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TMI Blog2019 (7) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the date mentioned in the satisfaction note viz a viz reply of the RTI. Be that as it may, there was no evidence suggesting that the AO of Nayan Kothari has recorded any satisfaction note before handing over the requisition material to the AO having jurisdiction over the assessee. From the above, it is concluded that the recording of satisfaction note for invoking the provision of section 153C is a mandatory requirement as it reveals that the AO has applied his mind to reach to the conclusion that the materials belong to the other person. If the AO of the person searched not recorded the satisfaction note, then initiation of proceedings u/s 153C of the Act was not held to be valid. Accordingly, we hold that the assessment framed under section 153C is not sustainable - IT(ss)A No.151/Ahd/2018 (Assessment Year : 2014-15) - - - Dated:- 24-7-2019 - Shri Mahavir Prasad, Judicial Member And Shri Waseem Ahmed, Accountant Member Appellant by : Shri A.L. Thakkar, AR Respondent by: Shri O.P. Sharma, CIT-DR ORDER Waseem Ahmed, The captioned appeal has been filed at the instance of the Assessee against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the asset was duly explained. 6. The learned Commissioner of Income Tax (Appeals) has erred in not appreciating the various evidences and other material furnished during the course of assessment/appellate proceedings which have wrongly been claimed not to have been filed by the Assessing Officer while drawing adverse inference against the assessee. 7. The appellant craves leave to add, alter, amend or modify, withdraw any of the grounds of appeal on or before the date of hearing of appeal. The assessee vide letter dated 04-06-2019 has also filed additional ground of appeal: 1. That the requisition u/s.132A(1)(c) of the Act was without jurisdiction and without having reason to believe therefore requisition itself is invalid, illegal and contrary to the provisions of the Act. Accordingly, the proceedings u/s.153A/153C of the Act are also illegal and bad in law and the assessment made in pursuance thereof deserves to be quashed. 2. At the outset, the Ld. AR for the assessee before us submitted that the additional ground raised vide letter dated 04-06-2019 is legal in nature, and all the relevant details in respect of such ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. In the instant case, therefore, the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the lower authorities and having a bearing on the tax liability of the assessee . In view of the above, we admit the additional ground of appeal raised by the assessee and proceed to adjudicate the same. The assessee in the additional ground of appeal has challenged the proceedings initiated under section 153C of the Act. 5. Before coming to the specific issue, we find it pertinent to note the history of the facts of the case in brief, which goes as follows. Shri Nayan Kothari was caught by the police department of Ujjain, Indore with the cash of ₹ 27,80,110/- and silver having the weight of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 deserves to be quashed at the primary stage itself. Without prejudice to the above it is hereby submitted that requisition of cash and silver was made in the hands of one Nayan Kothari who had intimated that the goods in question belong to the appellant i.e. Shri Rupam Gorecha. Accordingly, proceedings u/s.153A of the Act were initiated in the case of Late Shri Nayan Kothari represented by his father and legal heir Shri Rajendra Kothari. In the case of Shri Nayan Kothari, order u/s.153A r.w.s. 143(3) of the Act dated 24.10.2016 has been passed by Income Tax Officer, Ward-2, Dahod. The copy of the order has been palced on apge 43 to 46 of the PAPER-BOOK. It is relevant to note that in paragraph-7 of the aforesaid order, the AO has referred to obtaining approval of Additional Commissioner of Income Tax, Panchmahal, Range-Godhra u/s.153D of the Act vide letter dated 25.10.2016 whereas the order in question has been already passed on 24.10.2016 i.e. prior to the approval. This only goes to demonstrate that the order has been passed by the AO without obtaining the requisite approval u/s.153D which makes the assessment u/s.153A as illegal. Reliance is placed in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is conducted or requisition is made and] for the relevant assessment year or years referred to in subsection (1) of section 153A] :] 44 [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section132A in the second proviso to 45[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 48[and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.] [(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no valid requisition. Once there is no valid requisitioned, the proceedings of section 153A cannot be ubutuated, /tge orivsuibs if sectuidb 153/c fikkiw tge orivsuuibs if sectuib 153/a, UIt us ibkt wgere abt vakyabke artucke ir tgubg wgucg gas beeb seuzed ir reqyuisutuibed ybder wgucg a vakud 153/a oriceedubgs gave beeb ubutuatedm can proceedings u/s.153C of the Act can be invoked and not otherwise. As demonstated, the requisition proceedings in case fo Late Shri Nayan Kothari have been set aside by the Hon.M.P. High Court. Once the requisition proceedings itself have been set aside initiating proceedings u/s.153C would not be valid. The reaon being that where 153A proceedings do not survive the question of that Assessing Officer exercising his satisfaction that the goods belong to somebody else itself would not arise. Such satisfaction has to be exercised only in the proceddings u/s.153A of the Act. The proceedings of section 153C would always succeed the proceedings u/s.153A which have been quashed by the Hon.MP High Court and affirmed by the Hon.Supreme Court. Also approval u/s.153D not having been obtained the proceedings u/s.153A would fail by itself. Once 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering materials on record, assessment order passed under section 143(3) read with section 153A was to be set aside [In favour of assessee] 15. Last but not the least it is settled position of law that satisfaction has to be recorded both by the AO of the requisitioned party i.e. Nayan Kothari as well as by the AO of the appellant i.e. Rupam Gorecha for invoking the provisions of section 153C of the Act. When the recording of such satisfaction is missing the proceedings u/s.153C of the Act would fail and the assessment would be bad in law. At this juncture attention is invited to the order passed in the case of Shri Nayan Kothari which is placed on page 43 to 46 of the PB. The AO has nto made any reference to the satisfaction recorded with reference to the assets requisitioned as belonging to the appellant and thereby invoking section 153C of the Act. The copy of the order sheet in the case of Nayan Kothari has been palced on pagae 47 48 of the PB. The perusal of the order sheet would also reveal that no satisfaction has been recorded by the AO of Nayan Kothari with respect to the assets belonging to the appellant and thereby intimating the AO of Rupam Gorecha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction recorded also does not figure in the order sheet placed before your honour perusal. 18. Non recording of satisfaction is fatal to the undertaking of proceddings u/s.153C of the Act. Apart from the various decisions relied upon as referred in the order of the Ld.CIT(A)-4, Vadodara, reliance is palced on the following judicial pronouncements in support of our contention: i. Parshwa Corporation vs. DCIT (2016) 46 itr (t) 266 (Ahd.) ii. Smt.Rekhaben Thakkar v ACIT (2015) 155 ITRD 54 (Ahd.) iii. N.S. Softwares (2018) 403 ITR 259 (Del.) iv. Manish Maheshwari v. ACIT (2007) 289 ITR 341 (SC) On the other hand, the Ld. DR submitted that the satisfaction note was duly recorded by the AO having jurisdiction over the assessee before initiating the proceedings under section 153C of the Act. The Ld. DR also submitted that the information obtained by the assessee under the RTI, which states that there was no satisfaction note available on record, represents the technical error. Therefore, the same needs to be ignored. The Ld. DR vehemently supported the order of the authorities below. 6. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after that, in the capacity of AO of such other person, proceedings u/s 153C, read with Section 153A have to be initiated in the case of such other person. Thus, the AO who is assessing both, the person searched as well as the other person has to carry out the dual exercise, first for recording satisfaction in the case of the person searched qua the documents belongs to the other person and then such documents have a bearing on the total income of other person. Accordingly, the AO in the capacity of the AO of other person shall initiate proceedings u/s 153C in the case of other person. However, on perusal of order sheet entry in the case of Nayan Kothari placed on pages 47-48 of the 2nd paper book, we note that there was no such satisfaction recorded by the AO as discussed above. On a specific query from the bench to the Ld. DR, he failed to bring anything on record suggesting that there was the satisfaction recorded by the AO of the searched party. This fact is also evident from the reply received by the assessee under RTI which is placed on page 69 of the paper book. The relevant extract of the reply under RTI reads as under: No.DHD/Wd-2/RTI/RK/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on page 72 of the 2nd paper book. However, we further note that the AO having jurisdiction over the assessee has recorded the satisfaction note dated 31st July 2015, which is placed on page 53 of the 2nd paper book. Thus there are contradictory information available on record. Accordingly, a doubt arises about the genuineness of the satisfaction note recorded dated 31st July 2015. However, on perusal of the order sheet entry of the AO having jurisdiction over the assessee, it is revealed that there was no such entry/recording regarding the impugned satisfaction note recorded by the AO. On a question to the Ld. DR, he has not brought anything on record suggesting the genuineness of the satisfaction note recorded by the AO having jurisdiction over the assessee. He simply stated that there can be of technical lapse regarding the date mentioned in the satisfaction note viz a viz reply of the RTI. Be that as it may, there was no evidence suggesting that the AO of Nayan Kothari has recorded any satisfaction note before handing over the requisition material to the AO having jurisdiction over the assessee. From the above, it is conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C issued by the Assessing Officer of the person searched lacks jurisdiction which is not curable by virtue of the provisions of section 292B. II. Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of income of any other person - Assessment years 2003-04 to 2008-09 - Where no satisfaction was recorded by Assessing Officer of searched person and even Assessing Officer of assessee also did not record satisfaction before issuing notice under section 153C to assessee, notice issued under section 153C was invalid [In favour of assessee] Following a search conducted in case of 'R', a notice under section 153C was issued to the assessee. The assessee challenged validity of the notice. Held that, admittedly, no satisfaction is recorded by the Assessing Officer of the person searched. In fact, no satisfaction is recorded by the Assessing Officer of the assessee in instant case, prior to issuing notice under section 153C. Only in the notice under section 153C, satisfaction is claimed to have been recorded. The so-called satisfaction recorded in the notice under section 153C is totally vague. It has not specified which valuable art ..... X X X X Extracts X X X X X X X X Extracts X X X X
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