Assessee participated in proceedings – Not precluded from raising the issue of jurisdiction at appellate level

Short Overview : An assessee was not precluded from raising the issue of jurisdiction, merely because it did not object to the same during assessment proceedings and participating therein, as the issue was purely a legal issue and could be raised at any time in the course of appellate proceedings.

A search operation under section 132 was conducted in the case of one H.B. on 8-6-2012. Consequent to the search in the case of Shri H.B. notices under section 153C were issued, inter alia, to the assessee for assessment years 2008-09, 2011-12 and 2012-13, on 15-9-2014 requiring her to file returns of income. The assessee filed Returns of income and the assessments were concluded under section 143(3) read with section 153C vide orders dated 30-3-2015. The CIT(A), in Orders, dated 24-11-2017 cancelled the orders of assessment for assessment years 2008-09, 2011-12 and 2012-13 as being void-ab-initio. Revenue stated that the assessee did not have the locus standi to object to the assumption of jurisdiction under section 153C since she participated in the assessment proceedings without objecting to the same during the said proceedings.

it is held that An assessee was not precluded from raising the issue of jurisdiction, merely because it did not object to the same during assessment proceedings and participating therein, as the issue was purely a legal issue and could be raised at any time in the course of appellate proceedings. Consequently, ground raised by the Revenue for assessment years 2008-09, 2011-12 and 2012-13 was dismissed.

Decision: In assessee’s favour.

Followed: IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Karn) : 2016 TaxPub(DT) 2423 (Karn-HC).

Distinguished: CIT v. Safetag International Pvt. Ltd. in (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC), Shri Vijyabhai N Chandrani in (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC), CIT v. Sohan Lal Sewa Ram Jaggi (2009) 222 CTR 412 (All) : 2009 TaxPub(DT) 0311 (All-HC), CIT v. British India Corporation Ltd. (2011) 337 ITR 64 (All) : 2011 TaxPub(DT) 1982 (All-HC),  Vaishali Builders & Colonizers v. Addl. CIT (2012) 138 ITD 227 (Jod-Trib) : 2012 TaxPub(DT) 2832 (Jod-Trib), Pr. CIT v. Sheetal International Ltd. [ITA Nos. 375 to 379/2017] (Del.-HC) : 2019 TaxPub(DT) 362 (Del-HC), Pr. CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi-HC), Pr.CIT v. 3VS Instronics Ltd. (2017) 82 Taxmann.com 357 (Del.-HC) : 2017 TaxPub(DT) 1787 (Del-HC), CIT v. Smt. Sudha Gafoor (2017) 408 ITR 246 (Karn.-HC) : 2017 TaxPub(DT) 5078 (Ker-HC), Rajesh Sunderdas Vaswani v. Astt. CIT  (2017) 76 Taxmann.com 311 (Guj.-HC) : 2017 TaxPub(DT) 54 (Guj-HC), Raymond Woolen Mills Ltd. v. CIT (1999) 236 ITR 34 (SC) : 1999 TaxPub(DT) 348 (SC), Ganapati Fin Cap Services Pvt. Ltd. v. CIT (WP(C) 525/2015 & Ors.) (Del.-HC) and SSP Aviation Ltd., v. Dy. CIT (2012) 346 ITR 177 (Del.-HC) : 2012 TaxPub(DT) 2131 (Del-HC).

IN THE ITAT, BANGALORE BENCH

JASON P. BOAZ, A.M. & PAVAN KUMAR GADALE, J.M.

Asstt. CIT v. Pallavi Ravi

ITA Nos. 272 to 274/Bang/2018 and ITA Nos. 282 to 286/Bang/2018

5 July, 2019

Revenue by: R.N. Siddappaji, Addl. CIT

Assessee by: V. Chandrashekhar, Advocate

Per Bench:

These are 8 appeals by Revenue, directed against separate orders of Commissioner (Appeals)-11, Bangalore, dated 24-11-2017; for assessment years 2008-09 to 2012-13 in the case of Shri C.T. Ravi and for assessment years 2008-09 and 2011-12 to 2012-13 in the case of Smt. Pallavi Ravi. Since the cases of these two assessee’s and issues involved are connected, the appeals were heard together and we deem it appropriate to dispose them off by way of this consolidated order in seriatim, hereunder.

Smt. Pallavi Ravi (Revenue’s appeals in ITA Nos. 272 to 274/Bang/2018 for assessment years 2008-09, 2011-12 and 2012-13)

2. Briefly stated, the facts of the case are as under:

2.1 A search operation under section 132 of the Income Tax Act, 1962 (in short ‘the Act’) was conducted in the case of one Shri H.B. Sudarshan on 8-6-2012. Consequent to the search in the case of Shri H.B. Sudarshan, notices under section 153C of the Act were issued, inter alia, to the assessee for assessment years 2008-09, 2011-12 and 2012-13, on 15-9-2014 requiring her to file returns of income. The assessee filed Returns of income for these assessment years on 17-12-2014 and the assessments were concluded under section 143(3) read with section 153C of the Act vide Orders, dated 30-3-2015. The Commissioner (Appeals)-11, Bangalore, in Orders, dated 24-11-2017 cancelled the orders of assessment for assessment year 2008-09, 2011-12 and 2012-13 as being void-ab-initio.

3. Aggrieved by the separate orders of Commissioner (Appeals)-11, Bangalore, dated 24-11-2017 for assessment years 2008-09, 2011-12 and 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds :–

3.1 Assessment Year 2008-09

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. in (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani in (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting additions of a sum of Rs. 99,31,835, on account of Undisclosed Investment in residential House when the assessee has not exercised the cross examination of Shri Sudarshan on the entries thereby conceding that the evidence is valid and true in the assessee’s case also. Also, the case is covered under provision of section 292C of the Income Tax Act. Besides that, it also may be considered that all group cases have been represented by same AR.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

3.2 Assessment Year 2011-12

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

3.3 Assessment Year 2012-13

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting additions of a sum of Rs. 43,04,115, on account of Unexplained Cash Deposits when the assessee has not discharged the onus of explaining the credit.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting the estimated the undisclosed profit of Rs. 46,97,851 based on the material found whereas as the decision of Singhad Technical Educational Society case does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertains to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment and total income can be assessed as discussed in SSP Aviation case.

5. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

4. Ground Nos. 1 and 2 (for assessment years 2008-09, 2011-12 and 2012-13)

4.1 In these grounds (supra), Revenue has, inter alia, raised legal grounds assailing the impugned orders of the Commissioner (Appeals). The learned DR for Revenue vehemently contended that the Commissioner (Appeals) has seriously erred in relying the decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., (2016) 385 ITR 346 (Kar) : 2016 TaxPub(DT) 2423 (Karn-HC). The learned DR, in submissions, put forth the following arguments/propositions. According to the learned DR, firstly, the assessee did not raise the issue of assumption of jurisdiction under section 153C of the Act during the course of assessment proceedings and she is therefore precluded from objecting to the same in appellate proceedings; since her participation in the assessment proceedings without objecting to the assessing officer’s (AO) assumption of jurisdiction under section 153C of the Act takes away her right to raise this ground. It is contended that in view of the above, the Commissioner (Appeals) has erred in entertaining the ground on jurisdiction raised by the assessee for the first time before him. Secondly, the satisfaction recorded by the assessing officer is in order and that there was no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material. Initiation of proceedings under section 153 of the Act need not be based on incriminating material, but can be done even on the basis of material which is not incriminating. The learned DR thirdly contended that the Commissioner (Appeals), whose powers are co-terminus with that of the assessing officer, while considering the issue of jurisdiction, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153C of the Act and done whatever is required to strengthen the orders of assessment. In this regard, the learned DR, inter alia, placed reliance on the decisions of the Hon’ble Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and of the Hon’ble Apex Court in the case of CIT v. Singhad Technical Education Society C.A. No. 11080 of 2017 and others, dt. 29-8-2017 : 2017 TaxPub(DT) 3941 (SC).

4.2 Per contra, in response to the above contentions of the Revenue, the learned AR for the assessee submitted that firstly, there was no requirement of law that the assessee must first object to the assumption of jurisdiction by assessing officer under section 153C of the Act for the same issue to be taken up in appellate proceedings. The issue of assumption of jurisdiction involves purely a question of law and the assessee is in no way precluded from raising this issue/question before an appellate authority even if the same is not raised before the assessing officer and the assessee has participated in the assessment proceedings. Secondly, according to the learned AR, the Commissioner (Appeals) has rightly decided the issue of jurisdiction by relying on the decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., in (2016) 385 ITR 346 (Kar) : 2016 TaxPub(DT) 2423 (Karn-HC) wherein it was held that the presence of incriminating material leading to undisclosed income was a sine qua non for invoking the provisions of section 153C of the Act. Thirdly, the learned AR contends that the Commissioner (Appeals) could not have strengthened the orders of assessment since his hands were tied on the issue of jurisdiction because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating as they did not result in any addition by way of undisclosed income. The material based on which additions were made in the orders of assessment were not the ones relied upon to arrive at the satisfaction for invoking proceedings under section 153C of the Act. According to the learned AR, though the powers of the Commissioner (Appeals) are co-terminus with that of the assessing officer, the Commissioner (Appeals) has no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also submitted that the judicial pronouncements cited by the Revenue were not applicable to the facts of the case on hand.

4.3 We have considered the rival submissions/contentions put forth and carefully perused the material on record and proceed to consider and adjudicate the legal grounds raised by Revenue at Sl.Nos. 1 and 2 for assessment years 2008-09, 2011-12 and 2012-13.

4.4 In this regard, the propositions put forth by Revenue are dealt with hereunder.

4.4.1 On the issue that the assessee did not have the locus standi to object to the assumption of jurisdiction under section 153C of the Act since she participated in the assessment proceedings without objecting to the same during the said proceedings, the learned DR has placed reliance on the following judicial pronouncements; which we shall deal with —

(i) CIT v. Vijaybhai Chandari (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC) 

Briefly, the facts of this case are that the Department invoked proceedings under section 153C of the Act against the assessee. The assessee was provided with copies of the documents seized which formed the basis for invoking the provisions under section 153C of the Act. The assessee challenged the notice issued thereunder before the Hon’ble Gujarat High Court by way of a writ petition, on the ground that the seized documents did not belong to him. The Hon’ble High Court in its order quashed the notice. Revenue filed an appeal before the Hon’ble Apex Court, which held that the assessee ought to have objected to the notice before the assessing officer and follow due process of law as he had alternate remedy and ought not to have filed the writ before exhausting the alternate remedy available to him. In that view of the matter, the Hon’ble Apex Court set aside the judgment of the Hon’ble High Court. In our humble view, the above case does not help Revenue as the same cannot be applied to the facts of the case on hand; which are distinctly quite different. In the case on hand, the assessee has challenged the jurisdiction before the Commissioner (Appeals) after completion of assessment proceedings and has followed the due process of law. There is no dispute that the seized material belong to the assessee in the case on hand. The subject matter of dispute is whether the said seized material, not being incriminating in nature, can be the basis for invoking the provisions under section 153C of the Act.

(ii) CIT v. Safetag International Pvt. Ltd. (2010) 332 ITR 622 (Delhi) : 2010 TaxPub(DT) 0926 (P&H-HC)

In this case, the Hon’ble Delhi High Court held that the Tribunal/ITAT was not correct in remanding the proceedings to the assessing officer when the assessee had not asked the assessing officer for the reasons recorded for initiating proceedings under section 147 of the Act and also did not file any objections to the same. In our humble view, the above judicial pronouncement is not relevant to the issue on hand as the said decision was rendered in the context of section 147 and not section 153C of the Act.

(iii) CIT v. Sohan Lal Sewa Ram Jaggi (2009) 222 CTR 412 (All) : 2009 TaxPub(DT) 0311 (All-HC)

This case deals with the delay in issue of notice under section 143(2) of the Act and is not applicable to the case on hand.

(iv) CIT v. British India Corporation Ltd. (2011) 337 ITR 64 (All) : 2011 TaxPub(DT) 1982 (All-HC).

(v) Vaishali Builders & Colonizers v. Addl. CIT (2012) 138 ITD 227 (ITAT-Jodhpur) : 2012 TaxPub(DT) 2832 (Jod-Trib) 

The above cases deal with the issue of jurisdiction under section 124 of the Act and are not applicable to the case on hand.

(vi) PCIT v. Sheetal International Ltd., [ITA Nos. 375 to 379/2017] (Del.-HC) : 2019 TaxPub(DT) 0362 (Del-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(vii) PCIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(viii) PCIT v. 3VS Instronics Ltd. (2017) 82 taxmann.com 357 (Del.-HC) : 2017 TaxPub(DT) 1787 (Del-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(ix) CIT v. Smt. Sudha Gafoor (2017) 408 ITR 246 (Kar.-HC) : 2017 TaxPub(DT) 5078 (Ker-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(x) Rajesh Sunderdas Vaswani v. ACIT in (2017) 76 taxmann.com 311 (Guj.-HC) : 2017 TaxPub(DT) 0054 (Guj-HC) 

The Hon’ble High Court held on the facts therein that the assessing officer of the ‘Person Searched’ had indeed recorded a satisfaction that the seized material did not belong to the person searched but to the ‘other person’. This decision is not applicable to the issue before us in the case on hand.

(xi) Raymond Woolen Mills Ltd. v. CIT (1999) 236 ITR 34 (SC) : 1999 TaxPub(DT) 0348 (SC) 

This decision was rendered in respect of the sufficiency and adequacy of the reasons recorded for re-opening assessment under section 147 of the Act and therefore in our humble view, would not be applicable to the issue of dispute in the case on hand.

(xii) Ganapati Fin Cap Services Pvt. Ltd. v. CIT (WP(C) 525/2015 and others) (Del.-HC) where the Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

4.4.2 On the issue that the satisfaction recorded by the assessing officer is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material, but can be done even on the basis of material which is not incriminating in nature, the learned DR placed reliance on the following judicial pronouncement —

(i) SSP Aviation Ltd., v. DCIT (2012) 346 ITR 177 (Del.-HC) : 2012 TaxPub(DT) 2131 (Del-HC).

In a writ filed by the assessee, the Hon’ble Delhi High Court held that the assessee could not get the notice issued under section 153C of the Act quashed for the reason that in the satisfaction note there was no firm conclusion/opinion that the seized material showed undisclosed income. In our view, this judicial pronouncement does prima facie help the Revenue in the case on hand and we shall come back to the same later.

4.5 In respect of the legal grounds raised by Revenue at Sl. No. 1 and 2 for assessment years 2008-09, 2011-12 and 2012-13, the counter propositions put forth by the learned AR on behalf of the assessee are considered and dealt with hereunder.

4.5.1 On the proposition put forth by Revenue that the assessee did not have locus standi to object to the assumption of jurisdiction under section 153C of the Act since she participated in the assessment proceedings without objecting to the same during the said proceedings and is therefore precluded from objecting to the same in appellate proceedings, the learned AR for the assessee had placed reliance on the following judicial pronouncements in support of the assessee, which are being dealt with hereunder :–

(i) CIT v. Sinhgad Technical Education Society (C.A. No. 11080 of 2017) (SC) : 2017 TaxPub(DT) 3941 (SC)

In this case, the Solicitor General of India, appearing on behalf of Revenue, argued that it was improper on the part of the ITAT to allow that ground, questioning the jurisdiction under section 153C of the Act, to be raised by the assessee when it had not objected to the same before the assessing officer (para 17 of the order). The Hon’ble Apex Court observed that the Tribunal/ITAT entertained the ground, even though not objected to before the assessing officer during assessment proceedings, for the reason that jurisdictional issue was a legal ground taken up on the basis of facts on record and therefore could be raised at an appellate forum. The Hon’ble Apex Court at paras 18 and 19 of its order held that the reasoning of the Tribunal to be logical and valid and that it had correctly admitted the ground and dealt with the same on merits as well. Thus, it is clear that the Hon’ble Apex Court has decided this issue in favour of the assessee and against the Revenue, thereby giving a finality to this issue.

4.5.2 On the proposition put forth by Revenue that the satisfaction recorded by the assessing officer is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material and can be initiated even on the basis of material, which is not incriminating in nature, the learned AR has relied on the following judicial pronouncements :–

(i) CIT v. IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Kar) : 2016 TaxPub(DT) 2423 (Karn-HC)

In this case, before the Hon’ble jurisdictional High Court of Karnataka, the issue for consideration and adjudication was whether the Bangalore Bench of the Tribunal was right in holding that it was not necessary to record a satisfaction note to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that “the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act”. After considering the decision of the Hon’ble Apex Court in the cases of Manish Maheshwari v. ACIT (2007) 289 ITR 341 (SC) : 2007 TaxPub(DT) 1020 (SC) and CIT v. Calcutta Knitwears (2014) 362 ITR 673 (SC) : 2014 TaxPub(DT) 1547 (SC) and other judgments of the Hon’ble Apex Court and other Hon’ble High Courts; including the case of SSP Aviations Ltd., v. DCIT (2012) 20 taxmann.com 214 (Delhi) : 2012 TaxPub(DT) 2131 (Del-HC) which supports the Revenue and on consideration of the CBDT Circular No. 24/2015, dt. 31-12-2014, the Hon’ble Karnataka answered the question of law at paras 55 and 56 thereof as under :–

(ii) CIT-III, Pune v. Sinhgad Technical Education Society (CA No. 11080 to 11083 of 2017, dt. 29-8-2017) : 2017 TaxPub(DT) 3941 (SC)

In this case the Hon’ble Apex Court held at paras 18 and 19 of its order that proceedings under section 153C of the Act can be initiated only in respect of those assessment years pertaining to which incriminating material has been seized. Therefore, it is clear from this judgment of the Hon’ble Apex Court that initiation of proceedings under section 153C of the Act can be done in the case of an assessee only in respect of those assessment years pertaining to which seized material is incriminating in nature, i.e., the seized material must prima facie indicate undisclosed income. Any seized material which does not prima facie indicate undisclosed income cannot be termed as incriminating in nature. Therefore, for seized material to be considered to be incriminating in nature, it has to necessarily indicate prima facie undisclosed income. In view of the above, it is contended that it would be fair and reasonable to conclude that the judgment in the case of Sinhgad Technical Education Society (supra) approves the view/decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Karn) : 2016 TaxPub(DT) 2423 (Karn-HC) on the proposition that proceedings initiated under section 153C of the Act was not valid for the reason that there being no satisfaction recorded to the effect that the documents found/seized during the course of search were incriminating in nature and prima facie represented undisclosed income.

4.5.3 On the proposition that the Commissioner (Appeals), while considering the issue of jurisdiction, whose powers are co-terminus with that of the assessing officer, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153 of the Act and should have done whatever was required to strengthen the order of assessment, the learned AR contended as under :–

It is contended that the Commissioner (Appeals) had to necessarily consider and decide the question of jurisdiction at the threshold/outset of proceedings and if the same was found to be in order, he could proceed to consider and adjudicate upon the additions made to the income of the assessee. It is submitted that, based on the facts, the Commissioner (Appeals) realized that his hands were tied on the issue of assumption of jurisdiction under section 153C of the Act because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating and did not prima facie indicate undisclosed income and nor were any additions made based on these seized materials. It is further submitted that the Commissioner (Appeals) also must have realized that the material based on which additions were made in the orders of assessment are not the same material relied upon to arrive at a satisfaction to invoke the proceedings for assumption of jurisdiction under section 153C of the Act. It is also contended that the Commissioner (Appeals) had no choice/option but to cancel the orders of assessment as he was bound by the judgment of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (supra). According to the learned AR, the Commissioner (Appeals) could not have strengthened the orders of assessment, despite the fact that his powers are co-terminus with that of the assessing officer, as the very proceedings, initiated under section 153C of the Act was void-ab-initio and he had no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act.

The learned AR also contends that it is important to note the fact that the assessment jurisdiction of the assessee was transferred from her regular assessing officer at Chikkamagalur and notified to the Office of the DCIT, Central Circle 2(3), Bangalore by Order, dated 07-12-2012 and the satisfaction to invoke the provisions of section 153C of the Act was arrived only on 15-9-2014 by issue of notice thereunder. It is argued that there was no reason why the assessing officer could not have specified the seized materials which actually led to the additions made to the income of the assessee in the satisfaction note prepared for initiation of proceedings for assumption of jurisdiction under section 153C of the Act. Unless the assessing officer had reason to believe that the seized material, based on which the additions are made, did not belong to the assessee; in which case no proceedings could be initiated under section 153C of the Act based on the same. It is also contended that it is not possible to justify the decision to transfer the jurisdiction of assessments in the case on hand from the assessing officer at Chikkamagaluru to Central Circle, Bangalore; 2 years prior to arriving at satisfaction for assumption of jurisdiction under section 153C of the Act.

4.6 On a careful perusal and appraisal of the above cited judicial pronouncements by Revenue and the assessee, and after considering the rival arguments/contentions put forth, we proceed to adjudicate the following ground raised by Revenue hereunder:

4.7 Ground No. 1

4.7.1 “1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).”

4.7.2 The Hon’ble Apex Court in the case of CIT v. Sinhgad Education Society in C. A. No. 11080 of 2017 arising out of SLP (C) No. 2527 of 2015  : 2017 TaxPub(DT) 3941 (SC) has categorically held that an assessee is not precluded from raising the issue of jurisdiction, merely because it did not object to the same during assessment proceedings and participating therein, as the issue was purely a legal issue and could be raised at any time in the course of appellate proceedings. In our view, the Hon’ble Apex Court in the aforesaid decision in the case of CIT v. Sinhgad Education Society has clearly decided this issue in favour of the assessee and against Revenue. Consequently, ground No. 1 raised by the Revenue for assessment years 2008-09, 2011-12 and 2012-13 is dismissed.

4.8 Ground No. 2

4.8.1 “2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.”

4.8.2 It is an undisputed facts that the following two seized material were the only seized material that formed the basis for initiation of proceedings under section 153C of the Act in the case on hand :–

(i) A/HBS/10, Page 15 — Lease Agreement entered into by the assessee with one Somegowda;

(ii) A/HBS/10, Page 34 — Share allotment certificate issued in favour of the assessee by Pantaloon Ltd., giving details of allotment of Bonus shares as well as original shares held by the assessee in the said company.

Admittedly, no additions to income/undisclosed income have been made in the orders of assessment based on these two seized materials (cited above at (i) and (ii) (supra). Therefore, it is admittedly an undisputed fact that these two seized material cannot be considered to be incriminating in nature as, prima facie, they do not represent undisclosed income.

4.8.3 The Hon’ble Karnataka High Court in the case of IBC Knowledge Par (P) Ltd. (supra) has held that in order to invoke proceedings under section 153C of the Act it is necessary to record a satisfaction to the effect that the seized material relied upon to invoke proceedings under section 153C of the Act is incriminating in nature and prima facie represent undisclosed income. In our view, this proposition laid down by the Hon’ble jurisdictional High Court in the case of IBC Knowledge Park P. Ltd. (supra) is impliedly approved by the Hon’ble Apex Court in the case of CIT v. Sinhgad Technical Educaiton Society (supra) as the Hon’ble Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those assessment years for which there is incriminating seized material which prima facie represent undisclosed income.

4.8.4 In the course of arguments, the learned DR for Revenue put forth the proposition that the learned Commissioner (Appeals) ought to have sustained even those additions based on material, not relied upon to invoke proceedings under section 153C of the Act and that the Commissioner (Appeals) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition; in as much as the Commissioner (Appeals) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C of the Act in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the Commissioner (Appeals) has rightly cancelled the orders of assessment for assessment years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue’s appeals for assessment years 2008-09, 2011-12 and 2012-13 are dismissed.

5. Assessment Year 2008-09

5.1 As regards assessment year 2008-09, there is one other issue, though academic in nature as the same was not raised by Revenue in the grounds of appeal; but was argued by the learned DR during the course of hearing. The issue argued was that the Commissioner (Appeals) had erred in upholding the ground raised by the assessee that the initiation of proceedings for assessment year 2008-09 was barred by limitation in view of the proviso to section 153C of the Act.

5.2 After due consideration of the contentions put forth, we find that assessment year 2008-09 is outside the ambit of the provisions of section 153C of the Act in view of the proviso thereto. We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C of the Act is found to be in order, the year of search in the case on hand is to be reckoned as assessment year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15-9-2014 and the six assessment years immediately preceding the same would commence from assessment year 2009-10 and end with assessment year 2014-15. In these circumstances, assessment year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. In coming to this view, we drew support from the decision of the ITAT, Pune Bench in the case of Sinhgad Technical Education Society (2017) 16 taxmann.com 101 (SC) : 2017 TaxPub(DT) 3941 (SC), and accordingly hold that the Commissioner (Appeals) was correct in deciding this ground in favour of the assessee.

6. In view of the fact that we have held that the very initiation of proceedings under section 153C of the Act in the case on hand, for assessment years 2008-09, 2011-12 and 2012-13, is bad in law, thereby rendering the assessment proceedings for the impugned assessment years void-ab-initio; we refrain from deciding on the other grounds raised by Revenue on merits for these years as they are rendered academic in nature.

7. In the result, Revenue’s appeals for assessment years 2008-09, 2011-12 and 2012-13 are dismissed as indicated above.

Shri C.T. Ravi — Revenue’s appeals in ITA Nos. 282 to 286/Bang/2018 for assessment years 2008-09 to 2012-13

8. Briefly stated, the facts of the case are as under:

8.1 A search operation under section 132 of the Income Tax Act, 1962 (in short ‘the Act’) was conducted in the case of one Shri H.B. Sudarshan on 8-6-2012. Consequent to the search in the case of Shri H.B. Sudarshan, notices under section 153C of the Act were issued, inter alia, to the assessee for assessment years 2008-09 to 2012-13, on 15-9-2014 requiring her to file returns of income. The assessee filed Returns of income for these assessment years on 17-12-2014 and the assessments were concluded under section 143(3) read with section 153C of the Act vide Orders, dated 30-3-2015. On appeal by the assessee, the Commissioner (Appeals)-11, Bangalore, in Orders, dated 24-11-2017 cancelled the orders of assessment for assessment year 2008-09 to 2012-13 as being void-ab-initio.

9. Aggrieved by the separate orders of Commissioner (Appeals)-11, Bangalore, dated 24-11-2017 for assessment years 2008-09 to 2012-13, Revenue has preferred these appeals before the Tribunal raising the following grounds:

9.1 Assessment Year 2008-09

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective additions of a sum of Rs. 1,08,26,400; on account of miscellaneous receipts based on seized CD whereas Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective addition of Rs. 12,15,745; on election related expenses when Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC)  settled that protective assessment should not be decided till substantive assessment reaches finality.

5. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

9.2 Assessment Year 2009-10

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective additions of a sum of Rs. 1,75,00,000, on account of miscellaneous receipts based on seized CD whereas Gujarat High Court in 140 ITR 517 settled that protective assessment should not be decided till substantive assessment reaches finality.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective addition of Rs. 2,55,91,960 on election related expenses when in the case of Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC) where it was settled that protective assessment should not be decided till substantive assessment reaches finality.

5. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

9.3 Assessment Year 2010-11

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective additions of a sum of Rs. 1,10,93,254, on account of Undisclosed Investment in residential House where as Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC) settled that protective assessment should not be decided till substantive assessment reaches finality.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

9.4 Assessment Year 2011-12

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective additions of a sum of Rs. 1,78,28,445, on account of Undisclosed Investment in residential House where as Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC) settled that protective assessment should not be decided till substantive assessment reaches finality.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective addition of Rs. 63,45,500 on election related expenses when in the case of Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC) where it was settled that protective assessment should not be decided till substantive assessment reaches finality.

5. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

9.5 Assessment Year 2012-13

1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).

2. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.

3. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in deleting protective additions of a sum of Rs. 1,06,97,067, on account of Undisclosed Investment in residential House where as Gujarat High Court in (1983) 140 ITR 517 (Guj) : 1983 TaxPub(DT) 0325 (Guj-HC) settled that protective assessment should not be decided till substantive assessment reaches finality.

4. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act, 2000 and section 2(22AA) of the Income Tax Act and section 292C of the Income Tax Act.

10. Ground Nos. 1 and 2 (for assessment years 2008-09 to 2012-13)

10.1 In these grounds (supra), Revenue has, inter alia, raised legal grounds assailing the impugned orders of the Commissioner (Appeals). The learned DR for Revenue vehemently contended that the Commissioner (Appeals) has seriously erred in relying the decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd., (2016) 385 ITR 346 (Karn) : 2016 TaxPub(DT) 2423 (Karn-HC). The learned DR, in submissions, put forth the following arguments/propositions. According to the learned DR, firstly, the assessee did not raise the issue of assumption of jurisdiction under section 153C of the Act during the course of assessment proceedings and he is therefore precluded from objecting to the same in appellate proceedings; since his participation in the assessment proceedings without objecting to the assessing officer’s (AO) assumption of jurisdiction under section 153C of the Act takes away his right to raise this ground. It is contended that in view of the above, the Commissioner (Appeals) has erred in entertaining the ground on jurisdiction raised by the assessee for the first time before him. Secondly, the satisfaction recorded by the assessing officer is in order and that there was no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material. Initiation of proceedings under section 153 of the Act need not be based on incriminating material, but can be done even on the basis of material which is not incriminating. The learned DR thirdly contended that the Commissioner (Appeals), whose powers are co-terminus with that of the assessing officer, while considering the issue of jurisdiction, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153C of the Act and done whatever is required to strengthen the orders of assessment. In this regard, the learned DR, inter alia, placed reliance on the decisions of the Hon’ble Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and of the Hon’ble Apex Court in the case of CIT v. Singhad Technical Education Society [C.A. No. 11080 of 2017 and others, dt. 29-8-2017] : 2017 TaxPub(DT) 3941 (SC).

10.2 Per contra, in response to the above contentions of the Revenue, the learned AR for the assessee submitted that firstly, there was no requirement of law that the assessee must first object to the assumption of jurisdiction by assessing officer under section 153C of the Act for the same issue to be taken up in appellate proceedings. The issue of assumption of jurisdiction involves purely a question of law and the assessee is in no way precluded from raising this issue/question before an appellate authority even if the same is not raised before the assessing officer and the assessee has participated in the assessment proceedings. Secondly, according to the learned AR, the Commissioner (Appeals) has rightly decided the issue of jurisdiction by relying on the decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Karn) : 2016 TaxPub(DT) 2423 (Karn-HC)  wherein it was held that the presence of incriminating material leading to undisclosed income was a sine qua non for invoking the provisions of section 153C of the Act. Thirdly, the learned AR contends that the Commissioner (Appeals) could not have strengthened the orders of assessment since his hands were tied on the issue of jurisdiction because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating as they did not result in any addition by way of undisclosed income. The material based on which additions were made in the orders of assessment were not the ones relied upon to arrive at the satisfaction for invoking proceedings under section 153C of the Act. According to the learned AR, though the powers of the Commissioner (Appeals) are co-terminus with that of the assessing officer, the Commissioner (Appeals) has no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act. The learned AR also submitted that the judicial pronouncements cited by the Revenue were not applicable to the facts of the case on hand.

10.3 We have considered the rival submissions/contentions put forth and carefully perused the material on record and proceed to consider and adjudicate the legal grounds raised by Revenue at Sl. Nos. 1 and 2 for assessment years 2008-09 to 2012-13.

10.4 In this regard, the propositions put forth by Revenue are dealt with hereunder.

10.4.1 On the issue that the assessee did not have the locus standi to object to the assumption of jurisdiction under section 153C of the Act since he participated in the assessment proceedings without objecting to the same during the said proceedings, the learned DR has placed reliance on the following judicial pronouncements; which we shall deal with —

(i) CIT v. Vijaybhai Chandari (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC)

Briefly, the facts of this case are that the Department invoked proceedings under section 153C of the Act against the assessee. The assessee was provided with copies of the documents seized which formed the basis for invoking the provisions under section 153C of the Act. The assessee challenged the notice issued thereunder before the Hon’ble Gujarat High Court by way of a writ petition, on the ground that the seized documents did not belong to him. The Hon’ble High Court in its order quashed the notice. Revenue filed an appeal before the Hon’ble Apex Court, which held that the assessee ought to have objected to the notice before the assessing officer and follow due process of law as he had alternate remedy and ought not to have filed the writ before exhausting the alternate remedy available to him. In that view of the matter, the Hon’ble Apex Court set aside the judgment of the Hon’ble High Court. In our humble view, the above case does not help Revenue as the same cannot be applied to the facts of the case on hand; which are distinctly quite different. In the case on hand, the assessee has challenged the jurisdiction before the Commissioner (Appeals) after completion of assessment proceedings and has followed the due process of law. There is no dispute that the seized material belong to the assessee in the case on hand. The subject matter of dispute is whether the said seized material, not being incriminating in nature, can be the basis for invoking the provisions under section 153C of the Act.

(ii) CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC)

In this case, the Hon’ble Delhi High Court held that the Tribunal/ITAT was not correct in remanding the proceedings to the assessing officer when the assessee had not asked the assessing officer for the reasons recorded for initiating proceedings under section 147 of the Act and also did not file any objections to the same. In our humble view, the above judicial pronouncement is not relevant to the issue on hand as the said decision was rendered in the context of section 147 and not section 153C of the Act.

(iii) CIT v. Sohan Lal Sewa Ram Jaggi (2009) 222 CTR 412 (All) : 2009 TaxPub(DT) 0311 (All-HC)

This case deals with the delay in issue of notice under section 143(2) of the Act and is not applicable to the case on hand.

(iv) CIT v. British India Corporation Ltd. (2011) 337 ITR 64 (All) : 2011 TaxPub(DT) 1982 (All-HC) 

(v) Vaishali Builders & Colonizers v. Addl. CIT (2012) 138 ITD 227 (ITAT-Jodhpur) : 2012 TaxPub(DT) 2832 (Jod-Trib) 

The above cases deal with the issue of jurisdiction under section 124 of the Act and are not applicable to the case on hand.

(vi) PCIT v. Sheetal International Ltd., (ITA Nos. 375 to 379/2017) (Del.-HC) : 2019 TaxPub(DT) 0362 (Del-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(vii) PCIT v. Nau Nidh Overseas Pvt. Ltd., (Delhi-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(viii) PCIT v. 3VS Instronics Ltd., (2017) 82 taxmann.com 357 (Del.-HC) : 2017 TaxPub(DT) 1787 (Del-HC)

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(ix) CIT v. Smt. Sudha Gafoor (2017) 408 ITR 246 (Kar.-HC) : 2017 TaxPub(DT) 5078 (Ker-HC) 

The Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

(x) Rajesh Sunderdas Vaswani v. ACIT 76 taxmann.com 311 (Guj.-HC) : 2017 TaxPub(DT) 0054 (Guj-HC)

The Hon’ble High Court held on the facts therein that the assessing officer of the ‘Person Searched’ had indeed recorded a satisfaction that the seized material did not belong to the person searched but to the ‘other person’. This decision is not applicable to the issue before us in the case on hand.

(xi) Raymond Woolen Mills Ltd. v. CIT (1999) 236 ITR 34 (SC) : 1999 TaxPub(DT) 0348 (SC) 

This decision was rendered in respect of the sufficiency and adequacy of the reasons recorded for re-opening assessment under section 147 of the Act and therefore in our humble view, would not be applicable to the issue of dispute in the case on hand.

(xii) Ganapati Fin Cap Services Pvt. Ltd., v. CIT (WP(C) 525/2015 and others) (Del.-HC)

Where the Hon’ble High Court held that when the assessing officer for the ‘person searched’ and the ‘other person’ is one and the same, there is no requirement for recording two separate satisfactions. This decision, in our humble view, is not applicable to the issue before us in the case on hand.

10.4.2 On the issue that the satisfaction recorded by the assessing officer is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material, but can be done even on the basis of material which is not incriminating in nature, the learned DR placed reliance on the following judicial pronouncement —

(i) SSP Aviation Ltd. v. DCIT (2012) 346 ITR 176 (Del.-HC) : 2012 TaxPub(DT) 2131 (Del-HC)

In a writ filed by the assessee, the Hon’ble Delhi High Court held that the assessee could not get the notice issued under section 153C of the Act quashed for the reason that in the satisfaction note there was no firm conclusion/opinion that the seized material showed undisclosed income. In our view, this judicial pronouncement does prima facie help the Revenue in the case on hand and we shall come back to the same later.

10.5 In respect of the legal grounds raised by Revenue at Sl. No. 1 and 2 for assessment years 2008-09 to 2012-13, the counter propositions put forth by the learned AR on behalf of the assessee are considered and dealt with hereunder.

10.5.1 On the proposition put forth by Revenue that the assessee did not have locus standi to object to the assumption of jurisdiction under section 153C of the Act since he participated in the assessment proceedings without objecting to the same during the said proceedings and is therefore precluded from objecting to the same in appellate proceedings, the learned AR for the assessee had placed reliance on the following judicial pronouncements in support of the assessee, which are being dealt with hereunder :–

(i) CIT v. Sinhgad Technical Education Society (C.A. No. 11080 of 2017) (SC) : 2017 TaxPub(DT) 3941 (SC)

In this case, the Solicitor General of India, appearing on behalf of Revenue, argued that it was improper on the part of the ITAT to allow that ground, questioning the jurisdiction under section 153C of the Act, to be raised by the assessee when it had not objected to the same before the assessing officer (para 17 of the order). The Hon’ble Apex Court observed that the Tribunal/ITAT entertained the ground, even though not objected to before the assessing officer during assessment proceedings, for the reason that jurisdictional issue was a legal ground taken up on the basis of facts on record and therefore could be raised at an appellate forum. The Hon’ble Apex Court at paras 18 and 19 of its order held that the reasoning of the Tribunal to be logical and valid and that it had correctly admitted the ground and dealt with the same on merits as well. Thus, it is clear that the Hon’ble Apex Court has decided this issue in favour of the assessee and against the Revenue, thereby giving a finality to this issue.

10.5.2 On the proposition put forth by Revenue that the satisfaction recorded by the assessing officer is in order and that there is no requirement in law that the satisfaction arrived at to initiate proceedings under section 153C of the Act must be based on incriminating material and can be initiated even on the basis of material, which is not incriminating in nature, the learned AR has relied on the following judicial pronouncements :–

(i) CIT v. IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Kar) : 2016 TaxPub(DT) 2423 (Karn-HC)

In this case, before the Hon’ble jurisdictional High Court of Karnataka, the issue for consideration and adjudication was whether the Bangalore Bench of the Tribunal was right in holding that it was not necessary to record a satisfaction note to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that “the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act”. After considering the decision of the Hon’ble Apex Court in the cases of Manish Maheshwari v. ACIT (2007) 289 ITR 341 (SC) : 2007 TaxPub(DT) 1020 (SC)  and CIT v. Calcutta Knitwears (2014) 362 ITR 673 (SC) : 2014 TaxPub(DT) 1547 (SC) and other judgments of the Hon’ble Apex Court and other Hon’ble High Courts; including the case of SSP Aviations Ltd. v. DCIT (2012) 20 taxmann.com 214 (Delhi) : 2012 TaxPub(DT) 2131 (Del-HC) which supports the Revenue and on consideration of the CBDT Circular No. 24/2015, dt. 31-12-2014, the Hon’ble Karnataka answered the question of law at paras 55 and 56 thereof as under :–

(ii) CIT-III, Pune v. Sinhgad Technical Education Society (CA No. 11080 to 11083 of 2017, dt. 29-8-2017) (SC) : 2017 TaxPub(DT) 3941 (SC)

In this case the Hon’ble Apex Court held at paras 18 and 19 of its order that proceedings under section 153C of the Act can be initiated only in respect of those assessment years pertaining to which incriminating material has been seized. In our humble opinion, it is clear from this judgment of the Hon’ble Apex Court that initiation of proceedings under section 153C of the Act can be done in the case of an assessee only in respect of those assessment years pertaining to which seized material is incriminating in nature, i.e., the seized material must prima facie indicate undisclosed income. Any seized material which does not prima facie indicate undisclosed income cannot be termed as incriminating in nature. Therefore, for seized material to be considered to be incriminating in nature, it has to necessarily indicate prima facie undisclosed income. In view of the above, it is contended that it would be fair and reasonable to conclude that the judgment in the case of Sinhgad Technical Education Society (supra) approves the view/decision of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (2016) 385 ITR 346 (Karn) : 2016 TaxPub(DT) 2423 (Karn-HC) on the proposition that proceedings initiated under section 153C of the Act was not valid for the reason that there being no satisfaction recorded to the effect that the documents found/seized during the course of search were incriminating in nature and prima facie represented undisclosed income.

10.5.3 On the proposition that the Commissioner (Appeals), while considering the issue of jurisdiction, whose powers are co-terminus with that of the assessing officer, ought to have considered the orders of assessment in totality and not merely confined himself to material which formed the basis of initiation of proceedings under section 153 of the Act and should have done whatever was required to strengthen the order of assessment, the learned AR contended as under :–

It is contended that the Commissioner (Appeals) had to necessarily consider and decide the question of jurisdiction at the threshold/outset of proceedings and if the same was found to be in order, he could proceed to consider and adjudicate upon the additions made to the income of the assessee. It is submitted that, based on the facts, the Commissioner (Appeals) realized that his hands were tied on the issue of assumption of jurisdiction under section 153C of the Act because the material relied upon to invoke proceedings under section 153C of the Act were not incriminating and did not prima facie indicate undisclosed income and nor were any additions made based on these seized materials. It is further submitted that the Commissioner (Appeals) also must have realized that the material based on which additions were made in the orders of assessment are not the same material relied upon to arrive at a satisfaction to invoke the proceedings for assumption of jurisdiction under section 153C of the Act. It is also contended that the Commissioner (Appeals) had no choice/option but to cancel the orders of assessment as he was bound by the judgment of the Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (supra). According to the learned AR, the Commissioner (Appeals) could not have strengthened the orders of assessment, despite the fact that his powers are co-terminus with that of the assessing officer, as the very proceedings, initiated under section 153C of the Act was void-ab-initio and he had no powers to re-write the satisfaction required to invoke proceedings under section 153C of the Act.

The learned AR also contends that it is important to note the fact that the assessment jurisdiction of the assessee was transferred from his regular assessing officer at Chikkamagalur and notified to the Office of the DCIT, Central Circle 2(3), Bangalore by Order, dated 7-12-2012 and the satisfaction to invoke the provisions of section 153C of the Act was arrived only on 15-9-2014 by issue of notice thereunder. It is argued that there was no reason why the assessing officer could not have specified the seized materials which actually led to the additions made to the income of the assessee in the satisfaction note prepared for initiation of proceedings for assumption of jurisdiction under section 153C of the Act. Unless the assessing officer had reason to believe that the seized material, based on which the additions are made, did not belong to the assessee; in which case no proceedings could be initiated under section 153C of the Act based on the same. It is also contended that it is not possible to justify the decision to transfer the jurisdiction of assessments in the case on hand from the assessing officer at Chikkamagaluru to Central Circle, Bangalore; 2 years prior to arriving at satisfaction for assumption of jurisdiction under section 153C of the Act.

10.6 On a careful perusal and appraisal of the above cited judicial pronouncements by Revenue and the assessee, and after considering the rival arguments/contentions put forth, we proceed to adjudicate the following ground raised by Revenue hereunder:

10.7 Ground No. 1

10.7.1 “1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the order of Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. when the assessee has participated in the proceedings and had not challenged issue of notices as decided by Delhi High Court in the case of CIT v. Safetag International Pvt. Ltd. (2011) 332 ITR 622 (Del) : 2011 TaxPub(DT) 1058 (Del-HC) and Hon’ble Apex Court in the case of Shri Vijyabhai N Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC).”

10.7.2 The Hon’ble Apex Court in the case of CIT v. Sinhgad Education Society in C. A. No. 11080 of 2017 arising out of SLP (C) No. 2527 of 2015 : 2017 TaxPub(DT) 3941 (SC) has categorically held that an assessee is not precluded from raising the issue of jurisdiction, merely because it did not object to the same during assessment proceedings and participating therein, as the issue was purely a legal issue and could be raised at any time in the course of appellate proceedings. In our view, the Hon’ble Apex Court in the aforesaid decision in the case of CIT v. Sinhgad Education Society has clearly decided this issue in favour of the assessee and against Revenue. Consequently, ground No. 1 raised by the Revenue for assessment years 2008-09 to 2012-13 is dismissed.

10.8 Ground No. 2

10.8.1 “1. Whether on the facts and the circumstances of the case, the learned Commissioner (Appeals) is correct in relying on the case of Singhad Technical Society case as the decision does not restrain the assessing officer from making addition only on the incriminating material and it only refers that seized material should pertain to third person and terms it a condition precedent to initiate proceeding and not for finalization of assessment.”

10.8.2 It is an undisputed facts that the following two seized material were the only seized material that formed the basis for initiation of proceedings under section 153C of the Act in the case on hand :–

(i) A/HBS/10, Page 15 — Lease Agreement entered into by the assessee with one Somegowda;

(ii) A/HBS/10, Page 34 — Share allotment certificate issued in favour of the assessee by Pantaloon Ltd., giving details of allotment of Bonus shares as well as original shares held by the assessee in the said company.

Admittedly, no additions to income/undisclosed income have been made in the orders of assessment based on these two seized materials (cited above at (i) and (ii) (supra). Therefore, it is admittedly an undisputed fact that these two seized material cannot be considered to be incriminating in nature as, prima facie, they do not represent undisclosed income.

10.8.3 The Hon’ble Karnataka High Court in the case of IBC Knowledge Park (P) Ltd. (supra) has held that in order to invoke proceedings under section 153C of the Act it is necessary to record a satisfaction to the effect that the seized material relied upon to invoke proceedings under section 153C of the Act is incriminating in nature and prima facie represent undisclosed income. In our view, this proposition laid down by the Hon’ble jurisdictional High Court in the case of IBC Knowledge Park (P) Ltd. (supra) is impliedly approved by the Hon’ble Apex Court in the case of CIT v. Sinhgad Technical Educaiton Society (supra) as the Hon’ble Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those assessment years for which there is incriminating seized material which prima facie represent undisclosed income.

10.8.4 In the course of arguments, the learned DR for Revenue put forth the proposition that the learned Commissioner (Appeals) ought to have sustained even those additions based on material, not relied upon to invoke proceedings under section 153C of the Act and that the Commissioner (Appeals) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition in as much as the Commissioner (Appeals) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C of the Act in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the Commissioner (Appeals) has rightly cancelled the orders of assessment for assessment years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue’s appeals for assessment years 2008-09 to 2012-13 are dismissed.

11. Assessment Year 2008-09

11.1 As regards assessment year 2008-09, there is one other issue, though academic in nature as the same was not raised by Revenue in the grounds of appeal, but was argued by the learned DR during the course of hearing. The issue argued was that the Commissioner (Appeals) had erred in upholding the ground raised by the assessee that the initiation of proceedings for assessment year 2008-09 was barred by limitation in view of the proviso to section 153C of the Act.

11.2 After due consideration of the contentions put forth, we find that assessment year 2008-09 is outside the ambit of the provisions of section 153C of the Act in view of the proviso thereto. We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C of the Act is found to be in order, the year of search in the case on hand is to be reckoned as assessment year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15-9-2014 and the six assessment years immediately preceding the same would commence from assessment year 2009-10 and end with assessment year 2014-15. In these circumstances, assessment year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. In coming to this view, we drew support from the decision of the ITAT, Pune Bench in the case of Sinhgad Technical Education Society (2017) 16 taxmann.com 101 (SC) : 2017 TaxPub(DT) 3941 (SC), and accordingly hold that the Commissioner (Appeals) was correct in deciding this ground in favour of the assessee.

12. In view of the fact that we have held that the very initiation of proceedings under section 153C of the Act in the case on hand, for assessment years 2008-09, 2011-12 and 2012-13, is bad in law, thereby rendering the assessment proceedings for the impugned assessment years void-ab-initio; we refrain from deciding on the other grounds raised by Revenue on merits for these years as they are rendered academic in nature.

13. In the result, Revenue’s appeals for assessment years 2008-09 to 2012-13 are dismissed as indicated above.

14. To sum up, Revenue’s appeals in ITA Nos. 272 to 274/Bang/2018 for assessment years 2008-09, 2011-12, 2012-13 and in ITA Nos. 282 to 286/Bang/2018 for assessment years 2008-09 to 2012-13 are dismissed as indicated above.