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TMI Blog2011 (5) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the assessee was challenged. Thereafter, the assessee filed additional legal ground with regard to assumption of jurisdiction u/s 153C of the Act. The additional grounds read as under :- 1. On the facts and in the circumstances of the case, the assessment is bad in law, contrary to facts, without jurisdiction and void ab initio and hence liable to be quashed. 2. On the facts and in the circumstances of the case, the jurisdiction u/s 153C is void ab initio. 3. On the facts and in the circumstances of the case, no satisfaction u/s 153C was recorded. 4. On the facts and in the circumstances of the case, the satisfaction, if any, recorded u/s 153C is bad in law and nothing belonging to assessee was found during search. 2. It was contended by the learned counsel for the assesses that the additional grounds are purely legal in nature and no inquiry on facts is required as all the facts are already on record, hence, the same could be admitted. 3. On the other hand, it was contended by the learned CIT DR that there is delay of 19 months in filing the additional grounds, therefore, the same should not be accepted by the Tribunal. For this purpose, reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Incometax (Appeals) but raised for the first time before the Income Tax Tribunal. In this case, an appeal was filed by the department before the Hon ble High Court alleging the order of the Tribunal admitting additional ground for the first time. Hon ble High Court after relying on the decision of the Hon ble Supreme Court in the case of PVAL Kulandageen Chettiar; 267 ITR 654 held that the Tribunal could not be precluded from considering the question of law arising in an assessment proceeding not raised earlier and restricted the issue arising out of the appeal before the Commissioner. It was held that the Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or the learned Commissioner of Incometax (Appeals) but was raised for the first time before the Tribunal. The learned CIT DR has also relied upon the decision of the ITAT, Indore Bench, in the case of S. Kumar Tyre Mfg. Company; 61 ITD 326 wherein it was held that additional Ground cannot be entertained by the Tribunal. In this regard we find that this decision of the Tribunal has been reversed by the M.P. High Court and reported at 13 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rief, are that in all these cases, the Assessing Officer issued notice u/s 153C on 27.9.2005 and required the assessee to file return within 20 days from the date of receipt of the notice. The assessee filed return on 29.11.2005. The Assessing Officer assessed the income by passing the order u/s 153C/153A on 30.3.2006. The assessee has challenged the legality of assessment framed u/s 153C of the Act on the plea that no satisfaction was recorded by the Assessing Officer. The assessee has also placed on record copy of notice issued u/s 153C of the Act, copy of application for obtaining satisfaction written to the Assessing Officer and copy of order sheet entries. Attention of the Bench was also invited to the order sheet entry and the Assessing Officer s letter dated 17.1.2011 vide reference no. F.No. ACIT.1(1) /ITAT/ Ujjain/2010-11/6752 filed before us in case of all the appeals, narrating therein a specific finding that there was no requirement for writing of separate satisfaction note before the issue of notice u/s 153C of the Act. In view of this letter of the Assessing Officer dated 17.1.2011 which was written to the Additional Commissioner of Income Tax, ITAT-1, Indore, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the above case disginguished the Hon ble Supreme Court decision in the case of Manish Maheshwari narrating that since the Assessing Officer is the same in proceedings u/s 153A and 153C, there is no requirement of handing over the documents by the Assessing Officer of 153A proceedings to the Assessing Officer of 153C proceedings. In view of the notices placed before us in the case of Manish Maheshwari which arose only out of MP High Court decision, we find that in case of Manish Maheshwari and Indore Construction Company Private Limited; the Assessing Officer was the same which can be very well verifiable from the copy of notices u/s 158BC of Manish Maheshwari and Indore Construction Company Pvt. Ltd. placed before us by the learned counsel for the assessee. As such, the decision of the Hon ble Chhattisgarh High Court is not at all applicable to the facts of the instant case. In all the instant cases before us, no satisfaction has been recorded by the Assessing Officer which is a mandatory requirement before proceeding u/s 153C. 10. In the case of Krishna Sugar Corporation v. DCIT (2010) 133 TTJ 33 Lucknow, it was held that even when the Assessing Officer in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was held that no satisfaction having been recorded in the case of the assessee and therefore the notice issued was vague and show patent nonapplication of mind and was not valid. 12. With regard to the mandatory requirement of recording of satisfaction before assuming jurisdiction u/s 153C, the matter has already been dealt with in detail by the coordinate Bench in the case of Chidchid Hydro wherein following was the observation and conclusion of the Bench :- 78. We have considered the rival contentions, carefully gone through the orders of the authorities below and deliberated on the case laws referred by the lower authorities in their respective orders and by the respective 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/director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h satisfaction is recorded in writing. These provisions of section 153C are in pari materia with the provisions of section 158BD which provides that the Assessing Officer making the assessment of the searched person has to satisfy himself that some undisclosed income found by him belongs to some person other than the searched person and then he or the Assessing Officer having jurisdiction over such other person after receipt of record from the Assessing Officer of the searched person has to issue notice u/s 158BD of the Act and has to assess income of such other person. The provisions of section 158BD of the Act were examined in detail by the Hon ble Supreme Court in the case of Manish 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment and after due application of mind, strategies are finalized in respect of places/persons/concerns where search and seizure action u/s 132 of the Act is to be undertaken as well as the places/persons/concerns where action u/s 133A of the Act will serve the purpose. The whole action of search and survey is planned at a time and the department also keeps in mind that there should not be any harassment to the persons/concerns falling in the same group, who are not so important but are very much relevant and associated with the assessee, which necessitated simultaneous survey at their premises, so that nothing is left out. Our attention was drawn to various lists prepared as a part of appraisal note duly mentioning the names of the persons along with their addresses, date of search, who are appearing in the warrant of authorization u/s 132. A list was also prepared to show the premises wherein survey was undertaken u/s 133A of the Act. In the appraisal note, a list was also given where action u/s 153C of the Act was intended to be initiated. As per the learned CIT DR, such list comprises of the persons other than the person at whose premises search is being carried out in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppraisal report amounts to satisfaction by the Assessing Officer for issuing a notice u/s 153C of the Act. 80. On the other hand, in reply to the learned CIT DR's contentions, it was argued by the learned counsel for the assessee that even under the new scheme of assessment u/s 153C of the Act, satisfaction is to be necessarily recorded by the Assessing Officer of the searched person indicating the documents seized or requisitioned, which belong to a person other than the person referred to in section 153A of the Act. He invited our attention to the precise language used in section 153C of the Act which categorically requires the Assessing Officer s satisfaction to the effect that valuables, seized documents found during the course of search, which belong to a person other than a person searched and the procedure of handing over of these documents/valuables, etc. to the Assessing Officer having jurisdiction over such other person and thereafter obligation of the Assessing Officer of such other person to proceed against each such other person and issue such other person notice and thereafter to assess or reassess the income of such other person in accordance with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternal use, contents of which are not conveyed to the 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 Mahehwari 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 section 153C of the Act so as to empower the Assessing Officer to assume jurisdiction to issue notice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analogous to section 158BD and, therefore, decisions rendered with reference to the provisions of section 158BD would apply with reference to the cases falling u/s 153C unless the context requires otherwise. The Apex Court in the case of Manish Maheshwari (supra) after considering the provisions of section 158BD held that : (i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act (ii) The books of accounts 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 Assessing Officer has proceeded u/s 158BC against such other person. 15. Since the provisions of section 153A are analogous of section 158BD in this regard, the above observation of the Apex Court would squarely apply with reference to the provisions of section 153A/153C of the Act. 16. In view of the above, we do not find any merit in the assumption of jurisdiction by the Assessing Officer u/s 153C of the Act. With regard to merit of the addition, it was submitted that during t ..... 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