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TMI Blog2015 (8) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C of the I.T. Act. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. - Decided in favour of assessee. - ITA Nos.4297 to 4302/Del./2014 - - - Dated:- 31-7-2015 - SHRI R.S. SYAL and SHRI A.T. VARKEY, JJ. For The Assessee : Shri Kapil Goel, Advocate For The Revenue : Shri A.K. Saroha, CIT DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : These six appeals, at the instance of the assessee, are directed against the orders of the Commissioner of Income-tax (Appeals)-II, New Delhi for the assessment years 2003-04 to 2008-09. 2. The facts and circumstance in all the assessment years are similar except the difference in the additions, therefore, for the sake of brevity, we take the facts from the proceedings of the assessment year 2003-04. Brief facts of the case are that search and seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abrics, clothes, textiles and general goods. The AO found that assessee had shown gross profit of ₹ 2,20,657/- on sales of ₹ 33,33,007/- giving a gross profit (GP) rate of 8.62%. The AO noted that in the absence of books of accounts along with bills/vouchers and bank account, the trading version of the assessee could not be verified. The AO noted that the assessee had declared itself to be engaged in the business of trading of clothes, shawls and textiles and had shown purchases of ₹ 52,07,330/- and had declared sales amounting to ₹ 33,33,007/-. The AO observed that the goods dealt in by the assessee were such that could not be stored for long due to change of fashion and preferences and he took note that the post search enquiries conducted by the Investigation Wing had indicated that six concerns connected with the Thapar Group were declared as operating from the address of the assessee. The AO assumed that there may be much more number of concerns operating from the said address. After recording the statement of Shri Rajiv Khurana, Director of M/s. Indu Surveyors Loss Assessor, the AO came to the conclusion that Shri B.K. Dhingra was running these compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;t abate, the proceedings u/s. 153C of the IT Act in this case are bad in law and deserves to be quashed. 3. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT (Appeals)-II, has failed to appreciate 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 IT 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 (Appeals)-II, 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 IT Act be restricted to assessment in respect of seized documents of incriminating nature in the case of the appellant for the year under consideration and in absence of any incriminating seized document in the case of appellant, assessment framed u/s. 153C of the IT 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 provisions of law, the Ld. CIT (Appeals)-II, has erred in not admitting the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, append, delete any or all grounds of appeal. 5. The main ground that has been agitated before us is that satisfaction of the AO of the searched person as envisaged under section 153C of the Act has not been recorded, before initiating the proceedings against the assessee u/s 153C of the Act, which vitiated the entire impugned assessments. 6. Ld. AR for the assessee, Shri Kapil Goel submitted that in the present case, there is no satisfaction recorded by the AO of the raided party, as admitted in RTI replies placed at pages 9 to 12 of the paperbook and available note, at pages 7 8 of the paper book, is one recorded by the AO of the present assessee/other person. He submitted that the same is held to be invalid on same facts in the following cases :- (i) Delhi ITAT, H Bench order in the case of Tanveer Collections 168 TTJ 145; (ii) Delhi ITAT, C Bench order in the case of IECS Solutions Pvt. Ltd. (order dated 13.03.2015); (iii) Delhi ITAT, C Bench order in the case of Grover Garments (P) Ltd. (order dated 29.04.2015); (iv) Delhi ITAT, B Bench order in the case of DSL Properties 60 SOT 88. Ld. AR submitted that it is now held by Hon ble Telangana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. 9. From the above provision, it is clear that where the AO of the person searched is satisfied that any money, bullion, jewellery, books of accounts or other documents etc., belong to a person other than the person searched, then, such documents or assets, etc., shall be handed over to the AO of the other person and the later AO shall proceed against such other person to assess or reassess his income. A bare perusal of the provision indicates that before handing over such documents etc. to the AO of the other person , a satisfaction has to be recorded by the AO of the person searched that money, bullion or jewellery, etc., found from the person searched belong to the other person . Only when such satisfaction is recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 153C, thus, are required to be satisfied before the provisions of said section 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 s. 132A. That the recording of satisfaction by the AO having jurisdiction over the person searched is an essential and prerequisite condition for bestowing jurisdiction to the AO of the other person. 12. Let us examine the facts of the instant case more elaborately. It is seen that some satisfaction was recorded, a copy of which is available on page 8 of the paper book, as under :- Satisfaction Note for issuing Notice u/s 153C of the I.T. Act, 1961 in the case of Mrs. Nutan Khurana, Prop. Ishika Creations, A1-82, 2nd Floor, Hastal Road, Uttam Nagar, New Delhi, PAN : AJFPK7466E for A.Y. 2003-04 to 2008- 09. 03.09.2010 In the case of Sh. B.K. Dhingra, Smt. Poonam Dhingra, 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 seizure documents/papers as per Annexure A-26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department to the persons searched under the RTI Act, it clearly emerges that no satisfaction was recorded by the AO in the cases of the persons searched u/s 132(1) of the Act (i.e. Shri B.K. Dhingra, Smt. Poonam Dhingra , M/s Mayank Traders Pvt. Ltd. And M/s Horizon Pvt. Ltd ) that some books of account or documents etc. belonging to the assessee were found which were handed over to the AO of the other person (i.e. the assessee). The Satisfaction note as reproduced above has been prepared by the AO of the assessee. 13. The ld. DR was of the opinion that since the AO of the persons searched and the assessee is same, it does not make any difference whether the satisfaction is recorded in the case of the persons searched or other person. He emphasized on the factum of recording satisfaction by the AO, which condition in his opinion stood satisfied, by virtue of it having been recorded by the common AO. 14. This particular argument of the revenue was answered by the Coordinate Bench in the case of M/s. Tanvir Collections Pvt. Ltd. Vs. ACIT, Central Circle 21, New Delhi in ITA No.2421/Del/2014 order dated 16.01.2015 as under :- 16. In our considered opinion, this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of law necessitating the recording of satisfaction in the case of the person searched that money, bullion, jewellery, etc., found from the person searched belongs to the other person. What is crucial to note is capacity of the AO and not his identity. In view of the fact that when the statutory stipulation is for recording the satisfaction by the AO of the person searched, then, it cannot be substituted with the satisfaction of the AO of the other person. This contention also fails. 18. At this stage, it is relevant to note that the legislature has substituted the latter part of section 153C(1) by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014. The hitherto part of sub-section (1) : and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person referred to in sub-section (1) of section 153A. has been substituted as under : - and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (ITA No.5437/Del/2013), etc., in which the notices and the consequential assessments u/s 153C, under identical circumstances, have been quashed. The ld. DR contended that the above referred two Tribunal orders are per incurium and should not be followed. The main reason for declaring the tribunal orders as per incurium was the nonconsideration of the judgment of the Hon ble jurisdictional High Court in judgment in the case of SSP Aviation Ltd. VS. DCIT (2012) 252 CTR (Del) 291 . 23. Let us examine the case of SSP Aviation Ltd. (supra) for evaluating the contention that the instant assessment be declared as per law. The Hon ble High Court in that case has held that the Assessing Officer having jurisdiction over the searched person should be satisfied that the valuable article or books of account or documents seized during the search belong to a person other than the searched person and there is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must conclusively reflect or disclose any undisclosed income. We find that there is no such controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The absence of such satisfaction, in our considered opinion, failed to confer any valid and lawful jurisdiction on the AO of the assessee to proceed with the matter of the assessment u/s 153C of the Act. We, ergo, set aside the initiation and the ensuing assessment on the assessee as void ab initio . 27. The reliance of the ld. DR on some decisions on other legal issues or merits is of no consequence in view of the lack of jurisdiction of the AO to proceed with the assessments u/s 153C of the Act. In view of our decision on the first legal issue, there is no need to espouse the other grounds taken by the assessee dealing with other legal issues or merits. 28. In the result, the appeal is allowed. 15. In the light of the said ratio-decidendi of the aforesaid order of the Tribunal, the ld counsel for assessee, submitted that the first step itself has not been fulfilled. So according to the ld counsel, the issuance of notice u/s 153C is illegal. 16. We also take note of the recent judgement of the Hon ble jurisdictional High Court in a similar case in Pepsico India Holiday (P) Ltd Vs. ACIT (2014) 50 Taxmann. Com 299 (Delhi), after considering the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ward-Ill (2), Ahmedabad to the Assessing Officer of the petitioner at Bareilly. All the requirements of Section 153(c) were complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jewellers, Bareilly - the petitioner. The ownership and consignment of the petitioner was also confirmed by the Assessing Officer of the petitioner at Bareilly. The Income Tax Officer, Ward-Ill (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner s Assessing officer to proceed under Section 153(c) of the LT. Act. 21. After the assessment of the person in respect of whom search action was carried out is completed, the officer under Section 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the Assessing Officer on such person. The satisfaction in such case is in respect of the material and disclosures of the person with which the articles or assets are found and not in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A .... In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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