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TMI Blog2016 (7) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years 2008-09 to 2010-11 and the cross appeals by the department and the assessee for the assessment year 2011- 12 are directed against the separate orders each dated 29.09.2013 of ld. CIT(A)-XXXII, New Delhi. 2. Since the issues involved in all these appeals are common which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. At the first instance, we will deal with the appeal in ITA No. 6572/Del/2013 for the assessment year 2008-09. Following grounds have been raised in this appeal: 1. The Commissioner of Income Tax (Appeals) erred in law and on facts in deleting the disallowance made by the AO u/s 37 amounting to ₹ 38,83,148/-. 2. The Commissioner of Income Tax (Appeals) erred in holding the issuance of notice u/s 153C is bad in law. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 4. From the aforesaid grounds it would be clear that the main grievance of the department in this appeal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who was the Assessing Officer of Sh. J.P. Singh recorded satisfaction on 7/2/13 in the context of provisions of sec. 153C and on the basis of the said satisfaction note, notice u/s. 153C was issued on 8/2/13. The contents of satisfaction note are reproduced hereunder: Satisfaction Note u/s. 153Cofthe Income Tax Act. 1961 In the case of M/s. Nav Nidh Overseas Pvt. Ltd. PAN No. AABCN3865G M/s. Nav Nidh Motels Pvt. Ltd. PAN No. AAACN4560B D-6/1, Vasant Vihar, New Delhi. 1. During the course of assessment proceedings in the case of Sh. Jatinder Pal Singh PAN: AIPPS9874G for the assessment year 2011-12, it was noticed that during the search and seizure operation u/s. 132 of the Income Tax Act, 1961, undertaken on 22.4.2010 pursuant to authorization u/s. 132 in the case of Sri Jatinder Pal Singh, R/o D-6/13, Vasant Vihar, New Delhi, cash of ₹ 15,75,000/- was found out of which cash of ₹ 15,00,000/- was seized from the above premises. 2. Statement of Sh. Jatinder Pal Singh was recorded u/s. 132(4) of the income tax Act, 1961. In reply to question No. 7, it is stated as under: About ₹ 15 lacs is at my residence and ₹ 2 crores in my office whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction note referred to in the assessment order u/s. 153 being not relevant for the year under reference, the issue of notice u/s. 153C is illegal and without jurisdiction. 7. The reliance was placed on the following case laws: Jai Steel (India) Vs ACIT 259 CTR 281 (Raj.) ACIT Vs Asha Kataria (ITAT, New Delhi ITA No. 3105, 3106, 3107/Del/2011). Dinesh Tobacco Industries Vs DCIT 88 DTR 329 (JD.) Sh. Vikram Khandelwal Vs DCIT, ITA No. 1976/Mum/2009 8. The ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the AO by observing in para 7.1 to 7.1.7 of the impugned order which read as under: 7.1 Before addressing the grievance of the appellant company regarding the initiation of proceedings u/s 153C of the I.T. Act, 1961 it is appropriate to understand the provisions of section 153C and its applicability to the issue on hand. For applicability of the provisions of section 153C, the following conditions are required to be fulfilled: (i) The Assessing Officer is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account or document seized or requisitioned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound recorded in the file. Moreover the fact that such seized money of ₹ 10 lakh belonged to the appellant company could not be corroborated with the books of account of the appellant or the data on the computer to assess the nature of seizure whether disclosed or undisclosed in the hands of the appellant and is merely based only on the statement of the director of the company which he subsequently retracted on the ground that it was his personal money. Therefore, the pre-requisite of recording or drawing a satisfaction for initiation of proceedings u/s 153C of the I.T. Act, 1961 was not adhered to by the AO. It is also seen that the AO did not confront the director of the appellant company regarding the contradictory statement given. In these circumstances the ownership of the cash cannot be said to be ascertained to be belonged to the appellant The satisfaction note which is recorded by the AO in the case of the appellant company ignoring the same in the case of the searched person i.e. Sh. Jatinder Pal Singh, which is a pre-requisite condition for initiation of proceedings under section 153C does not hold any legal sanctity even otherwise when the ownership of the seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over under the first proviso to section 153B. Therefore in the present case the time limit for completion of proceedings u/s 153C would commence from the end of the financial year i.e. after 31.3.2011 in which such money, which belonged to the appellant company shall be handed over upto the end of 31.12.2013. 7.1.6 Therefore, in view of the above discussion, in my opinion, provisions of section 153C can be invoked with respect to the other person when the seized material belonged to other person and the Assessing Officer of the person searched records his satisfaction to this effect. In- the present case the following facts emerged to sum up where the provisions of the applicability of section 153C has been ignored. (a) No material was seized from the residence of the director of the appellant company, pertaining to the appellant company. (b) No warrant of authorization was issued in the name of the appellant company to initiate search operation u/s 132 against the appellant company with its address. (c) The ownership of cash of ₹ 10,00,000/- belonging to the appellant is doubtful as it is based on the contradictory statements of the director of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2013 i.e. within one and a half month approximately without affording a meaningful opportunity and sufficient time to present its case without conducting any independent enquiry by the Assessing Officer. (g) The additions made were the disallowance of the entire expenses u/s 37 of the IT. Act, 1961 without being supported by any incriminating document found at the time of search at the residential premises of Sh. Jatinder Pal Singh belonging to the appellant. 7.1.7 In view of the above discussion, and also relying on various case laws referred by the AR of the appellant, in my opinion the issuance of notice u/s 153C of IT Act 1961 is bad in law. 9. Now the department is in appeal. The ld. DR strongly supported the order of the AO and reiterated the observations made in the assessment order. 10. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the ld. CIT(A). It was further submitted that no satisfaction was recorded in the case of the searched person. Therefore, the issuance of notice u/s 153C of the Act was rightly held by the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the specified six AYs. In present case, the ITAT specifically recorded that, admittedly, a satisfaction note had not been recorded by the assessing officer of the searched person. It was contended by the 'Revenue before the ITAT that the assessing officer of the searched i.e. SVP Group was not required to record such satisfaction as both the Assessee and the SVP Group were being assessed by the same officer. After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In High Court opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him. It is settled that recording of such satisfaction is sine qua non for commencing any proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no disclaimer on the part of the J group in so far as the documents were concerned. Secondly, the finding of photocopies in the possession of a person in respect of whom search was conducted 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 J group might be the owner of the photocopies of the documents it was quite possible that the originals might be owned by some other person. Unless it was established that the documents in question, whether they be photocopies or originals did not belong to the person in respect of whom search was conducted, the question of invoking section 153C would not arise. None of the three sets of documents- copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement-could be said to belong to the assessee. The notice under section 153C was not valid. 15. In the present case also no satisfaction was drawn by the AO before issuing the notice u/s 153C of the Act while making the assessment of the searched Sh. Jatinder Pal Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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