DCIT/ACIT, Ranchi V. M/s Gaurang Allowys & Iron Ltd., Kolkata

ITSSA 29/RAN/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2442 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 22-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK RAUSHAN SR
• Assessee Lawyers: S JHAJHARIA
• Keywords: Search and seizure; Document seized; Retrospective amendment; Documents seized
• Section: 153A; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER IT (SS) A NO. 28 - 32 / RAN / 2015 ASSESSMENT YEARS :2004-05 TO 2008-09 DY/ASSTT.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, RANCHI-834 001 V/S . M/S GAURANG ALLOWYS & IRON LTD., ROOM NO. 143, MARSHAL HOUSE, 33/1 N.S.ROAD, KOLKATA [ PAN NO.AACCG 1485 A ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DEEPAK RAUSHAN, SR. STANDING COUNSEL /BY RESPONDENT SHRI S. JHAJHARIA, CA /DATE OF HEARING 14-09-016 /DATE OF PRONOUNCEMENT 16-09-2016 / O R D E R PER BENCH:- THESE ARE APPEALS BY THE REVENUE AGAINST A COMMON ORDER DATED 25.05.2015 OF THE COMMISSIONER OF INCOME TAX (APPEA LS)-I, PATNA, HEREINAFTER REFERRED TO AS CIT(A), RELATING TO AS SESSMENT YEARS (AY) 2004-05 TO 2008-09. 2. THE ASSESSEE IS A COMPANY. DURING THE PREVIOUS YEARS RELEVANT TO AY 2002-03 TO 2008-09, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE AND TRADING IN ALLOY STEELS/FERRO ALLOYS AND PIG IRON. IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 2 3. THERE WAS A SEARCH AND SEIZURE OPERATION CARRIED OUT ON 11.4.2007 AND SUBSEQUENT DATES BY THE REVENUE U/S.132 OF THE INCO ME TAX ACT, 1961 (ACT) IN THE BUSINESS AND RESIDENTIAL PREMISES OF ONE SRI GAJANAND AGRAWALLA GROUP OF CHIRKUNDA, DHANBAD. SRI GAJANAND AGRAWALLA, WHO WAS KEY PERSON AMONGST THE ASSESSEES BELONG TO THE GROUP. 4. THE AO ISSUED NOTICE ON 22.7.2009 TO THE ASSESSE E U/S.153C OF THE ACT, CALLING UPON THE ASSESSEE TO FILE A RETURN OF INCOME FOR AY 02-03 TO 2008- 09. 5. THE PROVISIONS OF SECTION 153A TO SEC.153C OF TH E ACT WERE INTRODUCED BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1-6-2003. IN RESPECT OF SEARCHES CARRIED OUT UNDER SECTION 132 OF THE ACT OR REQUISI TION OF BOOKS AND OTHER DOCUMENTS MADE UNDER SECTION 132A OF THE ACT AFTER 31-5-2003 THE ASSESSING OFFICER SHALL ISSUE A NOTICE CALLING UPON ASSESSEE TO FURNISH RETURN OF INCOME IN RESPECT OF SIX ASSESSMENT YEARS IMMEDIATELY PREC EDING ASSESSMENT YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE. THE ASSESSING OFFICER IS EMPOWERED TO RE-ASSE SS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITH SUCH S IX ASSESSMENT YEARS UNDER THE SECOND PROVISO TO SECTION 153A OF THE ACT. IF I N RESPECT OF ANY ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT YEARS REFERR ED TO EARLIER, ANY ASSESSMENT OR RE-ASSESSMENT IS PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OF THE ACT OR MAKING OF REQUISITI ON UNDER SECTION 132A, THE SAME SHALL ABATE. IN TERMS OF SEC.153-C OF THE ACT , IF IN THE COURSE OF SEARCH OF A PERSON U/S.132 OF THE ACT, ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS S EIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON WHO IS SEARCHED U/S.132 OF THE ACT, THEN THE AO OF THE PERSON IN WHOSE CASE SEARCH U/S.132 OF THE ACT HAS BEEN CARRIED OUT HAS TO ARRIVE AT A SATISFACTIO N THAT MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED BELONG TO SOME OTHER PERSON. ON ARRIVING AT SUCH SATISFACTION, HE HAS IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 3 TO HAND OVER THE DOCUMENTS OR ASSETS SEIZED OR REQU ISITIONED TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND IS SUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A THE ACT. 6. THE AO PROCEEDED TO FRAME ASSESSMENT FOR AY 2004 -05 TO 2008-09. IT IS NOT IN DISPUTE BEFORE US THAT THE ASSESSMENTS SO FRAMED AND ADDITIONS MADE FOR EACH OF THE AYS WERE NOT BASED ON ANY INCR IMINATING MATERIAL FOUND IN THE COURSE OF SEARCH BUT ON THE BASIS OF SOME DO CUMENTS ON THE BASIS OF WHICH THE AO DREW ADVERSE INFERENCE. 7. IN THE APPEAL FILED AGAINST THE ORDER OF ASSESSM ENT, THE ASSESSEE AMONGST OTHER GROUNDS CHALLENGED THE VALIDITY OF AS SUMPTION OF JURISDICTION U/S.153C OF THE ACT WITHOUT THERE BEING ANY INCRIMI NATING MATERIAL BELONGING TO THE ASSESSEE FOUND IN THE COURSE OF SEARCH OF SOME OTHER PERSON. THE ASSESSEE RELIED ON THE DECISION OF THE SPECIAL BENC H OF THE ITAT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. 137 ITD 287 (MUM )(SB) WHEREIN THE SPECIAL BENCH HAD TO DEAL WITH THE FOLLOWING QUESTION: 1. WHETHER, ON THE FACTS AND IN LAW, THE SCOPE OF ASSESSMENT U/S 153A ENCOMPASSES ADDITIONS, NOT BASED ON ANY INCRIMINATI NG MATERIAL FOUND, DURING THE COURSE OF SEARCH'? THE SPECIAL BENCH HELD AS FOLLOWS: 53. THE QUESTION NOW IS - WHAT IS THE SCOPE OF ASS ESSMENT OR REASSESSMENT OF TOTAL INCOME U/S 153A(1)(B) AND THE FIRST PROVISO? WE ARE OF THE VIEW THAT FOR ANSWERING THIS QUESTION, G UIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1). IF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND FOUND IN THE COURSE OF SEAR CH IN OUR HUMBLE OPINION SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS HA VE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR REASSESSMENT OF TOTAL INCOME UNDER THE AFORESAID PROVISION. SIMILAR POSITION WIL L OBTAIN IN A CASE WHERE UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY HA S BEEN FOUND AS A CONSEQUENCE OF SEARCH. IN OTHER WORDS, HARMONIOUS I NTERPRETATION WILL PRODUCE THE FOLLOWING RESULTS :- IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 4 A) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESSMENT U/S 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMENT YEAR SH ALL BE MADE SEPARATELY ON THE BASIS OF THE FINDINGS OF THE SEAR CH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE A O, (B) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSE SSMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCU MENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN T HE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISC OVERED IN THE COURSE OF SEARCH THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F THE ITAT KOLKATA IN THE CASE OF LMJ INTERNATIONAL LTD. (2008) 22 SOT 315 (K OL) WHEREIN IT WAS HELD THAT WHERE NOTHING INCRIMINATING IS FOUND IN THE CO URSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENT FOR SUCH YEARS CAN NOT BE DISTURBED. 8. THE CIT(A) IN THE IMPUGNED COMMON ORDER UPHELD T HAT STAND TAKEN BY THE ASSESSEE AND HE HELD AS FOLLOWS:- AFTER GOING THROUGH THE SUBMISSION OF THE APPELLAT E AND SATISFACTION RECORDED BY THE AO, I FIND THAT THE AO HAS MECHANIC ALLY INITIATED THE PROCEEDINGS U/S. 153C IN THE CASE OF THE APPELLATE WITHOUT MENTIONING ANY REASONS OR SATISFACTION FOR DOING SO. THE PROVI SION OF SECTION 153C IS REPRODUCED HEREUNDER:- S.153C: NOTWITHSTANDING ANYTHING CONTAINED IN SECT ION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, WHERE THE AO IS SATISFIED THAT ANY MONEY, BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE OR TING OR BOOKS OF ACCOU NT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERS ON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BO OKS OF ACCOUNT OR DOCUMENTS OR ASSET WAS SIZED OR REQUISITIONED SH ALL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON [AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH S UCH 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 AO IS SATISFIED THAT THE BOOKS OF AC COUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR YEARS REFERRED TO IN SU B-SECTION (1) OF SECTION 153A]. THE PROVISION OF THE ACT CLEARLY REQUIRES THAT THE AO HAS TO MENTION THE REASON FOR INITIATION OF PROCEEDING U/S. 153C BASED ON CERTAIN SEIZED IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 5 DOCUMENTS OR INCRIMINATING MATERIALS WHICH WERE FOU ND AND SEIZED DURING THE SEARCH AND SEIZURE IN OTHER CASE. THE AO HAS NOT SPECIFIED ANY REASON FOR DOCUMENTS OR INCRIMINATING MATERIALS WHICH WERE FOUND AND SEIZED DURING THE SEARCH AND SEIZURE IN OTHER C ASE. THE AO HAS NOT SPECIFIED ANY REASON FOR INITIATION OF PROCEEDINGS U/S. 153C WHICH IS BASED ON ANY SEIZED DOCUMENTS OR INCRIMINATING MATE RIAL BELONGING TO THE ASSESSEE FOUND AND SEIZED IN THE SEARCH ACTION OF SOME OTHER GROUPS. EVEN IN THE ASSESSMENT YEAR FINALIZED U/S.1 53C, THERE IS NO REFERENCE TO ANY SEIZE DOCUMENTS OR INCRIMINATING M ATERIALS. HENCE, I AM INCLINED TO ACCEPT THE APPELLANTS CONTENTIONS T HAT THE AO FAILED TO RECORD SATISFACTION FOR INITIATION OF PROCEEDINGS U /S 153C AND ACCORDINGLY, THE ASSESSMENTS PASSED U/S. 153C ARE H EREBY CANCELLED BEING VIOD ANB-INITIO. AS THE ASSESSMENTS HAVE BEEN CANCELLED VOID AB-INIT IO FOR LACK OF SATISFACTION RECORDED BY THE AO PRIOR TO INITIATION OF PROCEEDING U/S.153C OF THE ACT, THE OTHER GROUNDS OF APPEAL ON MERITS A RE NOT ADJUDICATED. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DR WHO RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE CIT(A) AND FURTHER REFERRED TO THE CBDT CIRCULA R NO.24/2015 DATED 31.12.2015 WHEREIN THE CBDT HAS LAID DOWN THAT RECO RDING OF SATISFACTION FOR PROCEEDING U/S.153C OF THE ACT ON THE BASIS OF INC RIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH IS A CONDITION PRECEDENT FOR I NITIATING PROCEEDINGS U/S.153C OF THE ACT AND WHEREVER SUCH SATISFACTION IS NOT SO RECORDED, THE PROCEEDINGS U/S.153C OF THE ACT ARE A NULLITY AND I N SUCH SITUATION THE REVENUE SHOULD CONCEDE THAT THE ASSESSMENTS ARE A NULLITY. 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDER OF THE AO AND CIT(A). THE PROVISIONS OF SEC.153C(1) AFTER ITS AMENDMENT BY THE FINANCE ACT, 2014, READS THUS: SECTION 153C ASSESSMENT OF INCOME OF ANY OTHER PERSON. IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 6 (1)NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 13 9, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULL ION, JEWELLERY OR VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DO CUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER T HAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCO UNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED O VER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH S UCH 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 REQUISITIO NED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR YEARS RE FERRED TO IN SUB-SECTION (1) OF SECTION 153A : 12. IT CAN BE SEEN FROM THE AMENDED PROVISIONS WHI CH ARE UNDERLINED THAT THE LAW HAS BEEN AMENDED BY LAYING DOWN A CONDITION THA T THE ASSESSING OFFICER CAN PROCEED AGAINST THE OTHER PERSON AND ISSUE NOTI CE AND ASSESS OR REASSESS THE INCOME OF THE OTHER PERSON IN ACCORDIN G WITH THE PROVISIONS OF SEC.153A OF THE ACT ONLY IF, THAT ASSESSING OFFICER IS SATISFIED THAT THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR R EQUISITIONED HAS A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR YEARS REFERRED TO IN SUB-SECTION (1) OF SEC.153A OF THE ACT. 13. WITH THE AFORESAID AMENDMENT, THE ASSESSING OF FICER OF THE OTHER PERSON ON RECEIPT OF THE SEIZED DOCUMENT FROM THE ASSESSIN G OFFICER OF THE PERSON WHO WAS SUBJECTED TO A SEARCH U/S.132 OF THE ACT CA NNOT BLINDLY PROCEED TO ISSUE NOTICE TO THE OTHER PERSON FOR THE PERIOD REF ERRED TO SEC.153A(1) OF THE ACT, BUT HAS TO APPLY HIS MIND AND REACH A SATISFAC TION THAT THE SEIZED DOCUMENT RECEIVED BY HIM AND BELONGING TO THE OTHER PERSON, HAS A BEARING IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 7 ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OT HER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR ASSESSMENT YEARS REFERRED TO SEC .153A(1) OF THE ACT. 14. THE FORESAID AMENDMENT HAS BEEN HELD TO BE CLA RIFICATORY IN NATURE AND THEREFORE HAS TO BE HELD AS APPLICABLE RETROSPECTIV ELY FROM THE INCEPTION OF SEC.153C OF THE ACT IN THE STATUE, BY THE ITAT KOL KATA BENCH IN THE CASE OF TRISHUL HI-TECH INDUSTRIES VS. DCIT IT(SS)A.NOS.84- 86/KOL/2011 (AY 04-05, 05-06 & 06-07) ORDER DATED 24.9.2014. IN THE AFORE SAID DECISION THE HONBLE KOLKATA BENCH OF ITAT, AFTER CONSIDERING THE AMENDE D PROVISIONS OF SEC.153C OF THE ACT BY THE FINANCE ACT, 2014, HELD THAT THE PROVISIONS OF SEC.153C OF THE ACT AS AMENDED BY FINANCE (NO.2) ACT, 2014 THOU GH IS MADE APPLICABLE ON AND FROM 1.10.2014, IS ALSO RELEVANT FOR EARLIER ASSESSMENT YEARS AS IT CURES THE INFIRMITIES OF THE PREVIOUS LEGISLATION A ND ALSO MAKES THE PROVISIONS WORKABLE BY AVOIDING ABSURD CONSEQUENCES. ACCORDIN GLY, SUCH PROVISION IS TO BE GIVEN RETROSPECTIVE OPERATION AND IS ALSO APPLIC ABLE TO PENDING PROCEEDINGS. THE BENCH FINALLY CONCLUDED THAT IN T HE ABSENCE OF INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH BELONG TO TH E OTHER PERSON WHICH IS HANDED OVER TO THE ASSESSING OFFICER OF THE PERSON WHO IS SEARCHED, THE ASSESSING OFFICER OF THE OTHER PERSON CANNOT ASSUME JURISDICTION U/S.153C OF THE ACT. SUCH ASSUMPTION OF JURISDICTION WAS QUASH ED AS BEING AB INITIO VOID , ULTRA VIRES AND EX FACIE NULL IN LAW. 15. ADMITTEDLY, THE ASSESSEE WAS NOT SUBJECTED TO A SEARCH U/S.132 OF THE ACT AND THEREFORE PROCEEDINGS U/S.153A OF THE ACT C OULD NOT BE INITIATED AGAINST THE ASSESSEE. ON 11.4.2007, THERE WAS A SE ARCH AND SEIZURE OPERATION U/S.132 OF THE ACT IN THE RESIDENTIAL AND BUSINESS PREMISES SRI GAJANAND AGRAWALLA GROUP AND NOT IN THE CASE OF THE ASSESSEE. AS TO WHAT WERE THE DOCUMENTS FOUND IN THE COURSE OF SEARCH AN D HOW THEY WERE INCRIMINATING IN SO FAR AS THE ASSESSEE IS CONCERNE D HAS NOT BEEN SPELT OUT ANYWHERE BY THE AO. IN FACT NO INCRIMINATING MATER IAL WHATSOEVER IN SO FAR AS IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 8 THE ASSESSEE IS CONCERNED WAS FOUND. IN TERMS O F SEC.153-C OF THE ACT, IF IN THE COURSE OF SEARCH OF A PERSON U/S.132 OF THE ACT, ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERS ON OTHER THAN THE PERSON WHO IS SEARCHED U/S.132 OF THE ACT, THEN THE AO OF THE PERSON IN WHOSE CASE SEARCH U/S.132 OF THE ACT HAS BEEN CARRIED OUT, HAS TO ARRIVE AT A SATISFACTION THAT MONEY, BULLION, JEWELLERY OR OTHER VALUABLE AR TICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED BELONG TO SOME OTHER PE RSON. ON ARRIVING AT SUCH SATISFACTION, HE HAS TO HAND OVER THE DOCUMENT S OR ASSETS SEIZED OR REQUISITIONED TO THE ASSESSING OFFICER HAVING JURIS DICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGA INST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSES S OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A THE ACT. AS OBSERVED BY THE HONBLE AM, THE PROVISIONS OF SE C.153C OF THE ACT, PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 2014 W.E.F. 1-10- 2014, DOES NOT IMPOSE ANY CONDITION ON THE AO OF THE OTHER PERSON TO PROC EED TO ISSUE NOTICE U/S.153C OF THE ACT FOR MAKING AN ASSESSMENT OF INC OME FOR THE PERIODS REFERRED TO IN SEC.153A OF THE ACT. THIS WOULD CAU SE UNDUE HARDSHIP. TAKE FOR INSTANCE THE CASE OF THE ASSESSEE. WHAT WAS FO UND IN THE COURSE OF SEARCH WAS A PURCHASE DEED EVIDENCING PURCHASE OF P ROPERTY BY THE ASSESSEE. THERE WAS NO ADVERSE INFERENCE DRAWN ON THIS DOCUMENT. THE AO, HOWEVER, HAS TO MAKE AN ASSESSMENT IN THE CASE OF THE ASSESSEE U/S.153C OF THE ACT FOR THE SIX ASSESSMENT YEARS RE FERRED TO IN SEC.153A OF THE ACT, EVEN IF NO INCRIMINATING MATERIAL WAS FOUN D IN THE COURSE OF SEARCH. THIS CREATED HARDSHIP AND THIS WAS THE REASON WHY T HE PROVISIONS OF SEC.153C OF THE ACT WERE AMENDED BY THE FINANCE ACT , 2014. THE KOLKATTA BENCH OF THE ITAT IN THE CASE OF TRISHUL HI-TECH INDUSTRIES (SUPRA) DEALT WITH THE PURPOSE BEHIND THE AFORESAID AMENDMENT AND AS T O WHY IT SHOULD HELD TO BE RETROSPECTIVE. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS:- THE PROVISIONS OF S.153C OF THE ACT WAS AMENDED TO OBVIATE PRACTICAL DIFFICULTIES WHICH AROSE IN ITS INTERPRETATION FROM TIME TO TIME. THE AMENDMENT IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 9 MADE BY FINANCE (NO.2) ACT, 2014 AS THE LEGISLATURE FOUND THAT DIFFERENT AUTHORITIES WERE ASSIGNING DIFFERENT MEANINGS TO TH E PROVISIONS. AS SUCH, A STATE OF AFFAIRS RESULTED IN AMBIGUITIES WHICH GAVE RISE TO CONFLICTING DECISIONS ON SUBJECT, THE LEGISLATURE IN ITS WISDOM THOUGHT I T PRUDENT TO CHANGE THE LANGUAGE THOROUGHLY EXPLICIT. IT SO HAPPENED FROM T IME TO TIME THAT DURING THE COURSE OF CONDUCTING A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO ANOTHER PERSON WERE SEIZE D. ON ONE HAND, THE SEIZED MATERIALS WERE SENT TO THE ASSESSING AUTHORI TY HAVING JURISDICTION OVER THE OTHER PERSON AND ON THE OTHER HAND, THE ASSESSI NG AUTHORITY RECEIVING SUCH SEIZED MATERIAL ACTS MECHANICALLY INITIATES PR OCEEDINGS U/S 153C OF THE ACT WITHOUT ANY VERIFICATION. SUCH INTERPRETATION I S NEVER THE INTENDMENT OF THE LEGISLATURE. THE LEGISLATURE FOUND THAT MULTIPLICIT Y OF PROCEEDINGS RESULTED AND CONFUSION REIGNED SUPREME. IN ORDER TO ELIMINATE SU CH CONTRADICTORY SITUATIONS, IT WAS MADE CLEAR THAT THE ASSESSING AU THORITY WHILE RECEIVING SUCH SEIZED MATERIAL BELONGING TO THE OTHER PERSON SHALL BE SATISFIED THAT SUCH MATERIAL MUST BE OF INCRIMINATING NATURE. THUS, T HE AMENDING ACT, IN FACT, EXPLAINED THE PROCEDURE TO DEAL WITH A SITUATION WH ERE INCRIMINATING MATERIALS FOUND IN COURSE OF A SEARCH BELONGED TO A THIRD PER SON. THE PROVISION WAS AMENDED TO STOP UNINTENDED CONSEQUENCES AND TO PREV ENT UNDUE HARDSHIP ON THE THIRD PARTY WHO IS NOT BEING SEARCHED. THE S CHEME THAT EVEN A PARTNERSHIP DEED OR A DISCLOSED BANK STATEMENT OR P ROJECTED STATEMENT WAS ENOUGH TO ASSUME JURISDICTION U/S 153C OF THE ACT W AS CURTAILED TO THE EXTENT OF INCRIMINATING MATERIALS FOUND. IN FACT A LOGICAL CONCLUSION WAS DRAWN TO THAT EFFECT. IN FACT, THE INTERPRETATION OF THE EXISTING PROVISIONS WAS DEFEATING THE OBJECT AND PURPOSE OF THE ENACTMENT AND WAS LEADING TO INFRUCTUOUS LITIGATION WITHOUT ANY RHYME OR REASON. BY SUCH INTERPRETATION , THERE WERE TWO ASSESSMENT ORDERS STANDING ON THE SAME ISSUES RAISI NG IDENTICAL TAX DEMANDS FOR THE SAME ASSESSMENT YEARS WHICH IS AN ABSURD PR OPOSITION. THIS BASED ON THE MAXIM UT RES MAGIS VALEAT QUAM PAREAT. THE CONS TRUCTION WHICH WOULD REDUCE THE LEGISLATION TO A FUTILITY SHOULD BE AVOI DED; AN ALTERNATIVE THAT WILL INTRODUCE UNCERTAINTY, FRICTION OR CONFUSION INTO T HE WORKING OF THE SYSTEM SHOULD BE REJECTED. AN INTERPRETATION WHICH LEADS T O UNWORKABLE RESULTS AND BRINGS ABOUT ABSURDITY CANNOT BE ACCEPTED. IN ANY C ASE, SUCH A SITUATION WAS NEVER THE INTENTION OF THE LEGISLATURES. TO DO AWAY WITH THIS JUDICIAL ERROR, THE ACT WAS AMENDED TO CURE THE OBVIOUS OMISSION AND TO CLARIFY THE INTENTION BEHIND THE ENACTMENT. THERE IS NO DOUBT OR DISPUTE TO THE FACT THAT THE P ROVISION OF S.153C OF THE ACT IS A PROCEDURAL PROVISION. LAW OF PROCEDURE ARE MEANT TO REGULATE EFFECTIVELY, ASSIST AND AID OF SU BSTANTIAL AND REAL JUSTICE AND NOT TO FORECLOSE EVEN AN ADJUDICATION O N THE SUBSTANTIAL RIGHTS OF CITIZENS OF PROPERTY, PERSONAL AND OTHER LAWS. IN THE CASE OF STATE OF UTTAR PRADESH VS SINGHARA SINGH (AIR 1964 SC 358),THE APEX COURT QUOTED WITH APPROVAL THE DEC ISION IN THE CASE OF TAYLOR VS TAYLOR (1875) 1 CH D 426, FOR THE PROPOSITION THAT WHERE A POWER IS GIVEN TO DO A CER TAIN THING IN A IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 10 CERTAIN WAY, THE THING MUST BE DONE IN THAT WAY OR NOT AT ALL AND THAT OTHER METHODS OF DEALING WITH THE MATTER ARE NECESS ARILY FORBIDDEN. FURTHER, IN CONTRAST TO STATUTES DEALING WITH SUBST ANTIVE RIGHTS, STATUTES DEALING WITH MERELY MATTERS OF PROCEDURE A RE PRESUMED TO BE RETROSPECTIVE UNLESS SUCH A CONSTRUCTION IS TEXT UALLY INADMISSIBLE [DELHI CLOTH & GENERAL MILLS CO.LTD. VS CIT (AIR 19 27 PC 242)]. FURTHER, AS STATED BY LORD DENNING THAT THE RULE THAT AN ACT OF PARLIAMENT IS NOT TO BE GIVEN RETROSPECTIVE EFFECTS APPLIES ONLY TO STATUES WHICH AFFECT VESTED RIGHTS. IT DOESNT APPL Y TO STATUES WHICH ONLY ALTER THE FORM OF PROCEDURE OR THE ADMISSIBILI TY OF EVIDENCE, OR THE EFFECT WHICH THE IT(SS).A.82,84-86/KOL/2011 TRI SHUL HI-TECH INDUSTRIES A.YRS.2004-05 TO 2006-07 8 COURTS GIVE T O EVIDENCE [BLYTH VS BLYTH (1966) 1 ALL ER 524 (HL)]. IF THE N EW ACT AFFECTS MATTERS OF PROCEDURE ONLY, THEN, PRIMA FACI E, IT APPLIES TO ALL ACTION PENDING AS WELL AS FUTURE [K.EAPIN CHACKO VS PROVIDENT FUND INVESTMENT COMPANY(P) :TD (AIR 1976 SC 2610)]. IN STATING THE PRINCIPLE THAT A CHANGE I N THE LAW OF PROCEDURE OPERATES RETROSPECTIVELY, IT WAS SETTLED THAT WITH APPROVAL THE REASON OF THE RULE AS EXPRESSED BY MAXWELL THAT NO PERSON HAS A VESTED RIGHT IN ANY COURSE OF PROCEDURE. HE HAS ONL Y THE RIGHT OF PROSECUTION OR DEFENCE IN THE MANNER PRESCRIBED FOR THE TIME BEING BY OR FOR THE COURT IN WHICH THE CASE IS PENDING, A ND IF, BY AN ACT OF PARLIAMENT THE MODE OF PROCEDURE IS ALTERED, HE HAS NO OTHER RIGHT THAN TO PROCEED TO THE ALTERED MODE [TIKARAM & SONS VS CST (AIR 1968 SC 1286)]. THE FACTUM OF SATISFACTION OF THE ASSESSING OFFICER THAT THE DOCUMENTS SEIZED ARE INCRIMINATING IN NATURE SO AS TO CASTIGATE THE OTHER PERSON IS A MATTER OF PROCED URE. NO SUBSTANTIVE OR VESTED RIGHT OF A PARTY IS AFFECTED THEREBY. THUS, THE PROVISION IS REMEDIAL OF THE ERSTWHILE LEGISLATION, DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH WAS CAUSING UNDUE HARDSHIP ON THE SUBJECTS AND IS ALSO CLARIFICATORY IN NATURE. IT IS SETTLED THAT RULE 1BB IS ESSENTIALLY A RULE OF EVID ENCE AS TO THE CHOICE OF ONE OF THE WELL-ACCEPTED METHODS OF VALUA TION IN RESPECT OF CERTAIN KINDS OF PROPERTIES WITH A VIEW TO ACHIE VING UNIFORMITY IN VALUATION AND AVOIDING DISPARATE VALUATIONS RESULTI NG FROM APPLICATION OF DIFFERENT METHODS OF VALUATION RESPE CTING PROPERTIES OF A SIMILAR NATURE AND CHARACTER AND ACCORDINGLY IS A PROCEDURAL LAW WHICH IS APPLICABLE TO PENDING CASES [CWT VS SHARVA N KUMAR SWAMP & SONS (1992) 210 ITR 886 (SC)]. IN THE FACTS OF THE INSTANT CASE, DUE TO THE UNINTENDED INTERPRETATION OF THE SCOPE OF THE PROVISIONS OF S.153C OF THE ACT, THE LAW WAS AMENDE D TO ENSURE A REASONABLE APPROACH OR AS OTHERWISE, DUE TO CONFLIC TING DECISIONS ON THE SUBJECT, THE CONSTRUCTION OF SUCH PROVISIONS WAS LEADING TO ABSURDITY. WITHOUT TAKING THE AID OF THE AMENDED PR OVISION, THE SCOPE AND AMBIT OF SUCH PROVISION WAS LEADING TO AM BIGUOUS PROPOSITION WHICH IS NOT THE INTENDMENT OF THE LEGI SLATURE. IT, IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 11 THEREFORE, FOLLOWS THAT THE AMENDED PROVISION OF S. 153C OF THE ACT IS ALSO DECLARATORY. IT SEEKS TO CLARIFY THE LAW SO AS TO REMOVE DOUBTS LEADING TO THE COURTS GIVING CONFLICTING DECISIONS. BEING CLARIFICATORY IN NATURE, IT MUST BE HELD TO BE RETROSPECTIVE IN T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. THE LEGISLATURE MAY PASS A DECLARATORY ACT TO SET ASIDE WHAT THE LEGISLATURE DEEMS TO HAVE BEEN A JUDICIAL ERROR IN THE INTERPRETATION OF STATUTE. IT ONLY SEE KS TO CLEAR THE MEANING OF A PROVISION OF THE PRINCIPAL ACT AND MAK E EXPLICIT THAT WHICH WAS ALREADY IMPLICIT. IT IS SETTLED THAT SECT ION 154 IS A PROCEDURAL PROVISION. IT IS SETTLED LAW THAT AN AME NDMENT OF A PROCEDURAL LAW IS NORMALLY REGARDED AS RETROSPECTIV E IN OPERATION BECAUSE NO ONE HAS ANY VESTED RIGHT IN A PROCEDURAL LAW AND THE TRIBUNAL WAS THEREFORE, JUSTIFIED IN HOLDING THAT S ECTION 154(1)(BB) WHICH WAS INSERTED DURING THE FINANCIAL YEAR 1964-1 965, COULD BE APPLIED FOR THE ASSESSMENT YEAR 1963-1964, AND THE IAC HAD JURISDICTION UNDER SECTION 154(1)(BB) TO RECTIFY TH E MISTAKE IN THE PENALTY ORDER DATED 4-3-1970 FOR THE ASSESSMENT YEA R 1963-64 [NURUDDIN & BROS VS CIT (1979) 116 ITR 704 (CAL)]. THUS, THE PROVISIONS OF S.153C OF THE ACT AS AMENDED BY FINAN CE (NO.2) ACT, 2014 WAS MADE APPLICABLE ON AND FROM 01-10-2014 AND IS RELEVANT FOR THE ASSESSMENT YEAR UNDER DISPUTE AS IT CURES T HE INFIRMITIES OF THE PREVIOUS LEGISLATION AND ALSO MAKES THE PROVISI ONS WORKABLE BY AVOIDING ABSURD CONSEQUENCES. ACCORDINGLY, SUCH PRO VISION IS TO BE GIVEN RETROSPECTIVE OPERATION AND IS ALSO APPLICABL E TO PENDING PROCEEDINGS. THAT BEING SO, THE ACTION OF THE LD.AS SESSING OFFICER IS FRAUGHT WITH ILLEGALITY AS HE PROCEEDED DE HORS ANY INCRIMINATING MATERIALS TO ASSUME JURISDICTION U/S 153C OF THE AC T IN THE INSTANT CASE AND ACCORDINGLY, HIS ACTION IS LIABLE TO BE QU ASHED BEING AB INITIO VOID, ULTRA VIRES AND EX-FACIE NULL IN LAW. 16. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW EX PRESSED AS ABOVE. IN VIEW OF THE STATUTORY AMENDMENT TO THE LAW, WE ARE OF THE VIEW THAT THE CONCLUSION OF THE CIT(A) THAT THE INITIATION OF ASS ESSMENT PROCEEDINGS AGAINST THE ASSESSEE U/S.153C OF THE ACT ARE INVALID FOR TH E ABSENCE OF PROPER SATISFACTION FOR PROCEEDING AGAINST THE ASSESSEE U/ S.153C OF THE ACT ARE JUST AND PROPER AND CALLS FOR NO INTERFERENCE. WE MAY A LSO ADD THAT IT IS SETTLED RULE OF CONSTRUCTION THAT EVERY STATUTE IS PRIMA FA CIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. ORDINARILY THE COURTS ARE REQUIRED TO GATHER THE IN TENTION OF THE LEGISLATURE FROM THE OVERT LANGUAGE OF THE PROVISION AS TO WHETHER I T HAS BEEN MADE IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 12 PROSPECTIVE OR RETROSPECTIVE, AND IF RETROSPECTIVE, THEN FROM WHICH DATE. WHAT HAPPENS SOMETIMES IS THAT THE SUBSTANTIVE PROVISION , AS ORIGINALLY ENACTED OR LATER AMENDED, FAILS TO CLARIFY THE INTENTION OF TH E LEGISLATURE. IN SUCH A SITUATION, IF SUBSEQUENTLY SOME AMENDMENT IS CARRIE D OUT TO CLARIFY THE REAL INTENT, SUCH AMENDMENT HAPPENS TO BE RETROSPECTIVE FROM THE DATE THE EARLIER PROVISION WAS MADE EFFECTIVE. SUCH CLARIFICATORY OR EXPLANATORY AMENDMENT IS DECLARATORY. AS THE LATER AMENDMENT CLARIFIES THE R EAL INTENT AND DECLARES THE POSITION AS WAS ORIGINALLY INTENDED, IT TAKES RETRO ACTIVE EFFECT FROM THE DATE THE ORIGINAL PROVISION WAS MADE EFFECTIVE. NORMALLY SUC H CLARIFICATORY AMENDMENT IS MADE RETROSPECTIVELY EFFECTIVE FROM THE EARLIER DATE. IT MAY SO HAPPEN THAT SOMETIMES THE CLARIFICATORY OR EXPLANATORY PROVISIO N INTRODUCED LATER TO DEPICT THE REAL INTENTION OF THE LEGISLATURE IS NOT SPECIF ICALLY MADE RETROSPECTIVE BY THE STATUTE. NOTWITHSTANDING THE FACT THAT SUCH AMENDME NT TO THE SUBSTANTIVE PROVISION HAS BEEN GIVEN PROSPECTIVE EFFECT, NONETH ELESS THE JUDICIAL OR QUASI- JUDICIAL AUTHORITIES, ON A CHALLENGE MADE TO IT, CA N JUSTIFIABLY HOLD SUCH AMENDMENT TO BE RETROSPECTIVE. THE JUSTIFICATION BE HIND GIVING RETROSPECTIVE EFFECT TO SUCH AMENDMENT IS TO APPLY THE REAL INTEN TION OF THE LEGISLATURE FROM THE DATE SUCH PROVISION WAS INITIALLY INTRODUCED. T HE INTENTION OF THE LEGISLATURE WHILE INTRODUCING THE PROVISION IS GATHERED, INTER ALIA , FROM THE FINANCE BILL, MEMORANDUM EXPLAINING THE PROVISION OF THE FINANCE BILL. ANY AMENDMENT TO THE SUBSTANTIVE PROVISION WHICH IS AIMED AT CLARIFY ING THE EXISTING POSITION OR REMOVING UNINTENDED CONSEQUENCES TO MAKE THE PROVIS ION WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITHSTANDING THE FACT T HAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY. THE ABOVE PRINCIP LES, IF APPLIED TO THE AMENDMENT TO THE PROVISIONS OF SEC.153C OF THE ACT BY THE FINANCE ACT, 2014, CAN LEAD TO ONLY ONE CONCLUSION THAT THE SAID AMENDMENT IS CLARIFICATORY AND THEREFORE SHOULD BE HELD TO BE RETROSPECTIVE IN OPERATION. 17. IT IS CLEAR FROM THE ORDER OF THE CIT(A) THAT THE AO BEFORE PROCEEDING U/S.153C OF THE ACT HAS NOT RECORDED ANY SATISFACTI ON AS IS NECESSARY FOR INITIATING PROCEEDINGS U/S.153C OF THE ACT. THIS H AS BEEN DULY TAKEN NOTE OF IT(SS)A NO.28-32/RAN/2015 A.YS.04-05 TO 08-09 DY/ACIT, CIR-2, RNC VS. M/S GAUARANG ALLOWYS & IRON LTD. PAGE 13 BY THE CIT(A) AND THE CIT(A) HAS RIGHTLY COME TO TH E CONCLUSION THAT THE ASSESSMENTS FRAMED U/S.153C OF THE ACT ARE A NULLIT Y AND THEREFORE HAS RIGHTLY CANCELLED THOSE ASSESSMENTS. 18. FOR THE REASONS GIVEN ABOVE, WE DO NOT FIND AN Y MERIT IN THESE APPEALS BY THE REVENUE AND THEY ARE THEREFORE DISMISSED. 19. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 16/ 09/2016 SD/- SD/- ( ) ('# ) (M.BALAGANESH) (N.V.VASUDEVAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP $- 16 / 09 /201 6 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DY/ACIT, CENTRAL CIRCLE-2, RANCHI, 834 0 01 2. /RESPONDENT-M/S GAURANG ALLOWYS & IRON LTD., ROOM N O. 143, MARSHALL HOUSE 33/1 N.S. ROA D, KOLKATA- 3. / 2 / CONCERNED CIT PATNA 4. 2- / CIT (A) PATNA 5. 5 ##/, /, / DR, ITAT, RANCHI 6. ; / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.PS, I TAT, RANCHI