Principal Commissioner Of Income Tax - 4 v. Shantisuri Securities Pvt. Ltd

C/TAXAP/649/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 649 of 2018 With R/TAX APPEAL NO. 759 of 2018With R/TAX APPEAL NO. 760 of 2018With R/TAX APPEAL NO. 761 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH andHONOURABLE MR.JUSTICE A.Y. KOGJE ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ?allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ======================================PRINCIPAL COMMISSIONER OF INCOME TAX - 4 Versus SHANTISURI SECURITIES PVT. LTD. ====================================== Appearance: MRS MAUNA M BHATT(174) for the APPELLANT(s) No. 1for the RESPONDENT(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE Date : 28/06/2018 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0]Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned Income Tax Appellate Tribunal “B” Bench, Ahmedabad (hereinafter referred to as “the learned Tribunal”) dated 21/12/2017 in ITA Nos.2481/Ahd/2014 and CO284/Ahd/2014 (in ITA No.2481/Ahd/2014) for the Assessment Year 2005-06 and ITA Nos.2482/Ahd/2014 and CO285/Ahd/2014 (in ITA No.2482/Ahd/2014) for the Assessment Year 2006-07 by which the learned Tribunal has dismissed the respective Appeals preferred by the revenue and has allowed the Cross Objections preferred by the assessee and has quashed and set aside the Assessment Orders passed under Section 153C read with Section 143(3) of the Income Tax Act, revenue has preferred the present Tax Appeals with the following proposed question of law; “Whether the Appellate Tribunal is correct in law and on facts in quashing and setting aside the assessment u/s 143(3) r.w.s. 153C r.w.s. 263 of the Act?” [2.0]For the sake of convenience, facts in Tax Appeal No.649/2018 arising out of ITA No.2481/Ahd/2014 for the Assessment Year 2005-06 are narrated, which are as under; [2.1]The assessee filed the return of income for the Assessment Year 2005-06 on 14/07/2005 declaring the income “Whether the Appellate Tribunal is correct in law and on facts in quashing and setting aside the assessment u/s 143(3) r.w.s. 153C r.w.s. 263 of the Act?” [2.0]For the sake of convenience, facts in Tax Appeal No.649/2018 arising out of ITA No.2481/Ahd/2014 for the Assessment Year 2005-06 are narrated, which are as under; [2.1]The assessee filed the return of income for the Assessment Year 2005-06 on 14/07/2005 declaring the income of Rs.9,790/-. The same was assessed under Section 143(3) of the Income Tax Act determining the income at Rs.2,34,787/-. There was search operation carried out in ‘Asian Group of cases’. The assessment was finalized under Section 153C read with Section 143(3) of the Income Tax Act. The return of income determined by the assessee was accepted. Thereafter, an order under Section 153C read with Section 143(3) read with Section 263 of the Income Tax Act was passed on 11/12/2012 making the addition of Rs.4,07,95,000/- under Section 68 of the Income Tax Act. The same was the subject matter before the learned CIT(A). Learned CIT(A) partly allowed the same and directed the deletion under Section 68 of the Income Tax Act. Aggrieved with the order passed by the learned CIT(A), both the assessee as well as the revenue filed Appeals /Cross Objections before the learned Tribunal. By the impugned common judgment and order, learned Tribunal has dismissed the Appeals preferred by the revenue and has allowed the Cross Objections preferred by the assessee by quashing and setting aside the order of assessment passed under Section 153C read with Section 143(3) read with Section 263 of the Income Tax Act specifically by observing that the proceedings under Section 153C of the Income Tax Act was bad in law inasmuch as there was not satisfaction recorded by the learned Assessing Officer in the case of the very assessee and no incriminating material belonging to the assessee was purportedly seized as a result of search carried out in ‘Asian Group of cases’ was found available on the case records. Consequently, by the impugned judgment and order, learned Tribunal held that the action undertaken by invoking Section 153C of the Income Tax Act was not permissible as prerequisites for invoking jurisdiction conferred on the learned Assessing Officer under Section 153C of the Income Tax Act are not satisfied and the proceedings under Section 153C of the Income Tax Act is complete nonstarter. Feeling aggrieved and dissatisfied with the impugned common judgment and order quashing and setting aside the assessment order under Section153C read with Section 143(3) of the Income Tax Act, revenue has preferred the present Tax Appeals with the aforesaid proposed question of law. [3.0]Heard Mrs. Mauna Bhatt, learned advocate appearing on behalf of the revenue. Before this Court also learned Advocate appearing on behalf of the revenue is not in a position to point out any satisfaction note by the learned Assessing Officer in the case of the assessee and /or that any incriminating material belonging to the assessee – Company was seized as a result of search carried out in ‘Asian Group of cases’. The findings recorded by the learned Tribunal in paragraph nos.8, 8.1, 8.2 and 8.3 have gone uncontroverted. In paragraph nos.8, 8.1, 8.2 and 8.3, learned Tribunal has observed and given the findings asunder; “8.To address the issue, we take note of the plea on behalf of the assessee that the action against the assessee has been taken under s.153C of the Act on the ground of some search initiated ‘Asian Group of cases’ on 07/02/2008. It is the case of assessee that “Asian Group” is a very generic and vague term. The inspection report duly signed by the AO dated 18/09/2017 makes it abundantly clear “8.To address the issue, we take note of the plea on behalf of the assessee that the action against the assessee has been taken under s.153C of the Act on the ground of some search initiated ‘Asian Group of cases’ on 07/02/2008. It is the case of assessee that “Asian Group” is a very generic and vague term. The inspection report duly signed by the AO dated 18/09/2017 makes it abundantly clear that most elementary information towards specific name of the searched person itself is not available on record. The proceedings under s.153C emanates from a valid proceedings under s.153A of the Act. The AO is apparently not privy to the details of searched person. The assumption of power for a non descript and unintelligible entity is beyond comprehension. 8.1.We also take note of the another plea of the assessee as demonstrated from the inspection report that no incriminating material belonging to the assessee-Company purportedly seized as a result of search carried out in ‘Asian Group of cases’ was found available on the case records. We find considerable merit in this plea of the assessee as well predominantly for the reason that the Revenue has failed to demonstrate possession of any incriminating material. Coupled with this, we also take note of the fact that in the first round of proceedings before the AO under s.153C of the Act, no reference to incriminating material was made and the returned income filed in pursuance of notice under s.153C of the Act was fully accepted and assessed as such which clearly reinforces the allegation of absence of any incriminating material. 8.2.The AO of searched person, as a jurisdictional requirement, must record his satisfaction that incriminating material found as a result of search belongs to assessee herein. In this regard, we take note of the plea of the assessee that no satisfaction note has been found recorded by the AO of the searched person to show that any money, bullion, jewelery or other valuable articles or things or books of accounts or documents seized etc. belongs to the assessee-company which has any bearing on the determination of total income of assessee herein. It goes without saying that substantive action under s.153C is not permissible for an empty cause without corroboration of incriminating material. 8.3.Thus, it is obvious that Revenue has grossly failed to substantiate legal foundation of action undertaken by invoking s.153C and further failed to controvert any of the aforesaid formidable pleas raised on behalf of the assessee in support of its cross-objection. This being so, it is crystal clear that he prerequisites for invoking jurisdiction conferred on the AO under s.153C of the Act are not satisfied and the proceedings under s.153C is a complete non-starter. Thus, the notice issued under s.153C of the Act is clearly without sanction of law and thus void ab initio. The consequent proceedings and the assessment framed based on such illegal notice issued without authority of law is thus null and void. Therefore, the very edifice for framing the assessment order in appeal is crumbled. The revenue has totally failed to satisfy us about regularity of proceedings under s.153C of the Act. Consequently, the orders passed under s.153C are quashed.” [4.0]If that be so. The issue is squarely covered against the revenue and in favour of the assessee in view of the decision of this Court in the case of Principal Commissioner of Income-tax Vs. Saumya Construction P. Ltd reported in [2016] 387 ITR 529 (Guj.). In view of the above, it cannot be said the learned Tribunal has committed any error in quashing and setting aside the proceedings under Section 153C of the Income Tax Act, which calls for the interference of this Court. No substantial question of law arise. Under the circumstances, all these Appeals deserve to be dismissed and are accordingly dismissed. (M.R. SHAH, J.) s.153C are quashed.” [4.0]If that be so. The issue is squarely covered against the revenue and in favour of the assessee in view of the decision of this Court in the case of Principal Commissioner of Income-tax Vs. Saumya Construction P. Ltd reported in [2016] 387 ITR 529 (Guj.). In view of the above, it cannot be said the learned Tribunal has committed any error in quashing and setting aside the proceedings under Section 153C of the Income Tax Act, which calls for the interference of this Court. No substantial question of law arise. Under the circumstances, all these Appeals deserve to be dismissed and are accordingly dismissed. (M.R. SHAH, J.) (A.Y. KOGJE, J.) siji