Shri. Maniklal B. Bhandari, Pune V. Assistant Commissioner of Income-Tax, Circle -3, Pune

ITSSA 18/PUN/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2645 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 07-09-2022
• Assessment Year: 2002-2003
• Appeal Filed On: 24-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; CHAPTER XIVB
• Section: 132; 69C; 139; 142(1); 153A; 292BB; 143(2); 158BC; 153C

Judgement Text

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI G.D. PADMAHSHALI, ACCOUNTANT MEMBER IT(SS)A Nos.17, 18 & 19/PUN/2020 Assessment Years : 2001-02, 2002-03 & 2003-04 Rajnish Bhandari, L/H of Late Shri Maneklal B. Bhandari, 1183, 1/3, 1 st Floor, F.C. Road, Shivajinagar, Pune – 411005 PAN : AARPB9091K .......अपीलार्थी / Appellant बनाम / V/s. The Asstt. Commissioner of Income Tax, Circle – 3, Pune ......प्रत्यर्थी / Respondent Assessee by : Shri Vardhaman Jain Revenue by : Shri Sardar Singh Meena सुनवाई की तारीख / Date of Hearing : 08-09-2022 घोषणा की तारीख / Date of Pronouncement : 28-09-2022 आदेश / ORDER PER S.S. VISWANETHRA RAVI, JM : These three appeals filed by the assessee against the common order dated 04-02-2020 passed by the Commissioner of Income Tax (Appeals)-1, Pune [‘CIT(A)’] for assessment years 2001-02, 2002-03 and 2003-04, respectively. 2 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 2. We find that all these appeals were filed with a delay of 82 days. Upon hearing both the parties, we find that the delay of 82 days is saved by the decision of Hon’ble Supreme Court passed during National Lockdown imposed on account of pandemic Covid-19. Therefore, the delay of 82 days is condoned in all the appeals. 3. Since, the issues raised in all the appeals are similar basing on the same identical facts and upon hearing and with the consent of both the parties, we proceed to hear all the appeals together and to pass a consolidated order for the sake of convenience. 4. First, we shall take up appeal in IT(SS)A No. 17/PUN/2020 for A.Y. 2001-02. 5. Brief facts relating to the case are that the assessee is an individual. A search and seizure action was conducted in the case of Shri Shriram H. Soni on 29-07-2003 and documents relating to the money lending transactions were seized. As per the information from Addl. CIT in accordance with the seized documents the assessee borrowed cash loan from S.H. Soni, interest and brokerage was paid by the assessee on the said loans. On receipt of the said information the AO issued notice u/s. 153C of the Act to the assessee. The assessee, in response to the said notice filed return of income declaring loss at Rs.4,30,47,153/- on 13-04- 2007. The AO asked the assessee to show cause why additions u/s. 69C and 69D should not be made on account of unexplained expenditure and availing cash loans, respectively. The assessee submitted its written explanation dated 06-12-2007 and 25-03-2008 which are reproduced by 3 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 the AO at pages 2 and 3 of the assessment order. The AO did not found the explanation of the assessee as acceptable and made additions for Rs.6,31,750/- u/s. 69C and Rs.1,39,00,000/- nu/s. 69D of the Act and determined loss at Rs.2,85,15,403/- vide its order dated 31-03-2008 u/s. 153C r.w.s. 153A of the Act. Having not satisfied with the order of AO, the assessee preferred an appeal before the CIT(A). The assessee raised as many as 10 grounds before the CIT(A) amongst which, legal issues that the assessment completed u/s. 153C r.w.s. 153A of the Act is bad since notice u/s. 153C is time barred and for non-issuance of notice u/s. 143(2) of the Act. The CIT(A) dismissed the ground Nos. 1 and 2 for not giving any submission in support of the contention of that assessment completed u/s. 153C r.w.s. 153A of the Act is bad since the notice u/s. 153C of the Act was time barred. As far as other legal ground is concerned, the CIT(A) sought remand report from the AO regarding the non-issuance of notice u/s. 143(2) of the Act. The AO submitted a report which is reproduced by the CIT(A) at pages 6 to 9 of the impugned order. The CIT(A) considering the remand report as well as the submissions of assessee held as the assessments u/s. 153C and 153A of the Act are on same footing by placing reliance on the decision of Hon’ble High Court of Delhi in the case of Ashok Chaddha Vs. ITO reported in 337 ITR 399 (Delhi), which, held that no further notice u/s. 143(2) of the Act could be contemplated for assessment u/s. 153C of the Act. Aggrieved by the order of CIT(A), now, the assessee is before us. 6. The ld. AR, Shri Vardhaman Jain drew our attention to grounds of appeal and urged to take up ground No. 3 as a preliminary issue as it goes 4 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 to the root of the case. Upon hearing both the parties and with the consent of ld. DR, we proceed to hear ground No. 3 as a preliminary issue. 7. The ld. AR submits that the AO did not issue notice u/s. 143(2) of the Act as required under law and the assessment made thereon in the absence of issuance of notice u/s. 143(2) of the Act is bad under law. He submits that the said issue was raised before the CIT(A) and without considering the remand report of AO the CIT(A) dismissed the said ground. The ld. AR argued that nowhere in the remand report the AO stated that notice u/s. 143(2) of the Act was issued, when there is no notice issued which is mandatory under law the assessment made by the AO u/s. 153C of the Act is liable to be quashed. The ld. AR drew our attention to the decision of Hon’ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal in Civil Appeal Nos. 6261-6262 of 2019 and submits that the Hon’ble Supreme Court confirmed the order of High Court in holding service of notice on the assessee u/s. 143(2) of the Act within the prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIV-B of the Act. 8. The ld. DR, Shri Sardar Singh Meena submits that no notice is required u/s. 143(2) of the Act under law in the assessment u/s. 153A and 153C of the Act. The provisions u/s. 153A provides no issuance of notice u/s. 143(2) of the Act. It is clear from Clause a of sub-section (1) of section 153A that the AO is required to issue notice to such person to furnish return of income in respect of each assessment year following within six assessment years. He argued vehemently that the contention of ld. AR that the assessment is bad under law for non-issuance of notice u/s. 5 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 143(2) of the Act is misconceived and the CIT(A) rightly confirmed the order of AO. Further, he submits that the AO did not deny that the notice u/s. 143(2) of the Act was not issued to the assessee in the remand report. He drew our attention to para 5 of the remand report and argued that the AO observed that the contention of no notice was issued u/s. 143(2) is incorrect. He drew our attention to the decision of Hon’ble High Court of Madras in the case of B. Kubendran Vs. DCIT reported in 434 ITR 161 (Madras) and argued that the High Court answered the legal issue in favour of the Revenue by holding that it would suffice that in framing assessment u/s. 153C of the Act due regard must be given to principles of natural justice, which requirement will stand satisfied either by issuance of notice u/s. 143(2) or a questionnaire u/s. 142(1) of the Act. He submits that the decision of Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) as relied on by the ld. AR is not at all applicable to the facts on hand and the same was considered by the CIT(A) who held that the decision of Hon’ble Supreme Court is with regard to assessment u/s. 158BC of the Act where it held that issuance of notice u/s. 143(2) of the Act is mandatory under Chapter XIV-B of the Act. He argued that the CIT(A) correctly held the decision of Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) is not applicable to the assessment completed u/s. 153C of the Act and drew our attention to para 7.5 at page 9 of the impugned order and prayed to dismiss the ground No. 3 raised by the assessee. 9. Heard both the parties and perused the material available on record. The main contention of ld. AR is that no notice was issued u/s. 143(2) of the Act and therefore assessment completed u/s. 153C in the hands of the 6 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 assessee is bad under law. We note that the said issue raised before the CIT(A) for the first time and in response to which the CIT(A) sought remand report from the AO to find out whether the notice was issued or not. The said remand report is reproduced by the CIT(A) in the impugned order. On perusal of the same, we note that the AO did not deny non-issuance of notice u/s. 143(2) of the Act and clearly stated that the contention of the assessee that notice u/s. 143(2) was not issued is incorrect which is evident from para 5 of the remand report dated 19-07-2019 which is placed on record by the ld. DR from pages 40 to 42 of the Revenue’s paper book which are as under : “4. EXAMINATION AND VERIFICATION OF ASSESSEE'S SUBMISSION 4.1 Vide submission dated 27/06/2011, the assessee has stated that notice u/s. 143(2) of the Act was not issued before completion of the assessment proceedings. In the case of the assessee, notice under section 153C of the Act was issued, in response to which the assessee had filed a return of income. Thereafter, notice u/s 142(1) of the Act dated 26/11/2007 was issued to the assessee along with detailed questionnaire before 'the completion of assessment u/s 153C r.w.s. 153A of the Act. The provisions of section 153C of the Act provides that the "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 section153A.” Further, section 153A of the Act provides procedure for assessment in case where a search is initiated or documents are requisitioned. Sub section (1) starts with non-obstante clause stating that it was "notwithstanding'' anything contained in sections 147, 148 and 149, etc. clause(a) thereof provides for issuance of notice to the person searched under Section 132 or where documents etc are requisitioned under Section 132(A), to furnish a return of income. It is to be mentioned here that there is no specific provision in the Act requiring the assessment made under section 153A/153C to be after issue of notice u/s 143(2) of the Act. 4.2 Similar view has been taken by the Hon'ble Delhi High Court in the case of Ashok Chaddha vs Income Tax Officer [2012] 337 ITR 399 (Delhi) on 27/07/2011 wherein the Hon'ble High Court held that: “13. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section I43(2) was mandatory in case of assessment under Section I53A. The use of the words, "so far as may be" cannot be stretched to 7 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A." 4.3 In the present case of the assessee for A Y 2001-02, notice u/s 153C of the Act dated 26/03/2007 was issued and duly served upon the assessee. In response, the assessee has duly filed his return of income u/s 153C on 13/0412007. Thereafter, notice u/s 142(1) of the Act dated 26/1112007 was issued and duly served upon the assessee to which the assessee made submission dated 06112/2007. Further, in the present case, provisions of section 292BB of the Act are also applicable. Relevant provisions are reproduced below for ready reference: "292BB. Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner:” 05. Therefore, considering the relevant provisions of the Income Tax Act, 1961 as discussed above and the Hon'ble Delhi High Court's decision in the case of Ashok Chaddha vs Income Tax Officer [2012] 337 ITR 399 (Delhi), the contention of the assessee that notice u/s 143(2) of the Act was not issued before completion of the assessment proceedings is not correct.” 10. In the light of the above and our discussion made here-in-above, the contentions of the ld. AR that no notice u/s. 143(2) of the Act issued are misconceived and are rejected. 11. Further, coming to the decision of Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) we note that a question raised before the Hon’ble Supreme Court by the Revenue stating whether the 8 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 service of notice on the assessee u/s. 143(2) of the Act within prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIVB of the Act. The Hon’ble Supreme Court was pleased to hold that nothing on record to show that the notice u/s. 143(2) of the Act issued by the department and confirmed findings rendered by the High Court and Tribunal in concluding that the service of notice on the assessee u/s. 143(2) is a prerequisite for framing the block assessment under Chapter XIV-B of the Act. On perusal of the impugned order the said case law was considered by the CIT(A) and we note that the Hon’ble Supreme Court was pleased to uphold the order of Hon’ble High Court regarding the block assessment under Chapter XIV-B of the Act, whereas under Chapter XIV-B a special procedure for assessment of search cases are provided from section 158B to 158BI. We note that the present assessment u/s. 153C fall under Chapter XIV of the Act where it is applicable in the case of search or requisition conducted after 31 st day of May, 2003 but on or before 31 st day of March, 2021. We note that a procedure is contemplated under Clause a of sub-section (1) of section 153A is that the AO shall issue notice to such person requiring to furnish within such period, return of income to be furnished u/s. 139 of the Act. In the case of any other person than a searched person the assessment requires to be made u/s. 153C of the Act, wherein under sub-section (2) of section 153C under Clause (c) statute mandated the AO 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 of the Act. Therefore, it is clear from clause (a) of sub-section (1) of section 153A that the AO shall issue notice, a return required to be furnished u/s. 139 of the Act. Therefore, it is not mandatory on the AO to issue notice u/s. 143(2) of the Act, but a, mere 9 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 issuance of notice requiring such person to file return of income is sufficient to complete the assessment. Admittedly, in the present case notice u/s. 142(1) of the Act was issued on 26-11-2007 and the assessee submitted reply dated 06-12-2007 in response to said notice u/s. 142(1) of the Act which is evident from paras 4 and 5 of the assessment order, so, therefore, the assessee was in the knowledge of what the AO asked u/s. 142(1) of the Act and explained the same in reply. 12. Coming to the decision of Hon’ble High Court of Madras in the case of B. Kubendran (supra) as relied on by the ld. DR. On careful reading of the same at para 22, the Hon’ble High Court pleased to observe that the difference in the language of section 158 BC and section 153A must be attributed sufficient weightage and held that there is specific reference to the provisions of section 143(2) in section 158BC, such reference is conspicuous by its absence in section 153A of the Act. Further, it held vide para 23 it is suffice that in framing an assessment u/s. 153A, due regard must be given to the principles of natural justice, which requirement will stand satisfied either by issuance of notice u/s. 143(2) or a questionnaire u/s. 142(1) of the Act. Therefore, the decision of Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) as relied on by the ld. AR is not applicable to the facts of the present case for the reason, that section 158BC under Chapter XIV-B provides issuance of notice u/s. 143(2) of the Act, whereas section 153A proceedings r.w.s. 153C under Chapter XIV of the Act where no reference to issuance of notice u/s. 143(2) of the Act. Therefore, the decision of Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) as relied on by the ld. AR is not applicable to the facts on hand. Therefore, we do not find any 10 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 infirmity in the order of CIT(A) and it is justified. Thus, ground No. 3 raised by the assessee fails and is dismissed. 13. Ground No. 2 raised by the assessee challenging the action of CIT(A) in holding as notice u/s. 153C of the Act was not barred by time. 14. On perusal of page 4 of the impugned order, the CIT(A) held that no submissions filed by the assessee in support of its contention that notice issued u/s. 153C was time barred. We note that admittedly there was no contention made before the AO challenging that notice u/s. 153C was barred by time and it was raised for the first time before the CIT(A). During the course of arguments before us the ld. AR drew our attention to the order of this Tribunal in the case of Kewal Kumar Jain Vs. ACIT in ITA Nos. 1384 & 1385/PUN/2016 and submitted that this Tribunal held the handing over of seized documents by AO of searched person to the jurisdictional AO of assessee is belated and is beyond the period prescribed in section 153C of the Act for initiation of proceedings u/s. 153C of the Act. We note that admittedly the assessee except, relying on the decision of this Tribunal in the said case, no evidences placed on record to show that the facts and circumstances in the said case i.e. Kewal Kumar Jain (supra) is identical to the facts of the present case on hand. Further, on a careful examination of the provisions of section 153C we note that no specific period prescribed for issuance of notice for initiation of proceedings u/s. 153C of the Act. Therefore, we find no infirmity in the order of CIT(A) in holding that the notice u/s. 153C is time barred. Thus, ground No. 2 raised by the assessee fails and it is dismissed. 11 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 15. Coming to ground Nos. 1 and 4 raised by the assessee are with regard to non-granting of opportunity and challenging the action of CIT(A) in confirming the addition of Rs.1,39,00,000/- u/s. 69D and Rs.6,31,750/- u/s. 69C of the Act. 16. We note that admittedly, there was no evidence before the CIT(A) in support of claim of assessee challenging the action of AO in making addition u/s. 69D and 69C of the Act which is evident from para 7.6 of the impugned order. Since, the ld. AR claimed that no opportunity was given by the CIT(A) in respect of issues on merits and pleaded to remand the issue to the file of CIT(A). Taking into consideration the facts and circumstances of the case, submissions of ld. AR and ld. DR and in the interest of justice, we deem it proper to remand the issues to the file of CIT(A) for its fresh consideration. The assessee is liberty to file evidences, if any, in support of its claim. Thus, ground Nos. 1 and 4 raised by the assessee are allowed for statistical purposes. 17. In the result, the appeal of assessee in IT(SS)A No. 17/PUN/2020 is partly allowed for statistical purpose. IT(SS)A Nos. 18 & 19/PUN/2020 (A.YS. 2002-03 & 2003-04) 18. We find that the issues raised in the appeals and the facts in IT(SS)A Nos. 18 & 19 /PUN/2020 are identical to IT(SS)A No. 17/PUN/2020 except the variance in amount. Since, the facts in IT(SS)A Nos. 18 & 19 /PUN/2020 are similar to IT(SS)A No. 17/PUN/2020, the findings given by us while deciding the grounds of appeal of assessee in IT(SS)A No. 12 IT(SS)A Nos. 17 to 19/PUN/2020, A.Ys. 2001-02 to 2003-04 17/PUN/2020 would mutatis mutandis apply to IT(SS)A Nos. 18 & 19 /PUN/2020, as well. Both the appeals of assessee are partly allowed for statistical purposes, accordingly. 19. In the result, all the appeals of assessee are partly allowed for statistical purposes. Order pronounced in the open court on 28 th September, 2022. Sd/- Sd/- (G.D. Padmahshali) (S.S. Viswanethra Ravi) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ददनाांक / Dated : 28 th September, 2022. रवि आदेश की प्रतततलतप अग्रेतषत / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-1, Pune 4. The Pr. CIT-2, Pune 5. तवभागीय प्रतततनति, आयकर अपीलीय अतिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ड फ़ाइल / Guard File. //सत्यातपत प्रतत// True Copy// आदेशानुसार / BY ORDER, िररष्ठ विजी सविि / Sr. Private Secretary आयकर अपीलीय अविकरण ,पुणे / ITAT, Pune