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TMI Blog2015 (3) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... by the reply of Revenue furnished under Right to Information Act. It is expected that the Assessing Officer should be careful in complying with the mandate of law to avoid loss to exchequer. Accordingly the ground raised by the assessee in cross objection, that the proceedings initiated under Section 153C is bad in law is allowed. The assessment framed u/s 153C read with section 143(3) pertaining to the Assessment Year 2003-04 is quashed. Since we have quashed the assessment on the legal issues. We are not adjudicating the other grounds raised in cross objection - Decided in favour of assessee. - ITA No. 6404 to 6409/Del/2013, C.O. No. 353 to 358/Del/2014 - - - Dated:- 13-3-2015 - S. V. Mehrotra, AM And Kul Bharat, JM,JJ. For the Appellant : Shri Kapil Goal, Adv. For the Respondent : Shri Gunjan Prasad, CIT-DR ORDER Per: Bench These six appeals by the Revenue and equal number of cross objections by the Assessee are directed against the separate orders of Ld. Commissioner of Income Tax (Appeal)-II, New Delhi in short here in after refer to as the CIT(A) dated 4th Separate, 2013 and 5th September, 2013 respectively and pertaining to the Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate that the assessment framed by Ld. AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s. 153C of the I.T. Act and as such the assessment being bad in law deserves to be quashed. 4. That on the facts and circumstances of the case and the provisions of law, the Ld CIT (A) has failed to appreciate that the Ld AO was not justified to ignore the submissions of the appellant that assessment u/s 153C of the Income Tax Act be restricted to assessment in respect of seized documents of incriminating nature in the case of the appellant for only theyear to which said documents relates to, and in absence of any such incriminating seized document in the case of appellant; assessment framed u/s. 153C of the I.T. Act for the year under consideration, is bad in law and deserve to be quashed. 5. That on the facts and circumstances of the case and the provision of law, the Ld CIT (A) has erred in holding the conclusion that the 'audited books' notwithstanding, the book results are required to be rejected, since the narrations are artificial, sham and not reflective of the actual business / commercial transactions. However, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... append, delete any or all grounds of appeal. 3. Briefly stated facts are that a search action under Section 132 of the Income Tax Act, 1961 (herein after refer to as the Act) was carried out at the business and residential premises of Shri B.K.Dhingra, Mrs. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. on 20.10.2008. During the course of search at residential premises F- 6/5, Vasant Vihar, New Delhi, certain documents alleged to have been recovered belonging to the Assessee. Accordingly, the Assessing Officer initiated proceeding under Section 153C of the Act. The Assessing Officer framed assessment under Section 153C/143(3) of the Act thereby the Assessing Officer made addition u/s 68 and 69C of the Act on account of unexplained expenditure and investment amounting to ₹ 15,01,580/- and 4,62,316 respectively. Against this the Assessee filed an appeal before Ld. CIT(A) who after considering the submissions of the Assessee rejected the grounds raised against the validity of proceedings under Section 153C, however on merit Ld. CIT(A) modified the Assessment order by directing the AO to work out the peak from the enteries in the cash book of the Assessee for the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s 153C of the I.T.Act and as such the assessment being bad in law deserves to be quashed. We proceed to decide this ground first, to examine whether in the absence of satisfaction note, by the AO of the searched party the proceedings initiated u/s 153C and assessment framed thereunder are bad in law and as such the assessment so framed is unsustainable and nullity in the eyes of law. 5. ARGUMENTS OF THE ASSESSEE Ld. Counsel for the assessee submitted that the information furnished by the Revenue under the Right to Information Act, reveals that the AO of the searched party has not recorded any satisfaction. He drew our attention to paper book pages no. 12-15, wherein the reply received under the Right to Information Act are inclosed. Ld. Counsel for the assessee reiterated the submission made in brief synopsis inclosed in Paper Book at page 1 to 6. He submitted that the Revenue has not controverted the factum of information and its contents furnished under the Right to Information Act. Therefore, he contends that the admitted position is that no satisfaction is recorded by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the Authorities below and case laws cited by the Respectives Representatives of the parties. We find the opening para of the Assessment order reads as under : Search seizure action u/s 132 of the I.T. Act was carried out in the cases of Sh. B.K.Dhingra, Smt. Poonam Dhingra M/s Madhusudan Buildcon Pvt. Ltd. on 20/10/2008 and during the course of search at their residential premises at F-[6/5, Vasant Vihar, New Delhi certain documents belonging to the assessee were seized. On the basis of documents so found belonging to the assessee company, proceedings were initiated in the case of the assessee company u/s 153C read with section 153A of the I.T.Act. The case of assessee was initially centralized with ACIT, Central Circle-7 u/s 127 of the I.T.Act by Commissioner of Income Tax, Delhi-IV, New Delhi vide order F.No. CIT-IV/Cent./121/2009-10/1343 dated 30.07.2010. Notice u/s 153C dated 14.09.2010 was issued to the assessee by the ACIT, CC-17, New Delhi requiring the assessee company to file return of income within 15 days of service of the notice. 7.1 From the above it is evident the basis of initiating proceeding u/s 153C is that certain documents belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132 or making of requisition under section 132A in the second proviso to 82[sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.] 83[(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. Ld. CIT(DR) during the counsel of hearing also drew attention to Section 148 (2) of the Act, which reads as under:- 8. The Revenue has raised four fold objections against quashing the assessment order. Firstly, it was argued that there is no requirement under the law that the satisfaction should be recorded. The satisfaction can be inferred by implication, had the intent of legislation been so, the word record as enshrined in Section 148(2) would have been incorporated. Therefore, there is no need of satisfaction note and on the basis of absence of satisfaction note Assessment cannot be annulled. In support of this submission the reliance is placed on the judgment Hon'ble Kerala Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page No. 11) Satisfaction Note for issuing notice u/s. 153C of I.T. Act, 1961, in the case of M/s. Instronics Limited, 192C, J K Pocket, Dilshad Garden, New Delhi, PAN : AAACI0163R for AY. 2003-04 to 2008-09. 30.09.2010: In the case of Sh. B.K.Dhingra, Smt. Poonam Dhingra and M/s Mayank TRADERS Pvt. Ltd., M/s Horizon Pvt. Ltd. search seizure took place u/s. 132 on 20.10.2008. The undersigned is the jurisdictional AO of these cases. During the course of search and seizure documents/papers at pages 1 to 38 of Annexure A-87, Annexures A-96, A-97, A-98 and A-99, are found to belong to M/s. Instronics Ltd., 192C, J K Pocket, Dilshad Garden, New Delhi. I have examined the above mentioned documents/papers and provision of section 153C is invokeable in this case. As the under signed is also the jurisdictional AO of M/s. Instronics Ltd., 192C, J K Pocket, Dilshad Garden, New Delhi, this satisfaction note is placed in the file before issueing notice u/s. 153C. Sd/- 30.09.2010 ACIT, Central Circle-17, New Delhi Reasons for aforesaid satisfaction note is not valid to assume the jurisdiction u/s 153C of the Act: That it is not recorded by specified authority that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isoned by Hon'ble Delhi High Court, ITA 583/2013 dated 05.12.2014. Regarding specific satisfaction by AO of raided party and in its absence consequential nullification of proceedings, Hon'ble Delhi High Court decision dated 26.11.2014 in case of Manju FINANCE Corportion (ITA No. 339/2002) (Case Law Paper Book Pages 17 to 24) is noteworthy. 2.2 That instant note is recorded mechanically and without application of mind: It is vivid from aforesaid note that same is recorded without even narrating and describing the nature of documents and their FINANCIAL implications and only Annexure numbers are loosely and vaguely mentioned which do not meet the basic criteria of any objective and rational satisfaction . That is there no clear finding in aforesaid note on i) nature of documents and ii) as to how Ld AO arrived at the satisfaction that samebelongs to appellant here which is quite crucial and critical iii) the financial implications of documents on block period. Nothing is comprehensible from the aforesaid note. How can without enumeration of basic documents mere mentioning of Annexure No's can be treated as adequate for arriving at just and valid satisfaction uls 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962 (SC) 1793 that the law declared by the High Court is binding on all authorities and tribunals within the State. Lastly, we humbly draw your honors kind attention to recent constitution bench order of Hon'ble Supreme Court in Vatika case reported at 367 ITR 466 wherein in no unclear words it is categorically held that Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax that is where two views are there one which favors the tax payer must befollowed. (vide se decision in case of Vegetable Products 88 ITR 192) . 4. Further where the issue is covered in favor of assessee on legal jurisdictional grounds there is no need to enter into merits at all is supported by Bombay High Court decision in case of M/s. Petroleum India International, Mumbai order Dated: 19th November, 2012 in Income Tax Appeal No. 2660 of 2009 wherein it is held that Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case Note on DELHI H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E TRIBUNAL DELHI BENCH B , NEW DELHI in I.T.A. Nos. 5430 to 5436IDel/2013 A.YRS. : 2003-04 to 2009-10 'Devi Dayal Petro Chemicals Pvt. Ltd., order dated 10-9-2014.' (Refer Case Law Paper Book Pages 67 to 7 ) has observed that Therefore, the Assessing Officer will drop the proceedings initiated under Section153 of the years to which the seized documents do not belong. For the year to which the seized documents belonged, he will verify whether the transaction reflected by the seized documents is duly accounted for in the books of account. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the Assessing Officer will drop the proceedings initiated under Section 153C ii) BENCH A , KOLKATA, ITAT in Trishul Hi-Tech Industries case order dated 24.09.2014, IT(SS)A Nos. 84-86/Kol/2011 (Refer Case Law Paper Book Pages 197 to 209) has held that To put it simply this amendment to proviso to section 153C(1) by finance act 2014 of the Act debars the AO from making any assessment dehorse any incriminating material found during the search iii) Pune bench ITAT in Bharati Vidyapeeth Foundation duly approved by Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el/2013 vi) PACL India Ltd., ITA No. 2637/Del/2010 vii) Kusum Gupta, ITA No. 3312/Del/2009 viii) MGF Automobiles Ltd., ITA No. 4212/Del/2011 ix) Vee Gee Industrial Enterprises, ITA No. 1/Del/2011 x) Asha Kataria, ITA No. 3105-3107/Del/2011 xi) Marigold Merchandise (P). Ltd. ITA No. 2666/Del/2013 xii) Pradeep Kumar, ITA No. 4016/Del/2011 xiii) ACIT vs. Manoj Narain Agarwal; 99 DTR (Del) (Trib.) 279 xiv) Parivar Properties (P) Ltd., ITA No. 1011/Del/2013 xv) Inlay Marketing Pvt. Ltd, ITA No. 4200/Del/2012 (identical fact setting) (Case Law Paper Book Pages 78 to 128) xvi) V.K.Fiscal, ITA No. 5460/Del/2013 xvii) Parsvnath Developers Ltd. vs. DCIT, 5188/Del/2013 xviii) Special Bench of the ITAT in the case of All Cargo Global Logistic Ltd. vs. CIT; 137 ITD 287 (Mumbai) (S.B.) xix) Delhi ITAT Bench, 'D'Bench New Delhi, Kurele Paper Mills Pvt. Ltd. 14.11.2014 (Case Law Paper Book Pages 172 to 186) xx) ITAT, Delhi 'A' Bench, Anjoo Kashyap Order dated 19.12.2014 xxi) ITAT, Delhi 'F' Bench Order, in the case of qualitron Comodities Pvt. Ltd. dated 06.01.2015 (Case Law Paper Book Pages 187 to 196) Submitted ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the document in fact belongs to somebody WP(C) 415/2014 Ors. Page 10 of 15 else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . Further the Hon'ble Delhi High Court held that mere use or mention of the word satisfaction or the words satisfied in the order as the same would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reason as basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched persons. It is pertinent to note here that the Hon'ble Delhi High Court in the case of Pepsi Food (P) Ltd. Vs. ACIT (Supra) has held that the satisfaction note by the AO searched party is a condition precedent for issuance of notice u/s 153C of the Act. In the light of judgment of the Hon'ble Delhi High Court, we cannot accept the argument of Revenue that no satisfaction is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee falls into the jurisdiction of Hon'ble Delhi High Court in view ratio of Delhi High Court judgment in case of Pepsi Foods (P) Ltd. (Supra), it was held that recording of satisfaction by AO of searched persons is a necessary pre condition for initiation of proceeding u/s 153C which was not done in that case. Accordingly, the Hon'ble co-ordinate Bench was pleased to quash the Assessment Proceedings. In the case in hand also the assessee company is within the territorial jurisdictional of the Hon'ble Delhi High Court. The facts are identical, no contrary view of the Hon'ble Delhi High Court or the Hon'ble Supreme Court brought to our notice by the Revenue. Therefore, we do not see any reason to take any contrary view, therefore, we are of the considered view that in the absence of a satisfaction recorded by the Assessing Officer of the searched persons, the Assessment framed u/s 153C of the Act by the Assessing Officer cannot be sustained, as such same is bad in law. 12. It is observed that the Revenue has not placed any material on record in respect of evidence qua the present assessee collected during the search operation. Moreover, the satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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