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TMI Blog2015 (8) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /10/2010. In response to the notice u/s 153C, the assessee filed a return for assessment year 2003-04 on 06.09.2010 declaring Nil income. A copy of the panchnama, reasons for issuing notice u/s 153C and jurisdiction order dated 19.10.2010 u/s 127 of the Act were dispatched to the assessee on 03.11.2010 as sought by the assessee. In response to the notice, the assessee took part in the proceedings. The AO found that the assessee company belonged to the Thapar Group of cases and one of the main allegations against the group was that several concerns had been floated by the group with dummy Directors and shareholders. He observed that these concerns were basically capital formation concerns which had build up huge reserves and surpluses over the years and these reserves and surpluses were declared invested in stocks of textiles. He further found that as and when cash was required, the stocks were sold and the money was utilized for other purposes as per required. Against this background, the AO analysed the facts of the case. The AO opened the assessment under the provisions of section 153C for the assessment year 2003-04. The AO noticed that the company was incorporated on 25.10.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these products. He further observed that the purchases sales were within M/s Thapar Homes Group of cases. He found that in inventories of Fabric Textile Goods shown in the balance sheet, the closing stock of last year stood at ₹ 8,94,32,924/- and this year the figure was ₹ 8,93,30,132/- which was almost the same. Therefore, he observed that the purchases sales were only out of current year transactions which were held unverifiable and bogus. The AO further observed that it was highly improbable that with a huge stock inventory of goods which change in fashion and taste, the assessee had to make sales from fresh purchases only. The AO observed that the preponderance of probability suggested that the stocks were not genuine but since these were declared prior to 01.04.2002, no action was being taken for now. In view of the above, the AO observed that all cash purchases were held unverifiable and hence a sum of ₹ 21,15,780/- was disallowed u/s 69C. Similarly, the AO observed that the expenses claimed by the assessee company in P L account were also unverifiable as such 100% of the expenses i.e. ₹ 4,43,240/- were disallowed. Aggrieved by the same, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the year 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 CIT (A) still relying on these books /book results for giving directions to the AO for the purpose of calculating the peak from the entries in the cash book of the appellant for the relevant year. 6. That in view of the facts and circumstances of the case, CIT (A) has erred in disregarding the purchases of ₹ 21,15,780/-, the sales and the expenses of ₹ 4,43,240/-claimed by the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, there is no satisfaction recorded by the AO of the raided party, as admitted in RTI replies placed at pages 3 to 5 of the paper book and available note, at pages 1 2 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 Andhra Pradesh High Court in Shetty Pharmaceuticals case that two separate notes are must u/s 153C i.e. one/first by raided party AO and other/second by non-raided party AO even if both are same, this recording of satisfaction is a sine-qua non for assumption of jurisdiction U/s 153C. He submitted that ratio of the aforesaid judgment was also relied upon by Delhi ITAT, H Bench in the case of Vinita Chau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 AO of the person searched and such documents or assets seized, etc., are handed over to the AO of the other person , that the later AO acquires jurisdiction to make assessment or reassessment of the other person. It is, therefore, clear that the AO of the other person can acquire jurisdiction to assess or reassess income of the other person only when the AO of the person searched records satisfaction in his case (searched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2 of the paper book, as under :- Satisfaction Note for issuing Notice u/s 153C of the I.T. Act, 1961 in the case of M/s. Shivaansh Advertising Publications Pvt. Ltd., RZ F-7, Vijay Enclave, Dwarka Puri, New Delhi Pan No. AAKCS9764N for A.Y. 2003-04 to 2008-09. 05.07.2010 Documents at pages 1 to 37 of Annexure of A-34 seized by the party R-2 from the premises at F 6/5, Vasant Vihar, New Delhi during the course of search conducted u/s 132 of the I.T. Act, 1961 on 20/10/2008 in the case of Sh. B.K.Dhingra, Smt.Poonam Dhingra, M/s Madhusudan Buildcon P Ltd. have been found to belong to M/s. Shivaansh Advertising Publications Pvt. Ltd., RZ F-7, Vijay Enclave, Dwarka Puri, New Delhi which has not been covered u/s132 of the I.T. Act, 1961. Accordingly, in terms of provisions of section 153C of the Act, notices u/s 153C are hereby issued for the A.Y. 2003-04 to 2008-09 in the case of M/s. Shivaansh Advertising Publications Pvt. Ltd. The case was centralized in the Central Circle -17, New Delhi vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contention advanced on behalf of the Revenue is devoid of merit. We fail to comprehend as to how the requirement of recording satisfaction by the AO of the person searched provided by the statute can be substituted with anything else. There is an underlying rationale in providing for recording of such satisfaction by the AO of the person searched. As the money, bullion, jewellery, books of account or documents etc. always come to the possession of the AO of the person searched who has to frame assessment, it is only he who can find out that which of such documents etc. do not belong to the person searched and are relevant for the assessment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in subsection (1) of section. 19. The above substitution has the effect of now making it mandatory for the AO of the other person also to record satisfaction that the books of account or documents, etc., have a bearing on the determination of the total income of such other person before embarking upon the exercise of his assessment or reassessment. Therefore, now under the law, w.e.f. 1.10.2014 it has become obligatory not only for the AO of the person searched to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 controversy before us as was there before the Hon ble High Court. It is not the case of the assessee before us in this ground that the documents etc. found from the persons searched did not positively indicate the existence of some income in the hands of the assessee. The argument is simply confined to non-recording of satisfaction by the AO of the persons searched. Instead of supporting the Department s case, we find that this judgment strengthens the assesasee s case by making it clear in no uncertain terms that the AO of the person searched is obliged to record the satisfaction. The relevant observations of the Hon ble High Court contained in para 15 merit reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cited by the Revenue held in para 5 as follows:- 5. While coming to the aforesaid conclusions the court had also examined the decisions which had been cited on behalf of the Revenue and which are, once again, being reiterated by the learned counsel for the Revenue before us. Those decisions are Kamleshbhai Dharamshibhai Patel v. CIT [2013] 214 Taxman 558/31 taxmann.com 50 (Guj.); CIT v. Classic Enterprises [2013] 358 ITR 465/219 Taxman 237/35 taxmann.com 244 (All.) and a decision of a Division Bench of this Court in SSP Aviation Ltd. v. Dy. CIT [2012] 346 ITR 177/207 Taxman 260/20 taxmann.com 214. This Court had indicated in its judgement in Pepsi Foods (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note requesting the petitioner s Assessing officer to proceed under Section 153 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 respect of the person who whom they belong. (Underlining Added) 7. The above extract makes it clear that a taxing statute must be construed strictly and in the case of a doubt or dispute the construction in favour of the assessee has to be adopted. Apart from this, the material observation of the Allahabad High Court in the case of Savesh Kumar Agarwal (supra) is to be found in paragraph 20 Page 13 of 16 thereof where it has been observed that the assessee established that the seized silver belongs to M/s. Sarvesh Jewellers, Bareilly - the petitioner. In other words, the person from whom the bullion was seized was able to establish that it did not belong to him but to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 necessarily mean and imply that they belong to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. 16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression belongs to with the expressions rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of the law explained by this Court in Pepsi Foods regarding the recording of satisfaction by the AO even in respect of the searched person was not fulfilled. Consequently, the fact that it was the same AO both for the searched person and the Assessee makes no difference to the consequence of non-compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO were the same, satisfaction would have to be recorded separately qua the searched person and the Assessee. 9. No substantial question of law arises for determination. The appeal are dismissed. 19. In the light of the case laws cited above and on a reading of Section 153A and 153C the exercise that is required to be done by the AO has been spelt out by the Coordinate Bench of this Tribunal in the case of DSL Properties Pvt. Ltd. Vs. DCIT 33 Taxman.com 420 vide para 15 has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee in other five assessment years i.e. 2004-05 to 2008-09 are similar to assessment year 2003-04, we order that the impugned assessment orders passed u/s 153C in assessment years 2004-05 to 2008-09 are also a nullity. 22. Before we part with this order, we were wondering whether during search, revenue authorities can resort to carte-blanche seizure of anything and everything from the premises of the raided party without the said documents having any bearing in assessment of income as per law. It should be remembered that any exercise of power under section 153C has catastrophic effect on the party against whom proceedings are reopened for scrutiny for six assessment years. So the raiding party has to apply its mind at least to prima facie satisfy themselves that the documents seized have a nexus with income. Any arbitrary exercise of power which is unbridled is a sworn enemy of the Article 14 of the Constitution and such exercise of power would offend the right to privacy and Rule of Law which is a basic feature of the Constitution. Therefore, the officers conducting the search while seizing the documents has to exercise the said powers with extreme care and caution; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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