SAMBHAVANATH INFRABUILD FARMS (SUCCESSOR TO LODHA CONSTRUCTION P. LTD P. LTD., MUMBAI V. ASSTT. CIT, CENTRAL CIRCLE-7(3), MUMBAI

ITA 1897/MUM/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0474 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Loose papers; Document seized; Period of limitation; Difference of opinion; Block assessment; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings; Set aside
• Section: 147; 148; 132; 143(3); 153A; 143(2); 246A; 64; 158BC; 153; 158BD; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “E” BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., {Successor to Lodha Construction Pvt. Ltd.,} 412, 4 th Floor, 17G Vardhaman Chamber Cawasji Patel Road, Horniman Circle Fort, Mumbai - 400001 PAN: AALCS1394M v. Asst. CIT– Central Circle – 7(3) Room No. 655, 6 th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Anuj Kisnadwala Department by Shri B.K. Bagchi Date of Hearing : 16.11.2021 Date of Pronouncement : 06.01.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals)– 48, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.09.2020 for the A.Y. 2011-12. 2. In this appeal assessee filed following grounds of appeal: - 2 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) erred in confirming the action of the Learned Assessing Officer in reopening the assessment u/s 147 of the IT Act which is bad in law and contrary to the provisions of the I.T. Act. 2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) erred in upholding the reopening the assessment u/s 147 of the IT Act without appreciating that the learned Assessing Officer had no jurisdiction to reopen the assessment based on the document found and seized during search action as the IT Act prescribes completely separate mechanism under section 153A to 153C dealing with the search cases which should have been followed. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) erred in confirming the action of the Learned Assessing Officer in making addition of Rs. 3,75,00,000/- being alleged cash loan taken by the appellant, by invoking section 69D of the I.T. Act. 4. On the facts and circumstances of the case as well as in law, the learned CIT(A) erred in making addition of Rs. 3,75,00,000/being alleged cash loan taken by the appellant without appreciating that the same is already taxed in the hands of Shri Somnath Nair, from whose premises the alleged documents were found; hence, the same cannot be taxed again. 5. Without prejudice to the above, the learned CIT(A) erred in making addition of Rs. 3,75,00,000/- being alleged cash loan taken by the appellant without appreciating that ' the said amount is already considered in the petition filed before the Income Tax Settlement Commission by the group companies of the appellant and it has been discussed and forming part of the order of the Hon’ble Settlement Commission.” 3. From the above grounds of appeal raised by the assessee, assessee is aggrieved with the order passed by the Ld.CIT(A)- 48, Mumbai that he has not dealt with the jurisdictional issue of upholding the reopening of 3 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., assessment u/s 147 of the Income tax Act, 1961 (in short Act) without appreciating the peculiar circumstances of this case based on the documents found during search and basis of initiation of proceedings u/s.147 of the Act was only the documents found during search. Other grounds raised by the assessee on the merits of the case. Since the jurisdictional issue is crucial to decide the validity of the assessment, we proceed to decide this issue first. 4. The brief facts relating to initiation of reassessment proceedings are, assessee filed its return of income on 29.09.2011 declaring total business income at Rs.(-) 40,202/-. The assessing officer initiated the reassessment proceedings by issue of notice u/s 148 and served the notice. The assessee was supplied with the reasons recorded u/s 148(2) of the Act, the same is given below: - "During the course of search proceedings at the residence of Shri Somanathan Nair at D-02, Vastu Shrusti CHS Ltd., Lodha Heritage, Bhopar Road, Desle Pada, Dombivaii (E), Thane a file Annexure A/1 containing loose papers numbered 1-49 were seized. On perusal of this loose papers especially page numbers 40 to 47 it Is observed that M/s. Lodha Construction P.Ltd. has taken cash loan from various parties as detailed herein under: - Sr.No. Name of the lender Date Amount Interest Rate 1. Mahendrabhai K. Shah 02-07-2010 45,00,000/- 1% per month i.e. 12% per annum 2. B.P. Mehta 01-04-2010 5,00,000/- 1% per month i.e. 12% per annum 3. S.D. Jain 07-01-011 25,00,000/- 1% per month i.e. 12% per annum 4 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., Sr.No. Name of the lender Date Amount Interest Rate 4. Mahendrabhal K. Shah 06-01-2011 1,00,00,000/- 1 % per month i.e. 12% per annum 5. No name and signature 06-01-2011 1,00,00,000/- 1% per month i.e. 12% per annum 6. Sampatbhal 04-01-2011 50,00,000/- 1% per month i.e. 12% per annum 7. B.P. Mehta 01-01-2011 5,00,000/- 1% per month i.e. 12% per annum 8. Mahendrabhail K. Shah 01-01-2011 45,00,000/- 1% per month i.e. 12% per annum The information contained in the above data is prima facie not reflected in the Return of Income filed by the assessee and thereby in the accounts of the assesses. I have therefore, reasons to believe that the income has escape assessment within the meaning of section 147 of the Income tax Act, 1961 for the A.Y.2011-12 to the extent of transaction mentioned above, Therefore, notice u/s. 148 is issued.” 5. In response, assessee filed the objections vide letter dated 28.01.2014 and after considering the submissions and objections, Assessing Officer rejected the same with the following observations: “4. The submissions of the assessee and the contentions raised by the assessee have been considered and the same are not acceptable. These papers have been seized during the search and seizure operations and they bear the seal and signature of the assessee company. Assessee has argued that these amounts have been added in the hands of Shri Somanathan Nair and therefore the same should not be added in the income of the assessee Company. This contention of the assessee is not acceptable. These papers belong to the assessee and the taxability of this amount in the hands of the assessee cannot be questioned. The fact that the mount appearing in the above mentioned papers has been added in the hands of Shri Somanathan Nair does not absolve the assessee of the tax liability arising in the hands of the assessee company as per the I.T. Act.” 6. From the above para, it is clear that the initiation of the reassessment proceedings is based on the documents found during the 5 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., search operation and from the above para, Assessing Officer is fully satisfied that the documents found during search belongs to assessee only. However, Assessing Officer proceeded to complete the reassessment on the basis of these documents and dealt with the merits on record. We observe from the record that the assessee first time raised the issue of jurisdiction before Ld.CIT(A) by raising grounds of appeal. We observe from the appellate order that Ld.CIT(A) recorded the various objections raised by the assessee on jurisdiction issue in his order, for the sake of brevity it is reproduced below: - “2.1 The Appellant is a Lodha group of companies which is a well known business house in the real estate business. A search action took place at Lodha Group on 10.01.2011 including various companies, residences of the directors and associates which inter alia included the residential premises of an individual namely Shri Somnath Nair (Nair), an employee of the Lodha group. In the course of search proceeding at the residence of Shri Nair fic. D/02, VastuShrusti CHS Ltd, Lodha Heritage, Bhopar Road, Desle Pada, Dombivali (east)] a file containing pages 1 - 49 were found and seized which at pages 40 to 47 includes loose papers showing the alleged cash loan taken by the Appellant (i.e. M/s. Lodha Construction Pvt. Ltd) from the following parties: Sr.No. Name of the lender Date Amount Interest Rate 1. Mahendrabhai K. Shah 02-07-2010 45,00,000/- 1% per month i.e. 12% per annum 2. B.P. Mehta 01-04-2010 5,00,000/- 1% per month i.e. 12% per annum 3. S.D. Jain 07-01-011 25,00,000/- 1% per month i.e. 12% per annum 4. Mahendrabhal K. Shah 06-01-2011 1,00,00,000/- 1 % per month i.e. 12% per annum 5. No name and signature 06-01-2011 1,00,00,000/- 1% per month i.e. 12% per annum 6. Sampatbhal 04-01-2011 50,00,000/- 1% per month i.e. 12% per annum 6 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., Sr.No. Name of the lender Date Amount Interest Rate 7. B.P. Mehta 01-01-2011 5,00,000/- 1% per month i.e. 12% per annum 8. Mahendrabhail K. Shah 01-01-2011 45,00,000/- 1% per month i.e. 12% per annum Total 3,75,00,000/- 2.2 On the basis of above documents, the Appellants case has been reopened vide notice dated 25.02.2013 issued u/s 148 of the Act. After considering the various submissions made by the Appellant during the re-assessment proceeding, an addition of Rs.3,75,00,000/- has been made under section 69D of the Act to the returned income of the Appellant vide order dated 29.03.2014 passed under section 143(3) r.w.s. 147 of the Act. 2.3.1 The Appellant, at the very outset, object the action of the AO in assuming the jurisdiction u/s 148 of the Act. The Appellant submits that the undisputed facts in its case are that the loose papers showing the alleged cash loan taken by the Appellant has been found and seized during the search action at the residence of Shri Nair. For such circumstances, there are separate and complete mechanism stated in section 153A to 153C of the Act dealing with the search cases which needs to be followed. Therefore, in the cases of search action, recourse to section 148 of the Act cannot be taken. 2.3.2 The Appellant submits that section 153A, 153B and 153C of the Act provides for new scheme of assessment of cases where the search has taken place on or after 31st Day of May 2003. In the present case before Your Honour, the search action took place in January, 2011; hence, the same has to be governed by the new sections/scheme. The relevant provision reads as under: “153C. Assessment of income of any other person. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance ‘with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other 7 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., person for the relevant assessment year or years referred to in sub- section (1) of section 153A. Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year: (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under subsection (2) section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over Such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.” 2.3.3 Section 153C deals with cases of persons other than the persons searched u/s 132 of the Act. As per the provisions of section 153C, where the Assessing Officer of the searched party is satisfied that any money, builion, jewcllery or valuable article or thing or books of account or other documents seized or requisitioned belongs to a person other than the searched person referred to in section 153A, then the books of accounts or documents shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed in accordance with the provisions of section 153A. The CBDT issued a circular No.7 of 2003 dated 5-9-2003 reported in 263 ITR 62 explaining the new scheme of assessment procedure in the following manner: 8 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., “65. The special procedure for assessment of search cases under Chapter XIV-B be abolished 65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed. 65.2 The Finance Act, 2003 has provided that the provisions of this Chapter shall not apply where a Search its initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 by inserting a new section 158BJ in the Income-tax Act. 65.3 Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition. 65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of Six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. 65.5. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 9 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., 65.6 The new section 153B provides for the time-limit for completion of search assessments. It provides that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling within six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed. 65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any Court; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being reheard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub- section (1) of section 245D is received by the Commissioner under subsection (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment. or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly. 65.9 The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. 10 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., 65.10 An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals). 65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections. 65.12 These amendments will take effect from 1 st June, 2003.” 2.3.4 A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. The language used in these sections, i.e. ‘notwithstanding anything contained’ in section 139, section 147, section 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A or 153C of the Act. 2.3.5 The Appellant submits that under the provisions of section 147 of the Act, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that there is material which suggests that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Before invoking section 148 of the Act to reopen the assessment u/s 147, the Assessing officer has to satisfy himself that there is an escapement of income chargeable to tax. This pre-requisite condition under section 147 at the Act has been done away in the cases of search whereby the assessment of the six years of the concerned assessees shall be reopened under section 153A of the Act. Section 153A of the Act deals with the assessment of the parties who have been searched whereas section 153C of the Act deals with the assessment of the parties, documents / information belonging to whom (i.e. third party) have been found at the premises of the searched party. Section 153C of the Act also provides a mechanism whereby Assessing Officer of the searched party, after recording the satisfaction that the documents or assets seized belonging to third party has a bearing on determination of total income, shall assess or re-assess the total income of third party. 2.3.6 With reference to recording of satisfaction in the case of parties covered u/s 153C of the Act, the CBDT has issued an instruction dated 31.12.2015 bearing no 24/2015 wherein the CBDT has specified as under: “2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 11 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., dated 12.3.2014 (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD, The Hon'ble Court held that the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.” 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon’ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the “other person” is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of Satisfaction note should also be decided in the light of the above Judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.” In view of the above facts, the Appellant submits that the re- assessment order passed u/s 143 (3) r.w.s. 147 of the Act shall be quashed as the same has not complied with the provision of the Act. 2.3.7 In the present case on hand, admittedly, the Assessing Officer has reopened the assessment based on a search conducted in a third party case (i.e. Shri Nair). The AO formed the opinion based on loose papers found from the premises of Shri Nair which shows alleged undisclosed income which is the very basis of reopening the assessment. 12 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., 2.3.8 The search is conducted on 10-01-2011 which comes under the assessment year 2011-12. The assessees 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 153C made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income u/s 153C r.w.s. 153A of the Act. 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 153C rw.s. 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 to reopen the assessment of year under consideration. 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. 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 153C r.w.s. 153A, made it mandatory that the Assessing Officer shall issue notice u/s 153C, thereafter proceed to assess or reassess the total income, where seized material is found during search. Therefore, the re-assessment order passed u/s 143(3) r.w.s 147 of the Act is bad in law, contrary to provision under the Act; hence shall be quashed. 2.3.9 In support of the above contentions, the Appellant rely on following judicial pronouncements: i) G. Koteshwara Rag vs DCIT (ITA No 400/Vizag/2014) Facts of the case: A search action has taken place at the premises of the third person where the documents belonging to the assessee has been found. The AO instead of using the methodology stated ins section 153C of the Act, re-opened the case u/s 148 of the Act and made the addition pertaining to undisclosed investment. The case travelled upto Hon'ble ITAT and Hon'ble ITAT had to decide whether AO was correct in reopening the assessment when the documents giving rise to re-assessment has been found in search action at the premises of third parties?. The reassessment order has been quashed by the ITAT. The operational part of the order reads as under: “17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the 13 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section IS3A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3) r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12- 2010 passed u/s 143(3) r.w.s. 147 is quashed.” ii) While giving the above findings, Hon'ble ITAT (Vizag) has very strongly relied on the two judgments of Hon’ble Mumbai ITAT in the cases of (a) All cargo Global Logistics and ors vs DCIT [137 ITD 287] (b) State Bank of India vs DCIT [22 ITR 609 Mum]. The operational part of these decisions are reproduced by the ITAT (Vizag) which is quoted as under: All cargo Global Logistics and ors vs DOT [137 ITD 287] "52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings und proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment Shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under Section 153B” " (page 21 paragraph 15 of ITAT. (Vizag) order) 14 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., State Bank of India vs DCIT [122 ITR 609 Mum] "18. ................ After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is Initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place.” (page 22 paragraph 16 of ITAT (Vizag) order) The judgment in the case of Allcargo (supra) has been confirmed by the Hon’ble Bombay High Court reported in 374 ITR 0645 Bom. In view of the above facts and judicial pronouncements, the Appellant submits that the re-assessment order passed u/s 143(3) r.w.s 147 of the Act shall be quashed.” 7. After considering the detailed submissions of the assessee, Ld.CIT(A) rejected the above submissions by following observations: “5.2 I have considered the facts of the case and submissions of the assessee. During the course of appellate proceedings, the assessee has argued that there was no reason to establish that the income had actually escaped assessment and therefore, reopening is based on change of opinion. Accordingly, the assessee argued that notice issued u/s. 148 was without jurisdiction and the order passed u/s. 147 was unlawful. In the assessment order, the AO stated that notice u/s.148 of the Act dated 25.2.2013 was issued and served on the assessee, alongwith reasons for reopening. The AO further stated that during the course of search proceedings at the residence of Shri Somnath Nair, D-02, VastuShrusti CHS Ltd., Lodha Heritage, Bhopar Road, Dombivili (E); Thane, a file containing loose papers - page nos. 1 to 49 were seized and from this file it was gathered that Lodha Construction P. Ltd. had taken cash loans from several parties amounting to Rs. 3,75,00,000/-. Also, the above information of loan was not reflected in the return of income filed by the assessee for 15 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., the year or in the accounts of the assessee. Under the circumstances, the AO had reason to believe that income has escaped assessment and therefore issued notice u/s. 148 as also after recording the reasons for reopening. The AO provided reasons for reopening vide letter dated 10.6.2013. In response, the assessee company, vide letter dated 15.07.2013 filed its objections to the reopening. The objections were disposed off by the AO vide order dated 30.12.2013 and held that this is a fit case for reopening. Accordingly, statutory notice u/s. 143(2) dated 02.01.2014 was issued. Consequently, the assessment was completed u/s. 147 of the act.” 8. In the above observations, Ld.CIT(A) rejected the jurisdictional issue without even discussing on the issue of applicability of assessment under section 153C of the Act. Aggrieved the assessee is in appeal before us. At the time of hearing, Ld AR submitted that Assessing Officer reopened the assessment u/s 147 based on the material found during search. He brought to our notice the relevant discussions of Assessing Officer in his order on reasons for reopening and justification of initiation of proceedings u/s 147. He submitted that the proper method to reassess the income of the assessee under section 153C and not under section 147. In this regard, he relied in the following case law: (i). Batta Yadamma v. ITO in ITA No. 1695/Hyd/2017 and others for A.Y. 2008-09 dated 29.11.2018. (ii). Sri Suryadevara Avinash v. Dy. CIT in ITA No. 496-498/Hyd/2017 for A.Y.s 2007-08 to 2009-10 dated 09.08.2019. (iii). M/s Kalyan Buildmart Pvt. Ltd. v. ACIT in ITA Nos 152 and 153/JP/2018 for A.Y.s 2007-08 and 2008-09 dated 28.06.2018. (iv). Kalyanji Velji HUF v. DCIT CC 8(4) in ITA Nos 2284/Mum/2019 and others for AYs 2010-11 to 2013-14 dated 08.01.2021. 16 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., (v). Shri V.L. Khandee in ITA No 1971/Pun/2014 for AY. 2006-07 dated 24.04.2018. (vi). Sanjay singhal (HUF) v. DCIT (207 TTJ 853 (Chd)) dated 19.06.2020. (vii). Asst. CIT v. Shri Srinivas Rao Hoskote in ITA Nos 1154 and 1155/Bang/2015 for A.Y.s 2010-11 and 2011-12 dated 21.02.2018. 9. He also made submissions of Merit, since we are dealing with the jurisdictional issue, we are not adjudicating on merit. 10. On the other hand, Ld. DR submitted that Assessing Officer has limited say on the issue of initiation of assessment since the investigation wing decides the section under which the Assessing Officer can proceed to reassess the income of the assessee. He also submitted that the case law relied by the assessee is irrelevant and he relied on the findings of Ld.CIT(A). On merit also he heavily relied on the findings of the lower authorities. Subsequently, he filed a note on merit defending the argument put forth by the Ld.AR, which is reproduced below: “Sub: ITAT Appeal in the case of Sambhavnath Infra Build And Farm Pvt. Ltd. (Previously Lodha Constructions Pvt. Ltd.) AY 2011- 12, ITA No. 1897/M/20 - reg. 1. The above case came up for hearing on 16.11.2021 before the Hon’ble Bench and was heard on that day. It was Assessee’s appeal where the undersigned appeared as Sr. AR for the Revenue. In this regard, the undersigned would like to clarify one issue which has emphasized by the Ld. AR of the Assessee company with much vigour. It was highlighted by the AR that since ‘Lodha Group’ was before the Hon'ble Settlement Commission and was admitted, hence the AO did not have the jurisdiction to pass the order. It was also 17 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., pointed out that Rs. 3.75 Crores, the main contentious issue in the appeal has also been considered by the Hon’ble Settlement Commission. 2. However, attention of the Hon’ble Members is drawn on Pg. Nos. 11 to 14 of the Paper-book submitted by the assesse on 02.11.2021 before the Bench. It contains the list of concerns before the Settlement Commission. The name of the Assessee company is missing there, which makes the defense argument weak. As far as matching the contentious amount it may be remembered that the ‘Lodha Group’ is a big group where 42 different entities are before the Hon’ble Settlement Commission and ‘nearly matching’ some figure through permutation and combinations does not take much efforts.” 11. Considered the rival submissions and material placed on record. We observe from the reasons recorded for initiation of reassessment proceedings that the proceedings u/s 148 of the Act were initiated heavily relying on the documents found during search conducted in the group concerns of the Lodha group in which the employee, Shri Somnath Nair, of the group is also covered. The documents found in his position were confiscated and the Assessing Officer has fully satisfied that these documents are belongs to assessee. After recording the satisfaction, he proceeded to initiate the proceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. We observe from the various decisions of Tribunals on this issue. The Hyderabad bench in the 18 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., case of Batta Yadamma v. ITO in ITA.No. 1695/Hyd/2017 and in Sri Suryadevara Avinash v. DCIT in ITA.No. 496-498/Hyd/2017, in which one of the member is a party, held as under: “7. Considered the rival submissions and perused the material on record. Similar issue was dealt by the Bengaluru Bench of ITAT in the case of Shri Srinivasa Rao Hostake (supra) wherein the coordinate bench has held as under: “06. We have heard the rival contentions and perused the record. In our view the scope of Section 153Cand 148 are clear from the bare reading of the two provisions insomuch as Section 153C it starts with 'Notwithstanding nothing containing in Section 139, 147, 148, 149, 151 and 153'. Thus if there is any contradiction between Sections 153C and 148 ,in that eventuality, Section 148 shall give way to Section 153C. There is a reason for saying so because if a notice u/s.153C is issued to the third party (assessee), then the AO may assess or reassess the income of the assessee for a period of six years whereas this is not the position in case of Section 148. Further u/s.153C of the Act, the assessment / reassessment can only be made based on the satisfaction recorded by the AO or the searched person as well as of the third party and further addition can only be made by the AO in respect of the assessment year for which the incriminating documents were found with the search person belonging to the third party. Therefore in our view the finding of the CIT(A) is in accordance with law, as the proceeding should have been initiated under section 153C of the Act, as it were based on material found during the search from the premises of searched person other than assessee and not under section 148 of the Act. Further we are of the opinion that this issue raised by the parties is no more res integra as the coordinate bench in the matter of G. Koteshwara Rao v. DCIT [(2015) 64 taxmann.com 159] in para 11 to 14 has held as under : 11. A careful study of section 153A to 153C and also the circular issued by the CBDT explaining the procedure of assessment in search cases, it shows that these are separate provisions independent of other provisions relating to reassessment, because of the non obstante clause begins with the said sections. The language used in these sections, i.e. 'notwithstanding anything contained' in section 139, section 147, section 19 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., 148, section 149, section 151 and section 153 made it clear that provisions of these sections are not made applicable to the assessments covered by the provisions of section 153A. Prior to the introduction of these three sections, there was a separate chapter XIV -B of the Act, by section 158BC to 158BE which governs the search assessments which is popularly known as Block assessment. The earlier provisions provides for single assessment to be made in respect of undisclosed income of Block period consisting of 10 assessment years immediately preceding the assessment year in which search took place and the broken period of up to the date of search was also included in the block period. After the introduction of new sections, i.e. section 153A to 153C, the single block assessment concept was done way with the new scheme of assessment of search cases where the Assessing Officer is to assess or reassess the total income of each of the assessment years falling within the period of six assessment years immediately preceding the assessment year in which the search is conducted. Therefore, under the new scheme, the Assessing Officer is required to exercise the normal assessment powers in respect of the previous year in which the search took place. From these facts, one thing is clearly emerged that both i.e. earlier concept of Block assessment and the new scheme of assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the reassessment proceedings, he has to cross the hurdles attached with reassessment by way reasons for reopening of assessment, time limit for issue of notice and provision for obtaining sanction of higher authority in certain circumstances. Under the provisions of section 153A to 153C these hurdles are cleared by using the non abstante clause in the said section. In other words, under 20 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., the new provisions of section 153A, the AO is not required to satisfy these conditions before issue of notice. The only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish the returns of income for each assessment years falling within the six assessment years immediately preceding the assessment year in which search or requisition is made. Another significant feature of this section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid period which includes disclosed and undisclosed income. Therefore, the new provisions has given wide powers to the Assessing Officer to assess or reassess the total income of six assessment years falling within the period of those six assessment years immediately preceding the assessment year in which search is conducted. Under the new provisions of section 153A, the statute is provides wide powers to the Assessing Officer in respect of assessments already completed u/s 143(1) or 143(3). If such orders is already in existence prior to the initiation of search, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, found during the course of search. For this purpose, the restrictions imposed on the Assessing Officer by way of sections 148 to 153 to reopen the assessment u/s 147 has been removed by the non abstante clause used in section 153A. 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 21 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., 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, but 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- obstante 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 u/s 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. 22 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., In view of the above and in view of the decision relied upon by the assessee, we do not find any merit in the appeals filed by Revenue.” 07. At this stage we may like to point out that the decision relied upon by the Revenue in the matter of Gudwill Housing Ltd (supra) was a decision on Section 158BD under the old Act. There is a significant difference in the construction, language and content of both the provisions i.e Section 158BD under the old Act and section 153C of new Act of 1961. Section 153C of 1961 Act, starts with a non-obstante clause, whereas this nonobstinate provision was not there in Section 158BD. Therefore, in our considered opinion the decision relied upon by the Revenue is not applicable to the facts and circumstances of present case. We hold accordingly.” In view of the ratio laid down in the said case, we are of the view that the AO wrongly initiated the proceedings u/s 148 and completed the assessment u/s 143(3) rws 147 of the Act, instead of initiating the proceedings u/s 153C of the Act. Therefore, we set aside the order of CIT(A) and quash the assessment made by the AO u/s 143(3) rws 147 of the Act. Since the very assessment is quashed, the additions made in such assessment automatically get cancelled.” 12. Respectfully following the above decision, the correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act. Therefore, we set aside the assessment passed under 23 ITA NO. 1897/MUM/2020 (A.Y: 2011-12) Sambhavnath Infrabuild and Farms Pvt. Ltd., section 143(3) r.w.s 147 of the Act. Accordingly, the ground no 1 and 2 raised by the assessee are allowed. 13. Since we are not dealing with other grounds on merit, we kept these grounds open and not adjudicated. 14. In the net result, appeal filed by the assessee is partly allowed. Order pronounced on 06.01.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (C.N. PRASAD) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 06/01/2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum