Validity of Reassessment on the basis of information gathered during course of statement recorded under section 132(4) from searched person by investigation wing

Validity of Reassessment on the basis of information gathered during course of statement recorded under section 132(4) from searched person by investigation wing

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Validity of Reassessment on the basis of information gathered during course of statement recorded under section 132(4) from searched person by investigation wing

 

Short Overview  Joint receipt was seized during the course of search as mentioned by AO in the assessment order as well as remand report and assessment was made under section 147 on the basis of statement recorded under section 132(4), appraisal report and the joint receipt. All of them were directly related to the information found from the searched person consequent to the search under section 132. No fresh information was collected by AO or no information had come to the notice of AO in normal course, other than the information collected during the course of search from searched person. Therefore, as provided under sections 153A and 153C, search assessments was required to be made under section 153A or section 153C, but not under section 147.
AO reopened assessment under section 147 in assessee s case on the basis of concealment of income estimated by DDIT (Inv.) in the appraisal report and made the additions on the basis of joint receipt which was found and seized during the course of search and the statement was recorded under section 132(4) on 10-4-2014 from M. Vijaya Kumar, Managing Director of Navya Constructions who was under the search. Assessee contended that assessments was to be made under section 153C, but not under section 147.
It is held that  There was no dispute that joint receipt was seized during the course of search as mentioned by AO in the assessment order as well as in remand report and assessment was made under section 147 on the basis of statement recorded under section 132(4), appraisal report and the joint receipt. All of them were directly related to the information found from the searched person consequent to the search under section 132. No fresh information was collected by AO or no information had come to the notice of AO in normal course, other than the information collected during the course of search from searched person. Therefore, as provided under sections 153A and 153C, search assessments was required to be made under section 153A or section 153C, but not under section 147.
Decision: In assessee s favour
Applied: G. Koteswara Rao & Ors. v. DCIT [I.T.A. No. 400/Viz/2014, dated 29-10-2015] : 2016 TaxPub(DT) 0070 (Visakhapatnam-Trib)
IN THE ITAT, VISAKHAPATNAM BENCH
N.K. CHOUDHRY, J.M. & D.S. SUNDER SINGH, A.M.
Samanthapudi Lavanya v. Asstt. CIT
I.T.A. Nos. 704 to 727/Viz/2019, I.T.A. Nos. 73 to 75/Viz/2020
27 April, 2021
Appellants by: G.V.N. Hari, A.R.
Respondent by: D.K. Sonowal, CIT, D.R.
ORDER
Per Bench:
These appeals are filed by the assessee against the order of the Commissioner (Appeals) [CIT(A)]-3, Visakhapatnam in common Order, dated 31-5-2018 for the assessment year (A.Ys.) 2009-10 to 2011-12. Facts of the case are identical in all the appeals, hence all the appeals are clubbed, heard together and disposed off in a common order for the sake of convenience. The facts of the case are extracted from I.T.A. No. 725/Viz/2019 and the same are applicable in all the appeals except the change in amounts.
  1. Condonation of Delay:These appeals are filed by the assessees with the delay of 492 days and the assessees have filed the condonation petitions stating that the assessees have received the appeal orders from the learned Commissioner (Appeals) on 31-5-2018 and the appeals ought to have been filed on or before 30-7-2018, but the appeals were filed on 31-12-2019 resulting in delay of 492 days. The assessees have filed the petition for condonation of delay along with the affidavits. In their petition for condonation the assessees have stated that the income tax related matters were looked after by Shri A. Murali Mohana Raju, Accountant and he has collected all the necessary papers for filing the appeal from the Advocate and got it signed by the assessees and fell sick for 10 days and later on forgot the issue completely and the assessees were under the bona fide impression that the appeals were filed. The assessees have realized the fact of non-filing of appeals, only when the department has pressed for payment of the demand. On realizing the mistake the assessees have taken immediate steps for filing the appeals and accordingly appeals were filed with the delay of 492 days and hence, requested to condone the delay. During the appeal hearing, learned A.R. submitted that there was no mala fide intention and it was the bona fide belief of the assessee that the appeals were filed by the learned Accountant. The learned A.R. relied on the decision of the Hon’ble Supreme Court in the case of Senior Bhosale Estate (HUF) v. Assistant Commissioner of Income Tax in Civil Appeal Nos. 6671-6676 of 2010, dated 7-11-2019 : 2019 TaxPub(DT) 7747 (SC), wherein Hon’ble Supreme Court had condoned the delay of 1754 days on similar conditions.
  2. The learned D.R. vehemently objected for condoning the delay.
  3. We have heard both the parties and find that the assessees have established their case that due to the mistake of the learned Accountant appeals could not be filed which caused the delay. The department has not placed any material to show that the submissions made by the assessees are wrong ormala fide. The assessees are not going to get any benefit by delaying the appeal and it is not the case of deliberate attempt or the intention of the assessee to file the appeal belatedly. Hon’ble High Court of Telangana in the case of Thunuguntla Jagan Mohan Rao v. DCIT, Circle(2)-1, Hyderabad, in ITTA No. 20 of 2020, dated 13-8-2020 : 2020 TaxPub(DT) 3277 (Tela-HC) relied upon by the learned A.R. condoned the delay of 154 days and held that while condoning the delay, the Court should be liberal and show utmost consideration to the suitor if the explanation does not smack of mala fide or it is not put forth as part of dilatory strategy. The Hon’ble Supreme Court on similar facts of having no knowledge of passing the order, in the case of Senior Bhosale Estate (HUF) (supra) condoned the delay of 1754 days. We extract the relevant part of the order of Hon’ble Apex Court in Senior Bhosale Estate (HUF) (2019) 112 taxmann.com 134 (SC) : 2019 TaxPub(DT) 7747 (SC) which reads as under :–
  4. The appellant(s) had asserted that they had no knowledge about passing ofOrder, dated 29-12-2003, until they were confronted with the auction notices in June 2008 issued by the competent authority.
  5. Soon thereafter, the appellant(s) filed appeal(s) accompanied by the subject application(s) on 19-7-2008. Notably, the respondent(s) did not expressly refute the stand taken by the appellant(s) that they had no knowledge about passing ofOrder, dated 29-12-2003until June, 2008. Unless that fact was to be refuted, the question of disbelieving the stand taken by the appellant(s) on affidavit, cannot arise and for which reason, the High Court should have shown indulgence to the appellant(s) by condoning the delay in filing the concerned appeal(s). This aspect has been glossed over by the High Court.
  6. Accordingly, these appeals are allowed. We set aside the impugned order of the High Court and relegate the parties before the High Court, by allowing the civil application(s) filed by the appellant(s) for condonation of delay in filing the concerned appeal.
In the instant case the assessee was under the bona fide impression of having filed the appeal by the learned Accountant, but came to know the fact of not having filed the appeal when there was pressure from the department for payment of demand. Therefore, following the orders of the Hon’ble Supreme Court, the Hon’ble High Court of Telangana (supra) and the principles laid by Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC) : 1987 TaxPub(DT) 1279 (SC), we find it justifiable to condone the delay and admit the appeal of the assessee in the interest of justice. Accordingly the appeals are admitted.
  1. The assesses are individuals and filed the Returns of income for the assessment years 2009-10 to 2011-12 as under :–
Name of the Appellant
A.Y. 2009-10
A.Y. 2010-11
A.Y. 2011-12
Returned income
Date of filing
Returned income (DOF : 30-3-2012)
Returned Income
Date of Filing
K. Subba Raju
8,97,340
31-3-2010
4,22,325
14,52,780
31-3-2012
K. Lakshmii Sirisha
4,93,600
1,84,310
5,65,960
S. Raja Ramesh
9,33,271
4,03,190
12,11,580
K. Lakshmi Uma
7,02,539
60,850
5,47,900
K. Prasad
9,96,109
9-12-2010
2,80,230
13,39,360
30-3-2012
K. Bhaskara Raju
8,82,490
31-3-2010
3,90,710
10,63,700
31-3-2012
K. Siva Rama Raju
9,55,230
4,32,490
11,72,850
S. Lavanya
5,56,410
2,07,790
6,36,620
K. Krishna Kumari
6,17,860
2,30,710
7,10,260
4.1 Subsequently, the assessees have filed the revised returns of income for the assessment year 2009-10 on 30-3-2012 as per the details given below :–
Name of the Appellant
A.Y. 2009-10
K. Subba Raju
1,42,270
K. Lakshmii Sirisha
80,260
S. Raja Ramesh
2,02,490
K. Lakshmi Uma
1,49,400
K. Prasad
2,39,992
K. Bhaskara Raju
5,84,880
K. Siva Rama Raju
2,69,050
S. Lavanya
1,09,620
K. Krishna Kumari
1,30,450
4.2 The assessee along with 8 other family members (in short’ land owners’) have entered into development agreement dated 1-12-2007 with M/s. Navya Constructions and Developers (builders/builder) in respect of their land admeasuring 10,345 sq.yards located at Nathayyapalem, Visakhapatnam with sharing ratio of 35% to the land owners and 65% to the builders. As per the development agreement, the assesses/land owners are entitled for constructed area of 81,890 sq.ft. in the form of 62 flats in lieu of surrender of 6,828.228 sq.yards of land given to the developers. The assesses, i.e., Mr. K. Subba Raju and 8 others family members have admitted the aggregate sale consideration of Rs. 6.99 crores for capital gains purposes as per their respective share holding in the land for the financial years 2008-09 to 2010-11 relevant to the assessment years 2009-10 to 2011-12 as under :–
Financial Year
Assessment Year
Consideration admitted for all 62 flats (Rs.)
2008-09
2009-10
1,27,04,500
2009-10
2010-11
1,63,44,500
2010-11
2011-12
4,09,04,000
TOTAL
6,99,53,000
4.3 A Search and seizure operations under section 132 of the Income Tax Act, 1961 (in short ‘Act’) were conducted in the case of ‘Navya Constructions Group’ (in short ‘Navya group’/builders) on 17-12-2013 and the group is engaged in the business of constructions and development of house properties in and around the Visakhapatnam District, since, the year 2005. During the course search proceedings a statement was recorded on oath from Shri M. Vijaya Kumar, Managing Director of Navya Constructions under section 132(4) on 10-4-2014, wherein, he had stated that the firm (builders) had sold 48 flats of land owners share and received the amount of Rs. 12,42,15,000 and out of which a sum of Rs. 4,31,27,426 was retained by the firm and the balance amount of Rs. 8,10,87,574 was paid to the land owners. The Deputy Director of Income Tax (Inv) (in short DDIT) during the search proceedings recorded the statement from Shri K. Subba Raju also on 11-4-2014, wherein he has confirmed that the builder had sold 48 flats and the remaining 14 flats were sold by them directly, however has not confirmed the actual amount received from the Builders. During the course of search proceedings, it was stated that the builder had submitted the Joint Receipt dated 21-12-2012 written on Rs. 100 stamp paper to the DDIT(Inv.), as per which Sri K.Subba Raju and others have confirmed the receipt of Rs. 8,10,87,574 from the Navya Group. The DDIT (Inv) has estimated the concealment of income of Rs. 2.65,06,574 in the hands Shri K. Subba Raju and eight other family members for transfer of land to Navya Constructions for development purposes in the appraisal report. On the basis of the appraisal report received from the DDIT(Inv),the assessing officer (AO) has reopened the assessments and issued the notice under section 148 of the Act on 30-3-2016 to the land owners, i.e., Shri Kanumuri Subba Raju and 8 others calling for the return of income for the assessment year 2009-10 to 2011-12. The assessee has filed a letter on 23-9-2016 requesting to treat the return of income filed on 30-3-2012 as the return in response to the notice issued under section 148 of the Act.
4.4 Against the admitted sale consideration of Rs. 6,99,53,000 for 62 flats by the land owners, the assessing officer estimated the sale consideration of Rs. 9,64,59,574 as under :–
Rs.
Sale consideration received in respect of 48 flats from the Builders
8,10,87,574
Less: Sale consideration offered in returns of income by land owners
6,99,53,000
Difference of sale consideration not offered for taxation (8,10,87,574-6,99,53,000)
1,11,34,574
Add: Estimated Sale consideration of 14 flats sold by land owners directly
1,53,72,000
Total sale consideration not offered by the land owners
2,65,06,574
4.5. Total Sale consideration estimated for 62 flats of land owners :–
Rs.
Amount paid by the builder for 48 flats
8,10,87,574
Sale consideration estimated for 14 flats
1,53,72,000
TOTAL
9,64,59,574
Accordingly the assessing officer made the addition of Rs. 2,65,06,374 as undisclosed sale consideration in the hands of the assessee and 8 other family members for the assessment years 2009-10 to 2011-12 and completed the reassessments under section 147 read with section 143(3) making the addition as per the details given below :–
Name of the assessee
Assessment Years
Concealment of Income (Rs.)
K. Subba Raju
2009-10, 2010-11 and 2011-12
36,23,449
K. Lakshmii Sirisha
2009-10, 2010-11 and 2011-12
36,23,449
S. Raja Ramesh
2009-10, 2010-11 and 2011-12
36,23,449
K. Lakshmi Uma
2009-10, 2010-11 and 2011-12
36,23,449
K. Prasad
2009-10, 2010-11 and 2011-12
31,35,728
K. Bhaskara Raju
2009-10, 2010-11 and 2011-12
24,01,495
K. Siva Rama Raju
2009-10, 2010-11 and 2011-12
19,16,425
S. Lavanya
2009-10, 2010-11 and 2011-12
24,01,495
K. Krishna Kumari
2009-10, 2010-11 and 2011-12
21,57,635
5.0 Against the order of the assessing officer, the assessee went on appeal before the learned Commissioner (Appeals) and challenged assessments on merits as well as on technical grounds. The learned Commissioner (Appeals), with regard to assessee’s objection of completion of assessment without communicating the reasons held that the assessing officer has shown the reasons recorded to the learned A.R. of the assessee during the assessment proceedings and hence viewed that there was no lapse on the part of the assessing officer in communicating the reasons to the assessee and accordingly dismissed the appeal of the assessee and held the reassessment made under section 147 read with section 143(3) is valid.
5.1. With regard to invoking the jurisdiction under section 147instead of 153C, the learned Commissioner (Appeals) observed that the assessing officer had relied on the information furnished by Shri M. Vijaya Kumar, M.D. of Navya Group on 10-4-2014 in the statement recorded under section 132(4) and also the statement of Shri K. Subba Raju on 11-4-2014 and came to conclusion that sum of Rs. 8,10,87,574 was received for 47 for flats. The learned Commissioner (Appeals) also viewed that the Joint receipt dated 21-12-2012 was submitted to the DDIT (Inv.) by the builders during the course of post search enquiries but not seized during the search.
The learned Commissioner (Appeals) viewed that the evidences collected during the post search enquiries does not disentitle the assessing officer to forgo the powers vested under section 147 and 148 and thus held that the assessing officer rightly invoked the jurisdiction under section 147 for reopening the assessment and the case does not fall under the scope of 153C of the Act and hence dismissed the appeal of the assessee on validity of initiation of proceedings under section 147 instead of 153C of the Act.
5.2. The assessment was also challenged on merits as well for sustaining the addition of Rs. 1,11,34,574 (i.e. the difference between sale consideration stated to be paid at Rs. 8,10,87,574 and the sum of Rs. 6,99,53,000) admitted in the returns of income by the assessee and 8 others for the assessment years 2009-10 to 2011-12. The learned Commissioner (Appeals) sustained the addition.
5.3. Against the order of the learned Commissioner (Appeals) the assessees have filed the appeals before this Tribunal and raised the following grounds :–
  1. The order of the learned Commissioner (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
  2. The learned Commissioner (Appeals) ought to have quashed the notice issued by the assessing officer under section 148 as invalid and consequently ought to have quashed the reassessment proceedings as void ab initio.
  3. Without prejudice to the above, the learned Commissioner (Appeals) ought to have quashed the reopening as the reasons recorded for reopening were not provided to the appellant
  4. Without prejudice to the above, the learned Commissioner (Appeals) ought to have quashed the assessment made under section 143(3) read with section 147 of the Act in as much as the assessment ought to have been made under section 143(3) read with section 153C of the Act.
  5. Without prejudice to the above, the learned Commissioner (Appeals) is not justified in upholding the action of the assessing officer in recomputing the capital gains at Rs, 927,050 as against Rs. 1,78,185 admitted by the appellant by adopting the sale consideration of flats at Rs. 9,64,59,574 as against the actual consideration of Rs. 6,99,53,000 received by the appellant and other co-owners.
  6. Any other grounds may be urged at the time of hearing.
6.0 Ground No. 1 and 6 are general in nature which does not require specific adjudication.
7.0 Ground No. 2 and 3 are related to the completion of assessment without communicating the reasons. The assessee in ground No. 2 and 3 challenged the validity of reassessments made under section 147 read with section 143(3) without communicating the reasons. In the instant case, the assessing officer had issued the notice under section 148 calling for the return of income and the assessee has filed a Letter, dated 23-9-2016 to treat the return already filed as return in response to the notice under section 148. Subsequently the assessee has requested for supply the reasons recorded for reopening the assessment, vide Letter, dated 21-10-2016. The assessing officer did not furnish the reasons recoded for reopening the assessment as requested by the assessee, however shown the reasons recorded to Shri Rama Chandra Murthy, CA and the learned A.R. of the assessee during the course of assessment proceedings.
7.1. During the appeal hearing learned A.R. argued that the assessing officer has completed the assessments under section 143(3) read with section 147, without furnishing reasons recorded by the assessing officer to the assessee, hence, the same is bad in law. The learned AR further submitted that the learned Commissioner (Appeals) has rejected the contention of the assessee on the ground that the assessing officer had shown the reasons to the Authorized Representative of the assessee during the assessment proceedings and the assessee was provided with a copy of the reasons during the appellate proceedings therefore viewed that the assessing officer had complied with legal requirement of supplying the reasons. The learned A.R. further argued that mere showing the reason to the A.R. of the assessee during the assessment proceedings is not sufficient compliance and the assessing officer must supply the reasons recorded to the assessee, once the assessee asks the reasons specifically. The learned A.R. further submitted that the failure to supply the reasons recorded, before the conclusion of the assessment proceedings vitiates the reassessment proceedings and the defect cannot be cured at a later stage. The learned A.R. placed reliance on the decision of Hon’ble Supreme Court in GKN Drive Shafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 0734 (SC) and the decision of this Tribunal in the case of Sri Sarvaraya Sugars Ltd. (Order, dt. 20-12-2017 in ITA Nos. 294, 295 & 576/Viz/2014) : 2017 TaxPub(DT) 5591 (Visakhapatnam-Trib). The learned A.R. further submitted that the assessing officer has raised objection before the learned Commissioner (Appeals) in the remand report stating that the assessee had requested reasons in only one case for the one assessment year and hence, viewed the assessing officer is not obliged to furnish the reasons in all cases. In this regard the learned A.R. submitted that the assessee, i.e., Shri K. Subba Raju had agreed to bear the tax liability on behalf of all the co-owners and the assessing officer has completed the assessments in all cases on the basis of the statement recorded from Shri K. Subba Raju therefore argued there is no justification to take such stand by the assessing officer.
7.2. On the other hand, the learned D.R. argued that the assessing officer has supplied the reasons by showing the same to the learned Authorized representative during the course of assessment proceedings. Therefore, argued that there is no merit in the argument of the learned A.R. that the assessment was completed without communicating the reasons. Since, the assessing officer has communicated the reasons to the assessee, the legal requirement of supplying the reasons was complied with by the assessing officer and hence argued that the learned Commissioner (Appeals) has rightly upheld the validity of the assessment. Therefore, the learned D.R. requested to uphold the order of the learned Commissioner (Appeals) and no interference is called for in the order of the learned Commissioner (Appeals) and dismiss the appeals of the assessee.
  1. We have heard both the parties and perused the material placed on record. In the instant case, the assessee has requested for supply of reasons and the assessing officer has not communicated the reasons in writing, however, shown the reasons recorded to the authorized representative of the assessee during the course of assessment proceedings. The other objection of the assessing officer was that the assessee had requested for reasons only in one case, i.e., Shri K. Subba Raju and not other cases and hence viewed that the assessing officer is not obliged in supplying reasons in other cases. There is no dispute that the assessing officer has completed the assessment of all cases on the basis of the statement recorded from Mr. K. Subba Raju and on his assurance that he will take care of the tax matters and bear the taxes of all the family members. There is also no dispute that Mr. Subba Raju has requested for reason recorded for reopening of assessment. When the assessing officer had completed the assessment of the assessee as well as eight others consisting of 25 assessments for 3 different years on the statement taken from Shri K. Subba Raju and on his assurance of taking care of all the income tax issues of himself and his family members, we do not find any justification in the argument of the learned assessing officer not to supply the reasons in other cases on the request made by Shri Subba Raju. It is pertinent to note that the assessing officer has not furnished the reasons even in the case of Mr. K. Subba Raju. Therefore, in the facts and circumstances of the case, we are of the considered view that the assessing officer is bound to communicate the reasons in all 25 cases on the request made by Shri K. Subba Raju and thus, the objection of the assessing officer with regard to non-receipt of request in other cases does not stand on its legs and hence, the same is liable to be rejected.
8.1 In the instant case, the assessee has requested the reasons for reopening of the assessment and the assessing officer did not communicate the reasons in writing. Communication of reasons for reopening of assessment is not a mere formality and it is a legal requirement. When the assessee has requested for reasons, it is mandatory obligation of the assessing officer to communicate the reasons as decided by Hon’ble Supreme Court in the case of GKN Drive Shafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 0734 (SC). Hon’ble Supreme Court in the case cited held that on filing the return, the assessee has the right to request for the reasons and the assessing officer is obliged to furnish the reasons recorded to the assessee. On furnishing the reasons, the assessee has right to place the objections for reopening the assessment and the assessing officer is bound to pass speaking order on the objections raised by the assessee. Thus communication of reasons to the assessee has specific purpose to address the issues of reopening the assessment under section 147. Therefore, once the assessee asks for the reasons specifically, the assessing officer is duty bound to communicate the reasons and non-furnishing the reasons renders the assessment made under section 147 read with section 143(3) as invalid. This issue was considered by this Tribunal in the case of Sri Sarvaraya Sugars Ltd. (Order, dt. 20-12-2017 in ITA Nos. 294, 295 & 576/Viz/2014) : 2017 TaxPub(DT) 5591 (Visakhapatnam-Trib). The coordinate bench of ITAT held as under :–
“9. The assessing officer has completed the assessment without communicating the reasons recorded for issue of notice under section 148, in spite of the specific request made by the assessee for furnishing the reasons. As per the judgment of Hon’ble Supreme Court in the case of M/s. GKN Drive Shafts (India) Ltd. v. ITO, it is obligatory on the part of assessing officer to communicate the reasons on furnishing the return of income. The assessee in response to the notice issued under section 148 submitted a letter to the assessing officer to treat the returns filed earlier as returns in response to the notice issued under section 148. Thus the assessee has complied with the mandate of Hon’ble Supreme Court judgment cited supra but the assessing officer failed to communicate the reasons. The assessee relied on the decision of Hon’ble High Court of Calcutta in the case of Berger Paints India Ltd. v. ACIT (supra), wherein Hon’ble High Court held that the assumption of jurisdiction of assessing officer under section 147 depends upon existence of reasons followed by communication thereof to the assessee. If the notice served under section 148 is challenged, the assessing officer cannot proceed with the assessment under section 147 unless reasons are communicated. In the instant case, the contention of the assessee is that the assessee has complied with the notice under section 148 and the assessing officer has not furnished the reasons recorded for issuance of notice under section 148 despite the request made by the assessee. The Revenue could not place any evidence to controvert the argument of the learned A.R. that the reasons were not communicated. Thus the assessee’s case is squarely covered by the decisions in the case of Berger Paints India Ltd. v. ACIT (supra) and CIT v. Trend Electronics (supra).
9.1. The Hon’ble Bombay High Court in the case of CIT v. Trend Electronics (supra) following the decision of CIT v. Videsh Sanchar Nigam Ltd. and applying the decision of Apex Court in the case of GKN Drive Shafts (India) Ltd. v. ITO held as under :–
“8. We find that the impugned order merely applies the decision of the Apex Court in GKN Driveshafts (India) Ltd. (supra). Further it also follows the decision of this Court in Videsh Sanchar Nigam Ltd. (supra) in holding that an order passed in reassessment proceedings are bad in law in the absence of reasons recorded for issuing a reopening notice under section 148 of the Act being furnished to the assessee when sought for. It is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever revenue seeks to exercise such power, they must strictly comply with the prerequisite conditions viz. reopening of reasons to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment.”
9.2. In the instant case, the assessing officer had issued notice under section 148 and the assessee has complied with the notice and requested for reasons. The assessing officer completed the assessment without communicating the reasons. Therefore, the facts of the case are similar to that of the decision of Hon’ble Bombay High Court relied upon by the learned A.R. cited supra. Respectfully following the decision of Hon’ble Bombay High Court, we hold that the assessment made under section 147 read with section 143(3) without communicating the reasons is bad in law. Accordingly, the orders framed under section 147 read with section 143(3) are quashed and the appeal of the assessee is allowed. Since, we have quashed the assessment made under section 143(3), we consider it is not necessary to adjudicate the grounds on merits.”
8.2. The Hon’ble A.P. High Court also considered the issue of validity of assessments for non-communication of reasons in Commissioner of Income Tax-III v. Shri N. Surya Prakasha Rao in Income Tax Appellate Tribunal Appeal No. 156 of 2014, dated 6-3-2014 relied upon by the learned A.R. and upheld the order of Tribunal and dismissed the appeal of the revenue. The department did not place any other judgments to controvert the decisions relied upon by the assessee. Similar issue was considered by Hon’ble Karnataka High Court in Pr. CIT v. V. Ramaiah in (2019) 103 taxamann.com 201 (Karn) : 2019 TaxPub(DT) 0033 (Karn-HC) and held that non communication of reasons recorded to the assessee is fatal to the assessment and the Hon’ble Supreme Court dismissed the SLP filed by the Revenue in (2019) 103 taxmann.com 202 (SC) : 2019 TaxPub(DT) 1802 (SC). For the sake of clarity we reproduce the relevant part of the order of Hon’ble High Court which reads as under :–
  1. Having heard the learned counsels for the parties, we are satisfied that no substantial question of law arises in the present appeal filed by the Revenue in as much as the recording of reasons for reassessment under section 147/148 of the Income Tax Act or non-communication thereof to the assessee does not amount to a mere procedural lapse. In view of the aforesaid Supreme Court decision inGKN Driveshaft’scase, it goes to the root of the matter and renders the reassessment order passed by the assessing authority without recording such reasons and communicating the same to the assessee, as being without jurisdiction.
  2. The contention raised by the learned counsel for the Revenue that in the order sheet dated 4-11-2011 in the reassessment proceedings were duly noted by the authorised representative appearing on behalf of the assessee and therefore, such assessee should be deemed to have been made aware of the reasons for reopening does not impress us.
  3. The Tribunal has clearly noted in its order after looking into the record of the case that the reasons which were placed before the learned Tribunal itself only for the first time were never communicated to the assessee during the contemporary period. Mere participation of the assessee or Authorized Representative in the reassessment proceedings does not amount to the assessee being made aware or known of the reasons for such reopening. The reasons now quoted by the learned Tribunal in the impugned order clearly indicates that they are purportedly detailed reasons and had the assessing authority given the said reasons before hand, the assessee could have raised objections before the assessing authority and the assessee could have rebutted the material on the basis of which the impugned reassessment proceedings were undertaken by the assessing authority. The assessee in the present case twice made a request to the assessing authority, but despite the specific requests, the assessing authority did not comply with the said request and supplied the reasons to the assessee. That casts a doubt even on fact of the recording of the reasons in the contemporary period by the assessing authority. The fact that such reasons are supplied before the learned Tribunal only for the first time was enough for by the learned Tribunal to hold that in view of the decision of the Hon’ble Supreme Court, the assessing authority lacked the jurisdiction in invoking the reassessment proceedings and therefore, the impugned reassessment order deserves to be quashed.
  4. The decision relied upon by the learned counsel for the Revenue is distinguishable on facts. The order which was to be passed by assessing authority as preliminary objection of assessee, once the assessee has raised the objection to such reassessment proceedings, the meeting of such objections in the main reassessment order, could be procedural aspect of the matter, but the recording of the reasons before the initiation of the reassessment proceedings and communication thereof to the assessee is sinequanon, as held by Hon’ble Supreme Court and that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be.
  5. In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order.
In view of the foregoing discussion, we hold that completion of assessment under section 143(3) read with section 147 of the Act, without communicating the reasons recorded to the assessee, when specifically requested is unsustainable and liable to be quashed.
  1. Now, we take up ground No. 4 which relates to the question as to whether in the facts and the circumstances of the case and the law, the assessing officer is right making the assessments under section 147 instead of invoking the jurisdiction under section 153C of the Act.
9.1. The learned A.R. argued that in the facts and circumstances of the case, having found the document during the course of search, the assessing officer ought to have made the assessment under section 153C but not under section 147 of the Act. The learned A.R. taking our attention to the order of the learned Commissioner (Appeals) submitted that in para No. 12(f) of the order, the learned Commissioner (Appeals) has given a finding that the assessing officer had relied on the statement of Shri M. Vijay Kumar, the Managing Director of Navya Group recorded under section 132(4) and the Joint receipt that was stated to be given by the builders during the post search enquiries and hence, viewed that reassessments made under section 147 of the Act are valid. The learned A.R. submitted that according to the learned Commissioner (Appeals), the assessment was reopened basing on the information already available on record and not on the basis of information collected by the department during the course of search, thus, held that the reassessment made under section 147 is valid. In this regard the learned A.R. has taken our attention to the para No. 6 in page No. 5 of the assessment order which reads as under :–
“6. In order to verify these facts, sworn statement of Sri Kanumuri Subba Raju was also recorded on 11-4-2014 during the search proceedings, wherein he has confirmed that the builder has sold 48 flats on behalf of the landlords and the remaining 14 flats were sold by them on their own. However, he has not confirmed the amount received from the builders and stated that the relevant information will be submitted soon. However, the landlords have not submitted the information. During the course of search proceedings, the builder has submitted the copy of ‘Joint Receipt’ dated 21-12-2012 written on stamp paper as per which Sri K.Subba Raju and others have confirmed that they had received an amount of Rs. 8,10,87,574 from M/s. Navya Constructions and Developers.”
The A.R. also invited our attention to Question No. 7 in page No. 4 of the assessment order, wherein Shri M. Vijaya Kumar had stated that they have paid the sum Rs. 8,10,87,574 as total sale consideration for sale of 48 flats in the statement given under section 132(4) of the Act. The learned A.R. asserted that as per the assessment order, joint receipt was seized during the course of search.
The learned A.R. argued that except the statement recorded under section 132(4), and the joint receipt that was seized during the course of search no other material is available with the department to believe that either the assessee had under stated the receipts or concealed the income. Thus submitted that, the basis for reopening the assessment was the Joint Receipt that was seized by the department during the course of search and the statement recorded under section 132(4), hence, argued that the assessing officer ought to have taken action under section 153C, but not under section 147 of the Act. The learned A.R. further argued that search assessments required to be made under section 153A or 153C as per the scheme, but not under section under section 147 of the act. Therefore argued that the assessment made under section 147 read with section 143(3) is invalid and required to be quashed and the assessee’s appeals to be allowed. The learned A.R. relied on the decision of Hon’ble Delhi High Court in the case of Pr. CIT (Central)-3 v. Anand Kumar Jain in ITA No. 23/2021, dated 12-2-2021 : 2021 TaxPub(DT) 1305 (Del-HC) and the decision of this Tribunal in the case of G. Koteswara Rao & others in I.T.A. No. 400/Viz/2014, dated 29-10-2015 : 2016 TaxPub(DT) 0070 (Visakhapatnam-Trib).
9.2. On the other hand, the learned D.R. relied on the order of the learned Commissioner (Appeals) and argued that the Joint Receipt was supplied by the builder during the post search enquiries to the DDIT but not seized during the search, therefore, argued that the same should not be considered as the incriminating material for invoking the jurisdiction under section 153C. Similarly, the learned D.R. argued the statement recorded under section 132(4) was recorded during post search enquiries, hence does not fall under the scope of section 153C, hence, submitted that assessing officer had rightly invoked the jurisdiction 147 of the Act and no interference is called for in the order of the learned Commissioner (Appeals).
  1. We have heard rival contentions and perused the material placed on record. It is seen from the order of the assessing officer that the assessment was reopened on the basis of concealment of income estimated by the DDIT (Inv.) in the appraisal report and made the additions on the basis of the joint receipt which was found and seized during the course of search and the statement recorded under section 132(4) on 10-4-2014 from Sri M. Vijaya Kumar, Managing Director of Navya Constructions who was under the search. Though the learned Commissioner (Appeals) stated in his order that the information was already available in the records of the department and joint receipt was supplied by the searched person during post search enquiries, the information available in the assessment order and the remand report shows apparently contradictory facts. The learned A.R. taken our attention to the assessment order para No. 6, wherein, the assessing officer had mentioned that during the course of search proceedings, the builder had submitted the copy of Joint Receipt dated 21-12-2012 which was seized. Further, the learned A.R. has taken our attention to the page No. 21 of the paper book, wherein the Assistant CIT, Central Circle-I, Vijayawada (AO) stated in the remand report that the Joint Receipt dated 21-12-2012 was seized during the course of search and the same was pertaining to the assessee’s business transactions. The learned A.R. also taken our attention to page No. 23 of the paper book, which is the forwarding letter of Addl. Commissioner of Income Tax, Central Range, Guntur dated 15-3-2018 to the learned Commissioner (Appeals) who endorsed the report of the assessing officer. As discussed earlier, the entire additions were also based on the statement recorded under section 132(4) from Shri M. Vjay Kumar, joint receipt, the ledger account copies of the builder and the appraisal report of the DDIT (Inv.). Both the assessment order and the remand report clearly show that the joint receipt was found and seized during the course of search. The department failed to controvert that the said joint receipt was not seized during the course of search and thus, we hold that the joint receipt was the document found and seized during the course of search, evidencing the payments stated to have been made by the builder to the assessee, which is the foundation for reopening the assessments.
10.1. As per section 153C of the Act, notwithstanding anything contained in section 139, 147, 148, 149, 151 and 153, where the assessing officer is satisfied that any money, bullion, jewellery, valuable article or thing seized or requisitioned belongs to or the books of accounts or documents seized or pertains or pertain to or any other information contained therein relates to a person other than the person referred to in section 153A (searched person), then the assessing officer of the searched person handover the books of accounts, documents or valuable articles or things or documents or the assets to the officer having jurisdiction over such other person and the assessing officer of such other person shall proceed against each such other person and issue notice and assess or reassess the income as per section 153C of the act. As provided in section 153C once the conditions are satisfied for invoking the jurisdiction under section 153C and the assessment must be made under section 153C only, but not under section 147 of the Act.
10.2. The issue with regard to the information gathered during the course of statement recorded under section 132(4) from the searched person by DDIT (Inv) whether to be assessed under section 153C or under section 143(3) read with section 147 was considered by this Tribunal in the case of G. Koteswara Rao and others (supra). This tribunal has taken a view that consequent to the information collected by the DDIT during the search under section 132 or from the statement recorded from the searched person, the assessments to be made under section 153C, but not under section 147 of the act. This Tribunal has considered the decision of special bench in the case of Alcargo Logistics Ltd. and others in 137 ITD 287 (Mumbai). For the sake of clarity and convenience, we extract para No. 14 of the order of this Tribunal in the cited case law which reads as under :–
“14. In the present case on hand, admittedly, the assessing officer has reopened the assessment based on a search conducted in a third party case. The assessing officer formed the opinion based on the statement recorded from the assessee, consequent to post search proceedings taken up by the DDIT(Inv), which shows undisclosed income which is the very basis of reopening the assessment. The search is conducted on 22-8-2008 which comes under the assessment year 2009-10. The assessing officer reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The assessing officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the assessing officer has to assess or reassess the total income of those six assessment years. The word “shall” used in section 153A made it clear that the assessing officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the assessing officer issued notice under section 148 to reopen the assessment.
Therefore, in view of the non-abstante clause begin with section 153A, the assessing officer has no jurisdiction to issue notice under section 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the assessing officer to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the assessing officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search under section 132 or books of accounts, or any other asset or other documents requisitioned under section 132A. If assessing officer justified in proceeding with section 147 to reopen the assessment, then there would be no relevance to section 153A, which was inserted in to the Act to deal exclusively with search cases. The legislators in their wisdom clearly spelt out the provisions of law applicable to search cases by using the word shall to begin with section 153A, made it mandatory that the assessing officer bound to issue notice under section 153A or 153C, thereafter proceed to assess or reassess the total income, where search is conducted under section 132 or requisition is made under section 132A. Therefore, in our opinion, the assessing officer is not justified in reopening the assessment under section 147 and his order is legal and arbitrary.”
10.3. In the instant case, there is no dispute that the joint receipt was seized during the course of search as mentioned by the assessing officer in the assessment order as well as the remand report and the assessment was made under section 147 on the basis of statement recorded under section 132(4) of the Act, appraisal report and the joint receipt. All of them are directly related to the information found from the searched person consequent to the search under section 132. Therefore, as provided under section 153A and 153C, all the search assessments required to be made under section 153A or 153C, but not under section 147 of the Act. No fresh information was collected by the assessing officer or no information has come to the notice of the assessing officer in normal course other than the information collected during the course of search from the searched person. Thus, the assessee’s case is squarely covered by the decision of this Tribunal in G. Koteswara Rao (supra). The department has not brought any other evidence to establish that the joint receipt was not seized during the search under section 132. The department also has not brought any other case laws to controvert the decision cited (supra).
10.4. In the light of the aforesaid discussion and on consideration of facts and the law we, hold that the assumption of jurisdiction by the assessing officer under section 147 is bad in law, hence, we set aside the order of the learned Commissioner (Appeals) and the assessments framed under section 147 read with section 143(3) are quashed. The appeals of the assesses in ground No. 2 to 4 are allowed.
  1. Since we have quashed the assessments passed under section 147 read with section 143(3) as bad in law and allowed the appeals of the assessee, we consider it is not necessary to adjudicate the appeal of the assessee on merits. Accordingly, appeals of the assesses are allowed.
  2. In the result, appeals of the assessees are allowed.

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