Sh. Rajesh Sunderdas Vaswani, Ahmedabad V. The DCIT, central Circle-1(1), Ahmedabad

CO 46/AHD/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4123 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure; Document seized; Reason to believe
• Section: 147; 132; 69C; 143(3); 153A; 153C

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No. 468/AHD/2019 With CO. No. 46/Ahd/2021 िनधाᭅरण वषᭅ/Asstt. Year: 2008-09 D.C.I.T., Central Circle-1(1), Ahmedabad. Vs. Shri Rajesh Sunderdas Vaswani, Kadia Kui, Relief Road, Kalupur, Ahmedabad. PAN: AAOPV6848B (Applicant) (Respondent) Revenue by : Shri Vijay Kumar Jaiswal, CIT.D.R Assessee by : Shri Tushar Hemani, Sr. Advocate with Shri Parimalsinh B. Parmar, A.R सुनवाई कᳱ तारीख/Date of Hearing : 31/03/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 31/05/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal and the CO. have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad, dated 25/07/2019 (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) r.w.s. 153C of the Income Tax Act 1961 (here-in-after referred to as "the Act"). The assessee has filed IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 2 the Cross Objection in the Revenue’s appeal bearing IT(SS)A No. 468/Ahd/2019 for the Assessment Year 2008-2009. 2. The only issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO for Rs. 8,15,10,000/- under the provisions of section 69C of the Act. 3. The facts are that the assessee in the present case is an individual and belongs to the group namely ‘Venus Group’ which was subject to search and seizure operation under the provisions of section 132 of the Act dated 10/3/2015/12-03- 2015. Since, the assessee belongs to the group, he was also subject to the same search under section 132 of the Act. 3.1 Besides the above, there was a search and seizure operation under section 132 of the Act dated 23 rd May 2008 in the case of “Adi Avirat” group being a 3 rd party. Based on the 3 rd party search, the proceedings were initiated against the assessee by issuing the notice under section 153C of the Act vide notice dated 28 August 2009. The assessee before the Hon’ble Gujarat High Court challenged the initiation of proceedings against him under the provisions of section 153C of the Act in pursuance to the search conducted at the 3 rd party i.e. Adi Avirat. However, the Gujarat High Court upheld the initiation of the proceedings under section 153C of the Act against the assessee vide order dated 10 th October 2016. Thus, the impugned issue was decided against the assessee. 3.2 The AO based on the search carried out dated 10 th and 12 th of March 2015 found certain documents of incriminating nature from the terrace of crystal arcade and thus the AO has made the addition in the hands of the assessee for ₹ 8,15,10,000/- on protective basis in the assessment framed under section 143(3) read with section 153C read with section 153A(1)(b) of the Act. The AO on substantive basis made the addition in the hands of Shri Deepak B. Vaswani. IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 3 4. Aggrieved assessee preferred an appeal to the learned CIT(A) who deleted the addition made by the AO by observing as under: 3.3. I have carefully considered the facts of the case, assessment order and submission of the appellant. A search and seizure operation was! conducted at the residence of Shri Kamlesh Ram Prasad Dhaupriya (Adi Avirat Group) on 23/05/2008 at A-7, Ayoja Nagar,Bodakdev, Ahmedabad in which various incriminating documents belonging to appellant were found and seized. The Assessing Officer has initiated proceedings u/(s. 153C after duly recording the satisfaction. The appellant has filed Special Civil Application challenging notice u/s. 153C before the Honourable Gujarat High Court. The Honourable Court upheld the notice U/S.153C of the Act. Subsequently, search was conducted in the case of appellant on\ 10/03/2015 and 12/03/2015 [Venus Group) in which several incriminating j materials were found. The Assessing Officer has made the addition of Rs.8,51,10,0007- on the basis of seized material found during the course of search at terrace of Crystal Arcade, C. G. Road, Ahmedabad on 12/03/2015. The AO in the assessment order has noted that same addition has been made in the case of Shri Deepak B. Vaswani brother of assessee on the basis of same documents as same were authenticated by him. The AO has made the addition in the case of appellant on protective basis. The appellant has contended that AO himself noted in the assessment order that identical amount of Rs.8,15,10,000/- has been added in the case of Shri Deepak B. Vaswani on substantive basis, and therefore, the addition made in the hands of appellant on protective basis may be deleted. It is seen that Assessing Officer has made the addition of Rs.8,15,10,000/- on the basis of seized material found during course of search at terrace of Crystal Arcade, C. G. Road, Ahmedabad. I have considered the above seized materials and confirmed the addition in the case of Shri Deepak B. Vaswani and Shri Ashok S. Vaswani as investment in other land transaction (Nisarg) as under ******************************************************************* As the addition of Rs.8,15,10,000/- has been confirmed in the case of Shri Deepak B. Vaswani and Shri Ashok S. Vaswani, protective addition made in the case of appellant is deleted. The ground of appeal is accordingly allowed. 5. Being aggrieved by the order of the learned CIT (A), both the Revenue and the assessee are in appeal and CO before us. The grounds raised in the CO bearing No. 46/Ahd/2021 by the assessee reads as under: 1. The Assessment Order deserves to be quashed since Ld. AO has travelled beyond the scope of material and evidences found during the course of search action carried out under section 132 of the Act. 2. The Ld. AO failed to appreciate that in view of provisions of section 153A of the Act, no addition can be made beyond the scope of material and evidences found during the course of search action carried out under section 132 of the Act. 3. The Assessment Order deserves to be quashed since the same has been passed beyond the limitation prescribed under section 153B of the Act. 4. The Assessment Order deserves to be quashed since the jurisdictional requirements for framing assessment under section 153C of the Act have not been fulfilled in the present case. IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 4 6. The learned DR before us contended that the learned CIT(A) has deleted the addition made by the AO in the hands of the assessee on the reasoning that the substantive addition in the case of Shri Deepak B Vaswani were confirmed by the learned CIT-A. Accordingly, the learned CIT(A) was of the view that once the substantive addition has been confirmed in the hands of Shri Deepak B Vaswani, there is no reason for making the addition in the hands of the assessee on protective basis. However, on subsequent appeal before the Tribunal by the Shri Deepak B Vaswani, the addition made in his hands was deleted vide order dated 12-11-2020. Thus once substantive addition has been deleted from the hands of Shri Deepak B Vaswani, it is implied that addition made in the hands of the assessee on protective basis becomes the addition as on substantive basis. Accordingly the learned DR prayed to confirm the addition in the hands of the assessee on substantive basis. 7. On the contrary the learned AR before us filed a paper book running from pages 1 to 684 and contended that the addition has been made in the hands of the assessee on protective basis on the documents found during the search at the 3 rd party but without recording the satisfaction note to the effect that the documents which were used for making the addition in the hands of the assessee were belonging to the assessee. In the absence of such satisfaction note, there cannot be any addition sustained in the hands of the assessee either on protective or substantive basis. 8. Admittedly, the documents found in the course of the search in the case of “Venus Group”, were used for the addition on protective basis against the assessee. However, the provisions of section 153C require reopening of assessment of 6 assessment year immediately preceding the year of the search. Accordingly, the proceedings under section 153C of the Act could not have been initiated for the year under consideration as the year in dispute falls beyond the period of 6 assessment years. IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 5 9. The learned AR further contended that the scope for making the assessment in the instant case should have been limited with respect to the search conducted in the year 2008 dated 23 rd May 2008. As such the documents found in the case of the search from the premises of “Veenus” group in March 2015 cannot be used against the assessee in view of the fact that there was no satisfaction recorded by the AO of the search party that these documents belongs to the assessee. Likewise, based on the search in the case of “Veenus” group, the proceedings under section 153C of the Act against the assessee should not have been initiated as year under dispute falls beyond the period of 6 assessment years. 10. Both the learned DR and the AR before us vehemently supported the order of the authorities below to the extent favourable to them. 11. We have heard the rival contentions of both the parties and perused the materials available on record. First, we take up the issue raised by the revenue in its appeal. It was contended by the learned DR that once the addition has been deleted from the hands of Shri Deepak B Vaswani, the protective additions in the hands of the assessee becomes on substantive basis. In this connection we note that there is no definition/concept of protective and substantive assessment provided under the provisions of law. However, this concept has been developed by virtue of various judicial pronouncements of the Hon’ble Courts. The question of making the addition on protective and substantive basis in the hands of different parties generally arises when the AO is not sure enough in whose hands the income is liable to be taxed. In such a situation, the revenue makes the addition in the hands of 1 of the party on substantive basis and in the hands of the other party on protective basis in order to protect the interest of the revenue. In the case of protective addition, the revenue is precluded from raising any demand from the assessee. However, the revenue keep the issue of protective addition alive for the simple reason that in the event the substantive addition is deleted then protective addition will turn into substantive addition in the hands of the other party. In other IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 6 words, the issue of protective addition cannot be decided standalone basis. It is for the reason that protective addition solely depends upon the substantive addition. If the substantive addition is continued, there cannot be any demand against the protective addition as it will not turn into substantive addition. 11.1 Coming to the case on hand, admittedly, the addition in the hands of the Shri Deepak B Vaswani has been deleted by the order of the ITAT in ITA No. 461/Ahd/2019 vide order dated 12-11-2020. But what is to be noted is that addition in the hands of Shri Deepak B Vaswani came to be deleted on the reasoning that the assessment order was invalid. In other words the issue of substantive versus protective was never raised before the ITAT. The relevant extract of the order of the ITAT is reproduced as under: 103. However, on comparison of the additions proposed in the reason to believe recorded for the assessment under Section 147 of the Act with the actual addition made by the AO as contended by the learned DR hereinabove, we find that the additions which were proposed in the reasons recorded were not matching with the actual additions made by the AO in the assessment order under Section 147/143(3) of the Act. As such the amount of addition viz a viz the basis of re-opening as proposed in the reasons recorded were not matching with the addition made by the AO in the assessment framed under Section 147/143(3) of the Act. Accordingly, we hold that there cannot be any addition in the assessment framed under Section 147/143(3) of the Act in the given facts and circumstances. In view of the above we quash the assessment framed under 147 of the Act. Hence, the grounds of appeal of the assessee are allowed. 11.2 Therefore, the issue i.e. substantive versus protective addition which is before us has not seen light of the day till date. To our understanding, until the substantive issue is decided the issue on protective addition cannot be considered for the purpose of the decision-making. As such the protective addition has not been turned into substantive addition as alleged by the learned DR of the revenue. Accordingly, we are not convinced with the argument of the learned DR and thus we dismiss the ground of appeal raised by the revenue. 12. Coming to the grounds raised by the assessee in the CO, admittedly the documents which were used for making the addition in the hand of the assessee were recovered from the terrace of crystal aracade during search at “Veenus Group” IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 7 being a 3 rd party. Therefore, in order to initiate proceeding under section 153C it was imperative for recording the satisfaction note by the AO of the search party that the material belongs to party other than search party and upon receiving of material from the AO of search party, the AO of the other party also have to record satisfaction that material have bearing on the income of the assessee. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case PCIT vs. Himanshu Chandulal Patel reported in 109 taxmann.com 202 where it was held as under: On a plain reading of section153C, it is evident that the Assessing Officer of the searched person must be 'satisfied' that inter alia any document seized or requisitioned 'belongs to' a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of section 153A. Therefore, before a notice undersection153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is after such satisfaction is arrived at -_ that the document is handed over to the Assessing Officer of the person to whom the said document 'belongs'. 12.1 In view of the above, we hold that the addition made by the AO in the absence of the satisfaction note is not sustainable. 13. The 2 nd argument of the learned AR is that the year under dispute falls beyond the period of 6 years as mandated under the provisions of section 153C of the Act with reference to the search conducted in the case of “Veenus” group in the month of March 2015. In the proceedings under section 153C of the Act can be initiated maximum for a period of 6 years preceding to the year in which, the search was carried out i.e. A.Y. 2015-16 which are calculated as under: 1. A.Y. 2014-15 2. A.Y. 2013-14 3. A.Y. 2012-13 4. A.Y. 2011-12 5. A.Y. 2010-11 IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 8 6. A.Y. 2009-10 13.1 Likewise in the case of search conducted at the premises of the “Adi Avirat” group dated 23 rd May 2008 corresponding to A.Y. 2009-10, the following years can be disturbed under the provisions of section 153C of the Act. 1. A.Y. 2008-09 2. A.Y. 2007-08 3. A.Y. 2006-07 4. A.Y. 2005-06 5. A.Y. 2004-05 6. A.Y. 2003-04 13.2 On analysis of the above years, we note that there was no common period which was falling with respect to both the searches as discussed above. Accordingly, we are of the view that based on the search in the case of “Veenus group” in March 2015, at the most the assessment years from 2014-15 to 2009-10 can be disturbed. As such the year in dispute is outside the purview of the provisions of section 153C of the Act. Therefore we hold that the revenue has erred in making the assessment for the year under consideration under the provisions of section 153C of the Act on the basis of material found during the search on “veenus” group. On this reason alone, the assessment order is not sustainable. 13.3 It is also interesting to note that the revenue in the own case of the assessee has also reopened the proceedings under section 147 of the Act which travelled up to ITAT vide ITA No. 457 & 805/Ahd/2019 which was quashed being invalid vide order dated 12-11-2020. The copy of the order is placed on record. Thus it can be inferred that the revenue on one hand has taken the proceedings under section 147 of the Act and on the other hand it has also taken the proceedings under section 153C of the Act for the year under consideration. Thus we note that the revenue IT(SS)A no.468/AHD/2019 with C.O.No.46/Ahd/2021 A.Y. 2008-09 9 has taken contradictory action which is not permissible under the provisions of law. Thus the view that proceedings under section 153C of the Act for the year under consideration cannot be initiated gets support from the action of the revenue for initiating the proceedings under section 147 of the Act for the year under consideration. In view of the above and after considering the facts in totality, we are not inclined to interfere in the order of the learned CIT-A. Accordingly we uphold the same. Hence the ground of appeal of the Revenue is dismissed whereas the ground raised by the assessee in the CO is allowed. 14. In the result the appeal filed by the Revenue is dismissed and CO filed by the assessee is allowed. Order pronounced in the Court on 31/05/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/05/2022 Manish