Madhuri Sunil Pandit, L/h of Late Sunil Y. Pandit, Pune V. Income-tax Officer, Ward - 7 (1), Pune

ITA 1812/PUN/2019

AI Insights

The case involves Mrs. Madhuri Sunil Pandit, the legal heir of late Mr. Sunil Yashwant Pandit, who appealed against the order of the CIT(A)-3, Pune, which was based on an assessment made under section 147/148 of the Income Tax Act, 1961. The assessment was initiated following a search operation at the premises of Sinhagad Technical Education Society (STES) Group, where incriminating documents were found that allegedly linked unaccounted cash payments to the assessee. The primary legal contention was whether the assessment should have been made under section 153C, given that the documents pertained to a person other than the one whose premises were searched. The Tribunal, referencing several judicial precedents, concluded that the assessment under section 147/148 was inappropriate and should have followed the procedures outlined in section 153C.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124361 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 26-01-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 20-11-2019
• Other Referred Cases: Smt. Samanthapudi Lavanya vs. ACIT, CC, Vijayawada, G. Koteswara Rao vs. DCIT, CC-l, Visakhapatnam, Janak Raj S/o Murari Lal vs. ITO Ward - 11(2), Muktsar, ACIT vs. Circle 45(1), New Delhi vs. K. S. Chawla & Sons (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Set aside
• Section: 143(3); 153A; 64; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 1812/PUN/2019 : A.Y. 2007-08 Mrs. Madhuri Sunil Pandit L/H of late Mr. Sunil Yashwant Pandit Flat No. 9, Chaitanya Apartment, Kanchangalli, Law College Road, Erandawane, Pune-411 004 PAN: AKVPP 7099 B Appellant Vs. The I.T.O. Ward 7(1) Pune Respondent Appellant by : S/Shri Amit Kumar Agarwal & Hitesh Jain Respondent by : Shri Ramnath P. Murkunde Date of Hearing : 27-01-2023 Date of Pronouncement : 31-01-2023 ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from order of the ld. CIT(A)-3, Pune dated 07-08-2019 for assessment year 2007-08 as per the grounds of appeal on record. 2. The assessee has raised both legal grounds as well as grounds on merit. The legal ground has been raised in the form of additional ground which reads as follows: “On the facts and circumstances of the case and in law, the ld. A.O has erred by initiating and completing the re-assessment proceedings u/s 147/148 of I.T. Act, 1961, since he was required to issue notice and complete the assessment proceedings as per provisions of sections 153C of the I.T. Act, 1961, therefore, the notice issued and completing the assessment proceedings u/s 147/148 of the I.T. Act, 1961 is bad in law.” 2 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 3. We would first adjudicate this legal ground raised by the assessee. The brief facts in this regard are the assessment was completed uls 147 of the I. T. Act, 1961 (hereinafter referred to as the “Act”) vide order dated 27/06/2014 by making addition of Rs. 64,50,0001- and assessed total income of the assessee to Rs. 67,14,106/- as against returned income of Rs. 2,64,106/-. A search was conducted on 06/08/2013 in case of Sinhagad Technical Education Society (STES) Group, at the office premises of Shri. Arvind V. Deshpande, Principal, Smt. Kashibai Navale College of Engg. STES Society Campus, S. No. 44/1, Vadgaon (Bk.), Opp. Sinhagad Road, Pune - 411041, uls 132 of the Act. During the course of search action certain incriminating material was found from the premises. The Ld. A.O. has opened the case uls 148 of the Act. The assessee has challenged the notice issued uls 148 of the that where some incriminating material is found during the course of search and such documents belongs to person other than searched entity then the Ld. A.O. is bound to issue notice uls 153C of the. The assessee relies on the following judicial decisions: (a) Smt. Samanthapudi Lavanya vs. ACIT, CC, Vijayawada (2021) 127 taxmann.com 188 (Visakhapatnam- Trib.) Section 153A, read with sections 143, 147 and 153C of the Income-tax, read with sections 143, 147 and 153C of the Act - Search and seizure - Assessment in case of (Scope of) – Whether once conditions are satisfied for invoking jurisdiction under section 153C, assessment must be made under section 153C only, but not under section 147 - Held, yes - Joint receipt evidencing payments stated to have been made by builder to assessee was seized during course of search in case of builder - Assessment was made under section 147 on basis of statement of managing director of builder, recorded under section 132(4), appraisal 3 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 report and joint receipt -tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Whether once conditions are satisfied for invoking jurisdiction under section 153C, assessment must be made under section 153 C only, but not under section 147 - Held, yes - Joint receipt evidencing payments stated to have been made by builder to assessee was seized during course of search in case of builder - Assessment was made under section 147 on basis of statement of managing director of builder, recorded under section 132(4), appraisal report and joint receipt - Whether since no fresh information was collected by Assessing Officer or no information had come to notice of Assessing Officer in normal course other than information collected during course of search from searched person consequent to search under section 132,therefore, search assessments were required to be made under sections 153A or 153C, but not under section 147 - Held, yes - Whether thus, assumption of jurisdiction by Assessing Officer under section 147 was bad in law, hence, assessments framed under section 147,read with section 143(3) were to be quashed and set aside - Held, yes [Paras 10.2 to 10.4] b. G. Koteswara Rao vs. DCIT, CC-l, Visakhapatnam (2015) 64 taxmann.com 159 (Visakhapatnam- Trib.) Section 153A, read with sections 143, 147 and 153C, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Assessment year 2008-09 - Whether in case of assessment made on assessee consequent to search in another case, Assessing Officer is bound to issue notice under section 153C and thereafter proceed to assess income under section 153A and, where Assessing Officer, instead of complying with provisions of section l53C, proceeded with reassessment under 4 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 section 147/148 which is not applicable to search cases, assessment order passed under section 143(3), read with section 147, would be illegal, arbitrary and without any jurisdiction - Held, yes [Para 17] c. Janak Raj S/o Murari Lal vs. ITO Ward - 11(2), Muktsar ITA No. 744/ASRl2013 (Amritsar ITAT) That very initiation of proceedings u/s 148 is bad in law in as much as action has been taken on the basis of a document found at the premises of a third party, thus proceedings, if at all, were required to be initiated under the provisions of Section 153C of the Act. d. ACIT vs. Circle 45(1), New Delhi vs. K. S. Chawla & Sons (HUF) ITA No. 2724IDEL/2015 (Delhi ITAT) "Notwithstanding to Ground no. 1 & 2 raised by the respondent, the Assessing Officer has erred in law and facts of the case in making assessment under section 147 of the without appreciating that assessment could be made only under section 153E of the Act based upon documents/ information found during the course of search of the third party". 4. On the other hand, the ld. A.O observed and held as follows: 4.2 Search and seizure Action u/s 132 of the Act was conducted in the cases of Singhagad Technical Education Society (STES) group cases on 6-8-2013. The office premise of Shri Arvind V. Deshpande, Principal, Smt. Kashibai Navale College of Engg. STE Society Campus, S.No. 44/1 Vadgaon (BK) Opp. singhagad Road, Pune-411 041, was also covered by search section u/s 132. During the course of search and seizure action at this premise certain incriminating papers/documents have been seized vide Panchanama dated 7-8-2013. Page No. 68 and 69 of Bundle No. 3 seized from this premise evidences unaccounted cash payment to Sunil Padnit, Director of M/s. Peal Infra Con. Pvt. Ltd. 4.3 Page No. 68 of seized bundle No. 3 is signed acknowledgement/receipt dated 20-6-2006 from M/s. Pearl construction Pvt. Ltd. about receipt of cash of Rs. 35,00,00/- page No. 69 of seized bundle No. 3 contains two signed acknowledgement/receipts. Out of which, one acknowledgement/receipt is dated 19-6-2006 from M/s. Pearl Construction pvt. Ltd. of cash of Rs. 16,50,000/- the other acknowledgement/receipt is dated 19-6-2006. This it is apparent that total cash payment of Rs. 64,50,000/- has been made by STES to Shri Sunil Yeshwant Pandit who has acknowledged the said receipts vide three separate receipts as per seized page No.68 and 69 of Bundle No. 3. 4.4 From the PAN database available on ITD system, it is noticed that there is no entity names as M/s. Pearl Construction Pvt. Ltd. Ltd. therefore the STES was asked to clarify about the said transactions. STES clarified that it has not made any transaction with M/ s Pearl Construction Pvt. Ltd. STES has further clarified that it has actually paid Rs. 1.80 crore to Pearl Infra-Con. Pvt. Ltd. during 12-6-2006 to 27-6-2006 by cheques of Rs. 20 lakh each. As there is no entity named as M / s Pearl Construction Pvt. 5 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 Ltd., the signature on receipts mentioned above was verified and it is observed that the signatures ( of acceptance) on all the three receipts mentioned above on seized page No.68 and 69 of bundle No.3 are made by Shri Sunil Yeshwant Pandit, Director of M/s Pearl Infra-con.Pvt. Ltd. 4.5 Thus, the noting on page 86 and 69 of bundle No. 3 indicates that STES has made unaccounted cash payment of Rs. 64,50,000/- to Shri Sunil Pandit in the month of June 2006. STES has denied of having made any such cash payhment. However, the signed acknowledgement of Shri Sunil Padnit, Director of Pearl Infra-con Pvt. Ltd. Is an irrefutable evidence that STES has made cash payment to shri Sunil Yeshwant Pandit. Therefore, addition of Rs. 64,50,000/- is required to be made in the hands of Shri sunil Yeshwant Pandit, as his unaccounted/undisclosed receipt. 4.6 In view of the above, I have therefore, reason to believe that the income to the extent of Rs. 64,50,000 has escaped assessment as per the provisions of section 147of the Act for the assessment year 2007-08. 5.1 As these payments of Rs. 64,50,000/- have not been reflected in the return of income for A.Y. 2007-08, I have reason to believe that income of Rs. 64,50,000/- is chargeable to tax has escaped assessment. Therefore, an amount of Rs. 64,50,000/- added to the returned income of the assessee as income from other sources for A.Y. 2007-08. Penalty u/s 271(1)(c) of the Act is initiated separately for furnishing inaccurate particulars of income/concealed income.” 5. The ld. A.O has completed the assessment u/s 143(3) r.w.s. section 147/148 of the Act. When the matter travelled before the ld. CIT(A) he had dismissed the appeal of the assessee on merits. 6. It is for the first time as an additional ground before us, the assessee has contended that in the given facts and circumstances when some incriminating material is found during the course of search and such documents belong to persons other than the search entity, then it was mandatory for the A.O to issue notice u/s 153C of the Act and proceed accordingly. Therefore, the assessment completed u/s 143(3) r.w.s. 147/148 was bad in law, void abinitio. 7. We have considered the submissions of the parties, analysed the facts and circumstances in this case and have given considerable thought to the judicial pronouncements placed on record along with applicable provisions of the Act. Undisputedly, the search action was done on the premises of Singhagad Technical Education society group and even the office premises of the Principal was also 6 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 covered by the said search action u/s 132 of the Act. During this search action some incriminating documents were found regarding unaccounted cash payments to the assessee. So therefore, the basic facts are that the search was conducted at a particular premises and therefore, the incriminating documents were found which relates to not the person searched but relates to another person, the assessee in this case. Section 153C of the Act lays down the procedure to be followed when any money, etc. or any books of accounts or documents is found during the course of search on a particular premises which belongs to another person other than the person whose premises is searched. Section 153C enables the revenue authorities to investigate into the contents of the documents seized which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of an appropriate person. When the Officer u/s 153C after the assessment of the person in respect of whom search action was carried out is completed finds that the seized articles belonged to some other person then he has to forward a satisfaction note to the A.O having jurisdiction to assess such person. In this case it is not the premises of the assessee which was searched. It was the office premises of the Principal of Singhagad Technical Education Society which was searched from where the incriminating documents were found and that pertained to the assessee. In such scenario resorting to reopening of the assessment u/s 147/148 of the Act was not correct on the part of the A.O and he should have issued a notice to the assessee u/s 153C of the Act and proceed accordingly. The case-laws relied on by the assessee before us emphasises this settled judicial principles that when the search takes place in the premises of a particular person and from there the incriminating documents are found which pertains to another person, which is absolutely applicable to the facts in the present case before us, in such scenario the correct applicable provision has 7 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 to be section 153C of the Act. Once conditions are satisfied for invoking the jurisdiction u/s 153C the assessment must be made u/s 153C only and not u/s 147 of the ct. The department also failed to controvert the present facts on record. The co-ordinate Bench, Bombay, in the case of All Corgo Global Logistics Ltd. Vs. Dy. CIT (2012) 23 taxmann.com 103/137 ITD 287 (Mum), on identical facts observed and held as follows: "14. In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case. The AO formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22- 8-2008 which comes under the assessment year 2009-10. The Assessing Officer reopened the assessment year 2008.09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153A made it clear that the Assessing Officer has no option, hut to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned uls 132A. If Assessing Officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the Assessing Officer bound to issue notice u/s 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted u/s 132 or requisition is made u/s 132A. Therefore, in our opinion, the AO is not justified in reopening the assessment u/s 147 and his order is illegal and arbitrary." 8. In the present case before us also, when the incriminating materials have been found relating to assessee during the course of search on third party then the correct course of action for the A.O should have been to proceed against the assessee u/s 153C of the Act and there was no justification for the A.O to initiate proceedings u/s 147/148 of the Act. Accordingly, the order passed by the A.O is 8 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 held to be bad in law, arbitrary and devoid of merit, void abinitio and is therefore, quashed. Consequently, the order of the ld. CIT(A) does not have any legs to stand. The legal ground raised by the assessee in form of additional ground is answered in favour of the assessee and against the revenue. Therefore, all other grounds raised by the assessee on merits becomes infructuous hence dismissed. 9. In the result, appeal of the assessee stands partly allowed. Order pronounced in the open court on 31st January 2023 Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated : 31st January 2023 Ankam Copy of the Order forwarded to : 1. The Assessee 2. The Respondent 3. The CIT(A)-3 Pune 4. The Pr. CCIT Pune. 5. The Pr. CIT-4, Pune. 6. DR, ITAT, „B‟ Bench Pune Guard File. //सत्यापित प्रपत// True Copy// BY ORDER, Sr. Private Secretary ITAT, Pune /// TRUE COPY /// 9 ITA 1812/PUN/2022 Madhuri Sunil Pandit A.Y. 2007-08 Date 1 Draft dictated on 27-01-2023 Sr.PS 2 Draft placed before author 30-01-2023 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 31-01-2023 Sr.PS/PS 7 Date of uploading of order 31-01-2023 Sr.PS/PS 8 File sent to Bench Clerk 31-01-2023 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order