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TMI Blog2017 (11) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... who is the Apex Body controlling the Administration of the Income Tax Department, in the aforesaid Circular has clearly directed the officers of the Department either not to file appeals or to withdraw the appeals where satisfaction note is not recorded by the Assessing Officer in the capacity of searched person. In such circumstances, advancing of above arguments are futile and wastage of resources of the Income Tax Department. There is no satisfaction recorded that any document belonging to the assessee was found during the search, it is seen that in the satisfaction note, the assessing officer has not recorded any satisfaction that documents “belonging to” the assessee was found during search. There is amendment in the Income Tax Act with effect from 1st June 2015 whereby the seized documents even if they pertains to or relates to “other person” and does not “belong to” “other person” can be the basis for initiation of proceedings u/s 153C of the Act. We quash the proceeding initiated under section 153C of the Act on the ground that satisfaction note was not recorded by the Assessing Officer in the capacity of Assessing Officer of searched person and in any case since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 were initiated against the assessee by issuing notice dated 26.11.2013 on the basis of satisfaction note dated 26.11.2013. The AO thereafter completed the assessment u/s. 153C/143(3) of the I.T. Act, 1961 vide his order dated 25.03.2014 at a total income of ₹ 76,16,960/- wherein an addition of ₹ 26,91,041/- was made on account of unexplained cash. Aggrieved with the assessment order, the assessee filed appeal before Ld. Commissioner of Income Tax(A) and challenged the validity of the proceedings u/s 153C of the Act as well as the additions made by the AO. The Ld. CIT(A) vide his order dated 09.06.2015 has dismissed the ground of the assessee related to the validity of proceedings u/s. 153C of the Act. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. 3. In the ground No.1, the assessee has challenged the notice issued under section 153C of the Act. According to the assessee the notice issued u/s 153C of the Act in this case is bad in law. The submission of the assessee on this ground has twofold, first that the satisfaction note has not been recorded by the AO in his capacity as AO of the searched person and second that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the so called satisfaction note has been recorded by the assessing officer in his capacity as assessing officer of the assessee (i.e. a person other than a searched person) and not in his capacity as assessing officer of a searched person. This is evident from the following :- I. In the satisfaction note, it has nowhere been stated by A.O. that he is recording satisfaction in his capacity as A.O. of any searched person. II. The Satisfaction Note in this case is a satisfaction note for taking up action u/s 153C and for initiating proceedings u/s 153C. Under the provision of search 153C, the A.O. of searched person is required to record satisfaction that documents belonging to other person have been found during the course of search and thereafter he has to handover those documents to assessing officer of person other than the searched person. The A.O. of the searched person is not empowered to issue notice u/s 153C or to give direction for issue of notice u/s 153C. This authority of issue / giving direction for issue of notice u/s 153C lies solely with the assessing officer of the other person . As can be seen from the last line of the so called satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see makes no difference to the consequence of non-compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO were the same, satisfaction would have to be recorded separately qua the searched person and the Assessee. 9. No substantial question of law arises for determination. The appeal are dismissed. 1.3 The Delhi Bench of ITAT in the case of ACIT v JNSW Infracon Pvt. Ltd. 2017(6) TMI 174- ITAT Delhi vide its decision dated 31.05.2017 has held that even if, the assessing officer of the searched person and other person are same, the satisfaction u/s 153C has to be recorded by the assessing officer in his capacity as assessing officer of Other Person. 1.4 Similar decision has been by Delhi Bench of ITAT in the case of Victory Accommodation Pvt. Ltd. v ACIT (2017)(5) TMI 1050 ITAT Delhi 1.5 The CBDT vide its Circular No. 24/2015 dated 31st December 2015 has accepted the position laid down by Hon ble Supreme Court in the case of Calcutta Knitwears (Civil Appeal No. 3958 of 2014 dated 12.03.2014) that even if the assessing officer of searched person and other person are same th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng belong or belongs to such person; ** ** ** Provision of section 292C(1)(i) 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; 2.1 In the case of Pepsi Foods (P.) Ltd.v ACIT [2014] 52 taxmann.com 220 (Delhi) the Hon ble High Court held as under :- 6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be satisfied that inter alia any document seized or requisitioned belongs to a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any satisfaction of the kind required under Section 153C of the said Act. 12. This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs. 2.2 The head note of judgement in the case of Pepsico India Holdings (P.) Ltd. v ACIT [2014] 50 taxmann.com 299 (Delhi) is as under :- Section 153C of the Income-tax Act, 1961 - Search and seizure, assessment in case of - Assessment of income in case of any other person - Assessment years 2006-07 to 2011-12 - Whether before provisions of section 153C can be invoked, Assessing Officer of searched person must be satisfied that seized material (wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court held that amendment to section 153C by including the documents pertaining to has been given prospective effect from 1st June 2015. In view of the above, it is submitted that in the so-called satisfaction note since the assessing officer has no where recorded any satisfaction about any seized document being belonging to the appellant, the proceedings initiated are bad-inlaw and therefore liable to be quashed. 3. That there has been no handing over of the seized documents as required u/s 153C before initiation of proceedings under that section. Under section 153C of the Income Tax Act, before initiation of proceedings u/s 153C against the Other person (i.e. a person other than a searched person) by the A.O. of that other person , there has to be not only a satisfaction note recorded by the A.O. of the searched person (with regard to seized documents being belonging to that other person ) but also handover of the seized documents from the A.O. of the other person . This requirement cannot be dispensed with even when the assessing officer of the searched person and of the other person is same. In the present case of the appellant, there has been n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized. Also, the AO is stated that satisfaction note for invoking section 153 C was recorded on 26.11.2013 which is placed in the assessment folder of the aforesaid companies. Thus, it is clear that the AO of the searched person recorded satisfaction as required under the provisions of the Income Tax Act. The Revenue reiterates that the provisions of section 153C unambiguously state that 153C. Assessment of income of any other person.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or 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 against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A 153(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that the AO initiated the proceedings u/s 153C after duly recording the satisfaction note. The AO of the searched person and the other person (appellant) is the same. Therefore, there is no substance in the contention of the appellant that the AD recorded satisfaction in the capacity of the AO of the searched person. Further, the satisfaction note clearly referred to the documents pertaining to the appellant, which were incriminating in nature and on the basis of which the AO had also made an addition in this case. Thus, the AO initiated the proceedings u/s 153 C after complying with the provisions of the said section. Therefore, I. find no merit ln the appellant's submission challenging the validity of proceedings u/s 153C. Accordingly, these grounds of appeal are dismissed. (Ref Para 7/Page4/CIT(A) order) So the A.O is empowered by the Income Tax Act and its provisions under section 153A/ 153C to assess the 'total income' of the assessee which includes undisclosed income. Reliance placed on following judgements: 1. PCIT Vs Sheetal International Pvt Ltd (2017-TIOL-1355-HCDEL- IT) (Copy Enclosed) where Hon'ble Delhi High Court held that proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013] 263 CTR 362 (Gujarat)} (Copy Enclosed) where Hon'ble Gujarat High Court held that where assessee sold certain land to purchaser, documents, viz., sale deeds of said land and agreements executed between assessee and erstwhile tenants regarding their eviction, found during search upon purchaser, would be said to be belonging to assessee for purpose of section 153C 7. Rajesh Sunderdas Vaswani Vs ACIT {[2016] 76 taxmann.com 311 (Gujaratl} (Copy Enclosed where Hon'ble Gujarat High Court held that where Assessing Officer of search person recorded that document found during search was copy of a ledger of books of account of assessee company which evidenced certain cheque payments as well as cash payments to a company by assessee, there was prima facie material to suggest that satisfaction as per section 153C was duly recorded and thus, notice issued to file return to assessee was justified. 8. SSP Aviation Ltd Vs DCIT (20 taxmann.com 214) (Copy Enclosed) where Hon'ble Delhi High Court held that In view of provisions of section 153C, satisfaction that is required to be reached by Assessing Officer having jurisdiction over searched person is that valuable artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining reliefs and appeals against improper orders etc. While tax law is a part of the general law, it has got its own distinct features. There are some special provisions which are attracted while interpreting tax laws. The need of interpretation arises only when the words used in the statute are on their own term, ambivalent and do not manifest the intention of legislature. [ Keshavji Ravji Co. v/s. CIT - [(1990) 183 ITR 1 (SC)l. Similarly rule of interpretation would come into play only if there is doubt with regard to the express language used. [Pandian Chemicals Ltd. vis. CIT- [(2003) 262 ITR 278 (SC)l. Literal rule: Language of Statute should be read as it is : The first and the most elementary rule of construction is that it is to be assumed that the words and phrases of legislation are used in their technical meaning if they have acquired one, or otherwise in their ordinary meaning, and the second is that the phrases and sentences are to be construed according to the rules of grammar. Krishi Utpadan Mandi Samiti vs. UOI (2004) 267 ITR 460 (All.) Pure, simple and grammatical sense of language used by Legislature is best way of understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. In the light of the written and oral submissions made during course of hearing, the appeals of the assessee may be dismissed and the issue decided in favour of Revenue. 4. We have heard both the parties and perused the relevant records, written submissions of both parties and also the impugned order passed by the Ld. CIT(A). We find that the first issue challenging the jurisdiction u/s. 153C of the Act raised is whether the satisfaction note required in terms of section 153C of the Act has been recorded by the AO of the searched person or of the other person (i.e. the assessee). It is apparent from the assessment order that a search was conducted under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o acquire jurisdiction and unless jurisdictional condition is satisfied, there can be no question of making assessment or reassessment in the case of such other person. 4.2 We further note that prior to the introduction of section 153C of the Act, under the scheme of block assessment for such cases, there is a corresponding section 158BD of the Act, which reads as under: Undisclosed income of any other person. 158BD. 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. 4.3 On reading of the aforesaid provisions, it is clear that when the AO of the person searched is satisfied that undisclosed income belongs to any person other than the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 substantial similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record a satisfaction that documents seized belong or belongs to other person. The assessing officer in his capacity as assessing officer of searched person is not concerned with initiation of proceedings u/s 153C of the Act or for making assessment against the other person because that can be done by assessing officer in his capacity as assessing officer of other person . In the present as is evident from the language of Satisfaction Note it has been recorded by A.O. in his capacity as assessing officer of the assessee i.e. the other person and not as the assessing officer of the searched person. Thus the pre-requisite of recording satisfaction by the assessing officer in his capacity as assessing officer of searched person has not been fulfilled. 4.12 We further find that Ld. CIT(DR) has submitted that technicalities and irregularities, which do not occasion in failure of justice should not be allowed to defeat the end of justice and the entire proceeding conducted by the Revenue cannot be held illegal, without jurisdiction. 4.13 Though, we agree in principle that technicalities should not come in the way of dispensation of justice but the issue of lack of juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as held by Hon ble Delhi High Court in the recent case of CIT v Renu Construction Pvt. Ltd. (Supra), the said amendment has been given prospective effect from 1st June 2015. Thus prior to June 2015, the seized documents had to be mandatorily shown to be belonging to the other person and not merely pertaining to or relating to such other person . The documents referred to in the satisfaction note , even if they pertain / relates to the assessee have not been shown to be belonging to the appellant and there is no such satisfaction recorded. Accordingly the requirement of recording satisfaction that seized documents belong to other person has not been fulfilled in the present case. 4.15 We also note that the case laws relied upon by the Ld. CIT(DR) are distinguished on facts. In the cases Pr. CIT v. Sheetal International Pvt. Ltd., Pr. CIT v Instronics Ltd., GanpatiFincap Services (P) Ltd. v CIT, the Hon ble Delhi High Court has held that where the A.O. of the Searched Person and Other Person is same, there was no requirement of recording two satisfaction notes, one by A.O. of searched person and another by A.O. of other person . The Hon ble Court held that satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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