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2020 (3) TMI 361 - SC - Income TaxAssessment u/s 153C - mandation of satisfaction note recorded by the AO as required u/s 153C - cash receipts on sale of shop/offices at M/s Super Mall - HELD THAT - From satisfaction note, it emerges that the Assessing Officer is satisfied that the documents containing the details of the cash receipts on sale of shop/offices at M/s Super Mall, Karnal belonged to the other person assessee M/s Super Mall. He is also satisfied that the documents/pen drive are seized from the searched person. He is also satisfied that the documents so seized from the residence of the searched person/Ved Prakash Bharti belonged to the assessee the other person. Therefore, the Assessing Officer was satisfied and it is specifically mentioned that the documents so seized belonged to the assessee the other person. Therefore, it cannot be said that the mandatory requirements of Section 153C of the Act, in the facts and circumstances of the case, have not been complied with. The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of Section 153C has been fulfilled. On facts, we are in complete agreement with the view taken by the High Court on the requirement of Section 153C of the Act being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C - Decided against assessee.
Issues Involved:
1. Validity of the satisfaction note recorded under Section 153C of the Income Tax Act, 1961. 2. Compliance with the procedural requirements of Section 153C of the Act. 3. Interpretation and application of judicial precedents and CBDT Circulars regarding Section 153C. Detailed Analysis: Validity of the Satisfaction Note Recorded Under Section 153C: The primary issue in this case revolves around the validity of the satisfaction note recorded by the Assessing Officer (AO) under Section 153C of the Income Tax Act, 1961. The satisfaction note is a prerequisite for initiating proceedings against a third party based on documents seized during a search operation on another person. The appellant argued that the satisfaction note recorded was invalid, while the respondent contended that the note was sufficient and compliant with the statutory requirements. Compliance with Procedural Requirements of Section 153C: The court examined whether the procedural requirements under Section 153C were met. The appellant's counsel argued that the AO of the searched person must be "satisfied" that the seized documents belong to a third party, and only then can the documents be handed over to the AO of the third party. The appellant cited several judicial precedents, including *Commissioner of Income Tax v. Calcutta Knitwears*, *Pepsi Food Pvt. Ltd. v. Assistant Commissioner of Income Tax*, and *Ganpati Fincap Service Pvt. Ltd. v. Commissioner of Income Tax*, to support their argument that the satisfaction note must be recorded by the AO of the searched person. The respondent's counsel argued that since the AO for both the searched person and the third party was the same, the requirement for a separate satisfaction note and transmission of documents was redundant. The court agreed with this view, referencing the decision in *Ganpati Fincap*, which held that if the AO is the same for both parties, a single satisfaction note suffices. Interpretation and Application of Judicial Precedents and CBDT Circulars: The court analyzed various judicial precedents and CBDT Circulars to determine the correct interpretation of Section 153C. It was emphasized that the AO must be "satisfied" that the seized documents belong to a third party before initiating proceedings. The court noted that the satisfaction note in this case explicitly stated that the documents seized from the searched person belonged to the assessee (third party), thus fulfilling the mandatory requirements of Section 153C. The court also considered the procedural aspect where the AO is the same for both the searched person and the third party. It concluded that in such cases, a single satisfaction note is adequate, and there is no need for transmission of documents between different AOs. Conclusion: The Supreme Court upheld the High Court's decision, confirming that the satisfaction note recorded by the AO was valid and compliant with Section 153C of the Income Tax Act. The court dismissed the appeals, directing the ITAT to decide the appeals afresh on merits, in accordance with the law. In summary, the judgment clarifies that when the AO for the searched person and the third party is the same, a single satisfaction note is sufficient to meet the requirements of Section 153C, provided it clearly states that the seized documents belong to the third party.
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