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TMI Blog2024 (3) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... as constituting the date from which that period is liable to be reckoned, the assessment is liable to be completed by 31 March 2024. Writ petitioner has thus chosen to approach this Court only a few days before the time for completion of assessment would expire and at the proverbial fag end of the proceedings. We consequently find no justification to interdict the assessment proceedings at this belated stage by invoking our jurisdiction under Article 226 of the Constitution. However and whether the asserted delay in commencement of proceedings would be fatal to the assessment itself is a question that we leave open to be urged at an appropriate juncture. - HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV For the Petitioner Through: Dr. A. M. Singhvi, Mr. Vivek Tankha, Mr. A. S. Chandhiok Mr. P.C. Sen, Sr. Advs. with Mr. Prasanna, Mr. Amit Bhandari, Mr. Siddharth S., Mr. Vipul Tiwari, Mr. Inder Singh, Ms. Simran Kohli, Ms. Vidhushi Keshari, Mr. Kanishka Singh, Mr. Nikhil Bhalla Ms. Swati Arya, Advs. For the Respondents Through: Mr. Zoheb Hossain, SSC with Mr. Vipul Agrawal, SSC with Mr. Sanjeev Menon, Ms. Sakshi Shairwal Mr. Vivek Gurnani, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was his submission that the assessment which is proposed to be undertaken for AYs 2014-15, 2015-16 and 2016-17 would be barred by the period of limitation as raised by virtue of the First Proviso to Section 153C of the Act. It was his contention that assessment under Section 153C of the Act could have at best covered the period of AYs 2017-18 to 2020-21 and the three additional AYs namely 2014-15, 2015-16 and 2016-17 would be barred by limitation. The aforesaid submission proceeds on the premise that in light of the satisfaction recorded, the action under Section 153C of the Act could have extended only to six AYs and that period undisputedly terminating on AY 2017-18. 4. The aforenoted submission additionally proceeds on the basis that since the AO had failed to invoke Section 153A, the ten permissible block assessment years which could be opened up by virtue of the definition of relevant assessment year would not apply. It was the submission of Dr. Singhvi that in the absence of the AO having alluded to the Fourth Proviso of Section 153A and having recorded satisfaction of income exceeding INR 50 lakhs having possibly escaped assessment for each of the relevant AY or AYs would co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 2023 would clearly not qualify or be compliant with the expression immediately after as the Supreme Court had observed. According to learned senior counsel, it was the aforesaid principles enunciated in Calcutta Knitwears which ultimately came to be accepted by the CBDT itself as would be evident from a reading of Circular No. 24/2015 which is reproduced hereinbelow:- CIRCULAR NO.24/2015 [F.NO.279/MISC./140/2015/ITJ] SECTION 153C, READ WITH SECTION 158BD, OF THE INCOME-TAX ACT, 1961 - SEARCH AND SEIZURE - ASSESSMENT OF INCOME IN CASE OF OTHER PERSON - RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD/153C OF SAID ACT CIRCULAR NO.24/2015 [F.NO.279/MISC./140/2015/ITJ], DATED 31-12-2015 The issue of recording of satisfaction for the purposes of section 158BD/53C 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 [2014] 43 taxmann.com 446 (SC) (available in NJRS at 2014-LL-03 12-51) 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rched party 29.07.2016 (Order of Settlement Commission) 29.08.2002 29.08.2002 27.03.2006 iii) Satisfaction note recorded by AO of searched person (Designation of AO of searched person) 25.04.2017 - - 30.05.2007 (Addl. CIT, Central Range -2 Pune) iv) Satisfaction note recorded by AO of other person (Designation of AO of other person) 08.02.2018 15.07.2003 15.07.2003 15.06.2007 v) Date of handing over of seized documents from AO of searched person to AO of other person 15.06.2007 vi) Notice issue u/s 153C/158BD of the Act 08.02.2018 31.03.2004 22.03.2004 18.02.2008 vii) Reply to notice u/s 153C of the Act 01.05.2018 - - 25.02.2008 viii) Other u/s 153C/158BD r/w 143(3) - 31.03.2006 - 30.12.2008 ix) REMARKS Gap of Eight Months cannot be said to be recorded immediately after the assessment proceedings (Para 20.8) A delay ranging between 10 months or one-and-half years cannot be considered contempora neous to assessment proceedings (para 6) Notice u/s 158BD issued after delay of 19 months is belated. (Para 6 29) That assessment of searched person was completed on 27.03.2006, then the handing over of seized documents by Assessing Officer of searched person to the jurisdictional Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar of limitation or disabling the respondents from initiating assessment/reassessment for the entire block period of ten assessment years. Consequently, and in our considered opinion, the submission that the power to assess would stretch only up to AY 2017-18 is misconceived. In light of the plain language and text in which Section 153C is couched, we are of the considered opinion that the material gathered in the course of the search would have empowered and enabled the respondent to undertake an assessment for six assessment years immediately preceding the assessment year pertaining to the previous year in which the search was conducted and would also extend to the four additional AYs which would stand included by virtue of Explanation 1 to Section 153A of the Act. The aforesaid position cannot possibly be doubted bearing in mind Section 153C incorporating the phrase ..and for the relevant assessment year or years referred to in sub-section (1) of section 153A . For the purposes of understanding the meaning to be assigned to the expression relevant assessment year, we would have to necessarily travel back to Explanation 1 as placed in Section 153A. The submission, therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date. 9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art thereof has escaped assessment for such year or years; and (c) the search under Section 132 is initiated or requisition under Section 132-A is made on or after the 1st day of April, 2017. 16. It must at the outset be noted that the Satisfaction Note which has been drawn in unambiguous terms, and more particularly in paragraph 140 thereof, recites that the AO was satisfied that this was a fit case for initiating proceedings under Section 153C read with Section 153A of the Act for AY 2014-15 to AY 2020-21. There is thus an explicit reference not only to Section 153A but also to the block of ten assessment years which were proposed to be made subject matter of the impugned proceedings. The submission, therefore, that Section 153A was not invoked is untenable. 17. The Satisfaction Note which straddles over 300 pages has alluded to copious material gathered in the course of the searches including inter alia, documents, loose sheets, evidence existing on electronic devices, WhatsApp chats, record of accounts maintained in Excel format as well as the statement of various individuals recorded in the course of the multiple searches. Although we have gone through the Satisfaction Note in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Various MLAs as per Ls.xlsx Payment of INR 90 lakhs made to Mr. Digvijay Singh Break up of payment made to various other MLAs found in the excel sheet Ls.xlsx Sheet with name of the MLAs found and seized during the search on Praveen Kakkar PDF 442 PDF 443 PDF 446 PDF 450 12. Other Seized Material Found Various documents found at the premises of Lalit Kumar Chhallani, Himanshu Sharma, Prateek Joshi were found. Some of these documents have the heading Election . Document 7 consisting of entries from 15.12.2015 upto 31.03.2016 Document 8 consisting of entries from September, October and November 2015 Document 10 consisting entries dated 11.06.2015 and 15.06.2015 Document 19 consisting entries from the period of 16.06.2014 to 15.01.2015 Document 20 showing balance as on 10.08.2015 PDF 520 PDF 525 PDF 526 PDF 527 PDF 532 PDF 533 13. Documents found during the search on Himanshu Sharma that corroborated the details found in Excel file LS.xlsx PDF 537 PDF 549 B. Evidences related to MP Assembly Election 2018 PDF 545 14. Files PK AC. xlsx and Final 12.12.18.xlsx found in the laptop of Lalit Chhallani seized from his residential premises Excel sheet found which mentions AICC has given 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining details of unaccounted cash (seized from WUPPTCL Office-subsidiary of MEIL) PDF 621 22. Relevant statements of PV Sunil, Shivendra, Rajendra, Kameshwar Yadav, Baswapoorna Reddy, Ramanjneyulu. SM Moin, Rajesh Sharma, Mukesh Kr. Pandey, Chander Prakash Malhotra, TM Varghese PDF 625 19. The material which is taken note of in the Satisfaction Note makes detailed references to unaccounted transactions with respect to the Lok Sabha Elections 2019, MP Assembly Elections 2018 and MP Assembly Elections 2013. Apart from the above there is specific reference to unaccounted for transactions pertaining to the three AYs in question as would be evident from some of the details that we have chosen to extract hereinabove. The search documents recovered from the MEIL Group appear to indicate unaccounted transfers to the political party during AYs 2017-18 to 2020-21. The material which forms part of the Satisfaction Note also captures details of disbursements made to candidates vying in upcoming elections together with signed receipts. There is a detailed reference to payments allegedly made to MPs /MLAs and candidates. The said note also carries material seeming to suggest payments and contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting material in the possession of the jurisdictional AO and forming the basis for formation of opinion. A reading of the Satisfaction Note also leads us to the irresistible conclusion that the escaped income as estimated would qualify the pre-conditions that stand constructed by virtue of the Fourth Proviso when viewed from the point of quantum as well as non-disclosure. Once the aforesaid position is accepted, it becomes apparent that the argument of limitation would disintegrate. 22. Another submission which was addressed by Dr. Singhvi was with respect to a combined Satisfaction Note having been prepared for all AYs in question without explicit reference to year wise incriminating material and taking into consideration material that was gathered and collected in the course of four different searches. We find ourselves unable to sustain that submission bearing in mind the indubitable fact that Section 153C of the Act represents the power conferred upon the AO to commence a process of assessment or reassessment for a block period of ten assessment years in the maximum. The procedure as prescribed in Section 153C is part of a distinct statutory regime pertaining to search assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt AY or AYs . This too appears to suggest that while the notice could be composite and based on a common satisfaction note which encapsulates the incriminating material pertaining to the AYs in question, it is only returns which must and mandatorily be filed separately. 25. Regard must be had to the indubitable fact that the Satisfaction Note merely forms the foundation for initiation of action and which would enable us to evaluate whether an opinion has been validly formed. As long as it rests on incriminating material which pertains to the AYs in question, the same would qualify the requirement of Section 153C. We deem it apposite to observe that while it would be imperative for the Satisfaction Note to refer to the material pertaining to the AYs which are sought to be reopened, a consolidated Satisfaction Note clearly does not appear to be an anathema provided it rests on material which pertains to the AYs which are sought to be reopened. 26. We in this respect also bear in mind the lucid explanation of the procedure liable to be adopted under Sections 153A and 153C as came to be enunciated by the Court in Commissioner of Income Tax (Central) -III Vs. Kabul Chawla 2015 SCC OnLi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 27. That leaves us only to evaluate the argument of inordinate delay. The submission of Dr. Singhvi essentially proceeded on the basis of Calcutta Knitwears and the expression immediately after appearing in paragraph 41 of the report. We deem it apposite to extract paragraphs 35, 37, 38 and 41 of the said judgment hereinbelow:- 35. Having said that, let us revert to the discussion of Section 158-BD of the Act. The said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person under Sections 132 or 132-A of the Act. Under Section 158-BD of the Act, if an officer is satisfied that there exists any undisclosed income which may belong to any other person other than the searched person under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts was made under Section 132-A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person. xxxx xxxx xxxx 41. In the result, we hold that for the purpose of Section 158-BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act; (b) along with the assessment proceedings under Section 158-BC of the Act; and (c) immedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., CIT v. V. K. Narang HUF (I. T. A. No. 1064 of 2009, decided on January 8, 2015) (2015) 372 ITR 333 (Delhi) where it was observed that (page 336): Having regard to the decision in Manish Maheshwari v. Asst. CIT (2007) 289 ITR 341 (SC) this court is of the opinion that the satisfaction note in the present case meets with the requirements of law. So far as the question of delay is concerned, the court is of the opinion that in the facts and circumstances of the present case, it cannot be held that there was any delay in recording the satisfaction note. The assessment of the searched person was completed on December 31, 2001. The satisfaction note was recorded on May 30, 2002, i.e., just about five months after the date of completion of the searched person. Notice was issued on June 3, 2002, immediately after the satisfaction note was recorded to the present assessee. Having regard to the declaration of law made by the Supreme Court which specified three possible points in time when notice under section 158BD can be issued to third party/assessee, on the basis of material found on the premises of the searched person, the period of five months spent by the Assessing Officer of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of each case. We would also and necessarily have to bear in consideration the scope, extent and complexity of the investigation and enquiry which may have preceded the initiation of proceedings under Section 153C. However, we find ourselves unconvinced to hold in favour of the petitioner on this score for reasons which follow. 32. It would be pertinent to recall Dr. Singhvi s submission in this respect who had referred to the date when the AO of the searched person had recorded its satisfaction [19 and 20 February 2023] even though the assessment of the searched persons had been completed a year and a half earlier. The Section 153C notices came to be issued thereafter on 07 March 2023. 33. The respondent in its order under Section 142(1) dated 01 March 2024 has referred to the flow of proceedings in the form of a chart which is extracted hereinbelow:- Sr.No. Date of notice u/s Compliance by assessee Reply dated Remarks i) 7.3.2023 153C 5.4.2023 Requesting for satisfaction note and related documents as stated in para 4 to 6 of the Reply ii) 28.6.2023/30.6.2023 Communication along with satisfaction note running into 307 sheets recorded by your good self as AO of the assessee on 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Miglani others group (comprising of 44 sheets) iv) Copy of satisfaction note dated 20.2.2023 recorded by the learned Deputy Commission of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Miglani others group (comprising of 81 sheets) v) Copy of satisfaction note dated 20.2.2023 recorded by the learned Deputy Commission of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely M/s Megha Engineering Infrastructure Ltd. (MEIL group (comprising of 81 sheets) 4.10.2023 i) It was submitted that contain satisfaction notes recorded by the Assessing Officer of the searched persons for Assessment Years 2014-15 to 2020-21. A copy of enclosures relied upon documents and copy of relevant part of statements attached. ii) It was submitted that enclosures were partial copies and relied upon documents and partial copies of statements. iii) It was thus submitted that satisfaction note satisfying the statutory preconditions provided in the Act for each of the assessment years separately. iv) It was also submitted that complete enclosures, complete copy of relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 to 78 of this Reply. ii) It was further submitted that in light of the aforesaid decision, non-mention of DIN on the satisfaction notes but mentioning DIN on the covering letters of the communication to the assessee is not in compliance of the mandatory CBDT Circular No. 19/2019 dated 14.8.2019 and therefore having regard to the said, the present satisfaction notes are illegal and therefore shall be treated as invalid and shall be deemed to have never been issued. iii) Having regard to the aforesaid the present proceedings being non-est, invalid and therefore may kindly be dropped, more particularly in view of binding judgment of Hon ble Delhi High Court in the case of CIT v. Brandix Mauritius Holdings Ltd. reported in 456 ITR 34 iv) It was submitted that assessee hastens to add here that the satisfaction notes as supplied are common satisfaction notes for all seven assessment years namely Assessment years 2014-15 to 2020-21 and therefore contrary of judgment of Apex Court in the case of CIT v. Singhad Technical Education Society reported in 397 ITR 344. It is thus reiterated to satisfy the burden imposed by establishing not only that the documents alleged to be relating/pertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon in the satisfaction note allegedly pertaining to assessee or containing any information allegedly relating to the assessee; and iii) Copies of statements recorded of the searched person, if any, in respect of above alleged documents seized from the search persons ix) 16.1.2024 Additional Satisfaction notes for Assessment year 2017-18 recorded on 12.1.2024 by the learned Deputy Commissioner of Income Tax, Central Circle-1(4), Bangalore i.e. AO of the searched assessee namely Mr. D.K. Shivakumar --- --- x) 17.1.2024 142(1) of the Act AY 2014-15 dated 17.1.2024 (comprising of 42 sheets) AY 2015-16 dated 17.1.2024 (comprising of 42 sheets) AY 2016-17 dated 17.1.2024 (comprising of 42 sheets) AY 2017-18 dated 17.1.2024 (comprising of 43 sheets) AY 2018-19 dated 17.1.2024 (comprising of 43 sheets) AY 2019-20 dated 17.1.2024 (comprising of 42 sheets) AY 2020-21 dated 17.1.2024 (comprising of 42 sheets) 29.1.2024. 29.1.2024 It was submitted that kindly dispose of the objections raised in reply dated 22.1.2024 xi) 31.1.2024 142(1) of the Act AY 2014-15 dated 31.1.2024 (comprising of 22 sheets) AY 2015-16 dated 31.1.2024 (comprising of 22 sheets) AY 2016-17 dated 31.1.2024 (comprising ..... X X X X Extracts X X X X X X X X Extracts X X X X
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