incriminating evidences were neither seized nor requisitioned in the course of search action under Section 132, but were impounded during the survey action under Section 133A and therefore, the initiation of proceedings under Section 153C of the Act was not justified by law and the resultant assessment framed under Section 143(3) read with section 153C be quashed, holding the same to be bad in law as void-ab-initio.
The application for the admission of the additional evidence states that the above ground is legal in nature, relevant facts are on record and it goes to the root of the matter being jurisdictional issue.
Therefore, same may be admitted.”
04. The learned Authorized Representative reiterated on the same facts and arguments.
05. The learned Departmental Representative vehemently objected to the above ground stating that same has not been raised before the lower authorities therefore, same may not be admitted.
06. We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that in the above ground, the assessee has challenged jurisdiction under which the assessment order should have been passed. The ground raised by the assessee is legal in nature, goes to the root of the matters, jurisdictional in nature and does not require any further investigation of facts. Therefore, same is admitted for all the four years.
07. We first state the facts of the case for A.Y. 2011-12, which is the first year. The assessee is a partnership firm engaged in the business of builders and developers. A search was carried out under Section 132 of the Act and survey under Section 133A of the Act was also carried out on 31st July, 2014 in Ameya Group of cases. The survey under Section 133A of the Act was carried out and documents were impounded showing cash transactions belonging to the assessee. On perusal of such impounded documents at premises of 1st Floor, Narsinh Smruti Building, Gaothan, Virar (W), Mumbai, it was seen that some of the papers belong to the assessee and having a bearing on the determination of total income of the assessee. The relevant assessment years were 2011-12 to 2014-15. Accordingly, after recording the satisfaction note a notice under Section 153C of the Act was issued on 30th September, 2015 by A.Y. 2009-10 to 2014-15. The assessee was also provided the copies of the statements recorded on 23rd March, 2015. The assessee filed return of income under Section 153C of the Act for all the years on 10th November, 2015 at ₹ nil. Subsequently, notice under Section 143(2) of the Act was also issued and further notice under Section 142(1) of the Act was also issued. Several unaccounted cash payments were found, all the documents impounded during the survey vide bundle 2 of party A-29 at the address, where the survey was carried out, for all such assessment years cash payments were tabulated at ₹10,20,69,400/-. Consequently, explanation of the assessee was obtained.
08. The learned Assessing Officer found that assessee has incurred cash expenditure which are recorded in the books of account of the assessee amounting to ₹7,11,07,000/- for A.Y. 2011-12, ₹77,75,000/- for A.Y. 2012-13, ₹1,38,87,500/- for A.Y. 2013-14 and ₹92,99,900/- for A.Y. 2014-15. Accordingly, the addition under Section 69C of the Act of ₹7,11,07,000/- was made for A.Y. 2011-12 and consequently, assessment order under Section 143(3) read with section 153C of the Act was passed on 15th September, 2016, determining the total income of the assessee at ₹ 7,11,07,000/-
09. Assessee challenged the assessment order before the learned CIT (A), Pune-11, and [the learned CIT (A)]. The assessee argued the additions on the merits of the case, which was confirmed by the learned CIT (A). The learned CIT (A) passed a consolidated order for A.Y. 2011-12 to 2014-15 confirming the additions on the merits of the case. Therefore, now assessee is in appeal before us.
010. On the additional ground, the learned Authorized Representative submitted that the alleged incriminating evidence on which the addition is made were not seized in the case of search action under Section 132 of the Act, but these are the documents impounded during the survey under Section 133A of the Act and therefore, all these four assessment orders passed under Section 143(3) read with section 153C of the Act are not valid. The correct course of action would have been to make the assessment under Section 143(3) or under Section 147 of the Act. The crux of the argument was that the assessment is framed on the basis of documents impounded during the course of survey under Section 133A of the Act and therefore, the learned Assessing Officer is not authorized to make / pass an assessment order under Section 153C of the Act where there is no seized documents pertaining to / belong to assessee. Thus, it was claimed that all these assessment orders are liable to be quashed.
011. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and submitted that when the search and survey actions were carried out on 31st July, 2011 simultaneously, all the documents whether found during the course of survey or during the search, on the same day authorizes the learned Assessing Officer to pass an assessment order under Section 153C of the Act. He specifically referred to the factual report of the learned Assessing Officer dated 27th October, 2022.
012. We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact clearly shows that a search under Section 132(1) as well as survey under Section 133A of the Income-tax Act, 1961 (the Act) was carried out at various premises of Ameya Group, Virar, Mumbai. During the course of survey under Section 133A of the Act at ground and 1st floor, Narsinh Smruti Building, Gaothan, Virar (W), Mumbai on 31st July, 2014, the documents were impounded as bundle no. 2 of party A-29. Based on this material, the addition under Section 69C of the Act is made in the hands of the assessee by invoking the provisions of section 153C of the Act. On careful reading of the assessment orders at page no.1 and 2 in Para no.1 and at page no.4 in Para no.7.1, the learned Assessing Officer specifically referred to the survey action at the above address and impounded incriminating document found during the course of survey which is the basis of addition under Section 69C of the Act. It is also admitted fact that no search under Section 132 of the Act was carried out at the premises i.e. ground floor and first floor of Narsinh Smruti Building, Gaothan, Virar (W), Mumbai, where the evidences were found, based on which the addition under Section 69C of the Act is made for all these four years u/s 153C of the Act. satisfaction note dated 30th September, 2015, recorded under Section 153C of the Act is also produced before us which is placed at page no.152 and 153 of the Paper Book which clearly shows that the evidences and documents based on which the addition is made were impounded from the place where survey action took place. Further, order under Section 133A (3)(ia) of the Act dated 31st July, 2014 was also passed by the learned Assessing Officer on 2nd August, 2014, which clearly shows that the documents were impounded during the course of survey. There is no order required to be passed under Section 133A of the Act if the documents are found and seized during the course of search. Thus, apparently, the addition has been made in the hands of the assessee on the basis of material found during the course of survey and not search. The factual report submitted by the learned Assessing Officer on 27th October, 2022 which also say so. Performa for recording satisfaction note under Section 153C of the Act dated 30th September, 2015 in column no.5 (b) of the Act which shows description of the seized material also says that the material is impounded during the course of survey. In proforma, relevant details in Panchanama in column no. 5(d), the details of impounding order dated 2nd August, 2014 is mentioned. Further also it is clear that all the additions made in the hands of the assessee were arising out of the documents impounded during the course of survey under Section 133A of the Act on 31st July, 2014. Thus, no material was found during the course of search based on which addition u/s 153C of the Act is made. Merely because search and survey are carried out simultaneously at several places, material found during the course of survey does not authorize the LD AO to make assessment u/s 153C of the Act.
013. In view of this, the assessment order passed under Section 153C of the Act for A.Y. 2011-12 to 2014-15 are not sustainable. Therefore, same are quashed.
014. Additional ground raised by the assessee for all the four years are allowed.
015. In view of above, our finding, the additions on the merits are not required to be adjudicated.
016. In the result, all the four appeals of assessee are allowed.
Order pronounced in the open court on 29.12.2022.
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