Case Law Details
Bharati Vidyapeeth Medical Foundation Vs ACIT (ITAT Pune)
ITAT Pune adjudicated a case involving Bharati Vidyapeeth Medical Foundation, where notices issued under Section 153C of the Income Tax Act were challenged. The tribunal ruled that assessments for specific assessment years (AYs) could not be reopened without the presence of AY-specific incriminating material. It emphasized that documents seized during a search must directly relate to the assessee and indicate undisclosed income to validate the issuance of such notices. For AYs 2000-01 to 2003-04 and 2005-06, the tribunal found no incriminating material, rendering the notices invalid. In the lone appeal for AY 2004-05, although some documents were seized, they were deemed accounted for and non-incriminating, leading to similar conclusions. Furthermore, review orders passed by the Commissioner of Income Tax (CIT) under Section 263 of the Act, which relied on these invalid notices, were also declared null and void. The tribunal held that the issuance of fresh assessments based on invalid notices and review orders lacked legal standing. Citing established legal precedents, including the Sinhgad Technical Education Society case, the ITAT reinforced that regular assessment items could not be revisited under Section 153C in the absence of incriminating evidence. As a result, appeals filed by the assessee were allowed, and those by the revenue were dismissed on technical grounds.
FULL TEXT OF THE ORDER OF ITAT PUNE
There are 22 appeals under consideration. Six of them are by the revenue and others are by the assessee. The grounds in all these appeals by the assessee and the revenue are either common or interlinked or overlapping on the issues. Therefore, they are clubbed and disposed of in this considered order. Otherwise, there are three categories of appeals in this group of 22 appeals. For the first category appeals numbering seven (including one by the revenue for the AY 2003-4), the impugned orders are passed u/s 153C rws 143(3) of the act in respect of the AYs 2000-01 to 2005-06. For the second category of the appeals, the review order of the CIT passed u/s 263 of the Act setting aside the above referred orders of the AO/CIT(A) is the impugned order. The assessee is in appeal against order of the CIT in respect of the AYs 2000-01 to 2005-06 with the exception for the AY 2003-04. Thus, there are 5 appeals in this regard. Third category of the appeals are the 10 cross appeals of the assessee and the revenue against the fresh assessment orders passed by the AO u/s 153C rws 143(3) rws 263 of the Act.
2. To start with, we shall take up the first category. On finding that the grounds in all these 7 appeals are either common or interlinked or overlapping on the issues, we proceed to adjudicate all of them in a consolidated manner. For the sake reference, we consider the impugned orders for the AY 2000-01 and the relevant grounds for the said AY 2000-01 are reproduced as under.
3. The following grounds including the additional ground are taken by the assessee for the AY 2000-01 and they are without prejudice to each other –
On facts and in law,
1. The ld CIT(A) erred in not appreciating that the notice issued u/s 153C was not valid and therefore, the assessment made u/s 153C r.w.s. 153A was null and void.
2. The ld CIT(A) erred in holding that the activities of the assessee trust were covered u/s 10(23C) and therefore, the claim of exemption of the assessee could be examined only u/s 10(23C) and not u/s 11 13.
3. The ld CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s 11 as it had violated the provisions of sections 13(1)(d) r.w.s. 11(5).
4. The ld CIT(A) erred in confirming the addition in respect of donation received through issue of coupons of Rs 31,25,000/- without appreciating that the said donations were received towards the corpus of the trust and hence, exempt u/s 11(1)(d) of the Act.
5. The ld CIT(A) erred in confirming an addition of Rs 97,50,000/- being donations received by the trust towards hospital equipment fund on the ground that the said donations received were not towards the corpus of the trust.
6. The ld CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that the Form No 10 was not filed by the assessee along with the return of income.
7. The ld CIT(A) erred in not allowing the deduction of Rs 7,47,475/- being the amount paid towards the repayment of liability of the trust.
8. The ld CIT(A) erred in not granting benefit of 25% of the income which is allowable as per law to be set apart and accordingly, the income computed should have been reduced by 25%.
9. The ld CIT(A) erred in not allowing the application of income of Rs 16,67,410/-being expenditure of capital nature while computing the income of the assessee trust.
10. The ld CIT(A) erred in not granting depreciation to the assessee as per law.
11. The ld CIT(A) erred in denying the exemption u/s 11 to the appellant.
12. The ld CIT(A) erred in denying the deduction u/s 80L to the appellant.
13. The ld CIT(A) erred in not appreciating that no interest was chargeable u/s 234B as per law. ”
The above abridged grounds are many in number and they are both legal and merit related ones in nature. The ground at sl no 1 ie “The ld CIT(A) erred in not appreciating that the notice issued u/s 153C was not valid and therefore, the assessment made u/s 153C r.w.s. 153A was null and void” is a common ground and the decision on this ground determines the validity of other appeals of the assessee for the AY 2001-02 to 2005-06 too. Further, the decision of all six cross appeals of the revenue is also dependent on the same. Therefore, we proceed to take up this crucial and legal ground in the very beginning of this order.
4. Relevant facts of the case in general and the said legal ground no 1 in particular are that a search and seizure action was conduced on 20.7.2005 in the case of Shri Ramchandra Dada Shinde at his office premises at Bharati Vidya Bhavan as well as at his residence at “Ashirwad” Bharati Nagar, Paud Road, Kothrud. Shri Ramchandra Dada Shinde is the trusted employee of Bharati Vidyapeeth, Pune and he worked as an Accounts Officer looking after the accounts of various trusts of Bharati Group including the assessee-trust. During the course of search action, number of documents relating to assessee were seized from Shri R D Shinde vide Panchanama dt 22.7.2005.The said seizer also includes Bundle No 10 which is the ledger of the assessee trust for the F.Y 2003-04. The case was assigned to this charge vide CIT (Central) Pune’s order No Pn/CIT(C)/ Assign.Juris/2006-07/15 dt 26.4.2006. On the basis of documents seized/ impounded from Sri R D Shinde and also on the basis of certain facts revealed during the course of post search enquiries the then AO after satisfying himself about the invocations of provisions of section 153C in the case of assessee issued a notice u/s 153C on 30.3.2007. As no returns were filed in response to this notice a further notice u/s 142(1) calling the returns and the final notice was issued to assessee on 2.8.2007 which was served on the assessee on 3.8.2007. As there was no response to this notice also a summons u/s 131 requiring the assessee trust to file the returns was issued to Managing Trustee on 16.8.2007. In the intervening period the assessee had however drawn my attention to their letter dt 28.8.2006 where they asked for reasons for issuing notice u/s 153C, the same were furnished to the assessee vide letter dt 10.0.2007. In the meantime, the assessee filed the returns on 18.9.2007 declaring Nil income. The return filed by the assessee though accompanied by Income and Expenditure Account and Balance sheet no audit report has been furnished along with return of income. The said return also is not accompanied by Form No 10 read with Rule 17 of the IT Rules.In the meantime to facilitate the completion of assessment a notice u/s 142(1) along with a detailed questionnaire was issued to the assessee on 7.9.2007 requiring the assessee to file their replies. The assessee trust is managed by a Board of Trustees consisting of following six members. They are: Dr Patangrao Shripatrao Kadam; 2.Smt Vijaymala Patangrao Kadam 3. Dr Shivajirao Shripatrao Kadam ; 4.Dr Asmita Rajendra Jagtap 5. Sri Vilasrao B Mhetre 6. Shri Dattatray Shankar Kulkarni and 7.Dr E.K. Barucha. Further, there are several other trusts having their registered office at the same address as that of the assessee trust. These trusts are: 1. Bharati Kala Academy; 2. Patangrao Kadam Pratishtan; 3.Abhijit Kadam Memorial Trust; 4. Bharati Krida Pratishtan; 5. Bharati Vidyapith Education Trust; and 6. Sonhira Foundation for Rural Development.
5. AO completed the assessment after making additions and the assessed income for the AY 2000-01 was Rs 2.45 crores against the nil income returned by the assessee. Admittedly, the assessee did not raise this legal issue relating to issue of invalid notice u/s 153C of the Act and there is no discussion in respect of validity of the said notice s. 153C, making it clear that the same was not raised before the AO. However, the issue came up substantially before the first appellate authority. Thus, it is a legal issue in nature and it was raised before the other revenue authorities and therefore, it can be raised before us and has to be entertained and addressed by us in this appeal. In particular, validity of the notice u/s 153C was raised before the CIT(A) who dismissed the said ground during the first appellate proceedings. Para 5 of the impugned order contains the relevant facts and the discussion on the issue. We proceed to the same in the preceding paragraphs. It is required to clarify here tha the impugned order is a common order passed by the AO attending to the grounds raised on the issues arising out of the search Assessment Order passed under section 153C r w s 143(3) and also the fresh assessment order passed u/s 153C r w s 143(3) r w s 263 of the Act. During the first appellate proceedings the assessee made various written submission on this issue relating to the validity of the notice u/s 153C of the Act issued to the assessee in respect of the six AYs under consideration ie 2000-01 to 20005-06. After considering the same, the first appellate authority dismissed the ground of the assessee and upheld the validity of the notice. It is the consistent view of the revenue that the vide the section 153C of the Act r w the first proviso to section 153A of the Act, the AO can assume jurisdiction automatically in respect of six AYs prior to the search irrespective of the fact whether there exist any incriminating material or otherwise as the expression ‘incriminating’ is not borne out of the Act. For the sake of completeness, we proceed to reproduce the said paragraph 5 from the impugned order and the same read as under.
5. Grounds No. 1 Assessment is null and void:
5.1 The appellant has raised the above ground vide grounds No 1 and 1.1 and the same are quoted below for ready reference:
“1) The assessment order u/s 153C r.w.s.263 is null and void as the basic order u/s 263 itself was not justified in law and on facts.
1.1) The asstt. Order u/s 153C r.w.s. 263 is also bad in law as it has been assed without giving a sufficient opportunity of hearing to the appellant. ”
5.2 It can be seen from the perusal of the above two grounds that the appellant has contended that the assessment made u/s 153C r.w.s. 263 is nul l and void as (a) the basic order u/s 263 itself was not justified in law and on facts and(b) sufficient opportunity of being heard was not given. Perusal o f the assessment order reveals that the AO has discussed the facts based on which the ld CIT (Central) passed order u/s 263 along with directions given to the AO. There is no discussion in respect of validity of s. 153C, making it clear that the same was not raised before the AO. Even the grounds referred to above, do not challenge the validity of notice issued u/s 153C.
5.3 The appellant has made their submissions vide their letter dt 9.10.2009 and the same was also considered. Relevant portion of the submissions are quoted below:-
3. On validity of notices u/s 153C
3.1 In this case, the ld AO had issued notice u/s 153C in pursuance o f the search on Shri R.D. Shinde. The ld AO has given us the satisfaction note wherein he has referred to the documents relating to the assessee found with Shri R D Shinde. The ld AO has stated that the notice u/s 153C was issued on account of certain documents seized from Shri Shinde. The notice was issued on 30.3.2007.Accordingly, the ld AO is of the opinion that since various documents seized from Shri R D Shinde pertain to the assessee, the notice u/s 153C is valid. The assessee submits that there is no justification for issue of notice u/s 153C. Section153C states that where any money, bullion, jewellery or valuable article or thing or books of accounts or documents seized belong to a person other than the person referred to section in 153A, then notice u/s 153C can be issued to the person whose books of accounts, etc. are seized. The assessee submits that the documents found with Shri Shinde which are mentioned in the satisfaction note recorded by the ld AO are not incriminating documents but they are the documents for the transactions which are duly accounted by the assessee trust in its books and therefore, there was no reason to issue notice to the assessee u/s 153C. The assessee contends that where regular documents which are accounted and can be verified are seized, then no notice u/s 153C can be issued. It is submitted that the ledger accounts for F Y 2003-04 were found with Shri Shinde. It is submitted that all these accounts were duly accounted and no incriminating material was found pertaining to the assessee during the search on Shri Shinde. Hence, we submit that the notice issued u/s 153C is not valid at all since no incriminating evidence has been found pertaining to the assessee. Accordingly, we submit that the notice u/s 153C is not valid and therefore, the asst. made by the ld AO in pursuance of the said notice is also invalid.
3.2 Without prejudice to the above submissions, the assessee submits that the notice issued u/s 153C was on 30.3.2007. Now, as per the proviso to section 153C, the date of reckoning the date of initiation o f asst. proceedings for earlier years is the date of handing over the documents by the AO. Now, in this case, the search on Shri R D Shinde took place on 20.7.2005. On the basis of this date, the notices are issued for immediately six preceding years i.e. F.Ys 1999-2000 to 2004-05. However, the notice u/s 153C was issued on 30.3.2007 and therefore, the six preceding years are F.Ys 2000-01 to 2005-06. Accordingly, in view o f the proviso to section 153C, the asst. for A.Y 2000-01 could not be completed u/s 153C. In this context, reliance is placed on Ahmedabad ITAT decision in the case of Vijay M Vimawal (25 DTR 363) wherein Honble ITAT has upheld this principle. In view of the above submissions, the assessee submits that the asst. u/s 153C r.w.s. 153A completed for A.Y 2000-01is null and void. ”
5.4. I have carefully considered the grounds of the appellant mentioned at para 5.1 and the rival submissions and find that the ground No. 1 is based on the order of the CIT passed u/s 263 of the I.T. Act. This ground is inadmissible at this forum as the appeal against the order passed u/s 263 can only be filed before the Hon’ble ITAT and therefore, the above ground is dismissed. The appellant has already filed an appeal before the Honble ITAT, Pune Bench, Pune………. In view of the above, both the above grounds raised by the appellant are treated as dismissed.
5.5 Without prejudice to the discussions made in the above para, it is observed that the submissions of the appellant are on the validity o f proceeding initiated u/s 153C, which is not the subject matter of appeal but are being discussed hereunder without admitting such issues as a matter o f appeal. It is clear that no objection was taken y the appellant during the proceeding initiated by the AO u/s 153C r.w.s. 143(3) of the I.T Act subsequent to the search. In view of the above, the same cannot be challenged to be invalid because of provisions contained u/s 292B and 292BB of the I.T. Act. The grounds are also inadmissible under Rle 46A of the I.T. Rules. On merit also s. 153C r.w.s. 153A refers to materials seized during search, which may or may not be incriminating. The word ‘incriminating’ is missing in these sections and therefore, its existence cannot be presumed. Assumption of jurisdiction u/s 153C is a prerequisite for the AO to enable him to verify the documents or materials seized whether the same is incriminating or not. On the submission of the appellant that the assessment year 2000-01 is beyond the purview of section 153C on the basis of the judgment given by Hon’ble ITAT Ahmedabad in Vijay M Vimawal, it is seen the above argument is based on the interpretation of amendment brought in proviso to s. 153C by Finance Act, 2005 with retrospective effect from 1.6.2003. However, in that process, the appellant seem to be ignoring other amendments brought in simultaneously through the same Finance Act in other related sections for bringing in harmony in the entire process of assessment and re-assessment required to be done after searches. The proviso to sub-section 1 of s. 153C was inserted along with second proviso to sub-section 1 of s. 153A and proviso to sub-section 1 o s. 153B. Along with the same, certain other amendments were made in those relevant sections. If all such amendments are considered together, it is not difficult to understand that by these amendments it was never meant that six years are to be counted from the assessment year in which cash/documents are received in case of persons referred in s. 153C. On the contrary, the same was to provide the AO time period of atleast one year for completing the assessment after receiving the seized materials. This aspect has been very clearly explained by the CBDT in para 3.26 of the circular No. 3 of 2006 dt 27.2.2006. This circular has been issued to explain al l these amendments brought in by Finance Act, 2005 and in para 3.26 the same has been referred as rationalization of the provisions relating to assessment o f income in search and seizure cases. Therefore, if there is any confusion in the interpretation of law, the most relevant source for seeking clarification has to be the above circular and not something else. Even otherwise, if the appellant’s argument is accepted, it will lead to a situation in which s. 153C will become substantially in-operational. Such interpretation will lead to absurdity. It has to be understood and realized that the material gathered during search has to be necessarily relating to years prior to the date of the search. Law has provided the authority to the AO to examine its relevance for assessment/reassessment for six assessment years prior to the year in which search takes place. There is no ambiguity on this concept so far provisions contained in s. 153A are concerned. However, if the date of reckoning for counting six years is advanced to the date of handing over of material to the AO of persons other than those searched as argued by appellant in s.153C, search materials being of relevance to the period prior to the date of search cannot have any relevant for years which get advanced due to time lag in handing over such materials. Therefore, may such assessment years for which action u/s 153C gets initiated as per the appellant will have no relevant seized materials and many of the seized materials will remain unutilized. Therefore, without admitting the issues raised in submissions, it is held that even on merit, they are not liable to be accepted.
6. We find from the above that the CIT(A) dismissed the said legal ground of the assessee on various reasoning and they are: (i) issue of validity of the notice was not raised before the AO; (ii) the said issue was pending before the ITAT at the relevant point of time and therefore, CIT(A) did not want to interfere by giving his decision on the issue; (iii) However, the CIT (A) opined that the expression ‘incriminating’ is not borne out of the statute and it our words it is not case of caucus emmicus; (iv) CIT(A) is of the view that the provisions contained u/s 292B and 292BB of the I.T. Act has a cure for such deficiencies if any. Accordingly, CIT(A) dismissed the submissions of the assessee and dismissed the relevant legal grounds. With regard to the validity of the notice u/s 153C for the AY 2000-01, the CIT(A) mentioned that the submissions of the gets answered by the departmental circular and finally, he held that the notice issued for AY 200001 is also valid. Otherwise, for the AY, the assessee submitted that the search on Shri R D Shinde took place on 20.7.2005 and notice issued u/s 153C was on 30.3.2007. As per the proviso to section 153C, the date of reckoning the date of initiation of asst. proceedings for earlier years is the date of handing over the documents by the AO. But the AO wrongly considered the date of search and accoridngly, the notices weere issued for immediate six preceding years i.e. F.Ys 1999-2000 to 2004-05 instead of the six preceding years are F.Ys 2000-01 to 2005-06 considering the date of transfer of the documents. Accordingly, in view of the proviso to section 153C, the asst. for A.Y 2000-01 could not be completed u/s 153C. In this context, reliance was placed on the ITAT’s decision in the case of Vijay M Vimawal (25 DTR 363)(Ahd) wherein Hon’ble ITAT has upheld this principle. CIT(A) rejected the said submission and dishonored the said principle in existence. In the back ground of the above, the assessee filed the appeals under consideration for all the six years. Revenue also filed cross appeals for all the six years on other issues. We shall take up the assessee’s appeals for all the six years in general and the AY 2000-01 in specific.
7. During the proceedings, Sri Sunil Pathak, Ld counsel for Assessee filed huge amount of the paper books and the written submissions. Sometimes the submissions are common to the appeal filed in connection with the appeals in the Bharati group cases in general and that of Bharati Vidyapeet in particular for the same AYs in connection with same ground relating to the issue of validity of the notice u/s 153C of the Act. Gist of the arguments of Sri Pathak relating to the legal of issue of validity is described in the following paragraphs. (i) Ledger – Accounted one or not- if it relates to AY 2003-04 or Ay 2004-05: From the satisfaction note, it is noted that the notice u/s 153C was issued because one ledger account pertaining to the assessee was found with Shri R D Shinde. It is submitted that the ledger account is duly accounted and not an incriminating document. The AO stated erroneously that the ledger pertaining to AY 2003-04 was found during the course of search on Shri R D Shinde. The copy of the said ledger is given on pages 571-597 of the paper book and it relates to the AY 2004-05. The relevant submission made by the assessee before CIT(A) is given on pages 598 – 612 of the paper book. In this regard, during the course of the proceedings before us, Sri Pathak, cross tallied certain entries in the ledger book vis-à-vis the amounts recorded in the balance sheet of the assessee. Thus, it was demonstrated that the ledger book is accounted ledger book. It was also clarified that apart from the said ledger, no other document pertaining to the assessee trust for the said AYs under consideration was found with Shri Shinde and transferred to the AO of the Assessee. (ii) On incriminating material: It is submitted that for the purpose of invoking the provisions of section 153C, there has to be some incriminating evidence found pertaining to the assessee with the third party. In the absence of any incriminating evidence, the proceedings u/s 153C cannot be initiated. Secondly the ledger book is duly accounted and not an incriminating document. (iii) Purpose of 153C – Unfettered Powers: It is submitted that the stand of the department is grossly incorrect in law as the purpose behind the introduction the special provision of section 153C is the same as that behind the provisions of section 158BD. That is, in short, to enable the department to proceed against a third person for bringing to tax any income of such third person, in search action, the diary, loose papers, assets etc have to be found unaccounted and incriminating in nature or not disclosed found to be belonging to a third person. Then only the AO gets the jurisdiction to assess such third person u/s 153C of the Act. The intention behind the provisions of section 153C is not to give unfettered powers to the AO to proceed against any such third person if any document is found pertaining to him. If the departmental stand is accepted it would lead to a situation wherein for genuine and fully accounted transactions, the ITO may get powers to proceed against any other person. To give an example, if a cloth dealer is searched he has purchased cloth from various reputed companies and the purchase bills are found with him. Now, because the bills are issued by the manufacturer companies, will be justified on the part of the AO to proceed against such companies u/s 153C of the Act. Similarly, if a dealer of a automobile manufacturing company is searched and in his place, the bills issued by the automobile company are bound to be found, in that case, will it be justified for the AO to proceed against such company. There can be may such example in day to day life. A person is going out of station for a long period of about 1 month or so and he keeps his car with a friend. Such friend is searched, will it be justified to trouble the other person by proceeding u/s 153C of the Act. (iv) Summary of the arguments: The provisions of section 153C for AYs 2000-01 to 2005-06 are wrongly invoked by the revenue. Out of these six years, no evidence at all was found for AYs 2000-01 to 2003-04 & 2005-06. The ledger book was found for AY 2004-05 but as clarified above, it is not an incriminating document. Accordingly, in view of the ITAT, Pune decision in the case of Sinhgad Technical Education Society v ACIT ITA Nos 114 to 117/PN/10, the assessee submits that the notice issued u/s 153C is bad in law and the assessments completed for the above six years may kindly be declared null and void.
8. Per contra, Sri A S Singh, DR for the Revenue asserted vehemently that for the purposes of invoking the provisions of section 153C of the Act, it is not necessary that the documents found pertaining to the third party should be incriminating in nature. The stress of the department is on the wording of section 153C of the Act wherein it I mentioned that if any assets or documents or books belonging to the third party are found with the person search, the AO will proceed against such third party. Sri Singh relied on certain decisions for the propositions that no incriminating evidence is necessary for initiating the proceedings u/s 153C of the Act and they are: Vijaybhai N Chandrani (231 CTR 474 (Guj); Panchuram Deshmukh & Ors 133 TTJ 53 (Bilaspur) and Shyam Lata Kaushik 114 ITD 305 (Del).
9. During the rebuttal time also Sri Pathak stated that the documents belonging to the party is incriminating or the asset found belonging to the third party or undisclosed, then only, the proceedings u/s 153C of the Act would be justified. On the other hand, if the AO is authorized to proceed against any third party just because some document, whether accounted and not incriminating, of the third part is found during search, it would lead to the cases mentioned in above wherein genuine parties for the fully accounted documents or assets will be subjected to the harassment of undergoing the block assessments ordeal to million of citizens as a consequence of wrong invoking of the provisions of u/s 153C of the Act. In short, as the departmental stand will lead to a harassment for the assessees in general and an arbitrary authority for the officers, such interpretation has to be avoided. In this context, the assessee relies upon the following decisions wherein the courts have held that when no incriminating evidence is found, no addition can be made in the assessment u/s 153A/153C – A. Anil Kumar Bhatia & Ors (2010) 1 ITR (Trib) 484 (Del): In this case, it has been held that in respect of an assessment under s. 153A, where processing returns u/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. B. LMJ International Ltd. (2008) 119 TTJ 214 (Kol): In this case, it has been held hat where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be disturbed; items of regular assessment cannot be added back in the proceedings u/s 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings.
10. Cases Relied upon by the CIT-DR: Sri Pathak submitted the following in connection with the arguments of Sri AS Singh, Ld DR for revenue. Otherwise, Sri Singh relied on certain decisions for the propositions that no incriminating evidence is necessary for initiating the proceedings u/s 153Cof the Act they are: Vijaybhai N Chandrani (231 CTR 474 (Guj); Panchuram Deshmukh & Ors 133 TT3 53 (Bilaspur) and Shyam Lata Kaushik 114 ITD 305 (Del). In this regard, it is submitted that in the various decision of the Tribunal wherein the view is taken in favour of the department, the above argument is not taken and secondly, in all these cases, prima facie, the documents were incriminating in nature while in instant case, it is not so at all. Hence, the notices u/s 153C are invalid. In fact, in the case before the Hon’ble Gujarat H.C., the issue was that some loose papers were found at the premises of one housing society in the course of search and on the basis of the said document, noticed u/s 153C was issued to the assessee. Hon’ble H.C held that the documents found did not pertain to the assessee and hence, notice issued u/s 153C was invalid. Accordingly, the issue before Hon’ble H.C was totally different. Further, in the case before ITAT, Bilaspur in the case of Panchuram Deshmukh & Ors 133 TT3 53 (Bilaspur) some documents were found pertaining to the assessee which indicated some prima facie benami transactions. Thus, ITAT held that the notice issued is valid. As regards the issue in the case before ITAT Delhi in the case of Shyam Lata Kaushik 114 ITD 305 (Del), the assessment in that case was completed u/s 153A and not u/s 153C. Thus, the facts are distinguishable. Where a person is searched, his assessment is to be completed u/s 153A and in that context, Hon’ble ITAT held that no incriminating evidence is necessary to complete the assessment u/s 153A.
11. Accordingly, it is submitted that the decisions cited by the ld DR are distinguishable and not applicable to the facts of the present case. It is submitted that since no incriminating evidence is found during the course of search on Shri R D Sinde pertaining to the assessee, the notice issued u/s 153C for the AYs 2000-01 to 2005-06 may be declared null and void. Without prejudice, only one document is found for the AY 2005-06 i.e. the inward register. Hence, for other five years since no document has been found and therefore, in view of the decision of ITAT, Pune in the case of Sinhgad Technical Education Society v ACIT (ITA Nos 114 to 117/PN/10) and M/s Kumar & Co. vide ITA No 463/PN/08 for the AY 2000-01, it is submitted that the assessment completed for these 5 years be declared null and void.
12. Further, the AO in the satisfaction note referred to the statement of Shri R D Shinde recorded during the course of search u/s 132(4). According to him, Shri Shinde had stated that the amount collected from the students has been deposited in the building and equipment fund of the various trusts of Bharati Vidyapeeth Group. Hence, this statement of Shri Shinde has also been considered while recording the satisfaction note u/s 153C. It is submitted that as per section 153C, where any money bullion, jewellery or other valuable articles or thing or books of account or documents belong to a person other than a person who is searched, then notice u/s 153C can be issued against the other person. Hence, as per section 153C where any money, bullion, jewellery or other valuable articles or thing or books of account or documents then action can be taken. Now, the ld AO has referred to the statement of Shri R D Shinde for recording the satisfaction. However, the section does not permit issue of notice u/s 153C on the basis of a statement recorded of the person searched. It is submitted that statement cannot be equated with document or valuable article of thing. In this context, reliance is placed the decision of Delhi H.C in the case of Late Raj Pal Bhyatia 237 CTR 1. In this case, the notice u/s 158BD was issued against the assessee on the basis of the statement recorded of the person searched. Hon’ble H.C held that notice u/s 158BD could not be issued on the basis of the statement recorded of the person searched and the statement of searched person cannot be the basis. It is submitted that the wording of section 158BD is similar to that of section 153C and hence, in view of the said decision, it is submitted that the ld.AO has erred in placing reliance on the statement of Shri Shinde for invoking the provisions of section 153C.
13. Further, we find it is necessary to highlight the stand of the revenue and the said stand of the revenue is communicated to us by way of written submissions and for the sake of completeness of the order, the same is extracted which is as under.
“In the additional ground the assessee has contended that the order passed u/s 263 is null and void, as the assessment order passed u/s 153A r.w.s. 153C is itself null and void. It is further contended that proceedings u/s 153C are bad in law for the reasons that there was no incriminating material found during the search conducted in the case of Shri R D Shinde, pertaining to assessee trust for the concerned years.
The assessee’s contention that no incriminating material was found during the search on Sri R D Shinde, pertaining to assessee, is not correct. This is clear from the satisfaction note recorded prior to issue of notice u/ 153C, a copy of which is enclosed herewith. The assessee has not contested the fact that the documents referred to in the satisfaction note were seized during the search on Shri R D Shinde and that they belong to the assessee. The conditions precedent for initiation of the proceedings u/s 153C are therefore satisfied and the proceedings are therefore valid.
If it is the assessee’s contention that the books of accounts or documents seized during the search should be specific to particular A.Y and that these should contain incriminating material, these contentions deserve to be rejected.
In this contention your honour’s kind attention is invited to the provisions o f section 153C of the I.T. Act. It may kindly be seen that as per the provisions of section 153C, the satisfaction required to be arrived at by the AO for issue of notice u/s 153C is that
“any money, bullion, jewellery or other valuable article or thing or books o f accounts or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A ”
If this satisfaction is arrived at, the AO is entitled to issue notice to the person in accordance with the provisions of section 153A.
The provisions of section u/s 153A provide for the assessments or reassessments of the income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. It may kindly be appreciated that the provisions in section 153A to section 153D are special provisions enacted for doing assessments in the cases o f persons who have been subjected to search or whose documents have been found during the search. It may also kindly be appreciated that the provisions in section 153A and section 153C are notwithstanding anything contained in the normal provisions relating to assessments like sections 139, 147,148, 149, 151, 153 etc. The assessments in search cases should, therefore, be strictly in accordance the provisions contained in sections 153A to section 153D.
As already noted, the only requirement for issue of notice u/s 153C is that the books of accounts or documents seized belongs or belong to the other person. The language of section 153C is very clear. There is no requirement that the books accounts or documents should contain incriminating evidence. Whether the information contained in the books or documents is incriminating is an issue that will have to be decided during the assessment proceedings. There is also no requirement that books or documents relating to each of the six years should have been found during the search.
It may also kindly be allowed to point out that if incriminating evidence relating to a particular assessment year is found during the search, action could be taken for reassessment of income of that year under the normal provisions contained in section 148 of the Income-tax Act. The insistence that incriminating documents relating to each o f the assessment years which are sought to be covered u/s 153C should be seized in order to bestow jurisdiction on the AO for action u/s 153C will be a throwback to the provisions of section 148, negating the very purpose of introduction of the special provisions contained in sections 153A to section 153D. It is, therefore, my humble submission that before taking action 153C, the AO is not required to arrive a satisfaction regarding incriminating nature of the documents and it is not necessary that documents pertaining to each of the six assessment years should have been seized. ”
14. As per the above note, stand of the revenue is clear that the AO at the time of handing over of the documents to the AO of the assessee is not required to arrive at the satisfaction regarding incriminating nature of the documents and further, as per the express provisions, it is not necessary that documents pertaining to each of the six assessment years should have been seized and handed over to the AO of the assessee.
15. We have heard the parties and perused the voluminous papers filed before us involving all the six AYs including the written submissions of the parties. As stated in the preceding paragraphs, we proceed the adjudicate the issue relating to the validity of the notice issued u/s 153C of the Act for the Six years in question. For this purpose we examine – SATISFACTION NOTE RECORDED BY THE HANDING OVER-AO;
SATISFACTION NOTE:
“Satisfaction note for proceedings u/s 153C of the I. T. Act, 1961 in the case o f Bharati Vidyapeeth Medical Foundation, Bharati Vidya Bhavan, Pune – 411030.
The search action u/s 132 of the IT Act was carried in the case of Shri Ramchandra Dada Shinde, on 22.7.2005. The assessee was working as accounts officer in the Bharati Vidyapeeth Group of trusts. During the search action the office cabin o f the assessee situated at Bharati Vidya Bhavan near Alka Talkies, Pune-30 was searched alongwith his residential premises.
During the search action books of accounts, documents & cash were found and seized. Total 3 bundles of loose paper were seized vide annexure A-1 of Panchnama dt 21.7.2005 and 18 loose paper bundles were seized vide annexure A-1 of the Panchnama dt 22.7.2005.
The details of seized documents as per annexure A of Panchnama dt 22.7.2005 belonging to the assessee firm are as follows-
1. Bundle No. 10 – This is ledger of Bharati Vidyapeeth Medical Foundation for A.Y 2003-04
The provisions of section 153C of the IT Act 1961 reads as ‘…where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books o f accounts or documents seized or requisitioned belongs or belongs to person other than the person referred to in section 153A then…. AO shall proceed against each such other person & issue such other notice and assess or reassess income of such other person in accordance with the provisions of section 153A…’Since in this case, the books o f accounts belonging to assessee trust has been seized, I am satisfied that notice u/s 153C of the IT Act should be issued.
Further Shri D Shinde in his statement recorded u/s 132(4) on 22.7.2005 stated that the amount received of Rs 2,00,00,000/- on account of consultancy from the students have been deposited in the past to the building fund and equipment fund o f the various trusts of the Bharati Vidyapeeth Group.
In the case of assessee trust, there is credit in trust fund a/c and development fund a/c from F Y 99-2000 to 05-06 is Rs 1,34,91,141/-
Examination of seized books of accounts of the assessee trust shows that the amount credited in various dates in the ledger a/c of dev fund and trust fund claimed to be receipts towards the corpus of the trusts has been received entirely in cash, and the donors has not been mentioned in the books of a/c. In view of the above facts, I am satisfied that, the receipts on account of dev. Fund and trust fund credited in the books are not genuine. Since the receipt credited n the books of a/c not from the genuine source for the charitable purpose of the trust, apparently the income of assessee trusts is not liable for exemption u/s 11,12,13 of the IT Act 1961.
Therefore notices u/s 153C is hereby issued for the following A. Yrs.
A.Y
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Sd/-
Date: 30 March 2007
Assessing Officer.
16. From the above, it is clear that there is seizure of ledger involving the assessee by way of Bundle No. 10 – This is ledger of Bharati Vidyapeeth Medical Foundation and we find it relates to AY 2004-05 and not for A.Y 2003-04 as mentioned by the AO in the above extracted ‘satisfaction note’. It is also a fact that there is no other seized documents/other listed ones pertaining to other AYs under consideration and belonging to the assessee. Further, it is the inescapable observation that rest of the documents relate to the AY 2006-07, which is not the subject matter of this order. As stated above, the CIT(A) dismissed the said legal ground of the assessee on the reasoning that the (i) issue of validity of the notice was not raised before the AO; (ii) the said issue was pending before the ITAT at the relevant point of time and therefore, CIT(A) did not want to interfere by giving his decision on the issue; (iii) However, the CIT (A) opined that the expression ‘incriminating’ is not borne out of the statute and in our words, it is not a case of casus omisus and there is no need to supply the words in the legislation; (iv) CIT(A) is of the view that the provisions contained u/s 292B and 292BB of the I.T. Act has a cure for such deficiencies if any. Further, the above extracted written submissions also add to the above list of the arguments of the revenue. We have examined the stand of the assessee which was already discussed in the preceding paragraphs and desist to repeat the same to avoid the duplication. Considering the above rival stands of the parties, we have examined the scope of the provisions of section 153C of the Act and legal pronouncements vis a vis (i) the incrimination of the seized documents and (ii) the requirement of the seizure and handing over of the documents belonging to the third party.
17. Scope: We have examined the provisions of section 153C, relevant provisions of section 153A of the Act. We have also examined the copies of the decisions in the cases of Kumar and Company (supra) and the Sinhgad Technical Education Society (supra) relied upon by the Ld Counsel for the assessee. In these orders, the Hon’ble Tribunal of this Bench has come to the conclusions that the AO shall not possess unfettered powers of summarily opining or reopening the concluded assessments of all the six assessment years in respect of the third party mentioned in section 153C of the Act without having in possession the AY-specific incriminating documents/other listed items. The said decision was taken by this bench relying on the Kolkata bench decision of the Tribunal in the case of LMJ International (supra). It is a fact that the provisions of section 153C does not have the expressions such as ‘incriminating’ or ‘undisclosed income’. However, considering the search seizure provisions, where there is no scope for estimations and surmises, Ho’ble Tribunal took the view that there is need for seizure of the documents and those documents handed over to the AO of the third party covered u/s 153C of the Act must be belonging to the said party and should be ‘incriminating’ too. Settled assessments must not be disturbed merely based on the dumb documents gathered and seized by the revenue. It is also the finding of the Tribunal that the such incriminating documents must be Assessment Year Specific and it is the finding of the Tribunal that AO has no power to issue notice us/ 153C of the Act in respect of an AY where there is no Asst Year Specific Incriminating seizure of the documents or other listed items. AO cannot issue notice in respect of an AY, when the incriminating material belonging to the assessee pertains to some other AY. We proceed to import relevant portions of an unreported decision of the Tribunal of this bench in the case of Sinhgad Technical Education Society Vide ITA NO 114 to 117/pn/10. This extract consists of the relevant portions again imported from the order of the Tribunal in the case of the Kumar and Company vide ITA No. 463/PN/08 for the same A.Y 2000-01.
18. Extraction of paragraphs 8 to 15 from the order of the Sinhgad Technical Education Society vide ITA NO 114 to 117/Pn/10.
“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 Sinhgad Technical 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 Shaikh Amir Shaikh.
4) page no. 14- this is voucher of STES dt. 27.09.2004 for cash payment o f Rs. 1 lacs to Shaki Amir 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
8) 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. ”
10. 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 o f 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.
11. 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 AY 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 o f entries, which are already found place in the books of accounts 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. 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 of the 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 o f 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 AY 2000-01 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 AYs automatically even with out any incriminating documents in respect of the concluded issues too. Accordingly, the relevant grounds of the 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 o f 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. 153A are 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 of action under s.132..”
3) Meghmani Organics Ltd. (2010) 129 TTJ (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) LMJ International Ltd. (2008) 119 TTJ (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 of the disallowed amounts in the search proceedings. ”
5) Kailash Auto Finance Ltd. (2009) 32 SOT 80 (Luck) Conclusion:- “A notice under s. 148(1) can be issued even where notice under 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) 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 o f 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 TTJ 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 4 appeals under consideration are allowed and in favour o f 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. ”
18. We have discussed the existing legal proposition on the issue of validity of the notice in the light of the provisions of section 153C r w s `153A of the Act. From the above, it is the decision of this bench of the Tribunal, taken relying on the decisions of the other benches of the Tribunal ie in the case of LMJ International Ltd (supra) that “where nothing incriminating is found in the course of search relating to any assessment year, the assessments for such years cannot be distributed. Thus, the assessments made by the AO u/s 153C of the Act without the existence of AY-specific incriminating documents are invalid.
19. Application of the above scope to the facts of this case: Now we shall take up the contents of the satisfaction note and examine if there are any documents seized involving the assessee and if they are incriminating with reference each of the six AYs of the assessee.
20. In the instant case as expressively mentioned by the revenue authorities that the AO issued notices u/s 153C of the Act simply relying on the contents of section 153A(1)(b) of the Act and also its first proviso. It is the stand of the department as discussed in the preceding paragraphs of this order that there is no need for the AY-specific seizure and handing over of the document to the AO of the assessee as the provisions of section 153C of the Act. AO relied on the plain reading of the relevant provisions of the said sections. In the process, revenue ignored various settled legal propositions on the subject. The said propositions are that the concluded assessments, which fall in the bunch of six AY should not be disturbed unless there exists AY specific incriminating material relevant for each of the said AYs or concluded assessments and it should not be a case of dumb documents. Probably, from the revenue’s point of view, the said propositions are dilution of the express provisions which reads that AO may ‘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). It is also fact that the decision in the case of LMJ International Ltd. (2008) 119 TTJ (Kol) 214 is undisturbed as on date and it is relevant for the proposition that “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 of the disallowed amounts in the search proceedings.” Nothing is brought to our notice by the revenue contrary to the above and the decisions relied on by the DR are otherwise distinguishable on facts.
21. In the present case of the assessee and in the appeals arising from the order of the AO under section 153C rws 143(3) of the Act for the AY AYs 200001 to 2005-06, there are six AYs. Based on the existence of the seized documents, these six AYs can categorized into two categories. (i) the AYs without seizure of any documents or any other seizures as referred to in the provisions of section 153C of the Act; and (ii) the AY with the seizure of some documents as referred to in the provisions of section 153C of the Act.
22. Appeals by the Assessee – AYs 2000-01 to 2003-04 & 2005-06: In connection with the AYs at sl no (i) above ie AYs 2000-01 to 2004-05, admittedly, there is no seizure of the documents as evident from the satisfaction note and the tables explained by the assessee. Considering the above scope of the provisions and legal propositions already adopted by this bench in the case of Sinhgad Technical Education Society (supra), we are of the opinion that the issuance of notices u/s 153C for the AYs 2000-01 to 2003-04 & 2005-06, where there are no seized documents, is invalid.
23. In so far as the lone appeal for the revenue in respect of the appeal ITA1039/PN/10 for AY 2003-04 is concerned, the same has to be dismissed without going in to the merits of the ground as we quashed the assessment proceedings in view of the invalid notice.
24. Appeals by the Assessee – AY 2004-05: In connection with the AYs at sl no (ii) above ie AYs 2004-05, admittedly, there is some seizure of the documents as evident from the satisfaction note. We are convinced that the said ledger is an accounted one. Further, the reasoning given by us in the order in the case of Sinhgad Technical Education Society (supra) apply to the issue in these appeals mutatis mutandis. In other words, the views approved by this bench in the case of Sinhgad Technical Education Society (supra) and Kumar Company (supra) are affirmed by the said Judgment of the Gujarat High Court in the case of Vijaybhai N Chandani 231CTR 474 (Guj) and mere appearance of names does not mean anything as section 153C of the Act is intended for taxing the undisclosed income of the third party based on the material/others seized during the search action. As such, only the unaccounted and incriminating material or others listed in the said section are only seized during the search and the accounted documents should not be seized. Seizure of the documents is aimed at the unearthing of the unaccounted income of the assessee assessable u/s 153A or the other third parties subjected assessment u/s 153C of the Act. When the documents do not indicate any undisclosed income, the ledger in the instant case, what is the relevance of such document? Such ledger constitutes merely an accounted one with no financial implications. Thus, the documents, the ledger in the instant case relevant for the AY 2004-05, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assasable u/s 153C of the Act. Accordingly, the legal grounds raised in all these appeals of the assessee relating to the validity of the notice u/s 153C of the Act are allowed in favour of the assessee in respect of all the AYs under consideration. Further, we are of the considered opinion that the adjudication of the other grounds relating to the other legal and merit oriented issues is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic.
25. In the result all the six appeals of the assessee are allowed and consequently, the cross appeal by the revenue vide ITA1039/PN/10 for AY 200304 is
Second category of the appeals
(Five appeals of Assessee against the order of the CIT u/s 263 of Act)
25. These are the assessee’s appeals arising out of the orders passed by the CIT u/s 263 of the Act. The ITA numbers under consideration here are as under.659/PN/08 for the AY 2000-01, 660/PN/08 for the AY 2001-02, 661/PN/08for the AY 2002-03, 662/PN/08 for the AY 2004-05 and 663/PN/08 for the AY 2005-06. As per Sri Sunil Pathak, Ld Counsel, all these appeals have to be quashed in case the notices issued by the AO u/s 153C in respect of all the AYs under consideration are held null and void. Ld DR relied on the orders of the revenue. We heard the parties and considered the arguments of the parties and the documents filed before us. We find that the legal ground raised by the assessee questions the validity of the review order of the CIT passed u/s 263 of the Act. From the above paragraphs of this order, it is evident that we have upheld the invalidity of the notices issued u/s 153C of the Act and in favour of the assessee and in effect, we hold that the orders passed u/s 153C r w s 143(3) by the AO for the AYs under consideration are held to be null and void. Consequently, the assessment orders reviewed by the CIT u/s 263 of the Act are null and void and therefore, the review order of the CIT also becomes null and void. Accordingly and consequently, these second category of appeals numbering 5 for the said AY have also to be decided in favour of the assessee and against the revenue. Thus, the said legal ground relating to the invalidity of the notice u/s 153C & the invalidity of the review order raised by the assessee in respect of the five AYs under consideration is allowed. The adjudication of the other grounds for all the AYs under consideration are to be dismissed as academic.
27. In the result, the five appeals of the assessee are
Third category of the appeals
(Ten Cross appeals of the Assessee and Revenue against the fresh assessment orders passed by AO u/s 263 rws 153C rws 143(3) of Act)
28. These are the ten cross appeals arising out of the fresh assessment orders passed by the AO u/s 263 rws 153C rws 143(3) of the Act. As per Sri Sunil Pathak, Ld Counsel, all these appeals have also to be quashed in case the notices issued by the AO u/s 153C in respect of all the AYs under consideration are held null and void and in case the review orders of the CIT are held null and void too. Ld DR relied on the orders of the revenue. We heard the parties and considered the arguments of the parties and the documents filed before us. We find that the legal ground raised by the assessee questions the validity of the review order of the CIT passed u/s 263 of the Act. From the above paragraphs of this order, it is evident that we have upheld the invalidity of the notices issued u/s 153C of the Act and in favour of the assessee and in effect, we hold that the orders passed u/s 153C r w s 143(3) by the AO for the AYs under consideration and the review orders of the CIT passed u/s 263 are held to be null and void. Consequently, the assessment orders reviewed by the CIT u/s 263 of the Act are null and void and therefore, the review order of the CIT also becomes null and void. Accordingly and consequently, these second category of appeals numbering 10 for the said AY have also to be decided null and void in view of the fact these appeals revolve around the fresh assessment orders arising out of the review orders which are held invalid. Thus, the said legal grounds relating to the invalidity of the notice u/s 153C & the invalidity of the review order and the fresh assessment orders raised by the assessee in respect of the five AYs under consideration are allowed and in favour of the assessee. The adjudication of the other grounds for all the AYs under consideration are to be dismissed as academic.
29. In the result, the five appeals of the assessee are allowed and five appeals of the revenue are dismissed on technicalities.
Order pronounced in open Court on 28th April, 2011
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