Mr M Srinivasa Reddy, Hyderabad V. DCIT, Central Cir-2, Hyderabad

ITA 1854/HYD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6367 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Search and seizure; Assessment record; Documents seized
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC) : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO. A.Y. APPELLANT RESPONDENT 1853/H/2012 2000-01 MR. M. SRINIVASA REDDY (HUF), HYDERABAD PAN AAGHM3539J DCIT, CENTRAL CIRCLE-2 HYDERABAD. 1854/H/2012 2001-02 1855/H/2012 2002-03 1857/H/2012 2004-05 1858/H/2012 2005-06 FOR ASSESSEE : MR. P. MURALI MOHAN RAO FOR REVENUE : MR. K.J. RAO DATE OF HEARING : 09.08.2016 DATE OF PRONOUNCEMENT : 09.08.2016 ORDER THESE APPEALS BY THE ASSESSEE-HUF ARE DIRECTED AGAINST THE ORDERS PASSED BY THE CIT(A)-III, HYDERAB AD. THOUGH THE FIRST APPELLATE AUTHORITY PASSED SEPARATE ORDERS BU T THE ISSUES INVOLVED THEREIN BEING COMMON, THEY ARE TAKEN- UP TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HUF RAISED SEVERAL GROUNDS IN THE GROUNDS OF APPEAL ENCLOSED TO REVISED FORM NO.36. IN ADDITION THERETO, A SEPARATE SET OF ADDITIONAL GROUNDS OF APPEAL WERE FILED WHEREIN IT WAS CONTENDED THAT THE LD. CIT(A) ERRED IN UP HOLDING THE ORDER OF THE ASSESSING OFFICER BY INVOKING THE PR OVISIONS OF SECTION 153C OF THE ACT WITHOUT RECORDING THE SATISFACTIO N OF THE ASSESSING OFFICER WHO HAS CARRIED OUT THE SEARCH AND FORWARDED THE FILE TO THE ASSESSING OFFICER WHO HAS ISSUED NOTICE UNDER SECTION 153C OF THE ACT. IN SHORT, THE PLEA OF THE ASSE SSEE IS THAT THE PROCEEDINGS UNDER SECTION 153C OF THE ACT ARE BAD I N LAW IN THE LIGHT OF DECISION OF THE JURISDICTIONAL HIGH COUR T IN THE CASE OF 2 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. CIT VS. M/S. SHETTY PHARMACEUTICALS AND BIOLOGICALS L TD., ITTA.NO.662 OF 2014 DATED 26.11.2014. IT WAS FURTHER SUBMITTED THAT SINCE THE ISSUE GOES TO THE ROOT OF THE MATTER AND NO FURTHER EXAMINATION OF FACTS ARE REQUIRED, OTHER THAN THOSE WHIC H ARE ALREADY AVAILABLE WITH THE ASSESSING OFFICER, THE ADD ITIONAL GROUND DESERVES TO BE ADMITTED IN THE INTEREST OF SUBSTA NTIAL JUSTICE IN THE LIGHT OF RATIO OF THE DECISION OF THE APE X COURT IN THE CASE OF NTPC REPORTED IN 229 ITR 383. LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE NOTICE ISSUED BY THE ASSESSI NG OFFICER DO NOT INDICATE THAT PROPER SATISFACTION WAS RECO RDED BY THE ASSESSING OFFICER AND THEREFORE, THE NOTICE UNDER S ECTION 153C OF THE ACT IS BAD IN LAW. IN ORDER TO VERIFY THE SAME, WE HAVE CALLED FOR THE ASSESSMENT RECORD. THE LD. D.R. PLACED BEFORE US COPY OF THE ORDER SHEET IN RESPECT OF THE A.Y. 2000-200 1 AND ALSO LETTER DATED 11.07.2016 OF THE ASSESSING OFFICER TO SU BMIT THAT THE ORDER SHEETS WERE IDENTICAL FOR ALL THE YEARS AND REASONS TO REOPEN ASSESSMENTS UNDER SECTION 153C ARE MENTIONED AS UNDER: IN THIS CASE, A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE I.T. ACT, 1961 WERE CONDUCTED ON 24.08.2 005 IN THE M.V. SUBRAMANYESWARA REDDY GROUP OF CASES. THE ASSESSEE SRI M. SRINIVASA REDDY IS THE BROTHER OF M .V. SUBRAMANYESWARA RAO, THE MAIN PERSON IN THIS GROUP AND HE IS ALSO COVERED UNDER SECTION 132. HE IS ASSESSE D TO TAX AND HE IS HAVING INCOME FROM HOUSE PROPERTY AND OTH ER SOURCES. A NOTICE UNDER SECTION 153A WAS ISSUED IN THIS CASE ON 28.02.2006 IN THE STATUS OF HUF. THE ASSESSEE HA S NOT FILED ANY RETURNS OF INCOME. HOWEVER, THERE WAS NO WARRANT ISSUED IN THE STATUS OF HUF. HENCE, TO AVOID LEGAL COMPLICATIONS, NOTICE UNDER SECTION 153C IS ISSUED AS CERTAIN DOCUMENTS SEIZED FROM ASSESSEES HOUSE RELATING TO HUF INDICATING UNDISCLOSED INCOME. THE ASSESSING OFFICE R HAS ALREADY ELABORATELY DISCUSSED IN THE ASSESSMENT ORD ER. 2.1. THE ORDER SHEET MERELY MENTIONS AS UNDER : 3 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN TH E MVS REDDY GROUP. THE ASSESSEES CASE COVERED UNDER SECT ION 153A/C OF THE I.T. ACT. NOTICE UNDER SECTION 153A P UT UP. 3. LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT TH E ORDER SHEETS PLACED BEFORE THE BENCH DO NOT INDICATE THA T THE OFFICERS WHO ARE INVOLVED IN SEARCH HAVE NOT RECORDE D ANY SATISFACTION THAT THE ASSESSEE HUF HAD CONCEALED ANY I NCOME AND EVEN THE ASSESSING OFFICER, WHO IS CONCERNED WIT H THE ASSESSMENT OF ASSESSEE HUF, HAS NOT RECORDED ANY SATIS FACTION AND IT WAS A MERE VAGUE NOTICE ISSUED UNDER SECTION 1 53A OF THE ACT AND EVEN AS PER THE LETTER OF THE ASSESSING OFFICE R, NOTICE UNDER SECTION 153C IS ISSUED TO AVOID LEGAL COMPLICAT IONS WHICH PROVES THAT THE ASSESSING OFFICER CONCERNED HAS NOT REC ORDED HIS SATISFACTION. 4. LD. D.R. WAS CALLED UPON TO EXPLAIN AS TO WHAT WAS THE SPECIFIC REASONS RECORDED BY THE ASSESSING OFFICE R CONCERNED WHILE ISSUING NOTICE UNDER SECTION 153C OF THE ACT. L D. D.R. ADMITTED THAT AS PER THE AVAILABLE ORDER SHEET ENTRIES ETC. , IT IS NOT CLEAR AS TO WHAT ARE THE SPECIFIC REASONS RECORDED BUT STATED THAT SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT IN THE CASE OF MVS REDDY GROUP. 5. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE RECORD. I HAVE ALSO PERUSED THE ORDER SHE ET COPY FOR THE A.Y. 2000-2001 AND ALSO THE LETTER ISSUED BY THE ITO, WARD- 6(5), HYDERABAD. THERE IS NO DISPUTE THAT PROVISIONS OF SECTION 153A COMES INTO PLAY ONLY IN THE CASE OF A PERSON AG AINST WHOM SEARCH WARRANT WAS ISSUED AND SEARCH AND SEIZURE PRO CEEDINGS WERE INITIATED UNDER SECTION 132 OF THE ACT. IN THE INST ANT CASE, SEARCH PROCEEDINGS WERE NOT CARRIED OUT IN THE NAME O F ASSESSEE 4 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. HUF. HOWEVER THE ASSESSING OFFICER, IN THE ORDER SHEE T, OBSERVES THAT ASSESSEES CASE IS COVERED UNDER SECTION 153A/C O F THE ACT. THE REASONS RECORDED, APART FROM BEING VAGUE, INDICA TES THAT NOTICE COULD NOT HAVE BEEN ISSUED UNDER SECTION 153A OF THE ACT. ONCE PROCEEDINGS ARE INITIATED IN THE CASE OF A PERSON WHO WAS SEARCHED AND IF SOME INCRIMINATING MATERIAL IS FOUN D IN RESPECT OF A PERSON OTHER THAN THE PERSON SEARCHED, THE ASSESSING OFFICER SHOULD RECORD HIS SATISFACTION THAT ANY MONEY, BULLION , JEWELLERY OR OTHER VALUABLE ARTICLES ETC., BELONGS TO SUCH PERSON , OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, AND THEREAFTER THE SAID BOOKS OF ACCOUNT ETC., SHOULD BE HANDEDOVER TO THE ASS ESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON S O AS TO ENABLE THE ASSESSING OFFICER CONCERNED TO PROCEED AGAINST SUC H PERSON. IN THE INSTANT CASE, THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE ASSESSING OFFICER WHO HAS CONDUCTED SEARCH, OR WH O HAS PROCEEDED TO MAKE THE ASSESSMENT AGAINST THE PERSON AGAI NST WHOM SEARCH IS INITIATED, WAS IN POSSESSION OF ANY IN CRIMINATING MATERIAL CONCERNING THE ASSESSEE HUF. NO MATERIAL WAS PLACED BY THE LD. D.R. TO SHOW THAT THE ASSESSING OFFICER WHO HAD ISSUED A NOTICE UNDER SECTION 153A/153C WAS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES BELONG S TO THE ASSESSEE HEREIN. THUS THE FIRST STEP TO INITIATE PROCEE DINGS UNDER SECTION 153C OF THE ACT WAS NOT FOLLOWED. IN OTHERWORDS, THE RECORD DO NOT INDICATE THAT THE BOOKS OF ACCOUNT, DOCUM ENTS OR ASSETS SEIZED WERE HANDEDOVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE ASSESSEE UPON RECORDING SATISFAC TION. SECTION 153C OF THE ACT IMPOSES AN OBLIGATION UPON THE ASSESSING OFFICER, WHO HAS TO INITIATE PROCEEDINGS U PON THE ASSESSEE, TO RECORD HIS SATISFACTION THAT INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE WAS FOUND DURING THE SEARC H AND 5 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. TRANSFERRED BY THE CONCERNED ASSESSING OFFICER. THE O RDER SHEET ENTRY AS WELL AS THE LETTER PLACED BEFORE ME DO NOT IND ICATE THAT THE ASSESSING OFFICER HAD ANY MATERIAL ON RECORD BASE D ON WHICH HE COULD HAVE RECORDED THE REASONS. IN FACT, REASONS FOR INITIATING PROCEEDINGS UNDER SECTION 153C ARE MISSING IN THE INS TANT CASE. 6. IT IS WELL SETTLED NOW THAT THE PROVISIONS CONTAINED IN SECTION 153C CAN BE INVOKED ONLY WHEN THE ASSESSING O FFICER HAVING JURISDICTION OVER THE SEARCH PERSON RECORDS H IS SATISFACTION AND THEREAFTER, THE ASSESSING OFFICER WH O HAS TO INITIATE PROCEEDINGS UPON THE ASSESSEE RECORDS HIS SA TISFACTION; IN THE INSTANT CASE, PROPER REASONS WERE NOT RECORDED BY BOTH THE ASSESSING OFFICERS. AT ANY RATE NOTHING WAS BROUGHT ON RECORD BY THE REVENUE TO SUPPORT ITS STAND THAT APPROPRIATE REASONS WERE RECORDED BY THE ASSESSING OFFICERS CONCERNED. 7. UNDER IDENTICAL CIRCUMSTANCES, THE ITAT HYDERABAD BENCH IN THE CASE OF SHETTYS PHARMACEUTICALS & BIOLOG ICALS LTD., VS. DCIT, CENTRAL CIRCLE-2, HYDERABAD (2014) 47 TAXMA NN.COM 85 (HYD.) (TRIBU.) QUASHED THE PROCEEDINGS FOR NON-RECO RDING OF REASONS BY OBSERVING IN PARA-33 AS UNDER : 33. THE ABOVE TWO JUDGMENTS WERE DELIVERED U/S. 1 58BD. WE HAVE CAREFULLY GONE THROUGH THE LANGUAGE USED IN SECTION 153C AND 158BD OF THE ACT. THE MAIN DIFFERENCE IN THE LANGUAGE IS THAT IN SECTION 158BD THE SCOPE OF JURISDICTION OF AO IS ONLY WITH RESPECT TO THE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H. WHEREAS IN SECTION 153C THE SCOPE OF JURISDICTION O F THE AO IS WITH RESPECT TO ANY MONEY, BULLION, JEWELLERY , OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOU NT OR DOCUMENTS WITH RESPECT TO WHICH THE ASSESSING OFFIC ER IS SATISFIED THAT IT BELONGS TO SUCH OTHER PERSON. BUT SO FAR AS THE REFERENCE TO WORD 'SATISFACTION' IS MADE IT IS SAME AS AVAILABLE IN SECTION 158BD OF THE ACT. 6 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. THEREFORE, WE ARE OF THE VIEW THAT THE RATIO LAID D OWN IN THE ABOVE CASES IN RESPECT TO THE POINT OF SATIS FACTION WILL APPLY FOR INITIATION OF ACTION U/S. 153C OF TH E ACT. IN VIEW OF THIS, WE ARE INCLINED TO HOLD THAT INITI ATION OF PROCEEDINGS U/S. 153C OF THE ACT IN THE CASE OF THE ASSESSEE FOR THESE TWO ASSESSMENT YEARS IS NOT PROP ER AS THERE IS NO SATISFACTION RECORDED BY THE AO HAVI NG JURISDICTION OVER THE PERSON SEARCHED OR REQUISITIO NED U/S. 132A OF THE ACT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS OF SEARCHED PARTY OR LATER BEFORE ISSUE OF NOTICE U/S. 153C OF THE ACT. ACCORDINGLY, WE QUASH THE ASSESSMENT FRAMED U/S. 153C OF THE ACT IN BOTH THE ASSESSMENT YEARS IN THIS CASE. 8. ON AN APPEAL FILED BY THE REVENUE, THE ORDER OF THE ITAT WAS AFFIRMED BY THE HONBLE A.P. HIGH COURT (ITT A.NO.662 OF 2014 DATED 26.11.2014). SINCE NO SATISFACTION WAS RECO RDED BY THE ASSESSING OFFICER AND THE SO-CALLED REASONS BEING VAGUE, I AM OF THE FIRM VIEW THAT THE INITIATION OF PROCEEDINGS UND ER SECTION 153C OF THE ACT DESERVES TO BE QUASHED AS IT DO NOT STAN D THE TEST OF LAW. SINCE THE INITIATION OF PROCEEDINGS ARE HELD TO BE BAD IN LAW, IT IS NOT NECESSARY FOR ME TO DISCUSS THE OTHER ISS UES URGED BY THE ASSESSEE ON MERITS. 9. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE TR EATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08.2016. SD/- (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED 09 TH AUGUST, 2016 VBP/- 7 ITA.NOS.1853, 1854, 1855, 1857 & 1858/H/2012 MR. M. SRINIVASA REDDY (HUF), HYDERABAD. COPY TO 1. MR. M. SRINIVASA REDDY (HUF), HYDERABAD. C/O. MR. P. MURALI & CO., CHARTERED ACCOUNTNATS, 6-3- 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 82. 2. THE DCIT, CENTRAL CIRCLE-2, HYDERABAD. 3. CIT(A)-III, HYDERABAD. 4. CIT (CENTRAL), HYDERABAD. 5. D.R. ITAT B (SMC) BENCH, HYDERABAD. 6. GUARD FILE