DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, PATNA, C.R. BUILDING, PATNA V. DEEPSHREE PROPERTIES PVT. LTD., SAGUNA KHAGAUL DANAPUR PATNA

ITA 239/PAT/2023

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle-2, Patna as the appellant and Deepshree Properties Pvt. Ltd. as the respondent. The dispute arose from the assessment order under section 143(3) of the Income Tax Act, 1961, which was challenged by the assessee. The primary issues were the legality of the assessment procedure followed by the Assessing Officer (AO) and the substantive additions made to the assessee's income. The ITAT found that the AO should have initiated proceedings under section 153C instead of section 143(3), given the context of seized materials and statements indicating unrecorded expenditures and investments. The ITAT also addressed the procedural error by the Commissioner of Income Tax (Appeals) in admitting an additional ground of appeal without proper satisfaction as required by section 250(5).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33462 (ITAT-PATNA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Other Referred Cases: National Thermal Power Company Ltd. vs. CIT, Jute Corpn. of India Ltd. vs. CIT, Gargsons Exports (P) Ltd. vs. CIT, Plastic Dela Foot Wear vs. CIT, Manindra Nath Dutta vs. CIT, Ajeet Kumar Seth vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Question of law; Unexplained expenditure; Document seized; Search and seizure; Right to appeal
• Section: 143(3); 143(2); 250; 154; 64; 132; 153A; 69C; 13; 69A; 153C; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA BENCH”, PATNA (VIRTUAL HEARING AT KOLKATA) SHRI DUVVURU RL REDDY, VICE PRESIDENT SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No. 239/Pat/2023 Assessment Year: 2018-19 Deputy Commissioner of Income Tax, Central Circle-2, Patna, 6th Floor, Room No.603, Patna - 800001 ........…...…………….... Appellant vs. Deepshree Properties Pvt. Ltd., 101, Basement Floor, Godawari Palace, Saguna, Khagaul, Main Road, Danapur, Patna - 801503 [PAN: AADCD1487C] ..........…..….................... Respondent Appearances by: Assessee represented by : Sh. A.K. Rastogi, Advocate Department represented by : Sh. Ashwani Kr. Singal, JCIT Date of concluding the hearing : 30.12.2024 Date of pronouncing the order : 08.01.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. The present appeal emanates from the order u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’), passed by the Ld. Commissioner of Income Tax (Appeals), Patna-3 [hereafter ‘the Ld. CIT(A)’], vide order dated 22.05.2023. This appellate order is against the order u/s 143(3) of the Act dated 19.04.2021, passed by the Ld. AO. 1.2 In this case, the assessee filed its return of income for AY 2018-19 on 25.09.2018 declaring total loss of Rs. 1,51,03,324/-. It has been recorded by the Ld. AO that a survey operation u/s 133A of the Act was carried out 2 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. on the business premises on 07.09.2018. Notice u/s 143(2) of the Act was issued on 28.09.2019. After considering the various facts and documents, the AO basically made two additions as under: (i) During the course of survey operations some loose sheets were impounded, which indicated certain expenditure which was not allegedly recorded in the books of accounts. During the course of survey, a statement under oath was recorded of one Mr. Satyendra Kumar, Accountant. It is recorded that Mr. Satyendra Kumar admitted that some expenses were not recorded in the books of accounts and on the basis of this statement the Ld. AO proceeded to add Rs. 37,70,600/-. This amount was added u/s 69C of the Act. (ii) It is also recorded in the Ld. AOs order that a search and seizure operation was carried out in the case of one S.P. Singla Group in Chandigarh on 09.08.2018. During the course of such search one document (Annexure SKS-1) was found in which investments amounting to Rs. 2.5 Crores were allegedly made in the assessee company and the same were not recorded in the books of account. This fact was admitted by Mr. Satyendra Kumar, Accountant during the course of statement under oath recorded during the course of survey operation. This amount was added u/s 69A of the Act. 2. Aggrieved with this action of Ld. AO, the assessee approached the Ld. CIT(A) and not only protested the impugned additions but also canvassed a presumably legal point that the Ld. AO could legally have completed the assessment only u/s 153C of the Act. In fact, this point was raised as an additional ground before the Ld. CIT(A), who has adjudicated the same as under: “The section starts with non-obstantive clause. Therefore, it supersedes the sections dealing with normal assessment proceedings and therefore in a situation when any assets or any documents which are seized, relates to a person other than the searched person then such assets/documents has to be handed over to the AO 3 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. having jurisdiction over such other person. The AO of such other person has to proceed against him and issue notice u/s 153C and assess or re-assess the income of such other person in accordance with the provision u/s 153A if that AO is satisfied that the seized assessment/document have a bearing on determining the total income of such other person for six assessment year immediately preceding the assessment year relevant to previous year in which such seized asset/documents are handed over to that AO having jurisdiction over such other. There is no dispute that the SKS-01/page no. 64 has been made basis of addition in case of the appellant. There is also no dispute that existence of such documents come to knowledge of the AO of the appellant at least on 07.09.2018 i.e. date of survey. The AO of the appellant was duty bound to record his satisfaction and initiate proceeding u/s 153C as the section supersedes other assessment provisions under the Act. It has been submitted by the Ld. AR that the AO has committed grievious error in law by not invoking the provision contained u/s 153C and initiate the assessment proceeding for six assessment year immediately preceding the AY 2019-20 i.e. from AY 2013-14 to 2018-19. It has been argued by the Ld. AR that provision of search assessments are unambiguous and the AO is duty bound to follow the provision u/s 153C under the fact and circumstances of the case. Considering the background fact, I am inclined to agree with the argument of Ld. AR. The Ld. AR has raised a legal ground which can be raised any level of appellate hierarchy. The additional ground, therefore, has to be admitted. Considering the entire legal canvas of the case under the background facts, I find that the AO has travelled beyond his jurisdiction by completing the assessment u/s 143(3) and not initiating proceedings u/s 153C of the Act. Under the circumstances, the assessment made u/s 143(3) is legally not sustainable. Accordingly, the entire assessment proceeding is declared as null & void. Thus, the Ld. CIT(A) held the entire assessment proceedings to be null and void and thereafter he has extensively reproduced the assessee’s submissions on the substantive grounds of addition also but was later content to simply record that once the assessment itself has been held to be void then rest of the grounds became academic and hence did not decide them on merits. At this stage, it deserves to be mentioned that the assessee moved for admission of the additional ground on the basis of section 250(5) of the Act and also relied on the case of National Thermal Power Company Ltd. reported in 229 ITR 383 (SC). Since this case has importance for deciding the issue at hand, the relevant portions may be extracted as under: Under section 254, the Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there 4 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. In the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688, the Court, while dealing with the powers of the AAC observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. (emphasis added) In the absence of any statutory pro- vision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. The Court further observed that there may be several factors justi- fying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. The view that the Tribunal is confined only to issues arising out of the appeal before the Commis- sioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the as- sessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The Tribunal has, therefore, jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. 2.1 Aggrieved with this action of Ld. CIT(A), the Revenue has come in appeal with the following grounds: “(i) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 3, Patna has erred in declaring the assessment order passed u/s 143(3) of the IT. Act, 1961 as null & void, holding that the assessment should have been completed u/s 153C of the Act. (ii) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 3, misinterpreted the provisions of section 153C. The non obstantive clause \"Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that....\" does not preclude assessment u/s 143(3)/144 by issue of notice u/s 143(2) where satisfaction of the assessing officer of the searched person making assessment u/s 153A is not relevant. (iii) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 3, Patna failed to appreciate the fact that the assessing officer had jurisdiction to make assessment u/s 143(3) on account of survey u/s 133A conducted in the case 5 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. of assessee and consequent compulsory scrutiny as per CBDT guidelines, and making addition on account of unexplained receipt by the assessee. (iv) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 3, failed to appreciate that the A.O. has made addition of Rs. 37,70,600/- u/s 69C and Rs. 2,50,00,000/- u's 69A on the basis of evidence and statement of Shri Satyenra Kumar, Accountant of the assessee company M/s Deepshree Properties Pvt. Ltd. (v) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 3, Patna failed to appreciate that satisfaction of the assessing officer of the searched person making assessment u's 153A is not sufficient, and the assessing officer of the 'other person' should be satisfied that recourse to Section 153C which is restrictive in terms of incriminating seized materials, is appropriate and in the interest of revenue, in the facts of the case where survey u/s 133A has revealed additional material. (vi) That the order of the Ld. CIT(A) being erroneous in law and on facts to be vacated and the order/notice of the A.O. be restored. (vii) That the applicant craves leave to add, alter, delete and modify the grounds of appeal before the Hon’ble ITAT.” 3. Before us, the Ld. DR arguing on behalf of the revenue stated that in the present case, the Ld. AO was acting on the basis of information and material made available during the course of survey operations (dated 07.09.2018). He further averred that the critical ingredient in the said exercise was the statement under oath of Mr. Satyendra Kumar, Account, whereby it was admitted that the two impugned additions were not recorded in the books of accounts of the assessee. The Ld. DR further averred that once the assessment proceedings have started and cognizance of certain allegedly incriminating material found during survey operation, and statement under oath recorded thereon, was taken then the fact of document seized from the premises of M/s Singla Group was only an additional material found useful for making the addition. It was vehemently argued that the statement under oath of the accountant was the material element in the said assessment and hence there was no requirement of any proceedings u/s 153C of the Act. 3.1 Per contra, the Ld. AR forcefully argued that any seized material seized during a Search and Seizure operation sought to be utilised for the 6 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. purpose of making an assessment would require that the said assessment be framed only under sections 153A/153C of the Act. He argued that the AO had fallen in error in not resorting to the provisions of Section 153C of the Act and thereby the entire proceedings were fatally hit. The Ld. AR relied on the order of Ld. CIT(A) and specifically pointed out the findings on page 18 of the impugned order extracted (supra). As an alternative submission the Ld. AR also pointed out that regarding the addition of Rs. 2.5 Crores, the paper in question itself mentioned that it was a profit and loss account up to 31.07.2018. He averred that for AY 2018-19 the statement of account would be beyond the relevant financial year. In this manner, the Ld. AR assailed the action of Ld. AO on merit as also on the legality aspect of it. 4. We have carefully considered the arguments of Ld. AR/DR and gone through the documents before us. Since, the assessment itself has been cancelled by the Ld. CIT(A) therefore, the appropriateness, or otherwise of this action, deserves to be discussed first. It is seen that the First Appellate Authority has powers to admit additional grounds of appeal u/s 250(5) of the Act. For the sake of reference, the said sub-section deserves to be extracted as under: “(5) The [***] Joint Commissioner (Appeals) or the] [Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the [***] [Joint Commissioner (Appeals) or the] [Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.” (Emphasis added) It is clear that the First Appellate Authority has to record his satisfaction regarding the omission of the ground of appeal from the Form of appeal in clear terms with regard to the wilfulness and unreasonableness aspect being clearly brought out. In this case, it is seen that while the assessee has made the application for admitting the additional ground of appeal u/s 250(5) of the Act but has chosen to rely on the case of National Thermal Power Company Ltd. (supra) to canvass the point that such 7 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. grounds can be raised at any stage of appellate proceedings provided that the requisite material already exists on record, necessary for its adjudication and no further investigation of facts is required. A close reading of The National Thermal Power Corporation Ltd. case (supra) reveals that it is specifically on the powers of ITAT u/s 254 of the Act. A conjoined reading of section 250(5) and 254 of the Act reveals that while section 254 of the Act is general in terms of orders of Appellate Tribunal, section 250(5) of the Act is specifically on the issue of admitting an additional ground of appeal by the first appellate authority. Since, the distinction between the two sections is germane for deciding the issue at hand, we may also extract the provision of section 254 of the Act. “Orders of Appellate Tribunal. 254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (1A) (Omitted by the Taxation Laws (Amendment Act, 1972, w.e.f. 1-1-1973.] (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Income-tax Officer: Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being bead (3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee and to the Commissioner. (4) Save as provided in section 256, orders passed by the Appellate Tribunal on appeal shall be final.” It is clear that the National Thermal Power Corporation case (supra) merely codifies the inherent power of ITAT in the admission of additional grounds of appeal. However, it may not be appropriate to juxtapose the directives in the said case on the powers of the First Appellate Authority in a mechanical manner since through the mandate given u/s 250(5) of the Act the First Appellate Authority is specifically mandated to entertain the 8 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. additional grounds of appeal after recording a satisfaction that “the omission of that ground from the form of appeal was not wilful or unreasonable”. A close reading of the impugned order reveals that the Ld. CIT(A) has not recorded any satisfaction to this extent and therefore, he has violated the spirit and letter of the very section that gives him powers to admit the additional ground of appeal. A review of judicial literature on the subject reveals that such recording of satisfaction is “sine qua non” for admitting such additional grounds for adjudication. Some of the cases may be discussed: (i) Gargsons Exports (P) Ltd. reported in 38 TTJ 309 (Delhi) In this case, it has been recorded that once the ITO was not given an opportunity of hearing with reference to the additional ground of appeal then the matter should be remanded back to the Commissioner (Appeals) for a fresh decision after giving both the assessee and the AO an opportunity of being heard. (ii) Plastic Dela Foot Wear reported in 203 ITR 759 (Rajasthan). In this case, the head notes, are self-explanatory and thus deserves to be extracted as under: “Under section 250(5), the AAC may, at the time of hearing of appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal if he is satisfied that the omission of that ground from the forms of appeal was not wilful or unreasonable. In the instant case, what was required to be seen by the AAC in respect of the new ground which was raised before it was as to whether he was satisfied that the omission of the ground from the appeal was wilful or unreasonable. No such finding had been given in this regard. (emphasis added). If it was a pure question of law, then it could be allowed to be raised. The Tribunal had proceeded merely on the basis that it was a pure question of law. If it was a pure question of law, then the Tribunal could have directed the AAC to take into consideration the said ground and decide it on merit. The position would also differ in a case where the matter pertained to an appeal against an assessment order and where the matter was only with regard to an appeal against the order passed in rectification proceedings. If an order, as in the instant case, has been passed in proceedings under section 154, then the jurisdiction to decide the appeal would be limited only with regard to the questions decided by the ITO by rectifying 9 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. or refusing to rectify the assessment order and any question which has not been decided or has been refused to be decided by an express order would be deemed to have become final. An assessee is not entitled to reopen those issues which has become final and for which no appeal has been preferred. The jurisdiction under section 154 on the application of the assessee or by the ITO suo moto is very limited and, therefore, it has to be seen as to whether the question which is allowed to be raised, arises out of the order passed by the ITO or is raised before him or considered before him. If the matter is not a subject-matter of dispute before the ITO, then it will be deemed that the assessee is satisfied with the original order of assessment and the doctrine of finality of judgment will be applicable. The order has become final and such question cannot be allowed to be raised even in appeal which is not the subject-matter of dispute in the rectification proceedings. Since no finding was given by the AAC in terms of section 250(5), the Tribunal was not justified in setting aside the AAC's order and directing him to entertain the additional ground raised by the assessee. The Tribunal had also not decided the issue in terms of the provisions of section 250(5) and unless a finding was recorded that the omission to take the ground in the form of appeal was not wilful or unreasonable, no direction could have been given to entertain the said additional ground. The matter was, accordingly, remanded back to the Tribunal to record a finding in terms of section 250(5) or to direct the AAC to do so. (iii) Manindra Nath Dutta reported in 54 ITD 685 (Cal) In this case, the relevant findings are extracted as under: “The Commissioner (Appeals) had admitted the additional ground without giving any opportunity to the Assessing Officer and without expressing his satisfaction that the omission of that ground from the form of appeal was not wilful or unreasonable in terms of section 250(5). The omission of the additional ground from the form of the appeal could be said to be wilful or unreasonable because the legal representative who had filed the appeal was aware of the fact that the return was filed in the name MND (deceased) by the legal representative and the assessment was to be made through the legal representative only. Therefore, the admission of additional ground itself was illegal and could not be sustained.” (iv) Ajeet Kumar Seth reported in 170 Taxman 154 (Allahabad) In this case, in paragraph 13 to 15 it has been recorded as under: “Section 250(5) gives ample power to the first appellate authority to permit the appellant to raise additional ground during the course of hearing of the appeal. The only restriction to permit the assessee to raise additional ground is where there is 'wilful omission' or 'unreasonableness' . [Para 13] The first appellate authority had not written a word in its order that it was 'wilful omission' or 'unreasonableness' to allow the assessee to raise additional ground. (emphasis added) However, the appellate authority had only said that there was considerable delay in raising the plea. The appellate authority had not applied its mind as to whether there was any 'wilful default' or 'unreasonableness' on the part of the assessee in not raising such ground earlier. [Para 14] 10 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. There was change in the facts and circumstances and the addition being confirmed in the hands of the wife of the assessee by the Tribunal by its order dated 19-1- 1988 was a relevant circumstance to be taken into consideration before rejecting the application for permission to urge an additional ground. [Para 15]” From the discussion on cases above, it is clear that any admission of additional ground u/s 250(5) of the Act has to be done only after recording of satisfaction that the omission to include a particular ground in the form of appeal was not wilful or unreasonable. A combined reading of the authorities cited above reveals that the admission of additional ground by the First Appellate Authority is not only not a mechanical exercise, but there is even a recording that such additional ground should have been shared with the Ld. AO also for comments. We find that the Ld. CIT(A) has not only admitted the additional ground of appeal but has not recorded his satisfaction as required before proceeding ahead with the adjudication. Accordingly, we deem it fit that on this issue this matter deserves to be remanded back to the Ld. CIT(A) for re-examining the facts relevant for the said additional ground of appeal and thereby arriving at a conclusion in line with the specific mandate of section 250(5) of the Act. Even at the expense of repetition, it deserves to be mentioned that the Ld. CIT(A) would do well to determine that the additional ground of appeal would not require any new fact to be brought on record. 5. Regarding the applicability of section 153C of the Act it is felt that the chronology of events in this matter needs to be recapitulated: (i) Survey u/s 133A of the Act conducted on 07.09.2018 (ii) Search u/s 132 of the Act conducted on 09.08.2018 (iii) Return of income filed on 25.09.2018 (iv) Notice u/s 143(2) of the Act issued on 28.09.2019 (v) Assessment order was passed on 19.04.2021. 11 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. It is clear that the provisions of section 153C of the Act would be triggered only after a satisfaction is recorded in terms of section 153C(1) of the Act. In this regard, we may refer to the case of Saksham Commodities Ltd. reported in 464 ITR 1 (Delhi). Through this case law the whole sequence of actions legally required to be taken for triggering the said section have been spelt out as under: At first the evident distinction that exists between section 153A and section 153C are to be taken note of. They are clearly couched in language which is dissimilar. Looking upon provisions of section 153A, it becomes apparent that where a search is initiated or documents and books requisitioned, the AO is mandated to issue notice calling upon the searched person to submit a ROI in respect of each AY falling within the six AYs’ and for the “relevant assessment year”. Upon submission of that ROI, the AO stands empowered statutorily to assess or reassess the total income of six AYs’ immediately preceding the assessment year corresponding to the year of search and for the “relevant assessment year”. The expression “relevant assessment year” has been duly defined by Explanation 1 placed in Section 153A and is explained to include those years which fall beyond the six AYs’ spoken of earlier but not later than ten AYs’ from the end of the AY relevant to the FY in which the search was conducted. [Para 37] The AO of the searched person while proceeding to transmit the material gathered in the course of the search to the AO of the “other person” is not obliged to form any opinion with respect to escapement of income or for that matter the material likely to have an impact on the total income of the non-searched entity. At the stage of transmission of material, the AO of the searched person is only required to be satisfied that the material or documents unearthed pertain to a person or entity other than the one searched. [Para 38] The AO of the searched person is only required to be satisfied that the documents or materials pertain to the “other person” at the stage of transmission of material or documents to the jurisdictional AO of the non-searched entity. [Para 39] It is thus apparent that it is only when the transmitted documents and material reaches the desk of the jurisdictional AO that it becomes empowered to initiate action under Section 153C. This is evident from a plain textual reading of that provision and which speaks of the commencement point being the handing over of documents or assets seized or requisitioned to the AO of the “other person” and it in turn proceeding to issue notice to assess or reassess the income of the non- searched entity in accordance with Section 153A. However, the initiation of action under Section 153C is significantly premised upon the AO being satisfied that the books of account or documents and assets seized or requisitioned having “a bearing on the determination of the total income of such other person”. This is manifest from the provision employing the expression “if, that Assessing Officer is 12 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. satisfied.....”. It would therefore necessarily follow that the issuance of a notice under Section 153C is clearly not intended to be an inevitable consequence to the receipt of material by the jurisdictional AO. That the AO before commencement of action under Section 153C is also obliged to be satisfied that the material so received would “have a bearing on the determination of the total income of such other person” is an aspect of significance and constitutes a fundamental point of distinction between Section 153A and Section 153C. This distinguishing element of the two provisions would become further apparent from the discussion which ensues. [Para 40] Firstly, and from a historical perspective of the legislation itself, it is found that one of the significant amendments which came to be introduced in Section 153C was ushered in 2014. The Finance (No. 2) Bill, 2014, sought to explain the objective of the amendments. [Para 41] It would also be apposite to notice the Notes on Clause 53 of the Finance Bill, 2014, which sought to amend Section 153C. [Para 42] It was consequent to the passing of the aforesaid Act that Section 153C came to incorporate provisions relating to the AO being satisfied that the books of account, documents or assets seized or requisitioned must “have a bearing on the determination of the total income of such other person” for the six preceding AYs’ or the “relevant assessment year” as referred to in Explanation 1 to Section 153A. Prior to the promulgation of these amendments, the AO of the non-searched party was not obliged to form an opinion that the material received by it was likely to impact the estimation of income of that person. Significantly, although this prerequisite came to be incorporated in Section 153C, no such corresponding precondition was included in section 153A. This, although the legislative history of the search assessment provisions placed in the Act would indicate that they were amended from time to time in order to constitute a complete and homogeneous code. This becomes apparent from the legislative mandate of those two provisions being applicable to searches undertaken in a particular time period, the principles of abatement being replicated and the search assessment power being available to be invoked for the “relevant assessment year”, and which extended the power to be exercised over a ten year block, being simultaneously introduced in those provisions. The Legislature clearly intended both these provisions to form part of a cohesive scheme and to be complementary to each other. However, the aspects of satisfaction and of the material likely to implicate or influence were not added in section 153A. The fact that any additions that may be ultimately made upon a culmination of assessment under section 153A being indelibly founded on the material gathered in the course of the search is a separate issue all together. [Para 43] The usage of the expression “have a bearing” would necessarily lead one to conclude that the mere discovery of books, documents or assets would not justify the initiation of proceedings under that provision. Upon receipt of that material, the jurisdictional AO must additionally be satisfied that those are likely to have an impact on “the determination of the total income”. The Shorter Oxford English Dictionary assigns the meaning to the word “bearing”. 13 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. As per the said meaning the word “bearing” would include something which would lend support or credence. It has also been defined to mean something which may have a practical relation or effect upon, influence or relevance. [Para 44] The Major Law Lexicon authored by P. Ramanatha Aiyar explains “Bearing on, Having” as referring to something having a relation with. [Para 45] The New Lexicon Webster’s Dictionary defines the word bearing. [Para 46] This too speaks of “relevancy” as one of the meanings one may gather where that particular expression is used. This leads to the inevitable conclusion that the initiation of action under Section 153C would have to be founded on a formation of opinion by the jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the “determination of the total income” and would be of relevancy for the purposes of assessment or reassessment. [Para 47]” In this case, the Ld. CIT(A) has recorded in last paragraph of page 16 and the portion extracted (supra) at page 18 that the Ld. AO presumably would have been made aware of the seized material on the date of survey (07.09.2018), as the search action pre-dates the survey action. In fact, there is no attempt by the Ld. CIT(A) to factually determine whether the said seized material was formally transferred by the Ld. AO of M/s Singla Group to the present AO and thereby there could have been a formal requirement of recording his satisfaction u/s 153C(1) of the Act for proceeding ahead with the assessment within the bounds of this section only and not section 143(3) of the Act. It is clear from the reading of the Ld. AO’s order that the evidence used for making the two impugned additions is the statement of Mr. Stayendra Kumar, Accountant recorded on the date of survey, which happened after the date of search operation. In fact, a close look at the impugned documents regarding the addition of Rs. 2.5 Crores extracted at page 5 of the Ld. AO’s order reveals that the investments are made by the persons connected with the Singla Group and hence, prima facie, in case the same has not been disclosed by the Singla Group then the addition would also be exigible for tax as an addition in the hands of that group. The fact that the accountant has stated that these 14 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. investments are not recorded in the books of the present assessee would mean that even here an appropriate addition will be required to be made on the basis of the same document. Thus, we are faced with the situation where one single document could be used for proceedings u/s 153A of the Act by the AO of Singla Group and perhaps the same document being used for assessment u/s 153C of the Act by the AO of the present assessee. In this regard, both the orders of authorities below are silent on the proceedings if any on the Singla Group on the basis of same document as has been admittedly utilised by the present AO, albeit in addition to the statement under oath recorded of the accountant of the assessee company. 5.1 In this regard, it also needs to be mentioned that the documents itself indicates that it is a “profit and loss account up to 31.07.2018” maintained by the Singla Group in respect of Shri Suresh Singla and Smt Lalita Yadav in Ganga Palace (Gaya). However, the date on the document indicates that the said transactions could even partially pertain to the financial year 2018-19 (not relevant for the present AY). In this regard, the alternative argument adopted by the Ld. AR has considerable merit and it would be in the fitness of things to remand the matter back to the file of Ld. CIT(A) for examining this issue on merit, after examining the totality of facts and circumstances relating to the transaction recorded in the impugned document and also determining whether the impugned amount pertains to the present assessment year or not at all. 5.2 Regarding the remaining addition of Rs. 37,70,600/- on account of unexplained expenditure it is seen that this addition has been made on the basis of a bunch of loose sheets impounded during the Survey and not during the Search action. Thus, this document could only be examined and considered in the proceedings initiated for assessment u/s 143(3) of the Act. The Ld. CIT(A) has not adjudicated this matter on merit at all, even though this issue emanates directly from the survey operation conducted 15 ITA No. 239/Pat/2023 Deepshree Properties Pvt. Ltd. u/s 133A of the Act. Accordingly, we deem it fit to remand even this matter back to the file of Ld. CIT(A) for adjudication afresh on merits. 6. With the above remarks, this matter is remanded back to the file of Ld. CIT(A) for adjudication on the lines mentioned in the body of this order. 7. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the court on 08.01.2025 Sd/- Sd/- (Duvvuru RL Reddy) (Sanjay Awasthi) Vice President Accountant Member Dated: 08.01.2025 AK, P.S. Copy of the order forwarded to: 1. Deepshree Properties Pvt. Ltd, Danapur, Patna 2. Deputy Commissioner of Income Tax, Central Circle-2, Patna 3. CIT(A)- 4. CIT- 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches "