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TMI Blog2017 (5) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... eady in the knowledge of the department as the same were furnished alongwith the regular return of income. Therefore, those documents by no stretch of imagination can be said to be incriminating as those were made out of the regular books of accounts of the assessee and the return of income was filed on the basis of those documents only. - Decided in favour of assessee. - ITA Nos. 6216 & 6217/Del/2014, And 6239 & 6240/Del/2014 - - - Dated:- 19-5-2017 - Shri H.S. Sidhu, JM AND Shri O.P. Kant, AM For The Assessee : Sh. Rano Jain, Adv., Sh. Ashish Goyal, CA For the Revenue : Sh. Naveen Chandra, CIT (DR) ORDER PER H.S. SIDHU, JM: The cross appeals by the assessee and the department and are directed against the separate orders of the of Ld. CIT(A)-XXXII, New Delhi, relating to assessment years 2009- 10 2010-11 respectively. 2. At the first instance we wi l l deal with the cross appeals in the case of M/s Victory Accommodation Pvt. Ltd. for the assessment year 2009-10. The grounds raised in ITA No. 6216/Del/2014 by the assessee read as under: 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter such satisfaction note along with the seized documents or books of account to be placed in the file of such other person. (3) The commissioner of Income Tax (Appeals) erred in law and on facts in holding that no fair opportunity of hearing u/s 143(2) of the Act was given to the assessee before completing the assessment u/s 153C of the IT Act. (4) (a) The order of the CIT(Appeals) 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 above grounds of the assessee s appeal, it would be clear that the main grievance of the assessee relates to the validity of the notice dated 27.02.2012 issued to the assessee and the assessment framed thereafter u/s 143(3) r.w.s. 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act). 5. Facts of the case as appearing in the orders of the authorities below in brief are that the assessee was engaged in the business of a Builder and Developer of Real Estate. A search and seizure operation u/s 132 of the Act was conducted by the Investigation Wing of the department in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and filed the copy of the said decision before the Bench. She further filed the copy of the decision of the Hon ble Delhi High Court in the case of Pr. CIT vs. Aakash Arogya Mandir Pvt. Ltd. vide order dated 28.7.2015 reported in 2015 (7) TMI 1047 in which the Hon ble High Court has dealt the similar issue and decided the appeal in favour of the Assessee, as a result the issue in dispute is squarely covered. In support of his contention, the filed the copy of the Synopsis. For the sake of convenience, the contents thereof are reproduced hereunder:- 1. The cross appeals filed by the assessee as well as revenue are against the order of the Ld. CIT (A) dated 20.08.2014, whereby she has partly allowed the appeal in favor of the assessee. 2. A search and seizure operation was conducted on Victory Group on 14.09.2010 and notice u/s 153A of the Act was issued to the assessee on 04.11.2011. However, when it was submitted to the department that no search and seizure operation was conducted in assessee's case, the said notice u/s 153A was withdrawn. 3. Subsequently, a notice u/s 153C of the Act dated 27.02.2013 was issued to the assessee. The AO in his order observed that in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee company and while dealing with a similar issue have held that in the absence of the satisfaction being recorded by the AO of the searched person, the assumption of jurisdiction u/s 153C of the Act in case of person other than searched person was not valid. The Hon'ble Tribunal vide its order dated 24.03.2017 in ITA Nos. 6225 to 6237/De1/2014, have decided this issue and stated as under: 15. On perusal of the aforesaid provisions, it would be clear that those provisions start with the non-obstante clause, so these provisions over ride the provisions contained in Sections 139, 147, 148, 149, 151 and 153 of the Act. It is also clear from the said provisions that the satisfaction of the AO of the searched person is must for assuming the jurisdiction u/s 153C of the Act in case of a person other than the searched person. In the present case, the Id. CIT(A) categorically stated in the impugned order (a relevant portion of the said order has been reproduced in the former part of this order) that the AO did not record any satisfaction during the assessment proceedings u/s 153A of the Act in the case of the searched person i.e. Sh. Pramod Goel. On the contrary, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a settled law that the recording of satisfaction by the AO of the searched person that the documents seized belongs to a person, other than the person searched, is sine qua non for initiation of proceedings u/s 153C of the Act. The above ratio has been recently followed by Hon'ble Jurisdictional High Court in the case of ARN Infrastructure India Ltd. v. ACIT in Writ Petition No. 2768/2017 dated 25.04.2017. 10. Further reliance in this regard is placed on the following judgments: Delhi High Court in the case of CIT v. Aakash Arogya Mandir Pvt. Ltd. in ITA No. 509/2015 dated 28.07.2015 Assessment uls 153C - whether the Assessing Officer (AO) is required, for the purposes of Section 153- C of the Act, to record satisfaction even when the AO of the person searched and the AO who exercises jurisdiction qua the Assessee is the same? - ITAT held that the AO has not recorded his satisfaction qua the searched person - Held that:- The Revenue has not placed any material to dispute the factual finding of the ITAT that the requirement of the law explained by this Court in Pepsi Foods [2014 (8) TMI 425 - DELHI HIGH COURT 1 regarding the recording of satisfaction by the AO even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In view of the above, he requested that the appeal of the assessee may be allowed. 9. In his rival submissions the Ld. DR strongly supported the assessment order passed by the AO and further submitted that even if the AO/Assessing Authority receiving satisfaction note had not found anything adverse against assessee on examination of accounts books, the notice u/s. 153 of the Act still could have been issued to the assessee to file the return of income. In support of his contention, Ld. DR filed the Written Submission, which read as under:- It is respectfully submitted that a written submission on the issue of initiation and recording of satisfaction u / s 153C, a legal issue, is being submitted herewith . It is humbly submitted that 1 . The language of section 153 C may kindly be examined by the Honourable Bench . The statutory provision nowhere lays down the manner of reaching satisfaction . Delhi High Court in the case of SSP Aviation Ltd 346 ITR 177 ( Del ) where Hon'ble High Court has used the word 'satisfaction that is required to be reached and nowhere Hon'ble Court has said in what manner satisfaction has to be recorded . This view is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and therefore he issued notices u/s 153A dated 04.11.2011 which were subsequently withdrawn on 26.02.2013 as having erroneously issued. Thereupon the AO, as assessing officer of the searched person, drew the satisfaction note on 27.03.2011 to render jurisdiction upon himself as assessing officer of the appellant. The sequence of events and the satisfaction note will clearly show that satisfaction has been recorded as required under 153C by the AO holding jurisdiction over the searched person. 3. WITHOUT PREJUDICE, Judicial decisions have held that when the Assessing Officer of the persons searched and the Assessing Officer of the person other than the persons searched are the same, then there is no need of recording satisfaction in the records of persons searched for initiation of proceedings under Section 153C of the Act. The requirement as per law is that the AO is, satisfied that any money documents seized or requisitioned belongs to a person other than the person referred to in s 153A , then the books of account etc shall be handed over to the assessing officer having jurisdiction. What is required is that satisfaction be reached. This view is also supported by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Trilok Singh Dhillon group, the AO is same. Without prejudice to the above, language of provisions of ss. 158BD and 153C is not similar. The provision of s. 153C mentions any money, bullion, jewellery or other valuable articles or thing or things or books of accounts or documents to a person other than person referred to in s. 153A The issue of handing over comes when AO in ss. 153A and 153C is same, and then there is no question of handing over of documents etc. Impliedly, no occasion for recording satisfaction with a person subjected to s. 153C action. Alternative stand of the assessee was that the seized materials were received by the AO only on 21st Oct., 2005 i.e., much after the issue of the notice under s. 153C i.e., 16th Feb., 2005. Therefore, there was no material available with the AO for taking such action. This issue has been taken care by us in preceding para of this order. Emphasis supplied. This decision of co-ordinate Bench of Hon'ble ITAT has been followed by another co-ordinate bench decision of Hon'ble ITAT in the case of Varsha Buildwel India Pvt. Ltd. Piyush Buildwell in ITA No. 5526/0/2013 5527/0/2013 order dated 28.11.2014. 4. This is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same by the Assessing Officer while issuing notice under section 158BC will not invalidate assessment completed under section 158BD read with section 1588C. In fact when records are received by the Assessing Officer from another officer under section 158BD he has to only issue notice to file return in Form 2B. The reasons and materials based on which undisclosed income is proposed to be assessed should be communicated to the assessee when assessment is made based on the return filed which is a step after issuing notice and after receipt of return. By virtue of operation of section 142 every assessee assessed under sections 158BC and 158BD gets an opportunity to file objections. In other words, the validity of the assessment is not affected by reason of the Assessing Officer's failure to record his satisfaction under section 158BD which is only for the purpose of transferring the file and once the file is transferred, the transferring officer becomes functus officio and the jurisdiction for all purposes is transferred to the officer to whom the file is transferred and who has jurisdiction to assess the assessee about whom details are obtained in the course of search of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were decided by the Hon'ble ITAT and under which the appellants case is sought to be treated as covered, was delivered on a peculiar conspectus of facts missing in this case i.e. in that case the asssesse was also a searched person u/s 153A and addition was made u/s 2(22)(e) on account of payments received from companies in which the assesse was a owner of more than 10% share. The Court held that the same was not an incriminating material on which additions u/s 153A can be made. In the appellants case there is no doubt about the ownership of the documents in the form of balance sheet and profit Loss account mentioned in the satisfaction note and the same has never been questioned by the appellant. The Balance Sheet shows the investments made in its share capital which correlated and has nexus with various other documents impounded as page 51 to 55 of A-5 in the course of survey from the appellant premises on the same date of search i.e 14.09.2010 which depicted transactions of accommodation entries in the nature of share capital, the basis on which the AO made the additions. This itself distinguishes the appellants case where there exists impounded materials which had nexus w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of SSP Aviation Ltd. vs. DCIT in W.P.C. 309/2011 dated 29.03.2012 has not been followed or distinguished which is an order of prior date and binding being the order of jurisdictional High Court. It is settled judicial discipline that the decision of a High Court is binding on the Tribunals in its jurisdiction. Besides this, the Hon'ble IT AT does not seem to be aware of coordinate bench decision in the case of M/s Piyush Infrastructure India Pvt Ltd ITA No.1072/Dell2011 vide order dated 25.10.2012 which held that admittedly same A . O . was holding jurisdiction over all the cases of Piyush Group including the assessee company and therefore, we are of the view that there was no requirement for sending the material to any other AO . Besides, as per provisions uls 153A / 153C of the Act assessment in the search cases is required to be made . Further, Hon'ble ITAT has observed in this Para that so far as contention of the Ld . AR that satisfaction was not recorded before issuing notice for the assessment year 2008 - 09 to the assessee is concerned we find that the AO has recorded his satisfaction for proceedings uls 153C read with section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Hukumchand Mills Ltd. v. State of Madhya Pradesh, 1964 SC 1329 the apex Court has ruled that mere mistake in the opening part of the notification in reciting the wrong source of power does not affect the validity of the amendments made. In the case of State Bank of Patiala v. S.K. Shaima, 3 SCC 364 the apex Court ruled that in case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. The order passed in violation of such provision can be set aside only where such violation has occasioned prejudice to the subject. It further went on to observe that even mandatory requirement can be waived by the person concerned, if such mandatory provision of law is conceived in his interest and not in the public interest. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enquiries. As a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself. In the case of Dove Investments (P) Ltd. v. Gujarat Industrial investment Corporation 2 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction note clearly lays down that AO of searched person DCIT CC 09 had recorded his satisfaction before making assessment of the appellant. The ITAT have allowed relief in a case of blatant ant-national activity on a technicality. This is a case where the appellant is clearly involved in generating as well as laundering black money and claiming the same as share capital. The AO has well established, from various evidences collected in the course of survey and post search investigations, that the appellant has accepted accommodation entries from established entry operators in the form of share capital and has laundered its black money as legitimate money. All the efforts of government in curbing the menace of black money and money laundering is being brought to naught on mere technicalities and taking a hyper technical view. To summarise: The AO is obliged to initiate u/s 153 C where valuable article, books of account, document etc relating to a person other than the searched person is seized. The satisfaction note recorded by the AO records clear satisfaction. The ownership of documents recovered from the searched premises has never been questioned by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4 onwards. The copy of the satisfaction note is placed at PB 17. From the perusal of the same, it is quite evident that the AO recording the satisfaction is the AO of the assessee, while the requirement as per the Act is the recording of satisfaction by the AO of the searched person, as well as the AO of the assessee. This finding of the Ld. CIT(A) is based on the fact that the note is dated 27.02.2013 and on the same day the notice u/s 153C of the Act was also issued, and the last sentence of the note reads as under: Notice u / s 153C of the Income - tax Act, 1961 are hereby issued for the assessment years 2005 - 06 to 2010 - 11 . 10.1 Further finding on this fact has been recorded by Ld. CIT(A) by calling of assessment records of the assessee as well as that of the searched person, and thereafter holding that the satisfaction note was found in the file of the assessee and not in the file of the searched person. 10.2 We further note that also, this Hon'ble Tribunal while deciding the appeal of the group concerns of the assessee company and while dealing with a similar issue have held that in the absence of the satisfaction being recorded by the AO of the searched per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso to 91 [ sub - section ( 1 ) of ] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :] [ Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated .] 15. On perusal of the aforesaid provisions, it would be clear that those provisions start with the non-obstante clause, so these provisions over ride the provisions contained in Sections 139, 147, 148, 149, 151 and 153 of the Act. It is also clear from the said provisions that the satisfaction of the AO of the searched person is must for assuming the jurisdiction u/s 153C of the Act in case of a person other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [ 2014 ] 43 taxmann . com 446 ( SC ) ( 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 . The Hon'ble Court held that the satisfaction note could be prepared at any of the following stages : ( a ) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or ( b ) in the course of the assessment proceedings under section 158BC of the Act; or ( c ) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person . 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at (2016) 380 ITR 573 held as under: The legal position that emerges on a perusal of section 153A and section 132 of the Income - tax Act, 1961, is as under : ( i ) Once a search takes place under section 132 of the Act, notice under section 153A ( 1 ) wi l l have to be mandatori ly issued to the person in respect of whom search was conducted requiring him to fi le returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place, ( ii ) Assessments and reassessments pending on the date of the search shal l abate . The total income for such assessment years wi l l have to be computed by the Assessing Off icers as afresh exercise . ( Hi ) The Assessing Off icer wi ll exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place . The Assessing Of f icer has the power to assess and reassess the total income of the six years in separate assessment orders for each of the six years . In other words, there wi l l be only one assessment order in respect of each of the six assessment years in which both the disclosed and the un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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