Chain Roop Baid vs Assistant Commissioner of Income-tax

This appeal filed by the assessee is directed against the order of ld CIT(A) Guwahati, dated 31.3.2012 for the assessment year 2003-04

Grounds of appeal No.1 raised by the assessee is as under: "1. For that on the facts and circumstances of the case, the ld CIT(A) erred in not holding that the notice served under section 153C of the Act on 1.10.2009 for the assessment year 2003-04 is barred by limitation and invalid and therefore, the consequent assessment is bad in law."

2.1 Briefly stated, the facts of the case are that a search & seizure operation under section 132 of the Income tax Act, 1961 (in short ''the Act'') was conducted at the residential and business premises of the assessee as well as in the case of M/s. Jai Chand Lal Singhi and others (hereinafter referred as Singhi Group) during the period 12.02.2009 to 8.4.2009. During the course of search & seizure operation, certain books of account and other documents were seized. The seized documents included certain documents relating to the assessee. At the time of search, the jurisdiction over the "Singhi Group" as well as the assessee lay with the ACIT, Bongaigaon Circle. Consequent to the search, the entire seized documents including relating to the assessee were handed over to the ACIT, Bongaigaon Circle on 5.6.2009. Subsequently, these cases were centralized with ACIT, Circle-4, Guwahati. Consequently, the books of account were handed over to the ACIT, Circle-4, Guwahati on 9.10.2009. In this case, the Assessing Officer initiated the proceedings under section 153C of the Act for the assessment years 2003-04 to 2008-09 (i.e. for six assessment years). Subsequently, assessments were made under section 144/153C of the Act. The Assessing Officer framed the assessment for the year under consideration on 31.12.2010 determining the total income at Rs. 1,29,56,970.00 by making certain additions/disallowances.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld CIT(A). One of the grounds raised by the assessee before the ld CIT(A) was that the assessment framed by the AO for the year under consideration is barred by limitation. However, the ld CIT(A) rejected the said ground for the reasons stated in paragraph 3.2 to 3.5 of the impugned order and hence, the assessee is in appeal before the Tribunal.

We have heard the ld representatives of both the parties and perused the materials available on record. Ld counsel for the assessee submitted that notice u/s.153C of the Act was issued and served on the assessee on 1.10.2009 calling for return of income. According to him, the said notice is barred by limitation as per the proviso to section 153C of the Act. In the instant case, the seized documents allegedly belonging to the assessee were handed over to the Assessing Officer of such other person on 5.6.2009. Now, as per the proviso to section 153C of the Act, the date of search is to be substituted by the date of receiving books of account or documents or assets seized. Accordingly, the assessment can be reopened of the preceding six years than 5.6.2009. According to ld counsel for the assessee, in this case, the previous year in which the documents are handed over is 1.4.2009 to 31.3.2010. The assessment year would be assessment year 2010-2011. According to ld counsel for the assessee, the AO has the jurisdiction to reopen the assessment for six assessment years preceding this assessment year. They are 2009-2010, 2008-09, 2007-08, 2006-07, 2005-06 & 2004-05. He further submitted that the assessment for assessment year 2003-04 is barred by limitation so far as the present assessee is concerned. In our opinion, there is substance in the above submission of ld counsel for the assessee and, therefore, we hold that the assessment framed u/s. 144/153C of the Act dt.30.12.2010 for assessment year 2003-04 is clearly barred by limitation. While taking such a view, we are fortified by the decision of ITAT Ahemedabad Bench in the case of Vijay M. Vimawal v. Asstt. CIT [2009] 34 SOT 34 (URO), wherein, the Bench of the Tribunal held as under: (Page 515 to 517)

"13. We have considered the rival submissions and perused the materials available on record. The facts as available on record remain that search in the case of Shri Subody Sanghvi was carried out on 20th December, 2004. The statement of the assessee under s.132 of the Act was recorded on 12th Jan, 2005 and intimation about the recovery of the documents pertaining to the assessee were sent to the AO of the present assessee on 3rd Nov. 2006. If it is presumed that there is no other correspondence between the AAO of the person searched and the AO of the present assessee, then handing over of documents to the AO of the present assessee could have taken place on or after 3rd Nov. 2006. In the backdrop of above facts let us examine the provisions of s.153 C and proviso thereof which reads as under:

"153C. Assessment of income of any other person-(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".

Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.

The main thrust of s.153C of the Act is to empower the AO of the person searched to handover the money, gold, jewellery or other relevant articles/things or books of account or documents belonging to the other person to the AO of that other person and the AO of that other person is empowered to proceed against such other person to assess undisclosed income resulting from such money, bullion, jewellery and valuable articles or things, books of account or other documents.

The proviso introduced by Finance Act, 2005 w.e.f. 1st June, 2003 makes a change in the date for reckoning the initiation of assessment proceedings of earlier years in the case of other person. In the case of person searched provisions of S.153A of the Act are applicable. Provisions of sub-s.(1)(b) empowers the AO assess or reassess total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Accordingly, the AO can issue notice under S.153A of the Act for six preceding assessment years following prior to the previous year in which search is conducted. In the present case, search in the csse of Shri Subody Sanghvi was conducted on 20th De.2004, then, in this case, the AO is empowered to initiate the proceedings for assessment/reassessment for the assessment years 2004-05, 2003-04, 2002-03, 2001-02, 2000-2001 and 1999-2000. It is because the assessment year relevant to previous year in which search took place is assessment year 2005-06 (previous year 2004-05). But when we apply proviso to section 153C of the Act, then date of search is substituted by date of handing over of the documents by the AO of the person searched to the AO of the other person (present assessee). This date is 3rd Nov. 2006 which falls in the previous year 2006-07 and relevant assessment year 2007-08. The AO now can reopen the assessment for six assessment years preceding this assessment year. They are assessment years 2006-07, 2005-06, 2004-05, 2003-04, 2002-03 and 2001-02. Thus, assessment for assessment year 1999-2000 is barred by limitation so far as the present assessee is concerned."

In view of above decision, we hold that the documents having been handed over to the AO of the assessee on 5.6.2009 relevant to assessment year being 2010-2011, the AO can reopen the assessment for six preceding assessment years i.e. assessment years 2004-05 to 2009-2010 and assessment for assessment year 2003-04 is barred by limitation. Consequently, we quash the assessment order relating to assessment year 2003-04.

In the result, appeal filed by the assessee is allowed.