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TMI Blog2024 (6) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... See ABHISAR BUILDWELL P. LTD. [ 2023 (4) TMI 1056 - SUPREME COURT] Addition made by the ld. AO is on account of investment made in two LLPs (of which one is the assessee) by its partner M/s. Dayanidhi Commercial Ltd., in the preceding financial year. We also note th the ld. Assessing Officer on the one hand, himself states that assessee company received capital contribution of Rs. 3.72 Crores in the preceding year but went on to make addition of Rs. 10.72 Crores for the year under appeal which includes Rs. 7 Crores received by another LLP, namely, M/s. Suntok Plantations LLP, from its partner in preceding financial year. It clearly indicates that the impugned additions has been made without making any reference to the incriminating material found during the course of search. Decided in favour of assessee. - Dr. Manish Borad, Hon ble Accountant Member And Shri Anikesh Banerjee, Hon ble Judicial Member For the Assessee : Shri Sanjay Modi, FCA For the Revenue : Shri Sanjay Jha, JCIT ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The present appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals), Dibrugargh, (hereinafter the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2016-17, the Id. AO was not justified in making addition of Rs. 10,64,00,000/- to the income of the assessee for the Assessment Year 2016-17. 4. For that the Id. CIT(A) ought to have also held that the impugned order of assessment is void and bad in law in absence of any valid approval under section 153D of the Act. 5. For that the other grounds of appeal taken before the Id. CIT(A) was not adjudicated upon in view of his decision in respect of preliminary grounds. 6. For that the cross-objector craves leave of your honours to take additional ground or grounds of cross-objection and/or to modify or resign any ground(s) of cross-objection at or before the time of hearing. 3. Brief facts of the case are that the assessee is a limited liability partnership firm engaged in the business of cultivation and manufacturing of tea. It furnished its regular return of income u/s 139(1) of the Act on 17/10/2016. A search action was carried out on Rajan Lohia Group on 09/01/2018. Certain documents and papers were claimed to have been seized and impounded during the course of search based on which notice u/s 153C of the Act dt. 26/12/2018 was issued calling to file return to which necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the ld. Assessing Officer stating that the alleged sum received by the assessee LLP are through shareholder/paper companies which have no substantial business and has been used as a conduit for bringing unaccounted money in the books in the form of capital investment. 5.1. On the other hand, the ld. Counsel for the assessee submitted that firstly, no proper satisfaction was recorded and, therefore, the ld. CIT(A) has rightly quashed the order u/s 153C of the Act. He further submitted that since no incriminating material has been referred by the ld. Assessing Officer in the assessment order and that the assessment year in question is a completed and non-abated year, the case of the assessee is squarely covered by the judgment of the Hon ble Supreme Court in the case of Pr. C.I.T. V/s. Abhisar Buildwell (P) Ltd. (2023) 454 ITR 212 (S.C.). He further submitted that alleged amount was not received by the assessee during the year and this was a capital contribution received in the earlier year. He also stated that no valid approval u/s 153D of the Act was taken which makes the assessment void ab initio and bad in law. For this proposition, he relied on the following judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok Tea Co. LLP and M/s. Suntok Plantations LLP but total addition for the alleged undisclosed income has been made in the hands of assessee LLP. 7. Now, before proceeding to deal with this issue in detail that, whether the addition for undisclosed income was justified in the hands of the assessee, we will first take up the legal issues based on which the ld. CIT(A) has deleted the addition. The first one is that no proper satisfaction was recorded by the ld. Assessing Officer of the searched person failing which a proper jurisdiction cannot be inferred by the ld. Assessing Officer. Now, the search was undertaken at Rajan Lohia Group on 09/01/2018 and various documents were seized of which some were claimed to be pertaining to the assessee company. We will first like to go through the satisfaction note recorded by the ld. Assessing Officer, which reads as follows:- Date: 26.12.2018 During the course of search operation, u/s 132 of the Income Tax Act, 1961 in the case of Rajan Lohia group of cases, books of account and documents seized/ requisitioned, which were handed over by the Investigation Wing contains certain entries and information which pertains to the assessee. As such, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the searched person under section 158BC of the Act, or (b) in the course of the assessment proceedings under section 158BC of the Act, or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 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 Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of search operation documents belonging to SHETTY PHARMACEUTICALS BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding 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 v. King Emperor). We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided. 11. Respectfully following the same as well as the other decisions referred by the ld. CIT(A) in the impugned order, we are inclined to hold that since no valid satisfaction note was recorded, the ld. Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. CIT v. Mehndipur Balaji 2022 SCC Online All 444/[2023] 147 taxmann.com 201/ [2022] 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. 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 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 16, it is held as under: 15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: 153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132- A after the 31st day of May, 2003, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such details of seized documents bearing serial no./annexure is available in the satisfaction note. Further addition made by the ld. Assessing Officer is on account of investment made in two LLPs (of which one is the assessee) by its partner M/s. Dayanidhi Commercial Ltd., in the preceding financial year. We also note th the ld. Assessing Officer on the one hand, himself states that assessee company received capital contribution of Rs. 3.72 Crores in the preceding year but went on to make addition of Rs. 10.72 Crores for the year under appeal which includes Rs. 7 Crores received by another LLP, namely, M/s. Suntok Plantations LLP, from its partner in preceding financial year. It clearly indicates that the impugned additions has been made without making any reference to the incriminating material found during the course of search and, therefore, the judgment of the Hon ble Apex Court in the case of Abhisar Buildwell (supra) squarely applies in favour of assessee and that, no addition could have been made by the ld. Assessing Officer for the impugned year. Thus, we fail to find any infirmity in the finding of the ld. CIT(A) on this issue also. 14. So far as the merits of the case ..... 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