Sri. Nagappa D. Waddar, Belgaum V. Jt.Commissioner of Income Tax .(OSD) , Cent. Circle-1, Belgaum

ITA 202/BANG/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75968 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI LD
• Assessee Lawyers: S VENKATESAN
• Keywords: Block assessment; Documents seized
• Section: 142(1); 153A; 145; 6; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA , HONBLE JUDICIAL MEMBER ITA NO. 202 / BANG /201 3 : (ASST. YEAR : 200 8 - 0 9 ) SRI NAGAPPA D. WADDAR ANJANEYA NIL A YA, AT POST : VAJJAL, TALUK SURPUR, YADGIR DIST. 585 215 PAN : ABEPN0127G (APPELLANT) VS. JT . COMMISSIONER OF INCOME TAX (OSD) , CENTRAL CIRCLE - 1, BELGAUM (RESPONDENT) ASSESSEE BY : S. VENKATESAN, CA REVENUE BY : SMT. ASHA DESAI , LD. DR DATE OF HEARING : 04 / 02/ 2014 DATE OF PRONOUNCEMENT : 28 /0 2 /2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DT. 31.1.2012 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. TH E APPELLANT DENIES HIMSELF LIABLE TO BE ASSESSED U/S.153C OF THE ACT IN AS MUCH AS, THERE WAS NO VALID SEARCH IN THE HANDS OF SRI MANAPPA D.VAJJAL IN TERMS OF SECTION 132[1] OF THE ACT AND FURTHER ASSUMPTION OF JURISDICTION BY INVOKING THE PROVISIONS OF SE CTION 153C OF THE ACT IS BAD IN LAW AS THE ONLY ASSET SEIZED WAS CASH AND THE SAME WAS DEPOSITED IN THE PD ACCOUNT OF THE CIT AND NO OTHER DOCUMENT WERE SEIZED BELONGING TO THE APPELLANT AND THESE WERE NOT HANDED OVER TO THE LEARNED A.O. TO ASSUME JURISD ICTION U/S.153C OF THE ACT AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 3. THE SEARCH INITIATED AND CONDUCTED IN THE CASE OF THE APPELLANTS BROTHER SRI MANAPPA D.VAJJAL, IS ULTRA - VIRES THE PROVISIONS OF SECTION 132[1][A], [B] AND [C] OF 2 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) THE ACT AND ISSUING THE WARRANT IS ILLEGAL AND THE SEIZURE OF THE ASSET BELONGING TO A THIRD PERSON FROM HIM, WHICH IS ADMITTEDLY NOT A UNDISCLOSED INCOME, BEING THE FUNDS DRAWN FROM THE APPELLANTS BANK ACCOUNT IS ALSO ILLEGAL AND THEREFORE, HAVING REGARD TO THE PARITY OF THE RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF AJITH JAIN REPORTED IN 260 ITR 80 AND THE JURISDICTION HIGH COURT IN THE CASE OF SRI C.RAMAIAH REDDY REPORTED IN 339 ITR 210, CONSEQUENT ASSESSMENT MADE BY INVOKING TH E PROVISIONS OF SECTION 153C IN THE HANDS OF THE APPELLANT IS ALSO BAD IN LAW AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE TRANSFER OF THE CASE FROM THE DCIT, - CIRCLE - I, GULBARGA TO ACIT, CENTRAL CIRCLE - 1, BELGAUM IS ULTRA - VIRES THE PROVISIONS OF SECTION 127 OF THE ACT AND THE VALID REASONS FOR THIS TRANSFER HAVE NOT BEEN STATED IN THE NOTIFICATION OF TRANSFER AND CONSEQUENTLY, THERE WAS NO VALID TRANSFER FOR THE ACIT, CENTRAL CIRCLE - 1, BELGAUM TO PROCESS TH E ASSESSMENT AND AT ANY RATE THE ASSESSMENT FINALLY COMPLETED BY THE JCIT [OSD] IS ALSO ILLEGAL AND THE LEARNED A.O. HAS NOT BEEN VALIDLY VESTED WITH THE JURISDICTION TO COMPLETE THE ASSESSMENT AND THE LEARNED JCIT, WHO COMPLETED THE ASSESSMENT FINALLY AND WHO PASSED THE ASSESSMENT AND HAS NOT ISSUED THE NOTICE IN ACCORDANCE WITH SECTION 129 OF THE ACT ON THE CHANGE IN THE INCUMBENT IN THE OFFICE OF THE ACIT, CENTRAL CIRCLE - 1, BELGAUM AND CONSEQUENTLY, THE ASSESSMENT MADE IS ILLEGAL AND LIABLE TO BE ANNULLE D. 5. THE LEARNED A.O HAS ERRED IN COMPLETING THE ASSESSMENT U/S.144 OF THE ACT, AS THERE HAS BEEN NO FAILURE TO FILE THE RETURN AND THE APPELLANT HAS PARTICIPATED IN THE PROCEEDINGS OF COURSE ALWAYS CONTENDING ABOUT THE INVALIDITY OF THE PROCEEDINGS AND THEREFORE, THE ORDER PASSED U/S.144 OF THE ACT, REQUIRES TO BE CANCELLED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINING A SUM OF RS.78,968/ - IN RESPEC T OF ACCRUED INTEREST ON FIXED DEPOSITS WHICH IS NOT DUE AND RECEIVED IN THAT THE SAME IS NOT CREDITED TO THE BANK ACCOUNT OF THE APPELLANT TO CONSTITUTE RECEIPT, WHICH IS THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 6.1 THE ADDITION IS PURELY ON ASSU MPTIONS AND PRESUMPTIONS, SUSPICIONS AND SURMISE AND BY REJECTING THE EXPLANATIONS UNREASONABLY AND CONSEQUENT ADDITION REQUIRES TO BE DELETED. 7. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HONBLE CCIT/DG, T HE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S 234 - A, 234 - B AND 234 - C OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE DESERVES TO BE CANCELLED, AS THE ENTIRE RECEIPTS FROM BUSINESS ARE FROM CONTRACTS AND TDS IS MADE BY THE CONTRACTEE. 3 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) 8 . FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR T HE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNER IN THE FIRM, M/S. M.D. WADDAR & CO., WHICH WAS CARRYING ON BUSINES S OF PWD CONTRACTOR. APPELLANTS BROTHER, MANAPPA D. WADDAR WAS C AUGHT AT BANGALORE I NTERNATIONAL A IRPORT ON 12.1.2010 WHILE CARRYING CASH OF RS.21,30,000/ - . IN THE STATEMENT RECORDED, HE SUBMITTED THAT THE CASH BELONGED TO HIS BROTHER, NAGAPPA D. WADDAR. SEARCH IN THE CASE OF THE ASSESSEES BROTHER WAS CARRIED OUT AN D CASH OF RS. 20 LACS WAS SEIZED. THE ASSESSEE DERIVED INCOME FROM SHARE, INTEREST AND SALARY IN ADDITION TO INCOME FROM THE FIRM . ACTION U/S 153C WAS TAKEN IN THE CASE OF THE ASSESSEE. THE ASSESSEE FILED REGULAR RETURN FOR THE IMPUGNED ASSESSMENT YEAR AT AN INCOME OF RS.3,69,790/ - ON 31.12.2008 ACCOMPANYING WITH THE AUDIT REPORT DT. 29.9.2008. THE AO COMPLETED THE ASSESSMENT U/S 144 R.W.S 153C AFTER ISSUING NOTICE TO THE ASSESSEE U/S 153A R.W.S 153C A S THE ASSESSEE DID NOT FURNISH THE RETURN TILL 2.12. 2011 ON AN INCOME OF RS.4,38,758/ - MAKING ADDITION OF RS.78,968/ - IN THE INCOME OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO. 3. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. THEREFORE, THE SAME STANDS DISMISSED. 4. GROUND NOS. 2 & 3 RELATE TO THE VALIDITY OF THE SEARCH U/S 132(1). 4.1 THE LD. AR BEFORE US RELIED ON THE DECISION OF THE JURISDICTION HIGH COURT IN THE CASE OF C. RAMIAH REDDY VS. ACIT , 339 ITR 210 IN WHICH IT WAS HELD THAT THE TRIBUNAL CAN LOOK INTO THE VALIDITY OF THE SEARCH WHETHER THE LEGAL REQUIREMENT AS CONTEMPLATED U/S 132(1)(A), (B) AND ( E ) HAS BEEN COMPLIED WITH BY THE REVENUE BEFORE , AS THE ACTION OF THE AO IS INEXTRICABLY LIN KED WITH THE 4 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) INITIATION OF THE ASSESSMENT PROCEEDINGS. IF THE SEARCH IS NOT VALID, THE ENTIRE PROCEEDING BASED ON SUCH SEARCH HAS NO LEG TO STAND. OUR ATTENTION WAS DRAWN BY THE LD. A R TO PG. 253 OF THE SECOND PAPER BOOK AND IT WAS CONTENDED THAT STATEM ENT U/S 131(1)(A) WAS RECORDED OF ASSESSEES BROTHER, MANAPPA D. VAJJAL ON 12.1.2010 AT 11.15 P.M. AT C.R. BUILDING ANNEXE IN WHICH HE HAS STATED THAT HIS BROTHER, SHRI NAGAPPA D. WADDAR I.E. THE ASSESSEE IS A CLASS I CONTRACTOR. H IS BROTHER HA D AVAILED O F LOAN OF RS. 1 CRO RE WITH THE STATE BANK OF INDIA. H E WAS DOING CONTRACT WORK AT BHADRA MODERNIZATION HARIHAR BRANCH CANAL PACKAGE, 6B, HARIHAR AND THERE WAS SHORTAGE OF FUNDS FOR CARRYING ON BUSINESS OVER THERE. THEREFORE, ASSESSEE HAS WITHDRAWN SUM OF RS. 20 LACS FROM THE BANK AND GIVE THE SAID MONEY TO SHRI MANAPPA D. VAJJAL WHO WAS ALSO MLA FROM LINGUSUR CONSTITUENCY WITH THE DIRECTION TO HAND IT OVER FOR THE PURPOSE OF AFORESAID PROJECT AND HE WAS CARRYING THE MONEY FROM VAJJAL TO HYDERABAD AND FLEW BACK TO BANGALORE BY KINGFISHER FLIGHT AND ARRIVED AT 10.30 P.M. IN THE MEANTIME, AT THE AIRPORT THE MONEY WAS IMPOUNDED. AGAIN ON 13.1.2010 AT 1.30 A.M. THE ASSESSEES BROTHER STATED IN THE STATEMENT THAT HE WILL PRODUCE THE EVIDENCE FOR THE POSSESSION OF THE CASH IN HIS HAND IN A FEW DAYS. THE PANCHNAMA WAS DRAWN SHOWING THE CONCLUSION OF THE SEARCH ON 13.1.2010. NO JEWELLERY OR ANY OTHER ASSETS EXCEPT CASH WAS SEIZED. THE SEARCH COMMENCED ON 13.1.2010 AT 1.10 A.M. AND CONCLUDED ON THE SAME DA Y AT 3.15 A.M. FOR THIS, ATTENTION WAS DRAWN TOWARDS PG. 249 AND 250 OF THE PAPER BOOK WHICH CONTAINS COPY OF THE PANCHNAMA AS WELL AS PG. 251 WHICH CONTAINS DETAILS OF RS. 20 LACS WHICH WAS SEIZED FROM THE POSSESSION OF THE ASSESSEES BROTHER. IT WAS STA TED THAT THE SUM OF RS. 2 1,30,000/ - WAS FOUND WHILE THE ASSESSEES BROTHER WAS LANDING FROM HYDERABAD TO BANGALORE WHICH WAS SEIZED. IT WAS VEHEMENTLY CONTENDED THAT NONE OF THE CONDITIONS STIPULATED U/S 132(1)(A) TO (C) IS BEING COMPLIED WITH IN THE CASE OF THE ASSESSEES BROTHER. SINCE THE SEARCH WAS INVALID IN THE CASE OF THE ASSESSEES BROTHER, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO BE ASSESSED U/S 153C OF THE INCOME TAX ACT. THE CASH, WHATEVER WAS 5 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) SEIZED, WAS DEPOSITED IN THE PD ACCOUNT OF THE CIT . EXCEPT FOR CASH, NO OTHER DOCUMENTS WERE SEIZED OR FOUND BELONGING TO THE ASSESSEE. ATTENTION WAS DRAWN TOWARDS SEC. 153C WHICH REQUIRES THAT THE BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE AO HAVING JUR ISDICTION OVER SUCH OTHER PERSON. IT WAS CONTENDED THAT THE AO OF SHRI MANAPPA D. VAJJAL WAS BOUND TO HAND OVER THE CASH TO THE AO OF THE ASSESSEE. ON A QUERY FROM THE BENCH, THE LD. AR STATED THAT SAME CIT HAS THE JURISDICTION OVER THE ASSESSEE AS WELL AS THE BROTHER OF THE ASSESSEE. HE ALSO AGREED THAT AS PER THE PROCEDURE, THE AMOUNT SEIZED DURING THE COURSE OF THE SEARCH HAS TO BE DEPOSITED IN THE PD ACCOUNT OF THE CIT. HE CONTENDED THAT SINCE NO CASH WAS HANDED OVER TO THE AO WHO WAS HAVING JURISDI CTION OVER THE ASSESSEE, THEREFORE, THE ASSESSMENT FRAMED U/S 153C IS INVALID AND MUST BE QUASHED. 4.2 THE LD. DR, ON THE OTHER HAND, VEHEMENTLY CONTENDED THAT THERE HAD BEEN NO SEARCH IN THE CASE OF THE ASSESSEE. THE SEARCH HAS TAKEN PLACE IN THE CASE OF MANAPPA D. VAJJAL, THEREFORE, THE VALIDITY OF THE SEARCH CAN BE CHALLENGED ONLY BY MANAPPA D. VAJJAL. IT IS A FACT THAT THE CASH HAS BEEN SEIZED AND MANAPPA D. VAJJAL IN HIS STATEMENT STATED THAT THE CASH BELONGED TO THE ASSESSEE. THE CASH WAS DEPOSITED IN THE PD ACCOUNT. THE SAME CIT WAS HAVING JURISDICTION OVER BOTH THE ASSESSEE AS WELL AS ASSESSEES BROTHER. ASSESSEES BROTHER WAS NOT A REGULAR ASSESSEE NEITHER HAS HE SUBMITTED ANY RETURN. THE RETURN WAS FILED ONLY WHEN THE SEARCH HAD TAKEN PLACE. SINCE THERE HAD BEEN NO SEARCH IN THE CASE OF THE ASSESSEE, THE ASSESSEE CANNOT CHALLENGE THE VALIDITY OF THE SEARCH. THE CASH BELONGING TO THE ASSESSEE WAS FOUND AND SEIZED AND THEREFORE, PROVISION OF SEC. 153C WAS CLEARLY APPLICABLE IN THE CASE OF THE A SSESSEE. FOR THIS, OUR ATTENTION WAS DRAWN TOWARDS THE PROVISIONS OF SEC. 153C. 6 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THERE HAD BEEN NO SEARCH IN THE CASE OF THE ASSESSEE. THE SEARCH HAD BEEN IN THE CAS E OF THE ASSESSEES BROTHER. THE LD. AR DID NOT FURNISH ANY EVIDENCE THAT THE ASSESSEES BROTHER HAS CHALLENGED THE VALIDITY OF THE SEARCH OR SEARCH HAS BEEN HELD TO BE INVALID IN HIS CASE. SINCE THE SEARCH WAS NOT HELD TO BE INVALID IN THE CASE OF MANAP PA D. VAJJAL, WE, THEREFORE, CANNOT HOLD THAT THE PROCEEDINGS INITIATED IN THE CASE OF THE ASSESSEE U/S 153C ARE INVALID. SECTION 153C IS APPLICABLE ONLY IF THE AO IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONGED TO A PERSON OTHER THAN THE PERSON REFERRED TO U/S 153A. THIS SECTION NOWHERE REQUIRES CONDUCTING OF SEARCH IN THE CASE OF THE ASSESSEE. SINCE THERE WAS NO SEARCH IN THE CASE OF THE ASS ESSEE, THEREFORE, THE GROUND TAKEN BY THE ASSESSEE ABOUT THE VALIDITY OF THE SEARCH IN THE CASE OF MANAPPA D. VAJJAL WILL NOT ASSIST THE ASSESSEE. IN OUR OPINION, THE GROUND ABOUT THE VALIDITY OF THE SEARCH DOES NOT ARISE IN THE CASE OF THE ASSESSEE. FOR READY REFERENCE, PROVISIONS OF SEC. 153C ARE REPRODUCED AS UNDER : 153C. [(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 OTHER 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 SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A :] [ PROVIDED THAT IN C ASE 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 RECEIVIN G THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON :] [ PROVIDED FURTHER THAT THE CENTRAL GOVERNMENT MAY BY RULES MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE, SPECI FY THE CLASS OR CLASSES OF CASES IN RESPECT OF 7 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) SUCH OTHER PERSON, IN WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE EXCEPT IN CASES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED.] [(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 THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITI ON 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 SUB - SECTION (2) OF 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 REC EIVING 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 A SSESSMENT YEAR IN THE MANNER PROVIDED IN SECTION 153A.] 4.3.1 AS PER THE FINANCE ACT, 2003 NEW PROCEDURE FOR ASSESSMENT, RE - ASSESSMENT WAS INTRODUCED. THE SAID PROCEDURE FOR ASSESSMENT, RE - ASSESSMENT OF PRECEDING 6 YEARS OF THE YEAR OF SEARCH IN THE CAS E OF ANY OTHER PERSON WAS INTRODUCED BY INCORPORATING SEC. 153C. FOR THE APPLICABILITY OF THE PROVISIONS OF SEC. 153C THE FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFILLED : 1) THE AO HAS TO BE SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONGED TO A PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM THE SEARCH HAS BEEN INITIATED. 2) THE BOOKS OF ACCOUNTS, DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON. 8 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) 3) THAT THE AO SHALL PROCEED AGAINST EACH SUCH OTHER PERSON IN THE SAME MANNER AS THE PERSON SEARCHED TO MAKE ASSESSMENT OR RE - ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 153A. THI S IMPLIES THAT SUCH OTHER PERSON SHALL ALSO BE ASSESSED OR RE - ASSESSED FOR THE YEAR OF SEARCH AND FOR PRECEDING 6 YEARS. THE RATIONALE OF THIS PROVISION IS THAT THE UNDISCLOSED INCOME IS TO BE ASSESSED IN THE HANDS OF THE PERSON WHO IS THE ACTUAL OWNER OF THE ASSET OR WHO HAS EARNED THE UNDISCLOSED INCOME. THEREFORE, SEC. 153 C REQUIRES THAT IF ANY INCRIMINATING MATERIAL OR UNDISCLOSED ASSETS ARE SEIZED IN THE COURSE OF SEARCH BELONGING TO SOME OTHER PERSON, SAME SHALL BE HANDED OVER TO THE AO HAVING JURISD ICTION OVER THE OTHER PERSON FOR MAKING THE ASSESSMENT OF SUCH OTHER PERSON. WE NOTED THAT THE ASSESSMENT IN THE CASE OF MANAPPA D. VAJJAL AND THAT OF THE ASSESSEE HAS BEEN MADE BY THE JT. COMMISSIONER OF INCOME TAX (OSD), CENTRAL CIRCLE - 1, BELGAUM I.E. T HE SAME AO. IN THIS CASE, CASH OF RS.21,30,000/ - WAS FOUND FROM THE POSSESSION OF MANAPPA D. VAJJAL WHO STATED THAT THE AMOUNT BELONGED TO THE ASSESSEE WHO IS HIS BROTHER. THEREFORE, PROCEEDINGS WERE INITIATED U/S 153C IN THE CASE OF THE ASSESSEE. THE L D. AR DID NOT DENY THAT THE CASH BELONGED TO THE ASSESSEE. SINCE THE MONEY SEIZED BELONGED TO THE ASSESSEE I.E. THE OTHER PERSON WITH RESPECT TO WHOM THE SEARCH HAS BEEN INITIATED, THEREFORE, IN OUR OPINION, THIS SATISFIES THE CONDITION ABOUT THE SATISFAC TION OF THE AO. THE MAIN OBJECTION RAISED BY THE LD. AR IS THAT THE CASH HAS NOT BEEN HANDED OVER BY THE AO OF THE BROTHER OF THE ASSESSEE TO THE AO WHO HAS JURISDICTION OVER THE ASSESSEE. IN OUR OPINION, HANDING OVER IS A PHYSICAL ACT AND IT IMPLIES THA T THE SEIZED MATERIAL BELONGING TO THE OTHER PERSON SHOULD BE PHYSICALLY HANDED OVER TO THE AO OF SUCH OTHER PERSON. HANDING OVER CAN BE ACTUAL PHYSICAL HANDING OVER OR CONSTRUCTIVE HANDING OVER. WE NOTED THAT IN THIS CASE THE JURISDICTION OF BOTH THE AS SESSEE AS WELL AS ASSESSEES BROTHER IS TRANSFERRED TO THE SAME AO. THE ASSESSMENT ORDER IN BOTH THE CASES HAS BEEN PASSED BY THE JT. COMMISSIONER OF 9 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) INCOME TAX (OSD), CENTRAL CIRCLE - 1, BELGAUM. SINCE THE ASSESSMENT HAS BEEN TRANSFERRED TO THE SAME AO AN D THE SAME AO HAS MADE THE ASSESSMENT IN BOTH THE CASES I.E. IN THE CASE OF THE ASSESSEE AS WELL AS IN THE CASE OF ASSESSEES BROTHER, THEREFORE, IN OUR OPINION, NO PHYSICAL HANDING OVER IS REQUIRED. OTHERWISE ALSO, WE NOTED THAT WHENEVER CASH IS SEIZED, IT IS DEPOSITED IN PD ACCOUNT OF THE COMMISSIONER OF INCOME TAX. THE LD. AR WAS FAIR ENOUGH TO CONCEDE THAT THE SAME CIT WAS HAVING JURISDICTION ON BOTH THE ASSESSEES. T HE CASH SEIZED SINCE HAS REMAINED WITH THE CIT UNDER THE PD ACCOUNT ONLY, IT CANNOT R EMAIN WITH THE AO. THEREFORE, EVEN IF THE AOS ARE DIFFERENT AND THEY ARE UNDER THE JURISDICTION OF THE SAME CIT, IN OUR OPINION, IT WILL NOT REQUIRE ANY PHYSICAL HANDING OVER OF THE CASH. ON THIS BASIS WE DISMISS THE PLEA OF THE LD. AR. 4.3.2 WE HAVE GO NE THROUGH THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF C. RAMIAH REDDY VS. ACIT, 339 ITR 210 ( SUPRA ) ON WHICH THE LD. AR HAS RELIED, A COPY OF WHICH WAS FILED BEFORE US. IN THIS CASE, WE NOTED THAT THE ISSUE RELATES TO WHETHER THE VALIDITY OF THE SEARCH CAN BE CHALLENGED IN APPEAL. WHILE DEALING WITH THIS ISSUE, THE HON'BLE KARNATAKA HIGH COURT HAS HE LD THAT THE TRIBUNAL HAS THE POWER TO LOOK INTO ALL THE ASPECTS OF THE SEARCH AND A VALID SEARCH IS SINE QUA NON FOR INITIATING BLOCK ASSESSMENT. IN THE CASE OF THE ASSESSEE, AS WE HAVE OBSERVED EARLIER, THERE HAD BEEN NO SEARCH. THE SEARCH HAS TAKEN PLA CE IN THE PLACE OF THE ASSESSEES BROTHER. THE LEGAL REQUIREMENT CONTEMPLATED U/S 132(1)(A) TO 132(1)(C) HAS TO BE COMPLIED WITH IN THE CASE OF THE ASSESSEES BROTHER AND THOSE CONDITIONS HAVE TO BE LOOKED INTO IN HIS CASE. THE LD. AR BEFORE US CONFESSED THAT THE SEARCH WAS NOT HELD INVALID IN THE CASE OF THE ASSESSEES BROTHER. WE, THEREFORE, ARE OF THE VIEW THAT GROUND NOS. 2 & 3 TAKEN BY THE ASSESSEE DOES NOT HAVE ANY LEG TO STAND. ACCORDINGLY, WE DISMISS THE SAME. 10 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) 5. GROUND NO. 4 RELATES TO THE VA LIDITY OF THE TRANSFER OF THE JURISDICTION U/S 127 OF THE INCOME TAX ACT. 5.1 THE LD. AR BEFORE US STATED THAT BEFORE THE TRANSFER, THE COMMISSIONER HAS GIVEN OPPORTUNITY TO THE ASSESSEE, BUT THE ASSESSEE COULD NOT FILE ANY OBJECTION CHALLENGING THE TRA NSFER. HE CONTENDED THAT THE CIT WAS BOUND TO RECORD THE REASONS AND STILL GIVE OPPORTUNITY TO THE ASSESSEE. TRANSFERRING THE JURISDICTION FOR CO - ORDINATING INVESTIGATION CANNOT BE A VALID GROUND FOR TRANSFERRING JURISDICTION. NO DOCUMENT FOR THE IMPUGN ED ASSESSMENT WAS FOUND DURING THE COURSE OF THE SEARCH. THEREFORE, THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR SHOULD HAVE NOT BEEN TRANSFERRED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : I) AJANTHA INDUSTRIES. V. CENTRAL BOARD OF DIRECT TAXE S, 102 ITR 281 (SC) II) GLOBAL ENERGY PVT. LTD. VS. CIT, 89 DTR 194 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT U/S 127 OF THE INCOME TAX ACT, THE COMMISSIONER OF INCOME TAX HAS TO GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE TRANSFERRING THE CASE AND HAS ALSO TO RECORD THE REASONS FOR TRANSFERRING THE CASE. IN THIS CASE, WE NOTED, AND AS CONFESSED BY THE LD. AR, THAT THE LETTER WAS ISSUED TO THE ASSESSEE FOR INVITING OBJECTION FOR THE TRANSFER OF THE JURISDICT ION BUT THE ASSESSEE DID NOT FILE ANY REPLY. EVEN THE COPY OF ANY REPLY IS NOT AVAILABLE ON RECORD. THEREFORE, IT IS NOT A CASE WHERE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE. THE CIT ALSO NOTED THE REASONS THAT THE TRANSFER OF THE JURISDICTION HAS BEE N DONE FOR CO - ORDINATING INVESTIGATION. WE HAVE GONE THROUGH THE DECISIONS AS CITED BY THE LD. AR. WE NOTED THAT IN THE CASE OF AJANTHA INDUSTRIES. V. CENTRAL BOARD OF DIRECT TAXES, 102 ITR 281 (SC) ( SUPRA ) JURISDICTION HAS BEEN CHALLENGED BY WAY OF A WRIT AND THE ORDER WAS HELD TO BE INVALID AS THE CIT HAD NOT COMMUNICATED THE REASONS IN THE ORDER PASSED U/S 127(1) OF THE INCOME TAX ACT. SIMILARLY, WE 11 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) NOTED THAT IN THE CASE OF GLOBAL ENERGY PVT. LTD. VS. CIT, 89 DTR 19 4 ( SUPRA ) THE TRANSFER OF THE JURISDICTION WAS CHALLENGED BY WAY OF A WRIT AND IN THAT CASE THE HON'BLE HIGH COURT HAS HELD THAT THE CIT OUGHT TO HAVE GIVEN REASONS WHY CO - ORDINATION INVESTIGATION IS NECESSARY AND IN THE ABSENCE OF THIS REASON, THE MATTER WAS REMANDED BACK TO THE CIT WHO SHALL PASS FRESH ORDER AFTER GIVING OPPORTUNITY TO THE ASSESSEE. WE NOTED THAT NO APPEAL HAS BEEN PRESCRIBED AGAINST THE ORDER OF CIT PASSED U/S 127(1) BEFORE THE TRIBUNAL. THE ORDER PASSED U/S 127(1) COULD HAVE BEEN CHAL LENGED BY THE ASSESSEE ONLY BY WAY OF A WRIT BEFORE THE HON'BLE HIGH COURT/SUPREME COURT OF COMPETENT JURISDICTION. THE ASSESSEE HAS NOT CHALLENGED THE ORDER PASSED BY THE CIT U/S 127(1). THIS TRIBUNAL HAS LIMITED JURISDICTION ONLY IN RESPECT OF THE ORDE RS WHICH ARE APPEALABLE BEFORE THIS TRIBUNAL. SINCE THE ORDER PASSED U/S 127(1) IS NOT APPEALABLE, THEREFORE, THIS TRIBUNAL CANNOT LOOK INTO THE VALIDITY OF THE ORDER PASSED U/S 127(1). THUS, GROUND NO. 4 TAKEN BY THE ASSESSEE STANDS DISMISSED. 6. GROUN D NO. 5 RELATES TO THE COMPLETION OF THE ASSESSMENT U/S 144. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. IT IS NOT DENIED BY THE LD. AR THAT IN THIS CASE THE AO HAS ISSUED NOTICE TO THE ASSESSEE U/S 142(1) WHICH HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE. SINCE THE NOTICE U/S 142(1) ASKING THE ASSESSEE TO SUBMIT THE DETAILS OF THE ASSETS AND LIABILITIES WAS NOT COMPLIED WITH, THEREFORE, IN OUR OPINION, THERE IS NO ILLEGALITY IN P ASSING THE ORDER U/S 144 BY THE AO. SECTION 144(1) EMPOWERS THE AO IN CASE THE ASSESSEE FAILS TO COMPLY WITH THE NOTICE ISSUED U/S 142(1) TO PASS AN ORDER U/S 144. AS PER THE SECOND PROVISO OF SEC. 144 IT IS ALSO NOT NECESSARY FOR THE AO TO GIVE OPPORTUN ITY TO THE ASSESSEE IN THIS REGARD BEFORE APPLYING THE PROVISIONS OF SEC. 144. WE, THEREFORE, DISMISS THIS GROUND. 7. GROUND NO. 6 RELATES TO THE ADDITION MADE IN RESPECT OF INTEREST ACCRUED ON THE FIXED DEPOSIT. 12 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) 7.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS RETURNED THE INTEREST INCOME ON RECEIPT BASIS. THE INTEREST HAS BEEN RECEIVED IN THE NEXT YEAR , T HEREFORE, THE SAME HAS BEEN RETURNED IN THE NEXT YEAR. 7.2 THE LD. DR, ON THE OTHER HAND, R ELIED ON THE ORDER OF THE AUTHORITIES BELOW. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE AO VIDE NOTICE DT. 22.11.2011 ISSUED U/S 142(1) ASKED THE ASSESSEE TO FILE THE EXTRACTS OF THE BANK ACCOUNT AND DETA ILS OF FIXED DEPOSIT MADE AND THE INTEREST ACCRUED THEREON. THE AO COMPUTED THE INTEREST ON THE MATURITY OF FIXED DEPOSITS AS PER THE RECORD OF KARNATAKA BANK, HUNSA GI. ACCORDING TO THE AO, 3 FIXED DEPOSIT RECEIPTS DT. 25.4.2006, 25.7.2006 AND 27.5.2006 OF RS. 73,000/ - , RS. 5,33,734/ - AND RS. 4,26,987/ - RESPECTIVELY HAVE BEEN WITHDRAWN BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR I.E. ON 25.4.2007, 27.5.2007 AND 27.5.2007. THEREFORE, THE INTEREST ON THESE FIXED DEPOSITS TO THE EXTENT OF RS.78,968/ - HAS BEEN RECEIVED BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR. IT IS NOT A CASE WHERE THE AO HAS ASSESSED THE INCOME ON FIXED DEPOSITS ON ACCRUAL BASIS. THE LD. AR EVEN THOUGH VEHEMENTLY CONTENDED BUT HAS NOT PRODUCED ANY EVIDENCE REGARD ING HOW THE INTEREST ON THESE FIXED DEPOSITS WAS RECEIVED BY THE ASSESSEE IN THE SUBSEQUENT YEAR WHEN THE FIXED DEPOSITS HAVE MATURED DURING THE YEAR. FROM THE ASSESSMENT ORDER IT IS APPARENT THAT THE INTEREST HAS NOT BEEN ASSESSED BY THE AO ON ACCRUED BASIS. W E DO AGREE THAT U/S 145 OF THE INCOME TAX ACT, THE ASSESSEE HAS AN OPTION TO CHOOSE EITHER THE CASH SYSTEM OF ACCOUNTING OR MERCANTILE SYSTEM OF ACCOUNTING FOR COMPUTING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES BUT WHATEVER METHOD IS ADOPTED BY TH E ASSESSEE, SAME METHOD HAS TO BE REGULARLY AND CONSISTENTLY ADOPTED. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE SUBMISSION MADE BY THE LD. AR BUT IN THE INTEREST OF JUSTICE AND FAIR PLAY TO 13 ITA NO. 202/BANG/2013 (ASST. YEAR : 2008 - 09) BOTH THE PARTIES, WE DIRECT THE AO THAT HE SHOULD LOOK INTO THE ISSUE WHETHER INTEREST HAS BEEN ASSESSED ON THE BASIS OF THE FIXED DEPOSITS BEING MATURED DURING THE YEAR AND THIS INTEREST HAS NOT BEEN AGAIN ASSESSED IN THE SUBSEQUENT YEAR. IF THE INTEREST HAS BEEN ASSESSED IN THE SUBSEQUENT YEAR, THE AO SHOULD REDUCE THE SUM FROM THE INCOME OF THE SUBSEQUENT YEAR. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO. 7 RELATES TO THE CHARGING OF INTEREST U/S 234 - A, 234 - B AND 234 - C WHICH IS CONSEQUENTIAL IN NATURE. WE, THEREFORE, DI RECT THE AO RE - COMPUTE THE INTEREST AFTER GIVING EFFECT TO OUR ORDER. 9. GROUND NO. 8 RELATES TO ALLOWING OF COSTS TO THE ASSESSEE. THE LD. AR SINCE DID NOT ADVANCE ANY ARGUMENT TO JUSTIFY WHY THE COSTS SHOULD BE IMPOSED ON THE REVENUE, WE, THEREFORE, DISMISS THIS GROUND. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 1 1 . ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 .02.2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 2 8 .02. 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. PRIVATE SECRETARY ITAT, PANAJI, GOA