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TMI Blog2019 (5) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... (SS).A. No. 43/Kol/2013, I.T(SS).A. No. 44/Kol/2013, C.O. No. 65/Kol/2013, C.O. No. 66/Kol/2013 - - - Dated:- 22-5-2019 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Shri A.K. Tibrewal, FCA For the Revenue : Shri A.K. Singh, CIT D/R. ORDER PER J. SUDHAKAR REDDY, AM :- Both these appeals filed by the revenue and the cross-objection filed by the assessee are directed against the order of the Learned Commissioner of Income Tax (Appeals) Central - III, Kolkata, (hereinafter the ld.CIT(A) ), passed u/s. 250 of the Income Tax Act, 1961 (the Act ), dt. 27/12/2012, for the Assessment Years 2008-09 2009-10. 2. The assessee is an HUF and is a proprietor of Kajaria Constructions. A search and seizure operation u/s 132 of the Act was carried out on 16/12/2010 at the residence of Jugal Kishore (individual). At page 1 of the assessment order, the Assessing Officer listed out the various assets found during the course of search and seizure which is extracted for ready reference:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks maintained on the computer by the chartered accountant were requisitioned and seized as part of the search material. 2.1.2. In reply to the notice u/s 153C of the Act, the assessee filed the return of income on 29/12/2011, wherein the income returned was same as that which was declared by it in the return of income filed originally u/s 139(1) of the Act. The assessment was completed u/s 143(3) of the Act, for the Assessment Year 2008-09 on 30/12/2011, determining the total income of the assessee at ₹ 95,57,126/- interalia making an addition of ₹ 67,05,235/- u/s 40(a)(ia) of the Act, on the ground that no tax was deducted at source u/s 194I of the Act and an addition of ₹ 21,79,531/- on the ground that the assessee failed to substantiate the expenditure claimed in its profit and loss account. 2.1.3. Similarly, for the Assessment Year 2009-10, the assessee filed its return of income, in response to a notice u/s 153C of the Act, declaring the same income as was declared in the original return of income filed u/s 139(1) of the Act. The Assessing Officer determined the total income of the assessee u/s 143(3) r.w.s. 153C of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia (individual) as required by law. Hence, he cancelled the assessments as bad in law. 3. Aggrieved the revenue is in appeal before us on the following grounds for both the Assessment Years 2008-09 2009-10:- 1. That on the facts and circumstances of the case, Ld. CIT(A) erred in cancelling the assessment without considering the confidential folder of Mr. Jugal Kajaria,(the person searched) and examining the satisfaction note kept therein. 2. That on the facts and circumstances of the case, Ld. CIT(A) erred in not considering the satisfaction note for initiation of proceedings u/s. 153C of the I.T. Act in the case of the assessee, citing that the satisfaction note is to be recorded in the file of the person searched and the same was not done, whereas, the satisfaction note has been written .by the A.O. on the person searched and kept in the confidential folder, which is overlooked by the Ld. CIT(A). 3. That the Department craves leave to alter, amend and/or modify any or all grounds of appeal. 4. The assessee has filed the cross-objection on the following grounds for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not extracted for the sake of brevity. For the sake of convenience they are heard together and disposed off by this common order. 5. The ld. D/R argued that it was wrong on the part of the ld. CIT(A) to quash the assessments for the reason that, no satisfaction was recorded by the Assessing Officer while completing the assessment or thereafter of the person searched i.e., Jugal Kajaria (individual). He argued that satisfaction was recorded and kept in a confidential folder of Shri Jugal Kajaria (individual), the person searched. He filed copies of the said satisfaction note said to have been recorded on 21/12/2011. The ld. D/R, submitted that the ld. CIT(A) should not have taken adverse inference simply because there is no mention of this fact in the remand report given by the Assessing Officer. 5.1. The ld. Counsel for the assessee, on the other hand, submitted that, detailed submissions were made before the ld. CIT(A) and he sent the entire set of arguments to the assessing officer for his response and on the issue of recording satisfaction, during the course of assessment or immediately thereafter of the searched person, the assessing officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed and it is claimed that this is the satisfaction recorded in the case of the searched party i.e., the assessee Shri Jugal Kajaria (individual). Nowhere in in the note, there is any indication that it was drawn up in the case of the searched person, who is, Shri Jugal Kajaria (individual). In fact the note is clear that it was drawn up in the proceedings of the assessee and thereafter a copy of this note was kept in the file of the searched party. The list of documents mentioned in para 3 are regular books of accounts, bank passbooks, which are also part of the regular books of accounts and annual accounts which are not incriminating material. The last paragraph suggests that the proceedings are initiated for non-deduction of tax at source. The Honourable Delhi High Court in the case of Canyon Financial Services Ltd. vs. ITO (supra) has held that identical worded carbon copy of satisfaction note does not satisfy the jurisdictional requirement of section153C of the Act. The alleged satisfaction note that is filed before us is identically worded as that of the satisfaction note recorded by the assessing officer in the case of the assessee Shri Jugal Kajaria (HUF). On these facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years are on the ground that no TDS has been made and hence, the provisions of Section 40(a)(ia) of the Act, are attracted and on the ground that part of the expenditure claimed could not be substantiated with evidence. Both these disallowances are not based on any material found during the course of search. The assessments for both the Assessment Year have not abated 11.1. We find that the various Courts of law under similar circumstances have held as follows:- CIT,Kolkata-III Vs. Veerprabhu Marketing Limited [2016] 73 taxmann.com 149 (Calcutta) : We are in agreement with the views of the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any incriminating material or evidence unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the assessment years where assessments had attained finality. The relevant observations and the ratio laid down would be discussed in the later part of this order. 15. Now coming to the ratios laid down by the Hon ble Jurisdictional High Court, first of all, in the case of Kabul Chawala (supra), the Hon'ble Court after discussing the issue threadbare and analysing the various judgments of different High Courts laid down the following legal proposition in terms of scope of addition which can be made u/s. 153A(1) which are as under:- 37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court has been followed in several judgments not only by the Hon'ble Delhi High Court but also by other Hon'ble High Court like, Pr. CIT vs. Somaya Construction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowledge Park Pvt. Ltd. 385 ITR 346 (Kar) and CIT vs. Gurinder Singh Bawa reported in 386 ITR 483. In the latest judgment the Hon'ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia, their Lordships reiterated the same principle after discussing and analyzing catena of decisions including that of Anil Kumar Bhatia (supra) and Dayawanti Gupta. The Hon'ble HighCourt observed and held as under:- 62. Subsequently, in Principal Commissioner of Income Tax-1 v. Devangi alias Rupa {supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. {supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. {supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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