Case Law Details
DCIT Vs Suraj Limited (ITAT Ahmedabad)
ITAT Ahmedabad held that AO had no jurisdiction to initiate proceedings u/s. 153C of the Income Tax Act beyond permissible period of six years from date of receipt of books/ documents by AO.
Facts- A search u/s. 132 of the Act was carried out in Suraj Group of cases on 18.12.2013. Certain incriminating documents belonging to the assessee was found during the course of search proceeding. Therefore, the AO initiated proceeding u/s. 153C of the Act against the assessee. The assessment was completed u/s. 143(3) r.w.s. 153C of the Act on 29.03.2016 at total income of Rs.11.06 Crores.
CIT(A) had deleted the addition of Rs. 11 Crore in respect of share application money by holding that addition was not based on any incriminating material found during the search. Being aggrieved, revenue has preferred the present appeal.
Conclusion- There is no ambiguity that for the proceedings under Section 153C of the Act, the year of search shall be substituted by the year of receipt of books or documents by the AO of the other person and thereafter the period of six years has to be counted backwards from that year. In the instant case, seized documents were deemed to be transferred to the common AO on the date of recording of satisfaction by the common AO in F.Y. 2015-16 relevant to A.Y. 2016-17. Therefore, the proceeding u/s 153C could have been validly initiated in the case of the assessee for the six years preceding the A.Y. 2016-17 i.e. for the A.Y.2015-16 to A.Y.2010-11 only.
Held that the AO had no jurisdiction to initiate proceedings under Section 153C of the Act for the A.Y. 2008-09, as it was beyond the permissible period of six years from the date of recording of satisfaction of the common AO and deemed handing over of the seized documents pertaining /belonging to the assessee. Therefore, the assessment order passed u/s 153C of the Act for the A.Y. 2008-09 is quashed due of the lack of jurisdiction of the AO to initiate the proceeding u/s 153C for this year.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, (in short ‘the CIT(A)’) dated 18.06.2019 for the Assessment Year 2008-09.
2. The brief facts of the case are that a search under Section 132 of the Act was carried out in Suraj Group of cases on 18.12.2013. Certain incriminating documents belonging to the assessee was found during the course of search proceeding. Therefore, the AO initiated proceeding under Section 153C of the Act against the assessee for the A.Y. 2008-09 by issuing notice under Section 153C of the Act on 11.01.2016. In response, the assessee had filed e-return on 20.01.2016 declaring Nil income. The assessment was completed under Section 143(3) r.w.s. 153C of the Act on 29.03.2016 at total income of Rs.11.06 Crores.
3. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned order. The Ld. CIT(A) had deleted the addition of Rs. 11 Crore in respect of share application money by holding that addition was not based on any incriminating material found during the search.
4. Now, the Revenue is in appeal before us. The following grounds have been taken in this appeal:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of share application money of ₹ 11,00,00,000/- on account of addition u/s 68 of the Act
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of 6,00,000/- made by the AO on purchase and sale of shares treating the same as bogus loss.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.
4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A. O. be restored to the above extent.
5. An additional ground was taken by the Revenue, which is as under:
1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that such additions made are not based on any material seized during the course of search proceedings without appreciating the fact that books of accounts were seized during the course of search and addition was made only on the basis of incriminating seized materials.”
6. The assessee has raised following two legal grounds vide application under Rule 27 of the ITAT Rules:
“a The Lad. AO has erred in law and on facts while framing the assessment u/s. 143(3) r.w.s. 153C of the Act on the basis of the Notice issued u/s. 153C of the Act upon a legally non-existent company on the date of issue of the notice. In view of the facts and legal position, the impugned order passed u/s. 143(3) r.w.s. 153C of the Act deserves to be quashed/cancelled being void-ab-initio and unsustainable at law.
b The Ld. AO has erred in law and on facts while making the addition/disallowance, in absence of any incriminating material indicating any unaccounted investment by the appellant company or relating to the investment made by Ganesh Plantations Ltd. as well as purchase and sale of shares of Suraj Stainless Ltd. In view of the settled legal position by the various courts of law that in 153C assessment proceedings, additions cannot be made unless they are based on any incrimination material or inquiries based on such material, the impugned addition/disallowance made by the AO is unjustified, illegal and hence deserves to be deleted.”
7. Dr. Darsi Suman Ratnam, Ld. CIT.DR and Shri Jignesh Parikh, Ld. AR for the assessee were heard in respect of the grounds as taken by the Revenue as well as the grounds raised by the assessee. The matter was heard on 6th June, 2024 and reserved for orders. Subsequently, it was noticed by us that proceeding under Section 153C of the Act was initiated in this case on 11.01.2016 for the A.Y. 2008-09. The Hon’ble Supreme Court had held in the case of CIT vs. Jasjit Singh, [2023] 155 taxmann–com 155 (SC) that the block period for the proceeding under Section 153C of the Act has to be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person. The Co-ordinate Bench of this Tribunal has also taken an identical view in the case of Ushaben Jayantilal Patel vs. ITO in IT(SS)A No. 12/Ahd/2024 dated 01.07.2024 [authored by one of us (Accountant Member)]. As the notice under Section 153C of the Act was issued in this case on 11.01.2016, it prima facie transpired that the six years for which proceeding under Section 153C of the Act could have been initiated in this case were the A.Ys. 2015-16 to 2010-11 only. Thus, the proceeding under Section 153C of the Act initiated for the A.Y. 2008-09 in this case was found to be not in order and beyond the permissible period. Therefore, the matter was fixed for clarification on this issue. This matter was heard on 15th July, 2024 and thereafter on 6th August, 2024. The submissions filed by the Revenue and the assessee in this regard have been taken on record.
8. The issue regarding proceeding under Section 153C of the Act for the A.Y.2008-09, being beyond the permissible period of six years was not raised by the any of the parties. The assessee also has not taken any specific ground in this regard. Nevertheless, this issue goes to the root of jurisdiction of the AO to initiate proceeding u/s 153C of the Act for the A.Y. 200 8-09. Therefore, we are of the opinion that this issue needs to be adjudicated first before we find it necessary to take up the grounds as raised by the Revenue and the assessee.
9. The Ld. CIT.DR, Dr. Darsi Suman Ratnam submitted that no such specific ground was taken by the assessee that the proceeding under Section 153C of the Act for A.Y. 2008-09 were beyond the limitation period. He submitted that in the case of Jasjit Singh (supra) as well as in the case of Ushaben Jayantilal Patel (supra), the assessee had taken specific ground challenging the validity of proceeding under Section 153C of the Act for the specific year. According to the Ld. CIT.DR, in the absence of any such specific ground being taken by the assessee, the Ld. ITAT was not competent to decide this issue by taking suo motto notice. He further submitted that in the case of Jasjit Singh (supra) as well as Ushaben Jayantilal Patel (supra), the AO of the searched person and the AO of the respective assessee were different and there was actual transfer of documents pertaining to the assessee from the AO of searched person to the AO of other person. In the present case, however, the AO of the searched person and the AO of the other person was the same and there was no requirements of transfer of seized documents belonging / pertaining to the assessee. The issue of notice under Section 153C of the Act in the case of the present assessee was only a technical requirement without transfer of the seized documents. Therefore, the facts of the present case were different from the facts of the Jasjit Singh (supra) & Ushaben Jayantilal Patel (supra) and, therefore, the ratio of the said decision cannot be applied to the facts of the present case. According to the Ld. CIT.DR, only the date of search needs to be applied in the present case to calculate the block period for initiating proceeding under Section 153C of the Act. He further submitted that since the hearing of the present case was concluded on 06.06.2024 and only a clarification on specific point was sought by the Ld. Tribunal, the assessee was not entitled to raise any specific ground on the basis of fresh facts. The Ld. CIT.DR vehemently contended that the judgment in the case of Jasjit Singh (supra) & Ushaben Jayantilal Patel (supra) was not applicable to the facts of the present case.
10. Per contra, Shri Jignesh Parikh, Ld. AR for the assessee submitted that it was a settled legal principle that consent can’t confer jurisdiction when the jurisdiction could be created only by fulfilment of the precedent conditions and he placed reliance in this regard on the decision of the jurisdictional High Court in the case of P V Doshi Vs. CIT (113 ITR 22) (Gujarat). He further submitted that following the decision of the Supreme Court in the case of Jasjit Singh (supra) the proceeding u/s 153C couldn’t have been initiated in the case of the assessee for the A.Y. 2008-09. The Ld. Counsel submitted that the issue of jurisdiction goes to the root of the matter and that under the provisions of the Act the Ld. ITAT had powers to examine this issue even if no specific ground was taken by the assessee in this regard.
11. We have given a thoughtful consideration to the issue and deeply pondered over the rival submissions. The contention of the Revenue is that the AO of the searched person and the AO of the other person was the same in this case and there was no requirement to transfer the seized documents belonging /pertaining to the assessee. Therefore, according to the Revenue, only the date of search needs to be applied in the present case as the reference point to calculate the block period of six years for initiating proceeding under Section 153C of the Act. As per the scheme of the Act, the year of search is considered as the reference point to determine the preceding six years only in respect of the searched person, where the proceeding is initiated u/s 153A of the Act. In case of non-searched person, proceeding is initiated u/s 153C of the Act and not u/s 153A of the Act. As no warrant of authorization was issued in the name of the assessee, even though the search was conducted in the group, we have to find out the reference point for considering the preceding six years in this case, u/s 153C of the Act.
12. As per provision of Section 153C of the Act, if the AO of the searched person is satisfied that any books of accounts or documents or assets belong or pertain to other than the searched person (other person), then such books of accounts or documents or assets shall be handed over by the AO of the searched person to the AO of the other person. In the present case the AO of the searched person and the AO of the other person was same. Therefore, there was no requirement of actual handing over of the seized documents belonging to the assessee to any other AO. Nevertheless, in order to assume jurisdiction on the case of the other person it is necessary for the common AO to record his satisfaction that the seized document pertains/belongs to the other person. Until and unless he records such satisfaction, he can’t assume the jurisdiction to initiate proceedings u/s 153C of the Act in the case of other person. The condition of recording satisfaction note by the AO of the searched person was, therefore, required to be mandatorily complied in this case as well.
13. In the course of hearing, vide order sheet note dated 11.09.2023, the Ld. CIT.DR was required to produce the satisfaction note of the AO of the searched person while handing over the documents found during the search and relating to the assessee, as prescribed by law under Section 153C of the Act. The satisfaction note as recorded by the AO of the searched person was not produced by the Revenue and a reply of the AO [DCIT, Central Circle-1(3)] dated 13.10.2023 was filed, which is reproduced below:
“2. It is submitted that in the case of Suraj Group of cases, a search action u/s 132 of the Act was carried out on 18.12.2013 M/s. Suraj Limited being one of the entities of the group was also covered in the search. During the course of search proceedings, various indiscriminating documents belonging to the assessee i.e. M/s. Suraj Limited was found and seized. Accordingly, the centralization was recommended by the Investigation Officer to DCIT Central Circle 1(3), Ahmedabad vide DGIT(Inv) Ahmedabad’s order No. DGIT(Inv. )/HQ/Ahd/Centr-Suraj Gr/201 3-14 dated 07/03/2014. Further, in the centralization proposal itself, M/s. Suraj Limited was recommended to be assessed u/s153C of the Income Tax Act based on post search findings. Thus, deriving clear cut satisfaction drawn by the Investigation Officer, seized material and based on specific recommendation of action under section 153C of the IT Act proceedings u/s 153C were initiated as per the law by issuing notice u/s. 153C of the I.T. Act following due procedure.Satisfaction drawn by the Investigation Officer, facts narrated in the appraisal report on seized material and specific recommendations for initiation of proceedings u/s 153C of the act, are enclosed to this effect. Therefore, the AO has taken due cognizance of specific recommendations as is evident from the additions made in the assessment order. The AO has also adopted the line of investigation as recommended by the Investigation Officer while processing action u/s 153C of the act. However, as the matter of assessment is very old and due to piling of assessment records one over the other, there is a possibility of misplacement of specific folder / page deriving satisfaction under section 153C of the act as the AO of the searched assessee and the AO over M/s Suraj Limited was one and the same. Such non availability or misplacement may kindly not to be construed as non-deriving of satisfaction u/s 153C of the act
2.1 Further it is humbly submitted that issues related to M/s Suraj Limited very thoroughly elaborated in the appraisal report are binding on the Assessing Officer of the Central Circle and the AO is duty bound to follow the same unless he/she finds any deviation based on specific investigations carried out. But in this case, no such deviation even, was suggested by the AO which clearly shows that AO had been very much clear about Satisfaction drawn by the Investigation Officer, facts narrated in the appraisal report on seized material and specific recommendations for initiation of proceedings u/s 153C of the act. Therefore, the order of the AO may kindly be held valid and in accordance with law.
2.2 Still efforts are on to trace that specific folder / page deriving satisfaction under section 153C of the act as the AO of the searched assessee and the AO over M/s. Suraj Limited was one and the same and there is a possibility that it might be tagged together at one specific folder kept separately for action u/s 153C of the act or may be tagged with other cases of the same group.”
14. Even if we accept the contention of the Revenue that there was no requirement of transfer of seized documents from one AO to another in this case, the proceeding under Section 153C of the Act could have been initiated only after recording of satisfaction by the AO of the searched person. It has been held by the Hon’ble Supreme Court in the case of Super Malls (P.) Ltd. vs. Pr. CIT [2020] 273 Taxman 556 (SC) that before issuing notice under Section 153C of the Act the AO of the searched person must be satisfied that any document seized or requisitioned belongs to a person other than the searched person. The recording of satisfaction by the AO of the searched person is sine qua non to initiate proceeding u/s 153C of the Act, even in a case where the AO of the searched person and AO of the other person is common. To quote from the order of the Hon’ble Supreme Court:
6. This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd. (supra). As held, before issuing notice under Section 153C of the Act, the Assessing Officer of the searched person must be “satisfied” that, inter alia, any document seized or requisitioned “belongs to” a person other than the searched person….
6.1…. At the same time, the satisfaction note by the Assessing Officer of the searched person that the documents etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the Assessing Officer of the other person is mandatory. However, in the case where the Assessing Officer of the searched person and the other person is the same, it is sufficient by the Assessing Officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, then the requirement of Section 153C of the Act is fulfilled. In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself. (Emphasis supplied.)
15. Thus, the recording of satisfaction by the AO of the searched person is a mandatory requirement for initiation of proceeding under Section 153C of the Act. It is only by recording the satisfaction that the common AO assumes the jurisdiction to issue notice u/s 153C of the Act in respect of the other person. Further, it is only on the date of recording of satisfaction that the AO of the other person will assume the jurisdiction to initiate proceeding under Section 153C of the Act in respect of the other person. Therefore, the submission of the Revenue that only the date of search needs to be applied to calculate the time limit in the present case, is neither correct nor in accordance with the provision of law as well as the decision of Hon’ble Supreme Court in the case of Super Malls (P.) Ltd.(supra). It doesn’t matter whether the assessee is related or unrelated to the searched group. The date of recording of satisfaction by the AO of the searched person will be the relevant date to initiate the proceeding under Section 153C of the Act and the time limit of six assessment years has to be computed with reference to the date of recording of satisfaction by the AO of the searched person. The seized documents pertaining to the other person will be deemed to be transferred to the AO of the other person on the date of recording of satisfaction by the common AO. Since, the Revenue has not produced the satisfaction note recorded by the common AO in this case, one can only presume that satisfaction was recorded immediately prior to the issue of notice under Section 153C of the Act. As per standard practice of the Department the notice u/s 153C is issued immediately after recording of satisfaction. Since the notice under Section 153C of the Act was issued on 11.01.2016 in this case, the year in which the satisfaction note was recorded and the documents were deemed to be transferred to the AO of the present assessee has to be taken as the financial year 2015-16 relevant to A.Y. 2016-17. Therefore, the six preceding years for which proceeding under Section 153C of the Act could have been validly initiated in this case were A.Ys. 2015-16 to 2010-11 only. The proceeding under Section 153C of the Act for A.Y. 2008-09 as initiated in this case is, therefore, not found within the permissible limit of 6 years from the date of deemed handing over of documents by the AO of the searched person to the AO of the other person.
16. It will be relevant to refer to first proviso of Section 153C of the Act which explains the date of initiation of search for the proceedings under Section 153C of the Act as under:
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:
The above proviso makes it crystal clear that the date of initiation of search as referred in 2nd Proviso of Section 153A of the Act shall be construed as reference to the date of receiving the books of accounts or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. Thus, the date of receiving of the books of accounts by the AO of the other person shall be treated / deemed as date of search and six years preceding to that year will be construed as the relevant years for which proceedings under Section 153C of the Act can be initiated in respect of such other person.
17. The Hon’ble Delhi Court has categorically held in the case of PCIT vs. Ojjus Medicare (P.) Ltd., [2024] 161 com160 (Delhi) that in case of a search assessment undertaken under Section 153C of the Act, the previous year of search would stand substituted by the date or the year in which the books of accounts / documents and assets seized are handed over to the jurisdictional AO of the other person as opposed to the year of search which constitutes the basis for an assessment under Section 153A of the Act. Thus, the block period for the proceedings under Section 153C of the Act has to be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person. This principle has been upheld by the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh (supra), wherein it was held that in case of other person the period for which they were required to file returns u/s 153C of the Act, commenced only from date when materials were forwarded to their jurisdictional Assessing Officers. The Apex Court categorically held that the proviso to section 153C(1) catered not merely to question of abatement but also with regard to date from which six year period was to be reckoned, in respect of which returns were to be filed by third party whose premises were not searched and in respect of whom specific provision of section 153C was enacted.
18. In view of the above legal position, there is no ambiguity that for the proceedings under Section 153C of the Act, the year of search shall be substituted by the year of receipt of books or documents by the AO of the other person and thereafter the period of six years has to be counted backwards from that year. In the instant case, seized documents were deemed to be transferred to the common AO on the date of recording of satisfaction by the common AO in F.Y. 2015-16 relevant to A.Y. 2016-17. Therefore, the proceeding u/s 153C could have been validly initiated in the case of the assessee for the six years preceding the A.Y. 2016-17 i.e. for the A.Y.2015-16 to A.Y.2010-11 only.
19. In view of the above facts, we are of the considered opinion, that the AO had no jurisdiction to initiate proceeding under Section 153C of the Act for the A.Y. 2008-09. As the issue of jurisdiction goes to the root of the matter the order of the AO passed under Section 153C r.w.s. 143(3) of the Act, is found to be beyond jurisdiction and is liable to be quashed.
20. The other contention of the Revenue is that the Tribunal is not empowered to adjudicate an issue, which is neither raised by the Revenue nor by the assessee, and that the jurisdiction of the Tribunal is necessarily restricted to the subject matter of the dispute before the First Appellate Authority. Further that the Tribunal cannot allow the assessee or the Department to dispute new items or entertain new claims for the first time nor can it consider such issues on its own. In this context it will be relevant to refer to the provision of Section 254(1) of the Act which reads as under:
“The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.”
21. The contention of the Revenue is that what the Tribunal is primarily entitled to do, is to determine the objections raised by the appellant before it and the word ‘thereon’ limits the jurisdiction of the Tribunal to the subject matter of appeal. However, upon perusal of the powers of the Appellate Tribunal as enshrined in Section 254(1) of the Act, it can be seen that widest jurisdiction has been conferred on the Tribunal which has been given powers to pass such orders, “as it thinks fit”. Further, Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 stipulates as under:
11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule:
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. (emphasis supplied)
22. This Rule, in no unequivocal terms, gives power to the Tribunal to not to confine its decision only on the grounds as set forth in the memorandum of appeal or the grounds as allowed in the course of hearing. This Rule doesn’t circumscribe or control the power of the Tribunal to pass the orders in the manner as it thinks fit. A constructive reading of section 254(1) of the Act and Rule-11 of ITAT Rules makes it amply clear that the ITAT is competent to consider any ground or issue not taken by either of the parties, if the same is found relevant to decide the appeal pending before it.
23. It is amply evident from the provision of Section 254 of the Act and Rule 11 of ITAT Rules that the power of Tribunal while dealing with the appeal is expressed in the widest possible terms. The Tribunal has jurisdiction to go into every aspect of the assessment proceedings before the taxing authorities. The Tribunal also has a jurisdiction to examine a question of law which arose from the facts as found by the taxing authorities which has a bearing on the tax liability of the assessee. Section 254 of the Act doesn’t put any fetters on the power of the Tribunal to consider an issue which may arise in any appeal. It was held by the Hon’ble jurisdictional High Court in the case of Gautam Harilal Gotecha vs. DCIT, [2006] 281 ITR 283 (Guj) that the Tribunal is final fact finding body in the hierarchy of the appellate jurisdiction under the Act and its order is supposed to reflect not only the facts and contentions of the rival parties before it but also the issues which arise for its consideration and the reasons for deciding the issues one way or the other.
24. It was held by the Hon’ble Gauhati High Court in the case of Assam Company (India) Ltd. vs. CIT, [2002] 256 ITR 423 (Gau) that it was permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal, though the party raising the said ground had neither appealed before it nor had filed a cross objection in the appeal filed by the other party. To reproduce from the said order:
The Appellate Tribunal Rules framed by the Tribunal in exercise of its power under s. 255(5) are wholly for the purpose of regulating its own procedure and the procedure of the Benches of the Tribunal. The Rules therefore embody the principles of procedure to be followed by the Tribunal and its Benches for the discharge of its functions. The scheme of the Rules read as a whole does not suggest that the Rules in anyway have the effect of curtailing or circumscribing the power, authority and jurisdiction of the Tribunal in dealing with matters at its disposal. No prohibition can be read in the Rules totally precluding the Tribunal from considering any ground beyond those mentioned in the memorandum of appeal filed by a party, whether the assessee or the Department, in the absence of an appeal or cross-objection by the other side projecting the new ground. It is a settled principle of law that procedural law is the handmaid of justice and has to be so interpreted to advance the cause ofjustice and not to thwart it. It is a solemn duty of the taxing authorities to correctly assess the tax liability of an assessee by duly following the relevant provision of law and, therefore, an inflexible and mechanical adherence to the law of procedure cannot be countenanced and in the process deny an assessee a benefit to which it is otherwise entitled in law. That could not have been the purpose offraming the Appellate Tribunal Rules. There cannot be any estoppel against law. Therefore such a primacy is not to be granted to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. This view is also reinforced by the language of r. ~~ which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. Therefore it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party.)
25. It was held by the Hon’ble Kerala High Court in the case of Common Wealth Trust of India Ltd., [221 ITR 474] that the Tribunal was justified in holding suo-motto that the initiation of the re-assessment proceeding was barred by limitation because such initiation fell under the then Section 147(b) of the Act and not under the then Section 147(a) of the Act. According to the Court, even though limitation was not specifically set up as a defence, a barred proceeding had to be dismissed and such was the mandate of Section 3 of the Limitation Act, 1963. The Court emphasized that the approach has to be justice- oriented and the relevant provisions of the law of procedure require meaningful appreciation. The relevant portion of the order is reproduced below:
15. It is needless to emphasize the regulatory (sic) principle in regard to the general law of limitation that even though limitation is not specifically set up as a defence, a barred proceeding has to be dismissed and such is the mandate of section 3 of the Limitation Act.
…. ……………..
17. Thus, the resume of the legal situation re-emphasise the basic principle that the law of procedure has to be approached, understood and appreciated as a helpmate in the course of the process of administration of justice and never as a situation of obstruction or obstacle in regard thereto. Time and again the approach in regard to this is ringing in the decisions of the Supreme Court that the approach has to be justice- oriented and it is the end of the litigation that should be in sight and in regard thereto if it is found that it would not be in consonance with justice to allow the proceedings to continue, the relevant provisions of the law of procedure require meaningful appreciation in the context.
26. The Hon’ble Supreme court has held in the case of CIT vs. Nelliappan, [1967] 66 ITR 722 (SC) that in deciding an appeal, the Tribunal was not restricted to the grounds set forth in the memorandum of appeal or taken by the leave of the Tribunal provided the party who is affected thereby is granted sufficient opportunities of being heard on the ground.
27. In the case of National Thermal Power Co. Ltd. vs. CIT, [1998] 229 ITR 383 (SC) the Hon’ble Supreme Court has held that the power of the tribunal in dealing with the appeals is expressed in widest possible terms. The Hon’ble Court further held that the view that the Tribunal was confined only to issues arising out of the appeal before the CIT(A) was too narrow a view of the powers of the Tribunal. It was categorically held by the Hon’ble Apex court that where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, such question has to be examined by the Tribunal when it is necessary to consider that question, in order to correctly assess the tax liability of the In the present case also, the question of law regarding jurisdiction of the AO to initiate assessment proceeding u/s 153C of the Act for the A.Y.2008-09 is arising from the facts which are already available on record of the assessment proceedings. Therefore, the question of jurisdiction, which is necessary to correctly assess the tax liability of the assessee, is required to be considered and decided by us.
28. In view of the above provisions of law and the judicial pronouncements, we are of the considered opinion that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below. The Tribunal has the power to examine the question of jurisdiction, which goes to the root of the matter and which doesn’t involve further investigation in facts, and this power is apparent from plain reading of Rule 11 of Appellate Tribunal Rules, 1963. Article 141 of the Constitution of India establishes the binding precedence of judgements delivered by the Supreme Court and declares that “the law declared by the Supreme Court shall be binding on all courts within the territory of India.” The law as declared by the Hon’ble Supreme Court in the case of Jasjit Singh (supra) is binding and we can’t shut our eyes to the fact that the proceeding initiated u/s 153C of the Act in this case was not in accordance with the law as laid down by the Hon’ble Court in that case. After carefully examining the facts as available in the assessment order itself, we have already held that the AO had no jurisdiction to initiate proceedings under Section 153C of the Act for the A.Y. 2008-09, as it was beyond the permissible period of six years from the date of recording of satisfaction of the common AO and deemed handing over of the seized documents pertaining /belonging to the assessee. Therefore, the assessment order passed u/s 153C of the Act for the A.Y. 2008-09 is quashed due of the lack of jurisdiction of the AO to initiate the proceeding u/s 153C for this year.
29. Since, the assessment order is quashed due to AO’s lack of jurisdiction to initiate proceeding u/s 153C of the Act for the Y.2008-09, we do not deem it necessary to adjudicate the grounds taken by the Revenue as well as by the assessee.
30. In the result, appeal preferred by the Revenue is dismissed.
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