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TMI Blog2019 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... - HELD THAT:- There is no case for considering the same as agricultural income in the hands of the HUF. Further it is seen from the orders of ITAT that the said lands were given to M/s.Dakshin Shelters Pvt. Ltd. [ 2012 (5) TMI 649 - ITAT HYDERABAD] for the purpose of development and the assessee came to know that the developer already started real estate project and incurred substantial expenditure for development of the same. The lands were stated to be mountainous lands. This fact finding was given by the ITAT in its order (supra). Except the land revenue authorities, no other evidence brought by the assessee for establishing the agricultural income. Therefore, we find no reason to interfere with the orders of the authorities below and accordingly, we, dismiss this appeal of assessee. - 1871 to 1877/Hyd/13 - - - Dated:- 25-10-2019 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Assessee : Shri K.C.Devdas, AR For the Revenue : Shri Y.V.S.T.Sai, CIT-DR ORDER PER BENCH : These appeals of the assessee are directed against the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn filed under section 139 of the Act much before the date of search. Thus, the assessment for the AY.2002-03 stands abated on the date of search and therefore, to assess the same income under section 153C of the Act without any incriminating material is invalid, bad in law and without jurisdiction. (vi). Without prejudice to the above grounds, the entire assessment order passed under section 143(3) r.w. section 153C of the Income Tax Act, 1961 ( the Act ) assessing the income arising on Agricultural lands situated in Vatinagulapally Village in the hands of the Appellant HUF is invalid, bad in law and without jurisdiction as the income/assets does not belong to Sudhir Kumar D.Shah (HUF). Therefore, the income returned and assessed at ₹ 1,50,000 must be deleted . 2.1. The common issues raised by the assessee in these appeals is the validity of initiation of proceedings u/s.153C of the Act, without having incriminating material and without recording the reasons for initiation of proceedings in the case of the searched person. 2.2. The brief facts of the case are that, the assessee is HUF and has not filed its returns of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes and also treated the agricultural income as income from other sources . Against the order of AO, the assessee went on appeal before the CIT(A) and challenged the validity assessment order on merits. During the appeal hearing before the First Appellate Authority (FAA), the Ld.AR also argued that initiation of proceedings u/s.153C of the Act, without having the incriminating material is invalid. The Ld.CIT(A) considered the arguments made by the Ld.AR, during the appeal hearing and referred the seized material marked as annexure A/SDS/2, wherein she observed that the complete details were available with regard to the sale consideration of the property at Chilkoor Village, which was confirmed and admitted by Shri Apoorva Shah, nephew of the assessee in the statement recorded from him u/s.132A of the Act on 09-10-2007. Therefore held that the proceedings u/s.153C of the Act were rightly initiated and dismissed the contentions raised by the assessee. Similarly, on merits the Ld.CIT(A) dismissed the appeals of the assessee for the AYs. 2002-03 to 2005-06, 2007-08 2008-09 and for the AY.2006- 07 partly allowed the appeals of the assessee. Against the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earched persons, i.e., Shri Sunil D.Shah and Shri Sudhir D.Shah belonging to the assessee. The material found and seized from the searched person requires further verification for identifying the relevant assessment years. The Department also did not place any evidence to show that the satisfaction was recorded in the case of searched person as required u/s.153A/153C of the Act. Therefore, we are of the considered opinion that the additional grounds need to be admitted and adjudicated. Hence, we admit the additional grounds. 6.1. Advancing the arguments during the appeal hearing, the Ld.Counsel for the assessee taken our attention to the Panchanama and the annexure in Pg.1 of assessee s Paper Book and submitted that there were three annexures found and seized during the course of search i.e., Pgs. 1 and 2 are being Books of account and the third one is cash of ₹ 5.00 Lakhs found and seized. Pg.No.6 of the Paper Book is inventory of cash belonging to Shri Sunil D.Shah but not belonged to the assessee. The books of account found and seized during the course of search marked as Annexure: A/SDS/2 were stated to be belonging to Shri Apoorva Shah, S/o. Sunil D Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. CIT Vs. Sinhgad Technical Education Society [397 ITR 344] (SC); ii. Pepsico India Holdings (P) Ltd., Vs. ACIT [370 ITR 295) (Delhi); iii. VijaybhaiN.Chandrani Vs. ACIT [333 ITR 436] (Gujarat); iv. CIT Vs. Late J.Chandrasekar (HUF) [338 ITR 61] (Madras); v. Pr.CIT Vs. Smt.Sunita Bai [78 taxmann.com 274] (Karnataka); vi. CIT Vs. IBC Knowledge Park (P) Ltd., [385 ITR 346] (Karnataka); vii. CIT Vs. Shettys Pharmaceuticals Biologicals Ltd., [232 taxman 268] (AP); viii. Pr.CIT Vs. Rajeev Behi [398 ITR 615] (Delhi); ix. Pepsi Foods (P) Ltd., Vs. ACIT [231 taxman 58] (Delhi); x. Avinash Estates Resorts Ltd., Vs. DCIT [151 ITD 399]; 6.3. Per contra, the Ld.DR supported the initiation of proceedings u/s.153C of the Act. Ld.DR submitted that Shri Sunil D.Shah and Shri Sudhir D.Shah are brothers and Shri Apoorva Shah is son of Shri Sunil Shah, who is the nephew of the assessee. Both the brothers have acquired large track of land at Vattinagulapalli village and entered in to development agreement with M/s.Dakshin Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified to hold that the initiation of proceeding are invalid and hence argued that the AO has rightly initiated the proceedings, and reasons were recorded, therefore, argued that the validity of assessments required to be upheld. In this connection, Ld.DR relied on the following decisions: i. CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd.,(2015) [64 taxmann.com 34] (SC); ii. V.H.Yahiya Vs. DCIT (2015) [56 taxmann.com 169] (Kerala); iii. CIT Vs. RRJ Securities Ltd., (2017) [79 taxmann.com 115] (SC); iv. Co-ordinate Bench decision of the ITAT in the case of Bharat Ginning Pressing Factory Vs. ITO (2013) [32 taxmann.com 322) [Ahmedabad Trib.]; v. CIT Vs. Panchajanyam Management Agencies and Services (2012) [20 taxmann.com 584] (Kerala); 6.5. Responding to the argument of Ld.DR, Ld.Counsel for the assessee referred to Para 4.2 of the order of Ld.CIT(A), submitted that the Ld.CIT(A) upheld the initiation of proceedings under the impression that Chilkoor lands were belonging to HUF. He submitted that Chilkoor lands were not belonging to assessee and they are belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 upheld the order of the ITAT and decided the issue in favour of assessee for not recording the satisfaction in the case of searched person. 6.7. Therefore, argued that in the instant case, there is no dispute that there was no satisfaction recorded in the case of searched persons, hence AO had incorrectly assumed the jurisdiction, therefore requested to quash the notice issued u/s.153C of the Act and cancel the orders of the lower authorities. 7. We have heard both the parties and gone through the material placed on record. In the instant case, there is no dispute that no satisfaction was recorded by the AO of the searched person. The department did not place any evidence to controvert the submission made by the assessee. As per the material placed before us, the AO has recorded the satisfaction in assessee s case. While handing over or transferring the seized material to the AO having jurisdiction of such other person it is mandatory obligation of the AO of the searched person to record the reasons and satisfaction, since, the act presumes that the material found during the course of search belongs to the person who is searched. Though the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served from the CBDT Circular No.24/2015 dated 31.12.2015 which is placed in page No.9B of the paper book , the CBDT has given guidelines to all the AOs to record satisfaction even if the AO of the searched person and the other person is one and the same. For the sake of clarity and convenience, we extract para No.4 and 5 of the Circular which reads as under : 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. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn / not pressed if it does not meet the guidelines laid down by the Apex Court. 9.1. Hon ble Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection we set out the text of the order of the Assessing Officer which is as follows: A search and seizure operation u/s. 132 was carried out in the group ease of Dr. T. Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceedings u/s. 153C of the I.T. Act.' 7. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 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 King Emperor). We think the learned Tribunal has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in fact incriminating and the AO of the searched person has recorded the satisfaction that the seized documents belonged to the assessee. The decision of Hon ble High Court of Delhi in the case of Ganapati Fincap Services Pvt. Ltd. Vs. CIT (supra) is against the writ petition and the facts of the assessee s case are distinguishable, therefore, the case laws relied upon by the Ld.DR are not applicable in the assessee s case. 11. In this connection, it is pertinent to mention section 292C of the Act places presumption that the material found during the course of search belongs to the searched person and the contents of such books of account and other documents are true. So it is the obligation of the AO as well as the searched person to prove that the incriminating material found during the course of search in fact does not belong to the searched person, but belonged to the other person. Therefore, unless there is satisfaction recorded with valid reasons it cannot be simply presumed that the seized material does not belong to the searched person, but in fact belonged to the other person. Therefore, satisfaction of the assessing officer of the searched person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has mentioned that in the laptop of Shri Rameshbhai B. Shah the data pertaining to the assessee were found and on that basis notices u/s 153C have been issued. However, in the notice u/s 153C, wherein the Assessing Officer is claimed to have been recorded the satisfaction for issue of the notice, there is no mention about such laptop or the alleged data in such laptop which is claimed to be belonged to the assessee. In view of above, we have no hesitation to hold that the basic condition for issue of notice u/s153C has not been satisfied. 14. The departmental circular dated 31.12.2015 also directed the AO to record the satisfaction, even if the AO of the searched person and the other person is one and the same and the Circular is binding on the assessing officers. Non recording of satisfaction of the assessing officer of the searched person renders the assessment proceedings u/s 153C as invalid. This view is supported by the decision of Hon ble High court of Delhi in Pepsi Foods (P.) Ltd.v. Assistant Commissioner of Income-tax, [2014] 52 taxmann.com 220 (Delhi).Hon ble High court of Delhi held as under: 6. On a plain reading of Section 153C, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note 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. Hon ble supreme court dismissed the SLP filed by the revenue against decision of Hon ble High Court ruling that before is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s appeals on this ground is allowed. 8. Since, we have allowed the appeal of the assessee on the ground of non-recording of reasons, we consider it is not necessary to adjudicate the other grounds raised by the assessee in these appeals. 9. In the result, the appeals in ITA Nos.1871/Hyd/13, 1872/Hyd/13, 1873/Hyd/13, 1874/Hyd/13, 1875/Hyd/13 1876/Hyd/13 are allowed. ITA No.1877/Hyd/2013 (AY.2008-09): 10. In this case, the AO made regular assessment u/s.143(3) of the Act. In the assessment proceedings, the AO made an addition of ₹ 1,60,000/- relating to agricultural income as income from other sources . The AO found during the course of assessment proceedings that the assessee along with other brothers are having lands situated at Vattinagulapally village and the lands were vacant lands. The land revenue records also shows that such lands were vacant lands and no agricultural activities were carried out. The AO further observed that majority of the lands were transferred by the assessee to M/s.Dakshin Shelters Pvt. Ltd., for the purpose of development. Therefore, there is no agricultural income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r income from other sources and requested to uphold the orders of the lower authorities. 14. We have heard both the parties and gone through the material placed on record. In the instant case, assessee stated before us that the lands situated at Vattinagulapally village does not belong to HUF and belonged to individual and acquired by inheritance through gift deed from his mother. Therefore, there is no case for considering the same as agricultural income in the hands of the HUF. Further it is seen from the orders of ITAT that the said lands were given to M/s.Dakshin Shelters Pvt. Ltd., for the purpose of development and the assessee came to know that the developer already started real estate project and incurred substantial expenditure for development of the same. The lands were stated to be mountainous lands. This fact finding was given by the ITAT in its order (supra). Except the land revenue authorities, no other evidence brought by the assessee for establishing the agricultural income. Therefore, we find no reason to interfere with the orders of the authorities below and accordingly, we, dismiss this appeal of assessee. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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