AI Structured Summary
Not yet generated for this judgment
Judgment
O R D E R
PER MAHAVIR SINGH, VP:
These are quantum as well as penalty appeals emanating from the respective orders of the Ld. Commissioner of Income Tax (Appeal-25), Delhi (hereinafter referred as CIT(A)), relevant to assessment year 2015-16.
In the quantum appeal viz. ITA No. 1630/Del/2026, at the time of hearing, ld. AR for the assessee has filed an application for admission of following additional grounds and requested to admit the same, in view of the decision of the Hon’ble Supreme Court in the case of NTPC vs. CIT (1998) 229 ITR 383 (SC):
“1.That the Ld. CIT(A) erred in law and on facts in upholding the notice issued u/s. 153C dated 21.2.2022, despite the requisite satisfaction having been recorded after 1.4.2021, rendering the notice and consequential assessment without jurisdiction and liable to be quashed.”
2.That the CIT(A) erred in law and on facts in upholding the assumption of jurisdiction under section 153C on the basis of a common and omnibus satisfaction note covering AYs 2014-15 to 2020-21, without recording an independent and year wise satisfaction in respect of the appellant for AY 2015-16 and without establishing the requisite nexus between the seized material and the determination of the appellant’s total income for the relevant assessment year.
3.That the Ld. CIT(A) erred in law and on facts in sustaining the assessment under section 153C, despite the satisfaction note failing to demonstrate how the seized material had a bearing on the determination of the appellant’s total income for AY 2015-16, and the assessment so framed being without valid assumption of jurisdiction.”
After hearing both the sides and perusing the records, we note that Additional Ground no. 1 has been only argued before us, which is purely legal, do not require fresh facts to be investigated and goes to the root of the matter, thus, in view of the decision in the case of NTPC vs. CIT (Supra), we deem it fit and proper to admit the aforesaid additional ground no. 1.
At the time of hearing, Ld. AR for the assessee submitted order passed by the AO is illegal and ab inito void. The assumption of jurisdiction by the AO u/s. 153C that as per first proviso of the Act is illegal and hence, all the subsequent proceedings are also liable to be quashed. In this case notice u/s. 153C of the Act was issued to the assessee company on 21.2.2022, despite the requisite satisfaction having been recorded after 1.4.2021. It was further argued that in the present case the satisfaction note in terms of section 153C was recorded on 14.2.2022 by the AO of the searched party. He further stated that copy of satisfaction note recorded by the AO of the assessee is ‘undated’. According to the Ld. Counsel for the Assessee in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh reported in 458 ITR 437 (SC) wherein search conducted at 3rd party premises and seized material were handed over, the date of handing over of the seized material was to be construed as date of initiation of search action, the other person in terms of provisions of section 153C of the Act. Further the Hon’ble Supreme Court has confirmed the decision of the Delhi High Court. Accordingly, learned counsel for the assesse argued that in terms of satisfaction note recorded by the Assessing Officer dated 14.2.2022 when he received the seized material. Ld. Counsel further argued that as there is amendment in the provisions of sub-section 3 of section 153C whereby as per first proviso there is a bar for invoking the provisions of section 153C of the Act with effect from 1 April 2021. Ld. Counsel stated that in the present case also the documents were received by the AO of the assessee on 14.2.2022 on which date he recorded his satisfaction that means the AO issued notice u/s. 153C of the Act is bad in law whereas assessment should have been framed u/s. 148 read with section 143(3) of the Act. For this proposition, Ld. Counsel for the assessee relied on the decision of the CIT vs. Jasjit Singh (Supra) and the also the decision of the Hon’ble Madras High Court in the case of Harigovvind vs. ACIT 485 ITR 509 (Madras).
When these facts were confronted to the Ld. CIT (DR) he could not controvert the above fact situation, but he relied on the assessment order and the order of the learned CIT.
We have heard the rival contentions and gone through the facts and circumstance of the case. In this case notice u/s. 153C of the Act was issued to the assessee company on 21.2.2022, despite the requisite satisfaction having been recorded after 1.4.2021. It is observed that in the present case the satisfaction note in terms of section 153C was recorded on 14.2.2022 by the AO of the searched party and the satisfaction note recorded by the AO of the assessee is ‘undated’. Thus, in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh reported in 458 ITR 437 (SC) wherein search conducted at 3rd party premises and seized material were handed over, the date of handing over of the seized material was to be construed as date of initiation of search action, the other person in terms of provisions of section 153C of the Act. Thus, in terms of satisfaction note recorded by the Assessing Officer dated 14.2.2022 when he received the seized material. Also there is amendment in the provisions of sub-section 3 of section 153C whereby as per first proviso there is a bar for invoking the provisions of section 153C of the Act with effect from 1 April 2021. In the present case also the documents were received by the AO of the assessee on 14.2.2022 on which date he recorded his satisfaction that means the AO issued notice u/s. 153C of the Act is bad in law whereas assessment should have been framed u/s. 148 read with section 143(3) of the Act. For this proposition, we draw support from the decision of the CIT vs. Jasjit Singh (Supra) wherein, the Hon’ble Supreme Court in the CIT vs. Jasjit Singh has observed as under :-
“9.It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under section 153C was enacted. The revenue argued that the proviso [to Section 153©(1)] is confined in its application to the question of abatement.
10.This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the AO seized of the materials – of the search party, under section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned AO. In that even if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is disproportionate. For instance, if the papers are in fact assigned under section 153C after a period of four years, the third party assessee’s prejudice in writ large as it would have to virtually preserve the records for at least 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of section 153-C supports the interpretation which this Court adopts.
Further, Hon’ble Madras High Court in the case of Harigovind vs. ACIT (Supra) has considered this issue and held that in case where search is initiated after 1st April 2021 the provisions of section 153C will not apply and assessment can only be framed in terms of section 148 of the Act. Hon’ble Madras High Court considered decision of Honorable Supreme Court in the case of CIT versus Jasjit Singh (supra) and has held as under:-
47.A reading of the above shows that the Hon’ble Apex Court had rejected the contention of the respondent and hence, it is clear that the first proviso to Sub-Section (1) of Section 153C is not only for the purpose of abatement but also for all other purposes, viz., initiation of search for other person in terms of section 153C(3) of the Act. In such case, the date of initiation of search for the petitioner is the date, on which the documents were handed over to the JAO of the petitioner, i.e., 25.11.2022 is the date of initiation of search for the petition.
48.In terms of Sub-Section (3) of Section 3 of Section 153C, the provision of Section 153C will not apply for any search, which is initiated on or after 1.4.2021.
49.As stated above, in this case, the date of handing over of seized material to the petitioner’s JAO is on 25.11.2022 And the said date is the date of initiation of search for the petitioner. Thus, in the present case, it is crystal clear like cloudless sky that the initiation of search was subsequent to 1.4.2021, for which, the provisions of section 153C will not apply. Therefore, the impugned notices dated 7.2.2023 is unsustainable and the same were issued without authority and against the provisions of sub-section (3) of Section 153C of the Act.
50.In such view of the matter, all the impugned notices are liable be quashed and accordingly, all the impugned notices dated 7.2.2023 issued by the 2nd respondent are quashed.”
As the issues are covered, in the present case notice under section 153C of the Act dated 21.02.2022 is without jurisdiction and hence quashed and its consequent assessment is also quashed. As regards other pleadings are concerned the same have become academic.
In the result, the quantum appeal of the assessee being ITA No. 1630/Del/2026 is allowed.
As regards penalty appeal being ITA No. 1631/Del/2026 is concerned, since we have already allowed the quantum appeal in the aforesaid paragraphs, thus the penalty appeal is not sustainable in the eyes of law, hence, the penalty in dispute is hereby deleted and appeal of the assessee is allowed.
In the result, both the appeals are allowed.