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TMI Blog2019 (6) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee on the validity of the issue of notice was dismissed. Non recording the reasons in the case of searched person - As relying on M/S. SHETTYS PHARMACEUTICALS AND BIOLOGICALS LTD. [ 2014 (12) TMI 1067 - ANDHRA PRADESH HIGH COURT] we hold that the issue of notice u/s 153C without recording the reasons in the case of searched person renders the notice issued u/s 153C as invalid. Accordingly, we quash the notice issued u/s 153C and the cancel the consequent assessment made u/s 143(3) r.w.s. 153C. Since we have quashed the notice issued u/s 153C and cancelled the consequent assessment, we consider it is not necessary to adjudicate the revenue s appeal which is on quantum of additions and the remaining grounds of appeal raised by the assessee in this appeal. Accordingly, the appeals of the assessee is allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of notice on the reason that the AO did not follow the procedure prescribed u/s 153C for issue of notice and there was no satisfaction recorded as provided u/s 153C of the Act by the assessing officer of the searched person. The Ld.CIT(A) has called for the remand report and the AO in the remand report submitted that AO of the searched person and that of the assessee are one and the same. Since the search u/s 132 was conducted in the partner's case i.e. R.Venkatramaiah and the incriminating material was found belonging to the assessee, the proceedings u/s 153C were initiated in the case of the assessee, after duly recording the satisfaction as per the notings recorded on the order sheet of the assessee. The CIT(A) viewed that the AO had initiated proceedings u/s 153C of the Act, after duly recording satisfaction in the case of the assessee and clearly mentioning the seized material hence held that the grounds raised by the assessee with regard to validity of notice u/s 153C are not tenable and accordingly dismissed. The appeal of the assessee on the validity of the issue of notice was dismissed. 6. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case, the contention of the assessee is that the AO has not recorded satisfaction in the case of the searched person for transferring the incriminating material to the AO of the assessee. The Ld.CIT(A) has called for the remand report, in the remand report also, the AO mentioned regarding recording of satisfaction in the case of the assessee, but no mention was made in respect of the satisfaction recorded in the case of searched person i.e. R.Venkatramaiah. The department also did not place any evidence to show that satisfaction was recorded in the case of searched person, R.Venktramaiah, while transferring the incriminating material. As observed 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 compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the Seizing Officer. In other words it is not an automatic action. We find satisfaction of two officers is missing. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings u/s 153C. The Ld.DR contended that if the AOs of both the searched person and the assessee are one and the same no separate satisfaction is required to be recoded and relied on the decision Hon'ble Delhi High court in case of Instronics Ltd and Ganapati Fincap Services Pvt. Ltd. In the case of Instronics Ltd the Hon'ble High Court of Delhi restored the matter back to the file of the ITAT since there is no discussion on whether the documents referred to in the ITAT's 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earched. The Assessing Officer of assessee did not record any satisfaction prior to issue of notice u/s 153C. The so-called satisfaction recorded in the notice u/s 153C is totally vague. It has not specified which valuable articles/things/books of accounts/documents were found from Shri Rameshbhai B. Shah which belongs to the assessee. In the assessment order the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". ------- 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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