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TMI Blog2018 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... zed 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/sl53C of the !T Act. 4. The Commissioner of Income Tax (Appeals) erred in law and on facts in deleting the addition of Rs. 48,00,000/- on account of deemed income under section 68 of the Income Tax Act, 1961." 2. Brief facts of the case as mentioned in the impugned orders are that assessee-company is engaged in the business of a Builder and a Developer of Real Estate. A search and seizure operation u/s 132 of the I.T. Act, 1961, was conducted by the Investigation Wing of the Department in Victory group of cases (Main Jagat Group) including its Directors, Other Individuals and Connected Associates on 14.09.2010. Since one of the Directors of the assessee-company was associated with one of the cases of Jagat Group, his residential premises was also searched simultaneously. As a result of this search operation, a survey operation u/s 133A of the I.T. Act, 1961 was also conducted by the Department on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No incriminating material belonging to assessee-company was found during the course of search. No search was conducted in the case of the assessee-company. The A.O. did not raise any query on documents filed by the assessee- company in respect of evidence of share application money received. The A.O. merely initiated the proceedings under section 153C of the I.T. Act, on the basis of copy of the balance sheet seized during the course of search which pertains to A.Y. 2010-2011. No undisclosed income was unearthed on examination of any documents found in search. Several case Laws were relied upon in support of the same. 3.1. The Ld. CIT(A) reproduced Section 153C of the I.T. Act in the order and on going through the interpretation of the said provision, he noted that action under section 153C can be taken in respect of any other person other than the person searched, if the Assessing Officer of the searched person is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belong to a person other than the person searched under section 153A. In such circumstances, the Assessing Officer shall hand-over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.06.2011 issued by the CIT, Delhi-Vl, New Delhi. I am therefore satisfied that the documents seized, as referred to above, belong to M/s Victory Accommodations Pvt. Ltd. warranting action u/s 153C in this case. 27.02.2013 (Sumesh Swani) Deputy Commissioner of Income Tax Central Circle-09, New Delhi Notices u/s 153C of the Income-tax Act, 1961 are hereby issued for the assessment years 2005- 06 to 2010-11. (Sumesh Swani) Deputy Commissioner of Income Tax Central Circle-09, New Delhi" 3.2. The Ld. CIT(A) on reading the above satisfaction note found that the Assessing Officer of the assessee-company recorded the satisfaction note under section 153C of the I.T. Act who has initiated action under section 153C of the I.T. Act, which is also supported by the fact that the said satisfaction note was recorded on 27.02.2013 and notice under section 153C have been issued on the same date. The A.O. who recorded satisfaction note in the file of assessee company is also the same A.O. who issued notice under section 153C in the case of the assessee-company. The Ld. CIT(A) also called for the assessment record of Shri Pramod Goel who was searched under section 132 on 14.09.2010. The A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re scanned in the assessment order, upon perusal, the A.O. noted that various companies purchased the shares of the company of the Victory Group at a premium of Rs. 90/- to Rs. 190/- per share on a face value of Rs. 10/- per share. According to A.O. the transactions for M/s. Victory Apartments P. Ltd., were arranged by Shri Tarun Goel, Entry Operator, who are running several companies. The assessee-company filed several documents before A.O. in support of genuineness of the share application money received such as share application form, copy of the ITR, PAN, Board Resolution, Bank Statements, Copy of Certificate of Incorporation, Ledger Account, Challan for filing return with Registrar of Companies etc. The assessee-company, therefore, submitted that it has received genuine share application money, on which, A.O. has not conducted any enquiry. Ld. CIT(A), accepted the contention of assessee-company that on filing documents on record, A.O. did not make any enquiry. The A.O. has gone through and relied upon report of DDIT, Kolkata, which was in respect of some other cases and not connected with the assessee-company. The Ld. CIT(A) noted that A.O. did not issue notice under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk of Contractor for construction of houses came out, in these premise, it was held that "the power of survey has been provided under Section 133A of the I.T. Act. Therefore, any material or evidence found/collected in a Survey which has been simultaneously made at the premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under Section 158BB read with Section 158 BH of the IT Act." The Ld. D.R. relied upon order of ITAT, Delhi Bench in the case of Shri Parag Dalmia, New Delhi vs. DCIT, Central Circle-26, New Delhi in ITA.No.5499/Del./2017 dated 26.02.2018 in which the documents received by the Government of India from a Sovereign Country containing information regarding the undisclosed foreign accounts were received prior to the search and was confronted to the assessee during the course of search. Therefore, it was held that the same constitutes incriminating material. The Ld. D.R, therefore, submitted that satisfaction note was validly recorded under section 153C of the I.T. Act. On merits, the Ld. D.R. submitted that the name of the parties tally with the additions. The entries were arranged by Shri Tarun Goel, Entry Operator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led all the documents before A.O. on merits but the A.O. without making any enquiry or without verifying any fact, made the addition which was correctly deleted by the Ld. CIT(A). A.O. relied upon the report of the Investigation Wing, Kolkata, which was not connected with the assessee-company. He has also relied upon the decision of Hon'ble jurisdictional Delhi High Court in support of his contention in cases of CIT vs. Fair Finvest Ltd., 357 ITR 146 and ACIT vs. Best Infrastructure (India) Pvt. Ltd., 2017-(8)-TMI-250. 6. We have considered the rival submissions. According to Section 153C of the I.T. Act, action under section 153C can be taken in respect of any other person than the person searched, if the A.O. of the searched person is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belonged to a person other than the person searched under section 153A. In such circumstances, the Assessing Officer shall hand over to the Assessing Officer of such other person money, jewellery, bullion or other valuable article or thing or books of account or document, and thereafter, the Assessing Officer of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Maheshwari (supra) as under : "As the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having jurisdiction over the matter, we are of the opinion that the impugned judgments of the High Court cannot be sustained, which are set aside accordingly. The appeals are allowed. However, in the facts and circumstances of the case, there shall be no order as to costs." 6.3. The CBDT vide Circular No.24/2015 dated 31st December, 2015 issued the following directions : "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/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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted on the assessee. On the basis of loose papers found with and seized from the president the Assessing Officer issued a notice under section 153C on the assessee and assessed the income. The Tribunal set aside the assessments. On appeals to the High Court: Held, dismissing the appeals, that the reasons assigned by the Assessing Officer in the satisfaction note were silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note was not enough. There was absolutely nothing to indicate as to in which educational courses, the education was imparted and institution wise, whether the admissions were granted to the technical courses merit-wise or on the basis of marks obtained in XII standard HSC exam. Whether any fee structure was approved and cash component was, therefore, collected over and above the sanctioned fees were matters which ought to have been gone into and there could, not be a general or vague satisfaction. The Tribunal was justified in setting aside the assessments." 6.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal held that the notice under section 153C was not valid. On appeal to the High Court : Held, dismissing the appeals, that the Assessing Officer did not have the benefit of the seized material while issuing the notice under section 153C. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing Officer at the time of issuing notice, the Tribunal rightly came to the conclusion that he assumption of jurisdiction under section 153C was not valid." 6.7. The ITAT, Agra Bench in the case of ACIT, Circle-I, Gwalior vs. Global Estate (2013) 142 ITD 740 (Agra) held as under : * The assessee had a case for quashing of proceedings under section 153C. No material is produced to prove that the Assessing Officer in the case of person searched was satisfied that any money, bullion, jewellery or other valuable article or things or books of account or documents seized or requisitioned belongs to or belong to a person other than the person referred to in section 153A. * No material is produced before to show if any satisfaction was recorded by the Assessing Officer in that case that the material belongs to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lid. Moreover, from the observation of the AO in the satisfaction note also it is crystal clear that no incriminating material was found, the addition was made only on the basis of the copy of balance sheet, profit and loss account and schedule of advances against supplies pertaining to the assessee, those documents were already in the knowledge of the department as the same were furnished along with 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." 6.9. The Hon'ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Index Securities Private Limited, Vidya Shankar Investment Private Limited 2017 (9) TMI 585 (Del.) (HC) (supra) observed that "the two seized documents referred to in the satisfaction note in the case of each assessee are the trial balance and balance-sheet for a period of 05 months in 2010. In the first place, they do not relate to the assessment years for which the assessments were reopened in the case of both assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng notice under section 153C are not satisfied in this case because no satisfaction have been recorded under section 153C in the case of the person searched and no incriminating material was seized pertaining to assessment year under appeal. Even during the course of survey, no incriminating material was found against the assessee-company because the same were regarding purchase of shares of the group companies and ultimately, A.O. made the addition based on books of account that the share application money have not been explained by assessee-company. Such material found in survey is not relatable to the material found during the course of search in the case of the person searched because the balance-sheet does not belong to assessment year under appeal. Therefore, there is no incriminating material found during the course of search against the assessee-company so as to record any satisfaction note against the assessee-company. Thus, there is no reason to believe that A.O. of the searched person would have recorded any satisfaction note that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belonged to a person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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