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TMI Blog2016 (5) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2002-03 2003-04. 2. In both the appeals the assessee has challenged the initiation of proceedings under section 153C of the Act, as no paper, documents or any adverse material relating to the impugned Assessment Year were found during search . The assessee has also on merits challenged the order of the Ld. CIT(A) in confirming the addition of ₹ 77,433/- made on account of determination of annual letting value under section 23(4) of the Act in both the assessment years and also the addition of ₹ 1,00,000/- and ₹ 4,98,551/- made under section 69A of the Act on account of unexplained gift received by the assessee in Assessment year 2002-03 and 2003-04 respectively. 3. Brief facts relating to the case are that search and seizure operations were carried out on the Shanker Gutka Group on 31/01/2008. Thereafter proceedings under section 153C read with section 153A were initiated in the case of the assessee on 02/07/2009 and assessment completed under section 153A read with section 143(3) after making addition on account of income from House Property amounting to ₹ 77,433/- and income under section 69A of ₹ 1,00,000/-to the returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY under consideration no assessment order either under section 143(3) or 147 had been passed and only intimation under section 143(1)(a) was sent, which by no stretch of imagination can be held to be an assessment order as held by the Hon ble Supreme Court in the case of ACIT Vs. Rajesh Javeri Stock Brokers pvt. Ltd. (2007) 161 Taxman 316 (SC) and therefore the issue of regular assessment for the impugned year had not reached finality. Therefore the Ld. CIT(A) held that the assessment or reassessment of the total income of the assessee for the impugned AY could be done as per the first proviso to section 153A(1)dealing with all matters including those issues also which relate to regular assessment and material, evidences etc. found during search relating to undisclosed income of the assessee because as per new scheme of search assessment u/s 153A, only one assessment or reassessment of such assessment years can be done after search. Ld. CIT(A) held that the AO was therefore justified in completing the assessment under section 153A(1) and in dealing with the matter relating to house property income found credited in the bank account of the assessee. Further Ld. CIT(A) upheld th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion since the searched person and the assessee were assessed by the same officer. We find no merit in the contention of the Revenue. The recording of satisfaction by the AO of the searched person is a sine qua non for commencing any proceeding under section 153C of the Act. A bare perusal of the provisions of section 153C reveals that proceedings thereunder begin with the AO of the searched person being satisfied that any money, bullion, jewellery or other valuable article or thing seized or requisitioned during search belongs to a third person. Thereafter the AO of the searched person hands over the relevant material to the AO of the third person, who in turn proceeds to assess such person if he is satisfied that these materials have a bearing on the determination of the total income of such person for the years or years mentioned in section 153A. The satisfaction of the AO of the searched person is significant since it has sever consequences on the third person. Therefore courts have held that satisfaction should be recorded by the AO in writing. It is thus not only that the AO of the searched persons should be satisfied but the satisfaction should be recorded in writing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is satisfied, that any money, document, etc., belongs to a person other than the searched person, then such money, documents, etc., are to be handed over to the Assessing Officer having jurisdiction over such other person . (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the searched person followed by handing over of all the requisite documents, etc., to the Assessing Officer of such other person , thereafter followed by issuance of the notice of the proceedings under section 153C read with section 153A against such other person . 27. The initiation of proceedings against such other person are dependent upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the searched person , or even during the assessment proceedings against him or even after completion of the same but before issuance of notice to the such other person under section 153C. 28. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of satisfaction is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, however, even otherwise such plea does not have any merit. 36. The contention of Sri Agrawal that section 153C is only procedural in nature, therefore, the non-recording of prior satisfaction does not vitiate the assessment order, as, such satisfaction, has been recorded in the assessment order passed subsequently with regard to the other person, is also not acceptable for the reason that the Supreme Court in the case of Calcutta Knitwears (supra) has already considered this aspect of the matter in the context of section 158BD, and after taking note of the fact that the said provision is a machinery provision has interpreted the same. In the light of the interpretation given by it and in view of the ratio laid down therein, the contention of Sri Agrawal does not hold ground. A clear and plain reading of section 153C leaves no doubt that recording of satisfaction by the Assessing Officer of the person searched is mandatory and it has to precede the initiation of proceedings against the other person (not searched). Moreover we find that on identical set of facts the Hon ble ITAT Agra Bench in the assessees own case for Assessment year 2004-05 to Assessment year 2007- 08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Annual Letting Value was determined. Therefore, conditions of section 153C as noted above are not satisfied in this case. Considering the above discussion in the light of our order in the case of M/s. Global Estates (supra), we do not find any justification to sustain the proceedings u/s.153C initiated by the authorities below against the assessee. We, accordingly, set aside the orders of the authorities below and quash the proceedings u/s 153C of the IT Act. Therefore, all the additions made in the assessment orders u/s 153C would stand deleted. It is pertinent point out that even the CBDT vide its circular no. 24/2015 dt. 31/12/2015 has accepted this position regarding recording of satisfaction note by the AO of the searched person being a prerequisite for the purpose of section 153C, even in cases where the AO of the searched person and the other person are the same The CBDT has further directed appeals to be decided accordingly and further directed pending litigation on this score of recording of satisfaction note u/s 153C/158BD to be withdrawn / not pressed. The CBDT Circular No. 24/2015 dt. 31/12/2015 is reproduced hereunder: CIRCULAR NO. 24/2015 F.No.279 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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