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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 ..... 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 Rs. 77,433/- and income under section 69A of Rs. 1,00,000/-to the returned income of the assessee of Rs. 1,75,900/- in Assessment year 2002-03 and addition of Rs. 77,433/- on account of Income from House Property and Rs. 4,98,551/- u/s 69A of the Act to the returned income of the assessee of Rs. 4,14,241/- for the Assessment year 2003-04. The assessee challenged the initiation and validity of proceedings under section 153C and the addition on merit before the Ld. CIT(A). Detailed submissions were filed by the assessee during appellate proceedings in which the assessee explained that no action under section 132 had been taken in the case of the assessee. The assessee stated that her main source of income was income from other sources and the search was conducted at the Residence 92-Surya,Nag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 the addition made by the AO on account of income from House property and addition made under section 69A. 4. Aggrieved by the same the assessee filed the present appeal before us. 5. Ground No. 1 raised by the assessee is against the validity of proceedings under section 153C. Ld. AR reiterated the submissions made before the Ld. CIT(A) below and submitted that no search had been conducted in the case of the assessee under section 132 of the Act and therefore the proceedings have been conducted under section 153C of the Act. Ld. AR submitted that since no incriminating material relating to the assessee had been found during the course of search on other persons, relating to the impugned year, which is evident from the fact that the addition h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 so as to maintain the objectivity and such jurisdictional fact is amenable to be examined by the higher authority in appropriate proceeding if agitated. Recording of satisfaction regarding seized material goes to the root of the matter to assume jurisdiction to make assessment of other persons u/s 153C. Therefore for assuming such jurisdiction the recording of satisfaction in writing is important and warranted even when the AO is common. The jurisdictional High Court in the case of CIT Vs. Gopi Apartments (2014) 365 ITR 411(All) has extensively dealt with this issue, and has held that initiation of proceedings against a third person u/s 153C is dependent upon a satisfaction being recorded in writing by the AO of the searched person, even if the AO of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 must, as, that is the foundation, upon which the subsequent proceedings against the "other person " are initiated. The handing over of documents, etc., in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory. 29. In this regard, the ratio of the judgment of the Supreme Court in the case of CIT vs. Calcutta Knitwears (supra), as noted above, clearly applies to the proceedings under section 153C also. 30. The "satisfaction" has to be in writing and can be gathered from the assessment order passed in respect of the "searched person", if it is so mentioned/ recorded or from any other order, note or record maintained by the Assessing Officer of the "searched person". The word "satisfaction" refers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 had quashed the proceeding under section 153C by holding at para 6.1 of its order as follows : 6.1 Considering the facts of the case, it is clear that no search was conducted against the assessee u/s 132 of the IT Act, therefore, proceedings u/s 153C have been initiated. The AO did not make any addition against the assessee on the basis of any adverse material. The AO passed the assessment order u/s. 153C of the IT Act making addition of Rs. 77,433/- on account of determination of Annual Letting Value u/s 23(4) of the IT Act of the property at 7% of investments. The determination of Annual Letting Value is only on notional basis and for that, no incriminating material was found against the assessee. No material is produced before us to prove that the AO in the case of person searched was sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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/Misc./140/2015/ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ****** New Delhi, 31st December, 2015 Subject: Recording of satisfaction note under section 158BD/153C of the Act - reg. The issue of recording of satisfaction for the purposes of section 158BD/I53C has been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014(available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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