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TMI Blog2010 (12) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [ 2007 (2) TMI 148 - SUPREME COURT] and G.K. Drive Shaft [ 2002 (11) TMI 7 - SUPREME COURT] 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 and thereafter frame assessment u/s 153A read with section 143(3) of the Act. Thus, we do not find any infirmity in the order of the ld CIT(A) who has quashed the assessment framed u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by this consolidated order. 3. Rival contentions have been heard and records perused. 4. Facts, in brief, are that there was a search at the residence of directors/partners of the assessee company/firm on 16.9.2005. However, there was no search at the assessee's business premises. Survey was conducted u/s 133-A at the assessee's business premises. Thereafter, notice u/s 153C was issued and the assessee filed return of income accordingly, thereafter assessments were framed u/s 153C. The assessee M/s. Chirchind Hydro Power Ltd.,is a private Ltd co. incorporated on 04-08-2000. The assessee maintained the regular books of a/cs , which were audited u/s. 44AB of the IT Act and filed the returns u/s.139(1) of the IT Act. The search was conducted against the directors of the company, Shri Mahesh Agrawal , Smt. Veena Agrawal and Shri Gaurav Agrawal u/s.132(1) of the IT Act on 16-09-2005. The ld. assessing officer issued the notice u/s. 153C on 22- 03-2006 and required the assessee company to file the returns for the assessment yr 2002-03 within 30 days from the date of receipt of the notice. The assessee received the notice on 25-03-2006 and filed the returns on 01-06-2006 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rched person and other than searched person as well then he shall issued the notice u/s. 153C after recording a satisfaction on the matter stated in para-a above. 6. It was further contended that the provisions of sec. 153C are identical with the provisions of sec. 158BD, which read as under:- Where the assessing officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other 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 [under section 158BC] against such other person and the provisions of this chapter shall apply accordingly . 7. Ld. AR further submitted before the CIT(A) that the provisions of sec.158BD provide 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 havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction before issue of notice u/s. 153C is mandatory and no such satisfaction has been said to have been recorded by the assessing officer in the case of any searched persons that there is some incriminating material and its belongs to the assessee. Infact, the perusal of the assessment order will clearly reflect that no incriminating material worth the name belonging to the assessee was found during the course of search. In the opening paragraph of the assessment order, the ld. assessing officer has observed that during the course of search (at the residence of Shri Mahesh Agarwal), the incriminating material relating to the assessee i.e. FDR's in the name of Chirchind Hydro Power were found . On perusal of the panchnama in the case of Mahesh Agrawal ,who is a director of the company and against whom the search proceedings were conducted , it may be seen that no such FDR was seized. Even if , otherwise held there was an FDR of ₹ 25,00,000/-, which was made from the bank a/c of the assessee from the centurion bank after obtaining the loan from M/s. Gwalior Tank Vessels (in short 'GTV'). As evident from the copy of the bank a/c and the copy of a/c of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion can become a ready tool for reopening six year cases on any pretext of a person, who had some dealing with the person-searched. The ld. A. R. has argued that before invoking section 153C there has to be some material on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person-searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March' 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12 cases, involving about 40 assessments, the assessing officer has recorded identical stereo type satisfactions by stating that during search actions carried out in December' 2003 in the cases of Santosh Kumar Sahu and Others incriminating documents pertaining to each of the years were found and seized whereas the fact is that in some of the years of some of those concerns were not in existence. However, these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso observed that the balance sheet for assessment year 01-02 to 2005-06 were not filed by the assessee along with the return. However, he intentionally omitted to mention that all the balance sheet were filed during the assessment proceedings, and they were already on record with the returns filed u/s. 139(1) . It will also be worth while to see that all the additions in all the assessment years have been made by the assessing officer on the basis of the balance sheet available before him. However, the ld. assessing officer made the additions without giving any opportunity and without inviting any objections from the assessee. The order has been passed by the assessing officer without providing adequate opportunity to the assessee and is against the principles of natural justice. It was requested to the CIT(A) that the order passed u/s. 153C/143(3) be kindly held as illegal and the same be kindly quashed. 12. With regard to the merit of the addition it was submitted that during the course of assessment ld. assessing officer found that there is receipt of share application money of ₹ 1,10,000/- . He observed that this share application money is unexplainable and therefore, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.A Colony, Banjara Hills, Hydrabad. Rs.2,00,000/-by cheque Smt. M. Srivara AJFPM7881D -do- ₹ 2,00,000/- by cheq. Shri G.Balaiah - 5-143, shaboonagar Miryalguda, Nalgonda A.P Rs.40,000/-by cash Shri T. Madhan - Sagar Road,Miryalgu da Nalgonda ,A.P. ₹ 40,000/- by cash Shri Maddi Madhusud an Reddy - Ramagiri , Nalgonda Nalgonda , A.P. ₹ 30,000/- by cash ============ Rs. 11,30,000/- ========== In support of the same, the copies of share allotment certificates and the copy of bank passbook were enclosed. a. Share application Name PANo. Address Share application money contributed Mr.S. Ramkrishna Reddy ARKPS1310E Plot No. 28C, New M.L.A Colony, Banjara Hills, Hydrabad. ₹ 30,00,000/- by cheq. Smt. M. Srivara AJFPM7881D -do- ₹ 5,00,000/- by cheq. Smt. M.Rajitha Reddy AFJPM9642N -do- ₹ 55,000/- by cash Smt. M.Lakshmi Reddy - -do- ₹ 40,000/- by cash Mr. M. Arjun Reddy AJSPM0907B -do- Rs.40,000/- by cash N. Bhupal Reddy - -do- ₹ 35,000/- by cash N.Vrushasena Reddy - -do- ₹ 20,000/-by cash =========== Rs. 36,90,000/- ============ 17. In support of the same, the copy of the confirmation letter and bank pass book of the above said share hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples by making the strong observations that even if there are the bogus share holders no addition can be made in the hands of the company. This principles has been laid down by the S.C. in the case of CIT vs Lovely Export (P) Ltd. as reported on (2008) 216 CTR S.C. 195. In view of the above, the share application money at ₹ 2,50,000/- be kindly accepted and the addition made towards the same be kindly removed. 20. In the assessment year 2005-06 the ld. assessing officer found from the balance sheet that the assessee had paid the amount of ₹ 28,00,000/- to the land lord towards purchase of land in the assessment year 2003-04 , which has been received back in the present assessment year 2005-06. He assumed that when the assessee return the land and received back the advance, he must have received some premium . He estimated the sale consideration of the land at ₹ 1 crore and since 28,00,000/- were paid by the assessee , he assumed that the assessee must have earned the premium of ₹ 72,00,000/- . The ld. assessing officer treated this amount of ₹ 72,00,000/- as the short term capital gain and accordingly , made addition of ₹ 72,00,000/- in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that some premium, howsoever small, has been given, the premium can not be estimated for the purposes of working of the capital gain even when section 52 was on the statue book till 01-04-88. In this connection, the ld. counsel also placed on record the decision of the Supreme Court in the case of K.P. Varghees vs CIT reported on 131 ITR 597 (SC). 21. In view of the above, it was pleaded that there is no justification to estimate the short term capital gain at ₹ 72,00,000/- and to make the addition towards the same. 22. In the assessment year 2006-07 ld. assessing officer found from the balance sheet that the share application money has increased from 15,70,000/- to ₹ 58,55,356/- during the accounting year and that there was the increase of ₹ 42,85,356/- . He treated the difference as unexplained share application money and accordingly, made the addition of ₹ 42,85,356/- in the hands of the assessee. In this connection, it was brought to the notice of Ld. Commissioner of Income Tax (Appeal) that the copy of account of the share application money as well as copy of account of M/s Gwalior Tanks and vessels ltd( in short GTV) was available in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alior Tanks and vessels ltd. (in short 'GTV') it was submitted that no satisfaction has been said to have been recorded by the assessing officer in the case of any searched persons that there is some incriminating material and its belongs to the assessee. Infact, the perusal of the assessment order will clearly reflect that no incriminating material worth the name belonging to the assessee was found during the course of search. In the opening paragraph of the assessment order, the ld. assessing officer has observed that during the course of search (at the residence of Shri Mahesh Agarwal), the incriminating material relating to the assessee LPS-1 to LPS-4 , LPS-5, LPS-8, LPS-13 and LPS-15 were seized . On perusal of these documents , it will be seen that they are not at all incriminating at all. These seized papers are discussed below:- Seized papers P. No. Particulars of pages LPS-1 1-72 } Purchase deed of flats by Shri Mahesh LPS-2 1-71} Agrawal 601-A-B-C D dtd. 14-07-2004. LPS-3 1- } LPS-4 1-} LPS-5 1-44 MOU for work between GTV Arun Excello LPS-6 1-86 Copy of balance sheet LPS-7 1-60 Details of calculation of balance and commission to be received from Techno Promo Expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived are having huge balances outstanding for some time and in most of the cases, they are being paid through cheques but amounts are received back in cash. (ii) The company is making bogus payments to various labour contractors and is claiming bogus fabrication charges. These contractors are being paid through cheque and the amounts are received back in cash. (iii) Bogus expenses are claimed in respect of non existing fabrication contract firms created in the names of present and past employees of the concern and money paid to these fabrication units are received back in cash from the said employees. 25. It was contended that these allegations are categorically refuted as they are baseless and without any supporting evidence or even material. 26. The ld. assessing officer observed in the assessment order that incriminating documents supporting such allegations were found during the course of search. But here he does not make mention of any particular documents. Then the assessing officer concludes that bogus payments are made to the material suppliers, the sub- contractors and cash is withdrawn from time to time from their bank accounts and is returned to the assessee firm. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of notice u/s. 153C and therefore, the notice issued u/s. 153C is illegal, invalid and untenable-in -law and therefore, it was pleaded that the assessment made on the basis of such illegal notice be kindly quashed. 28. It was also argued that the assessee was being assessed at Gwalior by ACIT-2, Gwalior. The ld. CIT, Gwalior issued the notice on 31-01-2006 to the assessee u/s. 127 of the IT Act as he intended to transfer the case from Gwalior to Bhopal on request from IT Authorities at Bhopal, The assessee strongly objected to the same and the matter of transfer of the case was dropped. However, after the change of incumbent of the office of CIT, the case was transferred on 23-08-2007 by the new incumbent nearly 10 months after the notice u/s. 127 without giving any opportunity to the assessee. The assessee filed the writ petition before the honourable High Court M.P. Gwalior bench, who granted stay till the date of next hearing on 27-09- 2007. On persuasion by the IT authorities at Bhopal, the assessee withdrew its writ petition and accordingly, the Hon'blee High Court vacated the stay on 05-10-2007 and allowed the assessee to withdraw his writ petition . In the meantime, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses but he has not given any basis for such wild allegations. As per ld AR the account books cannot be rejected without giving proper reasons for the same and in absence of any defects in the account books, they are ought to be accepted. The assessee relies upon the M.P. High Court decision in the case of Sureshchandra vs CIT as reported on (2006) 201 CTR 153 M.P and Gohati High Court decisions in the case of Pyarelal Mittal vs ACIT as reported on (2007) 197 Taxation 186. It is requested, therefore, that the results shown by the account books be kindly accepted and all the additions made by the Assessing Officer be kindly removed. 30. The ld. assessing officer found that the gross profit of the assessee has come down to 3.25% from 9.20% in the earlier year and there was no explanation on record. He also found that at Malanpur unit there is a gross loss of 133.80% and at Mandideep unit there is a gross profit of 40.98% . He also found that at the Malanpur unit, the manufacturing expenses are at ₹ 65,20,811/- (inclusive of purchase price of Iron Steel at ₹ 40,09,961/- ) and salary wages are at ₹ 61,25,388/- . The ld. assessing officer found that all these expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the above, out of the other income at ₹ 1,46,47,008/-, ₹ 70,00,000/- are towards rent and balance are towards payment against salary, wages and material paid by the assessee. If this amount is included in the sales, the total sales will go up to ₹ 1,48,17,664/- . Against which, the assessee has claimed the material consumed and manufacturing expenses including wages at ₹ 1,32,74,168/- and decrease in stock of ₹ 12,52,829/-, it means that the assessee has earned the gross profit from the manufacturing section at ₹ 2,90,667/- from the Malanpur unit, which comes to ₹ 1.96%, which quite comparable with the G.P. shown by the assessee in the earlier year at 9.2% as per chart enclosed. On these facts, it was pleaded before the CIT(A) that the ld. assessing officer has made the wrong presumption and has derived the wrong conclusion. The assessee has maintained these accounts on the quantitative basis and they are supported by bills and vouchers. In these circumstances, there is no justification for the assessing officer to disallow 1/4th portion of the purchases as the bogus purchases. The assessee had filed the party-wise details of pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from International Metro, which includes ₹ 70,00,000/- towards rent of the factory premises and ₹ 19,80,000/- towards rental for storage and balance ₹ 76,47,008/- towards reimbursement of salary and wages and material. The receipt of reimbursement at ₹ 76,47,008/- is almost equal to the difference pointed out by the assessing officer in the manufacturing expenses (Rs. 46,80,719/-) as salary and wages. (Rs. 34,67,971/-) totaling to ₹ 81,48,590/- . On the above facts, it may be seen that the assessee has not fabricated his accounts or has inflated their expenses under heads of manufacturing expenses or salary and wages. Infact, there is a mistake in proper accounting as the assessee should have shown the rental at ₹ 89,80,000 as other income and should have increased the sales by ₹ 77,66,360/- or should have reduced the manufacturing expenses and wages by the said amount and should have claimed them against the other income and this could have given the correct picture of the business affairs of the assessee. As pointed out above, the assessee has not inflated any expenses towards manufacturing salary and wages and there is no justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that she will serve the company for three years after completion of the training on the same salary as she was getting as a graduate. She completed her training in July'2002 and resigned the company. She got married and left the job in October'2003. As per requirement of the agreement, the efforts are being made to recover the amount of ₹ 3,16,895/- from Smita Agrawal. It was submitted that the company has incurred the expenditure solely for business purposes to have best training for their employees and such an expenditure is allowable deduction u/s. 37 of the IT Act and the expenditure can not be disallowed simply for the reason that the Smita Agrawal happens to be the daughter of the managing director. At any event, this amount of ₹ 3,16,895/- can not be disallowed in the hands of the company. 43. In an appeal filed before the ld. CIT(A), the basic grievance of the assessee was that notice u/s 143(2) was issued prior to filing of return in response to notice u/s 153-C. However, no notice u/s 143(2) was issued subsequent to filing the return u/s 153C. Accordingly, it was prayed that assessment so framed was invalid in view of the decision of Hon'ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment on the ground of no satisfaction having been recorded while issuing notice u/s 153C and framing ast u/s 153C read with section 153A, which section is in pari materia with the provisions of Section 158BD. There is no dispute to the well settled legal proposition that recording of satisfaction before issue of notice u/s 153C is mandatory and in case of failure of the Assessing Officer to record such satisfaction in the case of searched person showing that these are incriminating materials and belonged to the assessee will render the assessment so framed as nullity. In terms of decision of Hon'ble Supreme Court in the case of Manish Maheshwari (supra), the searched person has to be confronted with the seized material and when the searched person deny that seized material belonged to him, then opportunity has to be given to the other person and the AO has to satisfy that the seized material belongs to some particular person other than the searched person and he has to record his satisfaction before proceedings u/s 153C against such other person. In the instant case before us, no such satisfaction was recorded before initiation of proceedings and even the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y observation LPS-1 to LPS-4 P1-71 in all four sets Registered purchased deeds of flat at Mumbai, which have been purchased by the director Shri Mahesh Agrawal. LPS-5 P1-44 MOU between appellant and his other associate M/s. Arun Excello, which is not incriminating at all. LPS-8 P1-34 Chart and copies of the bills in the name of Techno Pharma Exports raised by the appellant, which are Chart and copies of the bills in the name of Techno Pharma Exports raised by the appellant, which are LPS-13 a. Agency agreement between TPF GTV b. Copies of cheques and covering letter from GTV Chennai Bhopal as internal correspondence. c. Copies of form 8 13 filed before ROC. d. Correspondence between GTV and TPF NHDC regarding completion of work. e. Copy of loan sanction to other party. f. Rough reconciliation papers of GTV figures appearing in the books of account. g. Rough sheet showing tax liability of Mahesh Agrawal. h. Statement of assets, liabilities and Mahesh, Veena and Dinesh Agrawal as on 27.3.2002. LPS-15 Proposal between Mahesh Dinesh Agrawal group for transfer of shares in the companies and firms. From the above chart, I have no hesitation to hold that these papers are not incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, but the notice u/s 153C cannot be issued on the basis of the same. In view of these facts, I hold that the invoking of Section 153C against the assessee was bad in law and the notice issued u/s 153C was illegal. The proceedings u/s 153C is ab initio null and void. The assessment made in consequence to such notice u/s 153C for all the assessment years are hereby quashed and accordingly, the ground no.1 of the appeal is allowed. 45. Various additions made on merit in case of Chirchind Hydro Ltd.were partly by the learned Commissioner of Incometax (Appeals) after having the following observations. 46. The learned Commissioner of Incometax (Appeals) quashed the assessment proceedings initiated by the Assessing Officer u/s 153C of the Act with the following observations :- In this ground, the appellant has challenged the legality of the assessment made u/s 153C/143(3) of the IT Act. I have examined the legality of the assessment in the assmt. Year 2001-02 and have decided that the assessment made u/s 153C/143(3) is illegal. Following the said order, the order passed u/s 153C/143(3) from this year is also held as illegal for the same reasons and accordingly, the assessment is quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 10,20,000/- towards share capital and ₹ 35,00,000/- towards share application money and I confirm the addition of ₹ 1,10,000/- towards share capital and ₹ 1,90,000/- towards share application money. Accordingly, the appellant gets the relief of ₹ 10,20,000/- and ₹ 35,00,000/-. In the result, ground no. 3 is partly allowed. 49. ITA No. 171/Ind/2008 Against the above order of CIT(A) the revenue has preferred this appeal on the following grounds :- On the facts and in the circumstances of the case, the learned CIT(A) erred in : 1. Quashing the order passed u/s 153C/143(3) of the I.T. Act, 1961. 2. Deleting the addition of ₹ 10,20,000/- made by the A.O. on account of unexplained share capital. Deleting the addition of ₹ 35,00,000/- made by the A.O. on account of unexplained share application money. 50. The learned Commissioner of Incometax (Appeals) quashed the assessment proceedings initiated by the Assessing Officer u/s 153C of the Act with the following observations :- In this ground, the appellant has challenged the legality of the assessment made u/s 153C/143(3) of the IT Act. I have examined the legality of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment in the assmt. Year 2001-02 and have decided that the assessment made u/s 153C/143(3) is illegal. Following the said order, the order passed u/s 153C/143(3) from this year is also held as illegal for the same reasons and accordingly, the assessment is quashed. 54. The addition of ₹ 42,85,356/- made by the Assessing Officer on account of unexplained share capital was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- On the above facts, it is quite evident that all the share application money at ₹ 47,55,356/- has been provided by M/s GTV, who is the regular income tax payer. The copy of a/c of share application money and GTV in the books of Chirchind Hydro Power Ltd. And the copy of a/c of Chirchind Hydro Power Ltd. in the books of GVT and the confirmation from M/s GTV are filed. On the facts, I find that the above said company is income tax payer and have accepted to have contributed the share application money. The honourable supreme court in the case of CIT v. Steller Investment Ltd. As reported on 251 ITR 263 sc have held that where the income tax payer accepts the contribution of share capital no additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that simply because some person does not attend in compliance to the notice u/s 131 or u] s. 133(6) no adverse inference can be drawn simply for his. non attendance. It may be mentioned here that I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the assessing officer that the cheques payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and therefore, this disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 78,76,426/- and accordingly, Ground no. 4 5 are allowed. 57. In respect of addition made on account of unexplained purchases from M/s. Everest Steel, the ld. CIT(A) has deleted the addition after having t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, it cannot be said that they are bogus particularly, because no engineering works can be done without laour work and because the payments to the sub contractors are made from time to time as evident from their copies of accounts on record. I hold that both the disallowances made by the Assessing Officer out of fabrication expenses at Malanpur and Mandideep units are unjustified. Accordingly, I remove both the additions of ₹ 36,36,992/- and of ₹ 8,31,645/-. In the result, ground no. 8 9 are allowed. 60. The AO has also made addition on account of foreign travel expenses incurred by the assessee, which was alleged to be not related to the business. By the impugned order, the ld. CIT(A) has deleted the disallowance after having the following observations :- I have gone through the assessment order and the written submissions of the AR. I don't know from where the AO got an idea that the foreign traveling expenses for Veena Agrawal and Smita Agrawal were incurred by the appellant. The documents before me indicate that Shri Mahesh Agrawal had gone to Germany and France as aManaging Director, and for the business purposes. Accordingly, I remove the addition of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that simply because some persons do not attend in compliance to the notice u/s 131 or u/s. 133(6) no adverse inference can be drawn simply for his non attendance. In view of the facts and circumstances of the case, I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the assessing officer that the cheques payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and therefore, this disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 1,14,02,395/-and thus, ground no. 4 5 are allowed. 63. An addition was also made by the Assessing Officer on account of expenditure incurred on fabrication at Malanpur Unit at & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. There is absolutely no evidence to indicate that the appellant has received back the cash amount from the suppliers or that the purchased material has not reached the factory premises of the appellant. ON these facts, I find that there is no justification for the disallowance of ₹ 51,77,539/-. Accordingly, the disallowance of ₹ 51,77,530/- is directed to be removed. Accordingly, the appellant gets the relief of ₹ 51,77,530/-. In the result, the ground no.4 is allowed. 66. The addition was also made by the Assessing Officer on account of manufacturing expenses and salary and wages amounting to ₹ 81,48,590/- u/s 69C after recording following findings, the ld. CIT(A) has partly deleted the addition to the extent of ₹ 76,47,008/- :- I have perused the assessment order and the written submissions of the AR. After minute examinations, I find that the whole confusion has arisen because of the mistake of the appellant in not bifurcating the receipt from Delhi Metro amounting to ₹ 1,67,46,360/-. The appellant had let out its factory and godown for the amounts of ₹ 70,00,000/-and ₹ 19,80,000/- respectively and all the balance expenditure wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts are not available, the form No.75/49 the commercial tax-rules- stamped at different sales tax check post is filed. Merely, because some of the transport receipts are not traceable, it does not mean that the purchases are bogus particularly, when the payment has been made through cheques. The assessee produces excisable items and claims Cenvat credits. The charge of the assessing officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and therefore, this disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 50,24,882/- and accordingly, ground no. 4 is allowed. 68. While framing assessment u/s 153C, the AO has also made addition of ₹ 2,10,00,000/- u/s 69C on account of commission payment, which has been deleted by the ld. CIT(A) after having following observations :- I have seen the assessment order as well as the oral and written submissions of the AR. I find force in the submissions of the AR. When he points out that when the appellant received the commission of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tendance. In the given facts and circumstances, I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. I find that the doubt of the AO about the small amount of Transportation charges is misplaced because they are simply for loading and unloading. The JAR has filed the detailed chart showing transportation charges loading and unloading charges at page no. 34 to 36 of the compliation. Some time, transportation charges are included in the purchase amounts. The assessee produces excisable items and claims Cenvat credits. The charge of the assessing officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and therefore, this disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing observations :- I have gone through the assmt. order as well as the written submissions of the appellant. I find that the assessing officer has treated the purchases made from the SRD Steel (P) Ltd as bogus. He also treated 1/4th portion of all other purchases from other parties also as bogus. He has given the reason that even after a notice u] s. 131 to M/ s. SRD steel and notice u/s. 133(6) to four other parties, nobody attended on their behalf and therefore, he disallowed all the purchases made from SRD steel and also disallowed 1/4th portion of other purchases as in line with other firms of the concerns of the group. I have seen the copy of the notice issued u/s. 131 on 23-11-2007 to SRD steel, which is said to have been sent by the AO calling for confirmation of the sales made by him. I find that large number of suppliers have sent their confirmations for supplies made by them. Only four parties have failed to send their copies of accounts, which are filed. There may be several reasons for not sending the copies. The assessment order is silent whether the notices were actually served on the suppliers. I am of the opinion that simply because some person does not attend i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,14,05,710/-. On the above facts, I find that there is no justification to sustain the addition of ₹ 1,87,67,570/- and accordingly, this addition is deleted. Consequently, assessee gets relief of ₹ 1,87,67,570/-. Thus, this ground is allowed. 74. Against the above order following grounds taken in I.T.(SS).A.No. 180/Ind/2008 - A.Y. - 2005-06 : On the facts and in the circumstances of the case, the ld. CIT(A) erred in - 1. Quashing the assessment proceedings u/s 153C. 2. partly allowing relief to the assessee on the ground of rejection of books of account. 3. deleting the addition of ₹ 9,98,47,818/- made by the Assessing Officer u/s 69C on account of unexplained bogus Purchase u/s 69C of the Income-tax Act, 1961. 4. deleting the addition of ₹ 1,87,67,570/- made by the Assessing Officer u/s 69C on account of unexplained payment to Panchsheel Engg. u/s 69C of the Income-tax Act, 1961. 75. Various other additions made in the assessment year 2006-07 were partly deleted by the CIT(A) after giving detailed findings in his order. Revenue is in appeal before us against the part deletion of additions where as assessee has filed cross objection against the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A of the Act. The opening word of section 153C speaks that not-with-standing anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, jewellery or books of accounts or documents seized or requisitioned belongs to a person other than the person referred to in section 153A, meaning thereby the Assessing Officer is to record a satisfaction to the effect that such jewellery or document so seized does not belong to the searched person but to some other person referred to in section 153A of the Act. Thus, the pre- requisite of section 153C is that the Assessing Officer making the assessment of the searched person has to satisfy himself that some material found during the course of search and seizure belongs to some person other than the searched person. Then the Assessing Officer making the assessment of searched person has to hand-over the said incriminating material belonging to some person other than the searched person to the Assessing Officer having jurisdiction over the said other person. Thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that recording of satisfaction before issue of notice u/s 153C is mandatory and in case where no such satisfaction has been recorded by the Assessing Officer in the case of searched person to the effect that some incriminating material so found belongs to some other person, the assessment framed u/s 153C will be liable to be quashed. However, detailed finding has been recorded by the learned Commissioner of Incometax (Appeals) after examining the assessment records of the concerned person/parties to the effect that no satisfaction has been recorded by the Assessing Officer of the searched person. This finding of the learned Commissioner of Incometax (Appeals) has not been controverted by the department by bringing any positive material on record. Accordingly, applying this propostion of law, the assumption of jurisdiction and framing of assessment in the instant cases by the Assessing Officer u/s 153C were bad in law. 79. It was argued by Shri K.K. Singh, the learned CIT DR, that satisfaction note, as stipulated u/s 153C of the Act, is to be seen in the context of satisfaction note prepared by the ADIT in the form of appraisal note after the search is over. He placed on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) or sub- section (2) of section 120 or any other provision of this Act and the Additional Commissioner or the Additional Director or Joint Commissioner or Joint Director, who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer. As per the learned CIT DR, under the new scheme of section 153A/C, there is no need to find out undisclosed income, but the assessment is made after the search is carried out to assess or reassess the income of the assessee for the immediately preceding six assessment years and the current assessment year falling upto the date of search. He further contended that under the old scheme of section 158BC/158BD of the Act, the department was to assess the undisclosed income on the basis incriminating documents found during the course of search whereas under the new scheme of section 153A/153C, where a search is initiated u/s 132 or books of accounts or other documents or any assets are requisitioned u/s 132A, then the department has to assess or reassess the total income of such assessee for six assessment years immediately preceding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in section 153A of the Act. Reliance was also placed on the proposition laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari; 289 ITR 341(supra) and G.K. Drive Shaft; 259 ITR 19 and the decision of the jurisdictional Tribunal in the case of Rishi Construction; 10 ITJ 346 and Asnani Builders; 10 ITJ 81. We have deliberated upon the contentions of the learned CIT DR, Shri K.K. Singh and learned counsel for the assessee, Shri H.P. Verma, with regard to interpretation of recording of satisfaction while assuming jurisdiction u/s 153C of the Act. Even in the new scheme of framing of assessment in case of search cases, the legislature has clearly stipulated the requirement for recording of satisfaction while assuming jurisdiction to issue notice and frame assessment u/s 153C of the Act which requires that satisfaction to be recorded with reference to the documents and other materials found during the course of search belonging to a person other than the searched person. Prima facie, Assessing Officer of searched person should form an opinion with regard to any document, valuable, etc. as found during the course of search that such document, which is declined by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as various additions were made by the Assessing Officer on merits, the same were partly deleted and partly confirmed by the learned Commissioner of Income tax (Appeals) after recording detailed finding, as narrated hereinabove. In respect of grounds filed by the revenue for deletion of addition by the learned Commissioner of Incometax (Appeals) on merits, the learned CIT DR relied on the order of the Assessing Officer. The findings recorded by the learned Commissioner of Incometax (Appeals) for partly deleting the additions on merits have not been controverted by the department, we, therefore, do not find any reason to interfere with such finding of the learned Commissioner of Incometax (Appeals). Accordingly, even the part of additions deleted on merit by the learned Commissioner of Incometax (Appeals) require no interference. 84. In the cross appeals and cross filed by the assessee, grounds have been taken against partially confirming some of the additions/disallowance of expenses, etc. by the learned Commissioner of Incometax (Appeals). As we have already upheld the order of the learned Commissioner of Incometax (Appeals) in entirety, even for the additions/disallowance s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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