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TMI Blog2018 (1) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon order of the ld. Commissioner of Income Tax (Appeals) for the concerned assessment years. The issues are common which read as under: 1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in quashing the notice issued u/s. 153C of the Act as well as the assessment order u/s. 143(3) r.w.s. 153C of the Act without appreciating the fact that the A.O. of the searched person and A.O. of the other person is the same and satisfaction note is recorded in the case of other person before assuming jurisdiction. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in quashing the notice issued u/s. 153C of the Act as well as the assessment order u/s. 143(3) r.w.s. 153C of the Act without appreciating the fact that section 153C does not require A.O. in searched person to prepare two satisfaction notes when the A.O. is same for both. 2. In this case, the assessment was framed u/s. 143(3) r.w.s. 153C of the I. T. Act. In its appeal before the ld. Commissioner of Income Tax (Appeals), the assessee raised issues relating to validity of notice as well as merits of the case. The ld. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g jurisdiction over the searched person vide letter dated 9.2.2015 addressed to the A.O. In this regard, it is observed from the letter of the A.O. (DCIT, CC-7(2), Mumbai) dated 10.2.2015, addressed to the appellant firm that the above said satisfaction note was recorded by the A.O. in the case of Lata Deshmukh for issue of notice U/S.153C of the Act. 5.3.2 During the appeal proceedings, a remand report on the additional grounds raised and the assessment records in the case of Subhash Deshmukh was called for from the A.O. The A.O has sent the assessment records in the case of Subhash Peshmukh, the searched person, for A.Y, 2005-06 to 2011-12 and the same were perused. The common order sheet has been n;aintained for A.Yrs. 2005-06 to 2010-11 in the assessment folder for A.Y. 2010-11. Notice u/s.153A in the case of Shri.Subhash Deshmukh has been issued on 8.11.2011 and assessment order u/s.143(3) r.w.s. 153A was passed for A.Y. 2005-06 to A.Y. 2010-11 on 21.3.2013. However, no satisfaction note u/s.153C was found to have been recorded in the files of Subhash Deshmukh, as per the assessment records for A.Y.s, 2005-06 to 2011-12, submitted by the A.O. 5.3.3 The appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in section 153A). Similar decision has been given by the Hon'ble High Court of Allahabad in the case of CIT (Central) vs Gopi Apartment 365 ITR 0411 (All). Further, in the CBDT circular No.24/2015, it has been observed as under:- 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, 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 person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5.3.5 In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Deshmukh at Flat No.1, Ground Floor, Nandini Apartment, 10t!l Road, Santacruz (E), Mumbai belongs and pertains to the captioned assessee. Further, captioned assessee has made a disclosure of ₹ 1,50,00,000/-. I am therefore fully convinced and satisfied that this is a fit case for initiation of proceedings u/s.153C of the Act. Accordingly, notice U/S.153C is issued requiring the assessee to file return of income for A.Y. 2005-06 to 2010-11. The appellant had sought a copy of the satisfaction note of the A.O. having jurisdiction over the searched person vide letter dated 9.2.2015 addressed to the A.O. In this regard, it is observed from the letter of the A.O. (DCIT, CC-7(2), Mumbai) dated 10.2.2015, addressed to the appellant firm that the above said satisfaction note was recorded by the A.O. in the case of M/s. L, S. Developers for issue of notice u/s,153C of the Act. During the appeal proceedings, the assessment records in the case of Shri. Subhash Deshmukh for A.Y. 2005-06 to 2011-12 were perused. The common order sheet has been maintained for A.Yrs. 2005-06 to 2010-11 in the assessment folder for A.Y, 2010-11. Notice u/s.153A in the case of Shri.Subhash Deshmukh has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in section 153C belongs or belong to a person (other than the person referred to in section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in section 153A). Similar decision has been given by the Hon'ble High Court of Allahabad in the case of CIT (Central) vs Gopi Apartment 365 ITR 0411(All). Further, in the CBDT circular No.24/2015, it has been observed as under :- 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, apply to proceedings u/s.1530 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of searched person, i.e., Shri Subhash Deshmukh, is fatal to the validity of jurisdiction assumed in this case. He submitted that CBDT has also issued Circular to this fact. He submitted that identical issue was considered by ITAT, Nagpur Bench in the case of Zaidun Leeng Sdn Bhd Artefact Projects Ltd. (JV) vs. Dy. CIT (in ITA Nos.382 383/Nag/2014 vide order dated 22.03.2017), in which on similar issue the assessment order passed was held to be without jurisdiction. Hence, the ld. Counsel of the assessee pleaded that accordingly there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). 7. Upon carefully consideration, I note that in the present case, it is undisputed that there is not satisfaction recorded in the case of the searched person, i.e., Shri Subhash Deshmukh that the incriminating materials seized belong to the assessee. The ld. Departmental Representative has also not disputed this proposition. Hence, though the satisfaction is there in the case of assessee, i.e., there is no such satisfaction in the case of searched person that the incriminating material belongs to the assessee. In this situation, the assessment order has been held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating seized material, no addition is sustainable where assessments have already been completed earlier. Learned counsel relied upon several case laws as mentioned above in his written submission. 11. We find that at the outset we need to adjudicate the jurisdictional aspect. The first limb of argument in this regard is that there is no valid satisfaction in the case of the person searched that incriminating material found may relate to the assesses in whose case action has been taken u/s 1530. The search records of the searched person, namely, M/s Artefact Projects Ltd. were called for and examined. No satisfaction note whatsoever was found recorded in the case of the searched person. Neither any satisfaction was mentioned in the order sheets nor any satisfaction note was found in the file which was not numbered. The fact that no satisfaction note is there in the case of the searched person is also evident from the finding of the learned CIT(Appeals) in his appellate order reproduced herein above wherein he also has referred to the satisfaction note which is recorded in the case of the assessee and not in the case of the searched person. 12. In this regard we can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his income. Thus it is manifest before handing over such documents to the AO of the other person a satisfaction has to be recorded by the AO of the searched persons, that money, bullion or jewellery, etc., found from the person searched belong to the 'other person1. Only when such 'satisfaction1 is recorded by the AO of the person searched and such documents or assets seized, etc., are handed over to the AO of the 'other person1, that the later AO acquires jurisdiction to make assessment or reassessment of the 'other person/ It is, therefore, clear that the AO of the 'other person1 can acquire jurisdiction to assess or reassess income of the 'other person' only when the AO of the persons searched records satisfaction in his case (searched person) before handing over money, bullion, jewellery, etc. to him. So, what emerges is that the recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person1 to acquire jurisdiction. Unless such jurisdictional fact is satisfied, there can be no question of making assessment or reassessment of the 'other person.' In the case of Anil Kumar Ors. vs. UOI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BD/153C 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 2O14-LL-0312-51) has laid down that for the purpose of Section 158BC of the Act, recording of a satisfaction note is a prerequisite and thesatisfaction 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 158BC. 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 158BD of the Act; or (b) in the course of the assessment proceedings under section 158BD 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, apply to proceedings u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153-A of the Act. It is contended that the same Assessing Officer is involved in the matter. This fact does not dispense with above requirement. It is settled position of law that when a thing is to be done in one particular manner under law this has to be done in that manner alone and not other way (See Nazir Ahmed v. King Emperor). We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided. Conclusion: Recording of satisfaction of AO(s) is pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind dconsciously as documents seized must be belonging to any other person other than person referred to in S. 153-A. ii) Hon'ble High Court of Madhya Pradesh High Court decision in the case of CIT vs. Mechmen in ITA No. 44/2011, ITA No. 45/2011 others vide order dated 10-07-2015. In this case the relevant exposition from the Hon'ble High Court is as under : Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be satisfied that the item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In a batch of appeals in ITA No. 60/2016 Others in the Principal CIT vs. Satkar Roadlines Pvt. Ltd. vide order dated January 12, 2016, the Hon'ble Delhi High Court noted as under : It is stated by Ms. Suruchi Aggarwal, Senior Counsel for the Revenue, that in light of the Circular No. 24/2015 dated 3ist December, 2015 issued by the Central Board of Direct Taxes on the subject Recording of satisfaction note under Section 158BD/153C of the Act , these appeals are not pressed These appeals are, accordingly, dismissed as not pressed. 16. From the above case laws and CBDT Circular, it is evident that recording of requisite satisfaction in the case of a searched party is a sine qua non for assuming jurisdiction for the issue of notice u/s 153C even if the AO of the searched person and the assessee are same. It is abundantly clear from the records in the case of the searched person that there is no requisite satisfaction granting the AO jurisdiction for issuing notice to the assessee u/s 153C of the I.T. Act. No satisfaction note whatsoever is found in the case of the searched person, namely, M/s Artefact Projects Ltd. In absence of any satisfaction note in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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