The Principal Commissioner Of ... vs M/S Siddhi Vinayak Developers
2023 Latest Caselaw 6121 Guj

                                                                                 NEUTRAL CITATION




    C/TAXAP/369/2023                             ORDER DATED: 21/08/2023

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           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                       R/TAX APPEAL NO. 369 of 2023

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   THE PRINCIPAL COMMISSIONER OF INCOME TAX 1, AHMEDABAD
                             Versus
                M/S SIDDHI VINAYAK DEVELOPERS
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Appearance:
MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1
MR B S SOPARKAR(6851) for the Opponent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
       and
       HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                       Date : 21/08/2023
                         ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. This Tax Appeal is filed under section 260A of the Income

Tax Act,1961 [For short 'the Act'] arising out of the

Judgement and Order dated 23.11.2022 passed in IT(SS) A

No. 269/Ahd/2017 for A.Y. 2011-12 by the Income Tax

Appellate Tribunal, Ahmedabad Bench D ['Tribunal' for

short].

2. The Revenue has raised the following substantial question of

law arising from the impugned judgement and order passed by

the Tribunal:

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"Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in quashing the assessment proceedings u/s. 153C of the Act by holding that the amended provision would not apply to those proceedings emerging from searches initiated prior to 01.06.2015 without appreciating that when the Assessing Officer assumed jurisdiction for initiation of proceedings under section 153C of the Act, the amended provisions had already been brought into effect?"

3. At the outset, learned advocate Mr. Varun Patel appearing for

the appellant revenue submitted that the issue raised in this

appeal is not res integra in view of the decision of the Hon'ble

Supreme Court in case of Income Tax Officer vs. Vikram

Sujitkumar Bhatia reported in [2023] 149 Tax.Com 123 SC.

4. Brief facts of the case are as under:

The assessee is engaged in construction

organization/development work. A search was conducted at

the premises of the members of 'Soham Group' on 13.06.2013

during which certain incriminating loose papers were found

and seized. Search was also carried out of 'Sakar Group" on

12.07.2013 and simultaneous survey action under section

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133A of the Act was also carried out at the business premises

of the said group.

5. During the course of search, evidences were collected showing

cash transactions between various parties and assessee-firm

and it is revealed during the course of the search that the the

assessee-firm has made unexplained investment in the

purchase of the land to the tune of Rs. 5.17 crore.

6. The Assessing Officer therefore issued notice dated

31.12.2015 under section 153C of the Act to reopen past

assessments u/s. 153A of the Act on the basis of the material

found during the course of the search as the same was

pertaining to the assessee.

7. The assessee challenged the action of the Assessing Officer

including the notice under section 153C of the Act on the

ground that as per the documents seized from M/s. Soham as

well as Sakar group, there were no handwriting of the assess as

well as no address of the assessee has been mentioned. Further

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more there was also no reference of registration number of sale

deed etc on such document. It was submitted by the assessee

that the seized documents from the searched assessee were not

confirmed and the loose papers were not binding on the

assessee as the same did not belong to the assessee at all. It

was therefore submitted that the Assessing Officer could not

have issued notice u/s. 153C of the Act by invoking

amendment made with effect from 01.06.2015 to search

carried out in the year 2013 so as to apply the amendment

retrospectively.

8. The Assessing Officer, however, completed the assessment

relying upon the documents found during the course of the

search under the provisions of section 153C read with section

153A of the Act.

9. Being aggrieved, the assessee preferred appeal before the CIT

(Appeals) contesting validity of the notice issued under section

153C of the Act on the ground that Assessing Officer could

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not have assumed jurisdiction to assess income under the said

section as the documents must "belong to the assessee" and

merely because the documents by even remotely pertains to

the assessee, the same could not have been made basis for

assuming the jurisdiction by relying upon the amendment in

section 153C retrospectively.

10. The CIT(A) after considering the facts of the case and

the provision of section 153C prevalent on the date of the

search allowed the appeal of the assess on the ground that the

Assessing Officer could not have assumed the jurisdiction as

the documents seized during the course of the search did not

belong to the assessee.

11. Feeling aggrieved by the order of the CIT, the Revenue

preferred appeal before the Tribunal. The Tribunal

Considering the decision in case of Anil kumar Gopikishan

Agrawal vs. CIT reported in 418 ITR 25 of this Court

dismissed the appeal filed by the Revenue by observing as

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under:

"6.6 In light of the above rulings, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that for the year under consideration, since the search was conducted prior to amendment in section 153C of the Act, it was an essential pre-requisite that the incriminating documents on the basis of which the assessment was framed must "belong" to the assessee. From the contents of the assessment order and the observations made by Ld.CIT(Appeals), even the assessing officer has not alleged that the documents "belonged" to the assessee and the AO has himself stated in the order that the documents "pertain" to the assessee. Therefore, in the instant set of facts, we find no infirmity in the order of the Ld. CIT(Appeals) wherein he has held that since the documents do not "belong" to the assessee, then in light of the various judicial precedents, including the jurisdictional Gujarat High Court decision on this subject, the additions are not liable to be sustained."

12. The Hon'ble Supreme Court in case of Income Tax

officer vs. Vikram Sujitkumar Bhatia (supra) dealing with

identical issue as to whether the Assessing Officer could have

assumed the jurisdiction on the basis of the materials

pertaining to the assessee seized during the course of search,

prior to the amendment in section 153C of the Act, notice

issued under section 153C was held to be valid as under:

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"10.8 Insofar as the submission on behalf of the respective respondents - assessees that by way of amendment to Section 153C by Finance Act, 2015, it brings into its fold, the assessees - persons, who were not so far covered by it and, therefore, it affects the substantive rights of the assessees and, hence, it should not be made applicable retrospectively, is concerned, the submission seems to be attractive but deserves to be rejected. As observed hereinabove, even the unamended Section 153C pertains to the assessment of income of any other person. The object and purpose of Section 153C is to address the persons other than the searched person. Even as per the unamended Section 153C, the proceeding against other persons (other than the searched person) was on the basis of the seizure of books of account or documents seized or requisitioned "belongs or belong to" a person other than the searched person. However, it appears that as in the case of Pepsico India Holdings Private Limited (supra), the Delhi High Court interpreted the words "belong to" restrictively and/ or narrowly and which led to a situation where, though incriminating material pertaining to a third party / person was found during search proceedings under Section 132, the Revenue could not proceed against such a third party, which necessitated the legislature / Parliament to clarify by substituting the words "belongs or belong to" to the words "pertains or pertain to" and to remedy the mischief that was noted pursuant to the judgment of the Delhi High Court. Therefore, if the submission on behalf of the respective respondents - assessees that despite the fact that the incriminating materials have been found in the form of books of account or documents or assets relating to them from the premises of the searched person, still they may not be subjected to the proceedings under Section 153C solely on the ground that the search was conducted prior to the amendment is accepted, in that case, the very object and purpose of the amendment to Section 153C, which is by way of substitution of the

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words "belongs or belong to" to the words "pertains or pertain to" shall be frustrated. As observed hereinabove, any interpretation, which may frustrate the very object and purpose of the Act / Statute shall be avoided by the Court. If the interpretation as canvassed on behalf of the respective respondents is accepted, in that case, even the object and purpose of Section 153C namely, for assessment of income of any other person (other than the searched person) shall be frustrated.

11. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court is held to be unsustainable and the question, i.e., "Whether the amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of amendment?", is answered in favour of the Revenue and against the assessees and is answered accordingly. Therefore, it is observed and held that the amendment brought to Section 153C of the Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of the amendment. The impugned common judgment and order passed by the High Court, therefore, deserves to be quashed and set aside and is accordingly quashed and set aside. However, as before the High Court respective assessment orders were challenged mainly on the aforesaid issue, which is now answered in favour of the Revenue as above, we reserve the liberty in favour of the respective assessees to challenge the assessment orders before CIT (A) on any other grounds which may be available and it is observed that if said appeals are preferred within four weeks from today, the same be considered in accordance with law and on their own merits, on any other grounds.

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Present appeals are accordingly allowed in terms of the above. However, in the facts and circumstances of the case, there shall be no order as to costs."

13. In view of the above dictum of law in the aforesaid case,

the appeal is required to be allowed and is accordingly

allowed. The impugned order dated 23.11.2022 passed by the

Tribunal is hereby quashed and set aside by answering the

question of law in affirmative and the matter is remanded back

to the CIT (Appeals) to decide the same on merits after giving

opportunity of hearing to the assessee on all other issues

except the issue which is already concluded by the above

decision of the Hon'ble Supreme Court. Appeal stands

disposed of accordingly.

(BIREN VAISHNAV, J)

(BHARGAV D. KARIA, J) JYOTI V. JANI