Reassessment was valid as Section 147 And 153C could be applied interchangeably

ITO Vs Anil Ghanshyam Kumawat (ITAT Surat)

Conclusion: Reassessment under section 147 was valid on reopening of already closed assessment and both Sections 147 and 153C could be used interchangeably based on the situation.

Held: In the instant case, assessee’s case was reopened on the basis of information received by AO that Investigation Wing Mumbai had carried out a search action of Shri Bhanwarlal Jain Group and his associates wherein incriminating materials were found which conclusively proved that Bhanwarlal Jain and his associates were dummy concern, were engaged in providing accommodation entries to various beneficiaries in the form of sale/purchase, loans etc. Assessee was identified as one of the concern person who had availed accommodation entries to the extent of Rs.80.98 crores from eleven bogus concern of Bhanwarlal Jain and his associates. AO after recording the reasons issued notice under section 148. Assessee had not challenged the validity of reopening, though for the first time, assessee had challenged the action of AO by taking plea that AO should have assessed assessee under section 153C and not section 147/148. AO made addition by disallowance @25% of purchases identified as bogus purchase. AO while making addition held that Bhanwarlal Jain in his statement under section 132(4) had admitted that his group were engaged in providing accommodation entries. Further notice under section 133(6) and summons issued under section 131 were issued to the parties from whom assessee has shown such purchases. AO recorded that all the parties were not found on the given addresses, which proved that purchases were shown from fictitious parties. AO disallowed purchases to the extent of 25%.  Dissatisfied by the order, assessee filed for an appeal to CIT (Appeals)[CIT(A)].  It was held that there were a number of decisions by the Hon’ble jurisdictional and other High Courts in favour of revenue where reopening had been upheld when it was based on information from the investigation wing of the department. The Hon’ble Gujarat High Court in case of Anderson Biomet (P.) Ltd. vs. ACIT, 129 taxmann.com 135 (Guj.) held that where search and seizure under section 132 was carried out in case of ‘J’ and it was found that ‘J’ was managing and controlling multiple companies which involved in providing accommodation entries and documents unearthed during search showed that the petitioner company had taken accommodation entries from one of such concerns, since prima facie there was live link between material coming to the notice of AO and formation of his belief that there had bene escapement of income due to assessee’s failure to disclose fully and truly all materials facts, initiation of reassessment was justified. In case of Silverdale Inn (P.) Ltd. vs. ITO, 127 taxmann.com 679, the Hon’ble Gujarat High Court held that where AO issued reopening notice against assessee based on information received from NMS (Non-filler Monitoring System) that assessee had received cash deposit but had not disclosed same in its return, reopening notice was justified. In case of Jayant Security & Finance Ltd., 91 taxmann.com 181 (Guj.), it was held that initiation of reassessment proceedings on basis of information received from investigation wing that assessee received loan from entry operator, was justified. Moreover, in the case of Silverdale Inn (P.) Ltd. vs. ITO the respective courts upheld the validity of reassessment under 147 and issuance of notice under 148 was valid even when there was a search and seizure being conducted on the assessee. As a result the reassessment was held valid.

FULL TEXT OF THE ORDER OF ITAT SURAT

This bunch of four appeals filed by Revenue and four Cross Objections(COs) therein by assessee are directed against the separate orders of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals) [for short to as “NFAC/Ld.CIT(A)] all dated 01.02.2024, which in turn arose out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s 147 of the Income Tax Act, 1961 all dated 03.03.2016 and 02.03.2016 for assessment years (AYs) 2009-10 to 2012-13. In all appeals and in COs, both parties have raised certain common grounds of appeals, except variation of additions on account of bogus purchases, facts in all appeals are almost similar, therefore, with the consent of parties, all the appeals and COs were clubbed, heard together and are decided by consolidated order to avoid conflicting decisions. For appreciation of fact, for A.Y. 2009-10, in Revenue’s appeal ITA No.346/SRT/2024 is treated as “lead” case. The Revenue has raised the following grounds of appeal: –

“i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition made by the Assessing Officer from 25% of the unverifiable purchases to 12.5% of such purchase and allowing the appeal of the assessee partly ignoring the facts that these purchases are sham transactions fabricated through bogus paper concerns of Shri Bhanwarlal Jain & Others which were engaged in providing accommodation entries?

ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition made by the Assessing Officer on account of bogus purchases even though in the case of Mayank Diamonds Pvt.Ltd. [2014] (11) TMI 812] the Hon’ble High Court has directed to make addition at the rate of 5% of the total turnover.

iii) On the facts and circumstances of the case in law, the Ld. CIT(A) has erred in restricting the addition without considering the judgment of Gujarat High Court in the case of N.K. Industries Ltd. vs. DCIT in TA No.240 to 242 of 2003 which has been upheld by the Hon’ble Apex Court in Special Leave to Appeal (c) No.769 of 2017 dated 16.01.2017, wherein the Hon’ble High Court held that 100% of purchase from bogus parties was liable to be added in the hands of the assessee, reversing the decision of Hon’ble ITAT to restrict the addition to 25%.

iv) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the entire addition ignoring the fact that bogus purchase shown in the books of assessee from paper companies which were specifically formed to provide accommodation entries and the assessee had re-route its unaccounted income through the purchase transactions made from these paper companies to hide the true income of the assessee for the year under consideration.”

2. On service of notice of appeal, the assessee filed COs raising following grounds;

“1. The Lower Authorities have erred on facts as well as law in not appreciating the facts that, the case has been reopened based on search conducted in the case of Bhanwarlal Jain on 03.10.2014 and addition has been made and therefore, the provision of Section 153C is applicable and therefore, the present proceedings and order passed u/s 148 dated 03.03.2016 is bad in law and void. 2.It is prayed that there is no new investigation on facts required and therefore, this being purely legal ground, may please be allowed for argument.”

3. Brief facts of the case are that assessee is a proprietary of ‘Kumawat Export’ engaged in the business of diamond. The assessee filed his return of income for assessment year 2009-10 on 28.07.2009 declaring income of Rs.1,56,410/-. Case of assessee was reopened under section 147 of the Act on 25.03.2015. Notice under section 148 issued on 25.03.2015 was served upon the assessee. In response to notice under section 148, assessee filed his reply dated 30.06.2015 stating that return of income filed on 27.07.2009 be treated as “return of income in response to notice under section 148 of the Act”. The assessee requested for reasons recorded which was provided to assessee. Case of assessee was reopened on the basis of information that DDIT(Inv.) Unit-IX (2), Mumbai carried out search and seizure operation under section 132 in case of Bhanwarlal Jain Group on 03.10.2013. In the search action various incriminating documentary evidences were found and seized. During investigation, it was found that Bhanwarlal Jain Group was running various companies/partnership firms or proprietary firm in the name of relative and employees and were not engaged in genuine business activities. Bhanwarlal Jain Group and his group was providing accommodation entries without actual delivery of goods. The list of beneficiary was prepared by Investigation Wing who has availed accommodation entry from various entities of Shri Bhanwarlal Jain Group. The assessee has availed such accommodation entries in the form of bogus purchases aggregating of Rs.80.98 crores from 11 such entities non-genuine entities managed by Bhanwarlal Jain Group. The Assessing Officer has recorded name of such entities and the corresponding accommodation entries provided by such entities. On the basis of such information, case of assessee was reopened. The assessee filed his objection dated 21.07.2015. Objection of assessee was disposed of in a speaking order dated 12.08.2015. The contents of objection raised by assessee and speaking order is recorded in para -2 & 3 of assessment order. The Assessing Officer after disposing the objection issued details of show cause notice to the assessee by referring the modus operandi of accommodation entry provider Bhanwarlal Jain by mentioning the names of various entities and the amount of accommodation entries and show caused as to why 25% of purchase should not be disallowed and added to the income of assessee. The assesse filed reply to the show cause notice. The contents of reply of assessee is recorded in para-5 of assessment order. The assessee in his reply, submitted that he is a commission agent only and all the purchases and sells of goods are made on behalf of principal parties on commission basis and account on the commission is shown in his profit and loss account. The information relied by Assessing Officer is totally based on wrong fact. The assessee has not purchased the goods. He has purchased and sells the goods on behalf of principal parties only and purchases reflected in other parties of books of account. The reliance placed on the search action in case of Bhanwarlal Jain has no relevance. He has no concerned with the aforesaid purchases. The Assessing Officer is relied on third party information. The assessee also submitted that there is no corroborative evidence to prove the fact that assessee has availed accommodation entries. The assessee requested for supply of copy of statement of said parties and their cross-examination. The assessee reiterated that he has received only commission. The assessee also submitted commission agent agreement, commission income bill and ledger of parties. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer recorded that during search action on Bhanwarlal Jain Group various evidences were collected which conclusively proved that fact that Bhanwarlal Jain Group was engaged in providing accommodation entries to various parties in respect of bogus sales and purchase. The statement of searched person was recorded on oath, wherein he has admitted that entire bogus business. The assessee has availed accommodation entries to the extent of Rs.80.98 crores the assessee has utilized such bogus purchases to suppress his profit to that extent. The Assessing Officer further noted that on the basis of submission of assessee dated 16.12.2015, assessee stated to issue notice to the parties to appear before Assessing Officer as such parties are available at the addresses and ready to appear and requested to issue notice under section 133(6) or summons under section 131 of the Act for verification of transactions. The Assessing Officer recorded that notice under section 133(6) was issued to 11 parties and Ward-Inspector was deputed to serve such notices on the their address. The Ward-Inspector in his report dated 28.01.2016 submitted that the said parties had closed their respective business 2/3 years back, as reported by neighbours. The assessee was asked to furnish confirmation but the assessee failed to file any such confirmation produce. In absence of confirmations, the Assessing Officer disallowed the 25% of purchases shown from eight parties. The Assessing Officer thereby disallowed Rs.20.24 crores, in the assessment order passed under section 143(3) r.w.s. 147 of the Act on 03.03.2016.

4. Aggrieved by the additions in the assessment order, the assessee preferred appeal before Ld. CIT(A). The appeal of assessee was dismissed in ex parte order for want of compliance by assessee. Further aggrieved assessee filed appeal before Tribunal. Similar order was challenged by the assessee for other three assessment years, i.e., assessment years 2010-11 to 2012-13. All appeals of assessee were dismissed in ex parte order by Ld. CIT(A). Appeal of assessee for all four assessment years were registered as ITA No (s). 301 to 404/SRT/2017. The Tribunal restored all the appeals back to file of Ld. CIT(A) to decide all the appeals on merit. As per the direction of Tribunal, Ld. CIT(A) fixed the hearing of appeals on 20.10.2023, 17.1.2023, 13.12.2023, 02.01.2023 and 24.01.2023 respectively. The Ld.CIT(A) in para-5 of his order recorded such details of hearing fixed and further recorded that despite service of notice through e-mail no response was received. The Ld. CIT(A) thus, decided the appeal on merit on the basis of material available on record. The Ld. CIT(A) while adjudicating all the appeals, granted partial relief to the assessee in sustaining the disallowance @ 12.5% of total purchase shown from various parties, managed by Bhanwarlal Jain and his associates. The Ld. CIT(A) in his order relied on various decisions of Hon’ble jurisdictional High Court including the case of Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj), CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj) and Vijay M Mistry Construction Ltd. 355 ITR 498 (Guj).

5. Aggrieved by the order of Ld. CIT(A) Revenue has filed present appeal before the Tribunal. On service of notice of appeal by Department, assessee has filed CO raising objection validity of notice under section148 dated 13.03.2016 as recorded above. No separate or independent appeal, challenging the addition in quantum assessment, on merit is filed by assessee.

6. We have heard the submissions of Ld. Commissioner of Income-tax-Departmental Representative (Ld.CIT-DR) for the Revenue and Ld. Authorized Representative (Ld.AR) of the assessee. The Ld. AR of the assessee fairly submits that there is delay of 42 days in filing all the CO’s before Tribunal. The Ld. AR of the assessee submits that delay in filing CO’s are not intentional or deliberate. The delay occurred due to the fact that office of Ld.AR is situated in Ahmedabad, and the assessee is having his business premises at Surat. Thus, in sharing with complete information with the office of his consultant, the assessees office took time and ultimately, his officer further took time in preparation of all CO’s. The delay is not too long and may be condoned as the assessee has raised legal issue which goes to the root of the case.

7. On the other hand, Ld. CIT-DR for the Revenue has submitted that assessee has disclosed self-serving story without substantiating without proper evidence or documents. The delay is not properly explained and application for condonation of delay deserves to be dismissed.

8. We have considered the submission of both the parties. Firstly, we shall consider the plea of condonation of delay in filing CO’s by the assessee. The foremost contention of the assessee is that delay is occurred only due to fact that office of Ld.AR is situated in Ahmedabad and assessee’s business at Surat. Though, such explanation is not plausible and convincing, yet keeping in view with the principle of natural justice that delay in filing CO’s are only 42 days each and that assessee is not going to be benefited by filing CO’s belatedly. Hence, keeping in view the principle of law that when technical considerations are pitted against the cause of substantial justice, the cause of justice may be preferred. Thus, delay in filing CO’s by the assessee are condoned. Now adverting to hearing on merit.

9. The ld.CIT-DR for the Revenue submits that Investigation Wing of Mumbai made a search and seizure action in case of Bhanwarlal Jain Group and his associates on 03.10.2013, wherein during the search and post-search investigation, it was clearly established that Bhanwarlal Jain Group and his associates were not indulging any business except providing entries. Bhanwarlal Jain Group made various proprietary firm, partnership firm or companies to provide accommodation entries without actual delivery of goods. Such bogus entries were provided to inflated the expenses and to reduce the taxable income. The assessee is one of the beneficiary of accommodation entries more than Rs. 80.00 crores and such purchases shown from entries managed by Bhanwarlal Jain Group and his associates are nothing but a bogus. Thus, Assessing Officer during assessment made a reasonable disallowance @ 25% from such bogus purchases. Therefore, addition / disallowance made by Assessing Office may be sustained by reversing the order of Ld.CIT(A). The ld CIT-DR for revenue submits that similar order may be followed in all assessment years.

10. On the other hand, Ld.AR of the assessee submits that during assessment, assessee asked for cross-examination of the parties which were identified by Assessing Officer as non-genuine parties. No such cross-examination was allowed. The Assessing Officer made addition on the basis of third party information without providing complete details of investigation carried out by search party. The assessee is a commission agent and has shown commission income in his profit and loss account. The Assessing Officer made addition without considering the peculiar facts and circumstances of the case. The sale of the assessee was not disputed. Books of accounts of assessee was not rejected. No independent investigation was carried out by the Assessing Officer. Thus, no addition was liable to be made.

In alternative submission, Ld. AR of the assessee submits that in a number of similar cases, wherein the parties were identified as beneficiary of accommodation entries either from Bhanwarlal Jain Group, Rajender Jain or Gautam Jain, only 6% of the disputed purchases was sustained by this Tribunal. Several decisions of this Surat Tribunal are confirmed by Hon’ble jurisdictional High Court including in Pr.CIT-1, Vs M/s Surya Impex (2023) 148 taxmann.com 154 (Guj) and in ITO Vs Pankaj K Chaudhary ITA No. 1152/Ahd/2017 (Surat Trib). Thus, Ld.AR of the assessee submits that disallowance should not be exceed more than 6% of the disputed purchases.

11. On the grounds of Cross Objections, the Ld. AR of the assessee submits that admittedly case of assessee was reopened on the basis of information that search action was carried in case of Bhanwarlal Jain Group and statement of Shri Bhanwarlal Jain was recorded under section 132(4) of the Act about operating various dummy concerned and providing accommodation entries. Some of the materials seized in the search action was considered and pertaining to other persons including of assessee, if the Assessing Officer is required to assess the other persons like assessee, he was required to records his satisfaction and to issued notice under section 153C of the Act. The Assessing Officer cannot take recourse of provision of Section147/148 for making addition on the basis of materials seized in case of such persons. The Legislature has specifically introduced provisions of Section 153C for making assessment on the basis of incriminating material pertaining to other persons seized during search carried out under section 132 of the Act. The Legislature has consciously used word “shall” in the proviso of Section 153C. Such provisions are special provisions prevailing over the general provisions. Thus, section 148 has no role to play, when assessment is based on the material in the search action carried out in case of other persons. The Ld. AR of the assessee submits that Ahmedabad Tribunal in Manjulaben Bipinbhai Patel vs. DCIT in ITA Nos. 1984-1903/Ahd/2019 held that statement recorded under section 132(4) can be considered as incriminating material for taking cognizance in the proceedings under section 153A. On the basis of alleged incriminating material found in the course of some other persons and making addition by reopening of the case under section 147/148 is completely devoid of any merit, unjustified and uncalled for and is to be set aside. To support his submission, ld. AR of the assessee relied on the following case law:

> Shyam Sunder Khandelwal vs. ACIT (2024) 161 taxmann.com 255(Raj)

> Sai Krupa Developers vs. ACIT ITA No.248 to 250/Ahd/2023,

> Ravi Nirman Nigam Ltd. vs. ACCIT ITA No.6428/Mum/2019,

> Jagjit Singh (164 taxmannn.com 324 Amritsar-Trib) dated 10.07.2024.

12. On the other hand, Ld.CIT-DR for the Revenue has submitted that it is settled law that revenue has option either to assessed the assessee on the basis of information gathered by Assessing Officer wherein a tangible information was received about various beneficiaries who have availed accommodation entries by taking recourse of section 147/148 or under section 153C. The Assessing Officer recorded reasons for escapement of income and reopened the case as per the scope of section 147 of the Act. The submissions of ld. AR of the assessee is devoid of merit and misplaced that assessment of assessee was to be completed under section 153C. The Ld. CIT-DR submits that grounds raised in assessee’s CO’s are liable to be rejected.

13. We have considered the rival submission of both the parties and have gone through the order of lower authorities carefully. We have also deliberated case law relied on Ld.AR of the assessee and Ld.CIT(A). We find that case of assessee was reopened on the basis of information received by Assessing Officer that Investigation Wing Mumbai has carried out a search action of Shri Bhanwarlal Jain Group and his associates on 03.10.2013 wherein incriminating materials were found which conclusively proved that Bhanwarlal Jain and his associates are dummy concern, were engaged in providing accommodation entries to various beneficiaries in the form of sale/purchase, loans etc. The assessee was identified as one of the concern person who has availed accommodation entries to the extent of Rs.80.98 crores from eleven bogus concern of Bhanwarlal Jain and his associates. The Assessing Officer after recording the reasons issued notice under section 148. We find that assessee has not challenged the validity of reopening, though for the first time, Ld.AR of the assessee has challenged the action of the Assessing Officer by taking plea that Assessing Officer should have assessed the assessee under section 153C and not section 147/148 of the Act, which we will deal with later part of this order. So far as disallowance in quantum assessment concerned, the Assessing Officer made addition by disallowance @25% of purchases identified as bogus purchase. The Assessing Officer while making addition held that Bhanwarlal Jain in his statement under section 132(4) has admitted that his group were engaged in providing accommodation entries. Further notice under section 133(6) and summons issued under section 131 were issued to the parties from whom assessee has shown such purchases. The Assessing Officer in para-6.3 of assessment order recorded that all the parties were not found on the given addresses, which proved that purchases were shown from fictitious parties. The Assessing Officer on the basis of decision of Vijay Proteins Ltd. reported viz; (55 TTJ 76), wherein purchases to the extent of 25% was disallowed as reasonable. The Ld. CIT(A) restricted the addition to the extent of 12.5% of such purchase by taking view that Assessing Officer has not doubted the sales. Thus, purchases appear to be made for inflating the expenses and to suppress the true profit. The Ld.CIT(A) thus estimated the suppress profit to the extent @12.5% of total purchases of Rs.80.98 crores. Now, before us Ld. CIT-DR vehemently argued that disallowance made by Assessing Officer may be sustained. We find that neither the book result of assessee was rejected nor the sales of assessee was disputed. The assessee claimed to be a commission agent, even no specific finding was given by Assessing Officer on such facts. The Ld. CIT(A) has estimated suppressed profit @ 12.5%, thus, we do not find any convincing reason for enhancing the disallowances restricted by ld CIT(A).

14. Though, the Ld.AR of the assessee in his alternative submission, submitted that in a series of decisions Surat Bench has estimated similar suppression of profit @6%. However, the Ld. AR of the assessee has not raised any ground in his CO’s nor any cross-appeal is filed. Thus, we are not convinced to accept the submission of Ld.AR of the assessee. Therefore, we are not inclined to further reduce the addition. No doubt this Bench has consistently sustained or increase similar addition to the extent of 6% of purchase. However, the assessee has neither filed Cross appeal nor any such ground is raised in Cross Objection for the reasons best known to them. Hence, we are not inclined to reduce the disallowances of impugned / disputed purchases.

15. In the result, appeals of Revenue in AY 2009-10 is dismissed.

16. Considering the facts that in all remaining three assessment years, the revenue has raised similar grounds of appeal, therefore, following the principal of consistency appeal for AY 2010-11 to 2012-13 are dismissed with similar findings.

17. So far as grounds in CO’s are concerned as raised by assesse that assessment proceedings and notice under section 148 is bad in law and provisions of Section 153 is applicable, the Ld. AR of the assessee has submitted that provisions of section 153C of the Act and not those of section 147 of the Act are applicable to the facts of the present case. We find that the assessment years involved in these appeals pertain to AYs.2009-10 to 2012-13. Hence, it would be proper to analyze provisions of section 153C of the Act as it stood at the relevant time. Section 153C of the Act was inserted by Finance Act, 2003 relating to assessment in case of search or requisition made on or after 01.06.2003. The new provisions were inserted after discontinuing block assessment provisions in Chapter XIV-B (sections 158B to 158BH) of the Act. The section at the relevant point was as under:

“153C. ⁸⁹[(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 any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :]

⁹⁰[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 ⁹¹[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 :]

^91a[Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.]

18. The section was amended by Finance Act, 2015 w.e.f. 01.06.2015. The substituted section reads as under:

“Assessment of income of any other person.

153C. (1) ⁵⁷[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 ⁵⁸[and that Assessing Officer shall proceed against each such other person and issue noticeand 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 the relevant assessment year or years referred to in sub-section (1) of section 153A] :] 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:

Provided further that the Central Government may by rules⁵⁹ made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.”

19. The Hon’ble Supreme Court in case of ITO vs. Vikram Sujitkumar Bhatia, 2023 SCC Online 370 considered the question whether amendment to section 153C of the Act as enacted by Finance Act would be applicable to searches conducted u/s 132 of the Act prior to 01.06.2015. The Hon’ble Supreme Court accepted that section 153C of the Act is a machinery provision and the substituted provisions would also apply in respect of searches conducted prior to 01.06.2015.

The scope and effect of the insertion of new sections 153A, 153B and 153C have been elaborated in the departmental Circular No.7 of 2003, dated 05.09.2003. The relevant portion is at para 65.9 which is as under:

“65.9 The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.”

21. A plan reading of the section 153C and the Circular issued by the CBDT makes it clear that section 153C was amended w.e.f. 01.10.2014 to provide that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to any person, other than the person in respect of whom the search was conducted, 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 income of such other person in accordance with provisions of section 153A, if he is satisfied that the books of account or documents or assets seized or requisition have a bearing on the determination of total income of such other person for the relevant assessment year or years referred to sub-section (1) of section 153A.

22. Jurisdiction of Assessing Officer to reassess the income u/s 153C of the Act is predicated on (i) the Assessing Officer of the searched person being satisfied that assets and material found during the search proceedings or requisitioned are incriminating insofar as the assessee other than the searched person is concerned; (ii) recording his (Assessing Officer of searched person) satisfaction to the aforesaid effect; (iii) transmitting the same to the Assessing Officer of the other person; (iv) Assessing Officer of the non-searched person being satisfied that the material information has a bearing on the determination of total income and (v) the Assessing Officer of such non-searched person issuing a notice to commence assessment / reassessment proceedings. If any of the aforesaid conditions are not satisfied, the income of such other person cannot be assessed or reassessed u/s 153C of the Act.

23. According to Ld. AR of the assessee in such circumstances, the Assessing Officer is precluded from initiating proceedings u/s 147 of the Act. The Hon’ble Delhi High Court in its very recent judgment delivered on 20.11.2024 in case of PCIT-7, Delhi vs. Naveen Kumar Gupta, in ITA No.401/2022, has after elaborate discussion decided the issue in favour of revenue. The Hon’ble High Court has discussed the interplay between sections 153C and 147 of the Act, specifically whether recourse to section 147 is available when the Assessing Officer is empowered to proceed u/s 153C of the Act. It was held that section 153C enables the Assessing Officer to assess or reassess income where incriminating material, assets or documents are found during search u/s 132 or requisition u/s 132A of the Act in respect of another person. However, in the present case, the jurisdictional condition to initiate proceedings u/s 153C were not satisfied as the Assessing Officer of the searched person did not record a satisfaction note and transmit relevant material to the Assessing Officer of the assessee.

The assessment proceedings were initiated under section 147 based on information received from investigation wing regarding assessee’s purchase of penny stock. Since the Assessing Officer did not assume jurisdiction under section 153C, the non-obstante clause of section 153C would not override sections 147, 148 and 149 of the Act and the decision to reassess u/s 147 was upheld. In the above judgement, the Hon’ble Delhi High Court has referred to the decisions of Hon’ble Supreme Court in cases of PCIT vs. Abhisar Buildwell (P.) Ltd., 149 taxmann.com 399 (SC), Amar Jewellers vs. ACIT, 137 taxmann.com 249 (Guj.), CIT vs. Kabul Chawla, 380 ITR 573 (Delhi), PCIT vs. Saumya Construction Pvt. Ltd., 387 ITR 529 (Guj.), Shyamsundar Khandelwal vs. ACIT, 161 taxmann.com 255 (Raj.) etc. The Hon’ble Court held that it was unable to concur that provisions of sections 139, 147, 148, 149 and 153 are overridden merely on account of assets, books of account, documents and materials being seized or requisitioned which either belong to or contain information regarding a person other than the one searched. If the Assessing Officer does not exercise the jurisdiction u/s 153C of the Act, recourse to normal assessment or reassessment are not foreclosed. The Hon’ble Court has specifically dealt with the decision of Hon’ble Rajasthan High Court in case of Shyamsundar Khandelwal (supra), relied upon by the Ld. AR of the assessee, and held that provisions of section 153C are enacted for the purpose of simplifying the procedure in search cases. The import of such provisions cannot be to ousted the recourse to the normal provision, which in any event are available for assessment / reassessment of an income of an assessee. In the said case, the revenue has disputed that a satisfaction note by Assessing Officer of the searched person was forwarded to the Assessing Officer of the assessee along with requisite documents. Hence, the Hon’ble held that jurisdictional condition to initiate further steps under section 153C were not satisfied.

24. At this stage, it would be proper to refer to the decision of the Hon’ble Supreme Court in case of CIT vs. Calcutta Knitwears, 362 ITR 673 and CBDT Circular No.24/2015, dated 30.12.2015. The Hon’ble Supreme Court in above case held that u/s 158BD of the Act, the existence of cogent and demonstrative material is germane to the Assessing Officer’s satisfaction in concluding that seized documents belong to a person other than the person against whom searched was conducted and it is necessary for initiation of action u/s 158BD of the Act. For the purpose of section 158BD, a satisfaction note is a sine qua non and must be prepared by the Assessing Officer before he transmits the record to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note should be prepared at either of the following stages: (i) at the time or along with the initiation of proceedings under section 158BC against the searched person, (ii) in course of assessment proceedings under section 158BC of the Act and (iii) immediately after assessment proceedings are completed u/s 158BC of the searched person. The CBDT has accepted the decision of the Hon’ble Supreme Court and has issued the above Circular No.24/2015 (supra). It had accepted that provisions of section 153C are substantially similar / pari materia to provisions of section 158BD and therefore the above finding of Hon’ble Supreme Court applies to provisions of section 158BC of the Act.

25. Let us, now examine the facts of the present appeal in the light of the statutory provisions, decisions of Hon’ble Supreme Court and the various High Courts and the CBDT Circular cited above. It is clear from para 4 of the assessment order that the Assessing Officer received information from DGIT (Inv.), Mumbai that a search and seizure action under section 132 was carried out in case of Bhanwarlal Jain Group on 03.10.2013. The search revealed various incriminating documents and evidences that the group was involved a providing accommodation entries. The assessee was one of the beneficiaries of such accommodation entries pertaining to bogus purchases of Rs.80,98,55,707/-from 11 concerns of the group. Therefore, the case was reopened on the basis of the information from the DGIT (Inv.), Mumbai and not based on “satisfaction note” prepared by the Assessing Officer of Bhanwarlal Jain Group. There is neither any “satisfaction note” of the Assessing Officer of the searched person nor handing over of books of account or documents or assets seized or requisitioned by the Assessing Officer of the searched person to the Assessing Officer of the appellant. The Assessing Officer of the appellant has also not prepared a satisfaction note that the material information received has a bearing on the determination of total income of the appellant. Hence, the conditions precedent for invoking provisions of section 153C are not satisfied. Therefore, the Assessing Officer could not have invoked provisions of section 153C of the Act.

26. On the other hand, he has rightly reopened the case under section 147 of the Act. There are a number of decisions by the Hon’ble jurisdictional and other High Courts in favour of revenue where the reopening has been upheld when it was based on information from the investigation wing of the department. The Hon’ble Gujarat High Court in case of Anderson Biomet (P.) Ltd. vs. ACIT, 129 taxmann.com 135 (Guj.) held that where search and seizure under section 132 of the Act was carried out in case of ‘J’ and it was found that ‘J’ was managing and controlling multiple companies which involved in providing accommodation entries and documents unearthed during search showed that the petitioner company had taken accommodation entries from one of such concerns, since prima facie there was live link between material coming to the notice of Assessing Officer and formation of his belief that there have bene escapement of income due to assessee’s failure to disclose fully and truly all materials facts, initiation of reassessment was justified. In case of Silverdale Inn (P.) Ltd. vs. ITO, 127 taxmann.com 679, the Hon’ble Gujarat High Court held that where AO issued reopening notice against assessee based on information received from NMS (Non-filler Monitoring System) that assessee had received cash deposit but has not disclosed same in its return, reopening notice was justified. In case of Jayant Security & Finance Ltd., 91 taxmann.com 181 (Guj.), it was held that initiation of reassessment proceedings on basis of information received from investigation wing that assessee received loan from entry operator, was justified. Under similar circumstances, Hon’ble Gujarat High Court in case of Aradhana Estate vs. DCIT, 91 taxmann.com 119 (Guj.) has upheld reopening which was based from information received based on investigation wing. Hence, the case of the assessee is covered by the authoritative decisions of the Hon’ble jurisdictional High Court. Accordingly, the plea of the Ld. AR is not tenable and the ground of cross-objection is dismissed.

27. In the result, assessee’s CO of assessee is also dismissed in all assessment years.

28. A copy of the instant common order be placed in the respective case file(s).

Order pronounced in open Court on 25/11/2023.