M/s. Ravi Buildtech (P) Ltd. vs DCIT/ACIT

“1.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order u/s 153C and that too without assuming jurisdiction as per law and without recording mandatory 'satisfaction' in accordance with law and without complying/following with the other mandatory conditions/procedure as laid down u/s 153C in accordance with law.

2.

That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in passing the impugned assessment order u/s 153C, is illegal, bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds.

3.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.35,00,000/- on account of unsecured loan by treating it as alleged unexplained income u/s 68 and taxing the same u/s 115BBE and that too without there being any incriminating material found as a result of search and by recording incorrect facts and findings and without following the principles of natural justice and without confronting the adverse material on record and without providing the opportunity of cross examination and without considering the provisions of section 65B of the Evidence Act, 1872.

4.

That in any case and in any view of the matter, action of Ld. CIT(A) ▼ confirming the action of Ld. AO in making aggregate addition of Rs.35,00,000/- on account of unsecured loan u/s 68/115BBE, is bad in law and against the facts and circumstances of the case.

5.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.1,05,000/- (i.e. 3% of Rs.35,00,000/-) on account of alleged commission paid by treating it as alleged unexplained expenditure u/s 69C and taxing the same u/s 115BBE and that too without there being any incriminating material found as a result of search and by recording incorrect facts and findings and without following the principles of natural justice.

6.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs.2,54,137/- on account of interest paid on above unsecured loan by treating it as alleged non-business expenditure u/s 69C and that too without there being any incriminating material found as a result of search and by recording incorrect facts and findings and without following the principles of natural justice.

7.

That in any case and without prejudice to the above grounds, addition/disallowance made in the impugned assessment order are beyond jurisdiction and illegal, also for the reason that such order could not have been made since no incriminating material has been found as a result of search.

8.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order dated 26-03-2024 without there being requisite approval as per law and in any case approval, if any, is mechanical without application of mind and is no approval in the eyes of law. For Ravi Buildtech (P) Ltd.

9.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order dated 26-03-2024 which is barred by limitation.

10.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 153C and passing the impugned assessment order u/s 153C dated 26-03-2024 is illegal, and bad in law for the reason that the satisfaction recorded by Ld. AO of the searched person and AO of the assessee and the approval does not contain the DIN in the body of the satisfaction note as per the mandate of CBDT circular no. 19/2019 dated 14-08-2019.

11.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of Income Tax Act, 1961.

12.

That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without For Ravi Buildtech (P) Ltd. prejudice to each other.”

“3.

We have heard the rival contentions and have gone through the records before us. It needs to be mentioned that the additional grounds of appeal are admitted for adjudication following the case of NTPC (supra).

3.1

Coming to the merits of the additional ground it is observed that the satisfaction note u/s.153C of the Act in the case of the assessee was recorded on 24.06.2022 and also on 02.02.2023 for issuing the notice u/s.153C of the Act dated 02.02.2023. By virtue of Section 153C(3) of the Act, which was effective from 01.04.2021, where in case of a search initiated after 01.04.2021 the proceedings u/s 153C of the Act are not valid and applicable, but the provisions of section 148 of the Act are applicable. In the case of the assessee since the satisfaction note was recorded on 24.06.2022 or 02.02.2023 i.e. after 01.04.2021, the deemed date of search in the case of the assessee being person other than the searched person, shall be the date of recording of satisfaction note in view of the decision of the Hon'ble Apex court in the case of Jasjit Singh SHREE SAMBHAVNATH RAJENDRA JAIN reported in 458 ITR 437 and the assessment framed u/s.153C of the Act pursuant to the satisfaction note recorded on or after 01.04.2021, is bad in law.

3.2

The Hon'ble Madras High Court in the case of Harigovind Vs. ACIT (supra) held that in terms of sub-section (1) of section 153C of the Act for the purpose of calculation of six years period, the date of handing over the materials to the AO has to be construed as the date of initiation of search for the person other than the searched person. The Hon'ble Madras High Court further held that in terms of first proviso to sub section (1) of section 153C of the Act for the purpose of abatement also the date of handing over of the materials to the AO has to be construed as the date of initiation of search for the other person (other than searched person). The Hon'ble Madras High Court did not agree with the submissions made by the revenue that another date is available for the purpose of initiation of search in respect of other person (other than searched person). The Hon'ble Madras High Court further held as under :-

"39.

As far as the other person is concerned, the six years period would be calculated, the date on which the requisition was made and that would be the date, for the purpose of determination of assessment of income. On the other hand, as far as the searched person is concerned, this 6 years period would vary and the same would be calculated from the date of search made in the premises of searched person. Therefore, for the purpose of initiation and determination of income for 6 assessment years, two different dates have been fixed by the Statute, i.e.. for the searched person, it was taken the date of search, whereas, for the other person, it was taken the date, on which the requisition is made to the JAO of the other person.

40.

Thus, as far as the searched person is concerned, the date of initiation of search is the date, on which the search was conducted in his premises. The said date would be the date of initiation of search for CO searched person for all purposes. As far as the other person is concerned, the date of initiation of search would be the date, on which the materials, books of accounts, etc., are handed over to the JAO of the other person and this date would be considered as the date of initiation of search for other person for all purposes. Thus, there cannot be two different date of initiation of search, either for the searched person or for the other person.

41.

The provisions of Sub-Section (3) of Section 153C states that "153C(3) .....nothing contained in this Section shall apply in relation to a search initiated under Section 132 or books of account, other documents or any assets requisition under Section 1324 on or after the 1" day of April, 2021" which means, if the search is initiated subsequent to 01.04.2021, the provision of Section 153C will not apply and accordingly, no proceedings can be initiated against the other person.

42.

According to the petitioner, the date of handing over of the seized materials, i.e., 25.11.2022, is the date of initiation of search. If the said contention of the petitioner is accepted, obviously, the issuance of impugned notices dated 07.02.2023 by the 2nd respondent is without any BCOpauthority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the same is liable to be quashed.

43.

In terms of Sub-Section (1) of Section 153C of the Act, for the purpose of calculating the six years period, the date of handing over of the materials to the petitioner's JAO has to be construed as the date of initiation of search for other person. Further, in terms of first proviso to Sub-Section (1) of Section 153C, for the purpose of abatement also, the date of handing over of the materials to the petitioner's JAO has to be construed as the date of initiation of search for the other person. In such view of the matter, this Court is unable to comprehend the submissions made by the learned counsel for respondents that yet another date is available for the purpose of initiation of search in respect of the other person.

44.

Certainly, there cannot be two different dates for initiation of search for the other person. Hence, for all practical purpose, the initiation of search would be the same date and it is apparent upon reading the provisions of Section 153C of the Act. In the provision of Section 153C(1) of the Act, the date of initiation of search is mentioned as the Odate of handing over of materials and as per the first proviso, the same date would apply for the purpose of abatement also. When such being the case, no other date will come into picture for the purpose of determination of initiation of search for other person. At this juncture, it would be apposite to refer the judgement rendered by the Hon'ble Apex Court in CIT Vs. Jasjit Singh SHREE SAMBHAVNATH RAJENDRA JAIN reported in [2023] 458 ITR 437 (SC), wherein, it was held on the aspect as to whether the first proviso to Section 153C would apply only for the purpose of abatement of pending proceedings or otherwise.

45.

When a similar contention was raised before the Hon'ble Supreme Court in the aforesaid case of CIT Vs. Jasjit Singh, the same was recorded in the said judgement as "........The revenue argued that the proviso to Section 153C(1), is confined in its application to the question of abatement".

However, while deciding the said issue, the Hon'ble Apex Court had arrived at a conclusion and rendered its judgement by stating that "............. the revenue's argument is insubstantial and without merit"........"

When such being When such being the case, it is clear that the Hon'ble Apex Court had rejected the contention of the revenue that "the first proviso to Section 153C(1), is confined in its application to the question of abatement", which means, as per the law laid down by the Hon'ble Apex Court, the said provision is not only for the purpose of abatement but also for all the other practical purposes.

"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 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(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 A.O. seized of the materials of the search party, under Section 132 - would take his own time o forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" us 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 dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 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 SHREE SAMBHAVNATH RAJENDRA JAIN reading of Section 153-C supports the interpretation which this Court adopts.