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TMI Blog2015 (7) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. The power bestowed on the Assessing Officer having jurisdiction be it under Section 153C or Section 158BD is identical.Suffice it to observe that the dissimilarity of the form of two provisions would make no difference to the purpose underlying. We are not inclined to accept the argument of the Department that the purpose underlying the two provisions is different. We also find that even the procedure is not different. The subject matter of the action would differ in the context of the machinery provision invoked, in the given case. That, however, cannot be the basis to extricate the Assessing Officer, who resorts to power under Section 153C of handing over the items referred to in Section 153C to the Assessing Officer having jurisdiction, of his duty to be satisfied about the jurisdictional fact that the items belongs or belong to a person other than the person referred to in Section 153A. After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act regularly. A search was conducted against the partners of respondent firm under Section 132(1) of the IT Act on 16.9.2005. A survey under Section 133A was conducted at the business premises of the respondent firm and no papers were impounded during the course of that survey. However, the Assessing Officer [ACIT-1(2)] issued notice under section 153C on 22.3.2006, calling upon the respondent to file returns for the AYs 2000-01 to 2005-06 within 30 days from the date of receipt of the said notice. The respondent filed returns within the prescribed time on 24.4.2006 for the respective assessment years. The respondent also filed return for the Assessment Year 2006-07 under Section 139(1) on 30.10.2006. Besides, a response was also filed to the notice under Section 142 (1) dated 1.9.2007 on 28.9.2007. The Assessing Officer vide order dated 31.12.2007, passed under Section 153C/143(3) of the IT Act, made identical additions towards disallowances of purchase amounts and fabrication charges for all the assessment years and by making further addition towards excess stock in the Assessment Year 2006-07. Being aggrieved, the respondent filed seven appeals before the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is because of the reason that on a plain reading of sec. 153C, it does not transpire that recording of a satisfaction is a must. But at the same time, it is also to hold that it does not mean that required satisfaction could be highly subjective, not open to scrutiny by the appellate authorities. The minimum requirement to justify the invoking of sec. 153C is that at least it should be possible to gather a satisfaction-there should be some seized record pertaining to the assessee which had been found in a search action. Further the same should have also been confronted to the assessee. But during the assessment proceedings no seized record pertaining to the assessee was confronted to him. What were confronted were the documents impounded during the survey action conducted at its office. In view of these facts, it is held that the invoking of section 153C against the assessee was bad in law. The proceedings so initiated, therefore, are held to be void ab-initio and all the assessments therefore, are declared ab-initio null and void . (emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive counsels during the course of hearing before us. From the record we find that the search was carried out at the residential premises of directors/partners of these concerns and not at the premises of these concerns. After the search was carried out at the residence of directors/partners of these associate concerns, assessment was framed in respect of these concerns u/s 153C of the Act on the plea that incriminating material was found during the course of search at the residence of partners/directors. The assumption of power by the Assessing Officer u/s 153C of the Act for framing the assessment is subject to the condition that the Assessing Officer assessing the search party, is satisfied that the jewellery or other valuable articles or things or books of accounts or documents or assets, seized or requisitioned, pertain to some person other than the person referred to in section 153A , then the books of accounts or the documents or assets seized or requisitioned, shall be handed over by the Assessing Officer of searched person to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against each of such persons and issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Maheshwari; 208 CTR 97. The said Hon'ble Supreme Court decision was followed by the Hon'ble Delhi High Court in the case of New Delhi Auto Finance Limited; 300 ITR 83. The Hon'ble Supreme Court has laid down a proposition that the Assessing Officer making the assessment of the searched person has to necessarily record in writing the specific objective satisfaction which is mandatory to the effect that the undisclosed income found by him, on the basis of seized material, belongs to some person other than the searched person. Insofar as the provisions of section 153C of the Act are in pari materia with the provisions of section 158BD of the Act with regard to the requirements of recording necessary satisfaction by the Assessing Officer of searched person, the law laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) shall apply with full force in case of initiation of proceedings u/s 153C. The assumption of jurisdiction and framing of assessment by the Assessing Officer u/s 153C without recording such satisfaction is void ab initio. Applying the proposition of law laid down by the Hon'ble Supreme Court, as discussed above, it is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee nor its copy is supplied to the assessee even on making a written request. The appraisal note so prepared by the department is meant to monitor after the search proceedings are over so as to ensure exhaustive assessment of all searched person with respect to their correct income and to plan a strategy for further deep inquiry and investigation of documents found during the course of search. Since copy of such appraisal note is not supplied to the assessee, it cannot be taken at par with the requirement of recording of satisfaction note as stipulated u/s 153C of the Act, which is a mandatory requirement. What is the legislative intent of such satisfaction and in what manner it should be recorded has been dealt with in the judicial pronouncements in the cases of Manish Maheshwari and G.K. Drive Shaft by the Hon'ble Supreme Court. Accordingly, we are not inclined to agree with the proposition that the appraisal note prepared by the department should be treated as a satisfaction note as required to be recorded in terms of sec tion 153C of the Act so as to empower the Assessing Officer to assume jurisdiction to issue notice and thereafter frame assessment u/s 153A read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in Section 158BD of the I.T. Act. For, Section 153C has been placed in Chapter XIV which deals with the procedure for assessment, unlike Section 158BD is placed in Chapter XIV-B which deals with the special procedure for assessment of search cases for block period and undisclosed income. It is contended that in the matter of search carried out with reference to the provisions under Chapter XIV the Assessing Officer is not required to record satisfaction that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned during search belongs or belong to a person other than the person referred to in Section 153A. Inasmuch as, the said Assessing Officer cannot have access to the information which may be germane to proceed against the person other than the person referred to in Section 153A. Besides, explanation can be offered by the other person (other than the person referred to in Section 153A) on the basis of the returns already filed by him before the Assessing Officer having jurisdiction over that person. Further, if any tentative opinion is recorded by the Assessing Officer forwarding the material to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the principle underlying the mandate of Section 158BD would apply on all fours to the procedure specified in Section 153C of the I.T. Act. Because, the purpose of both the provisions is the same and the person against whom such notice is issued suffers the same consequence. The respondents have then invited our attention to the finding of fact recorded by the First Appellate Authority and affirmed by the Tribunal that no satisfaction has been recorded by the Assessing Officer having jurisdiction before issuing notice under section 153C. Further, none of the material adverted to, belong to the respondent or can be said to belong to it. Further, no addition or even observation has been made by the Assessing Officer having jurisdiction in any of the orders for the concerned assessment years on the basis of the material found during the course of search. Even for that reason, no action under Section 153C could have been initiated against the respondent. The respondent submits that the Assessing Officer who seized or requisitioned the material during the search of a person referred to in Section 153A as also the Assessing Officer having jurisdiction over the respondent have acted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother (2015) 370 ITR 295 (Delhi) dated 14.8.2014 and lastly Commissioner of Income Tax Vs. Madhi Keshwani Income Tax Appeal No.108 of 2014 (All) dated 11.3.2015. 10 . Having considered the rival submissions, even though, the wider issues raised on behalf of the Department may not require consideration in the facts of the present case; and more particularly in the backdrop of the concurrent finding recorded by the two Appellate Authorities, we may deal with the same in this judgment as it may arise for consideration in the companion appeals heard analogously and are being disposed of by separate judgment passed today with reference to the concerned assesse. 11 . The moot question is: whether there is any distinction or dissimilarity between Section 158BD and Section 153C of the I.T. Act? If we accept the argument of the Department, that the purpose underlying the two provisions is completely different, further investigation into the scope of Section 153C may become necessary. For the sake of convenience, therefore, we deem it apposite to advert to the relevant part of Section 153C which may have to be considered and juxtaposed with Section 158BD for answering the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefor are : (i) Satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The AO has proceeded under Section 158BC against such other person. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act. (emphasis supplied) 13 . In a recent decision of the Supreme Court in the case of Commissioner of Income Tax-III Vs. Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Section 148 of the Act where recording of reasons in writing are a sine qua non. Under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y refer to the expression undisclosed income. However, in both the situations, the Assessing Officer engaged in carrying on search of the assessee within his jurisdiction, if seizes or requisitions the items (books of account or other documents or any assets for Section 158BD; and money, bullion, jewellery or other valuable article or thing or books of account or documents for Section 153C), is expected to handover those items to the Assessing Officer having jurisdiction over such other person and thereafter the Assessing Officer having jurisdiction has to proceed against such other person within his jurisdiction. Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be satisfied that the items belongs or belong to the person other than the person referred to in Section 153A. That satisfaction of the concerned Assessing Officer is a sine qua non . The consequences flowing from the action to be taken on the basis of such information handed over to the Assessing Officer having jurisdiction, for the assesse, who is a person other than the person referred to in Section 153A, is drastic of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, the argument of the Department must be negatived. 19 . After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him. 20 . As a result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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