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TMI Blog2024 (7) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated in Section 153C have not been satisfied cumulatively and simultaneously. Non-satisfaction of any of the pre-conditions mentioned in the provision of Section 153C of the Act would result in notice under 153C legally unsustainable or invalid. The ratio of the decision of Sinhagad Technical Education Society ( 2017 (8) TMI 1298 - SUPREME COURT ) and the decision of Index Security Pvt. Ltd. (8 2017 (9) TMI 585 - DELHI HIGH COURT] was rightly applied to the facts of the assessee s case. Thus, we see no infirmity in the orders passed by the Ld.CIT(A). The same is sustained. Decided against revenue. Validity of notice u/s. 153C as barred by limitation - Validity of notice issued beyond block of 6 years - HELD THAT:- We find that in this case date of search was 11.11.2014 and the Date of recording of satisfaction u/s. 153C was 02.12.2016. We are of the considered view that in a case of searched person, the block of 6 years for assessments are 6 years immediately proceedings the year of search. As the search u/s. 132 was conducted in the Apple Group on 11.11.2014, hence, the date of search falls in AY 2015-16 in the case of Apple Group. Accordingly, the AO in the case of searche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich remained unexplained hence such documents constituted incriminating material for the purpose of the issue of notice u/s 153C in the context of assessee. 3. Whether on facts and circumstances of the case and in law, the Ld CIT(A) erred in not appreciating that after 01.4.2005 the test of issue of notice u/s 153C is availability of seized material Which has bearing on assessment of income which has to be only in nature of prima facie belief having live nexus not in nature of absolute evidence based on detailed investigation. 4. That the appellant craves leave to add or amend any other more ground of appeal as state above as and when needs for doing so may arise. 5. The order of the Ld CIT(A) is erroneous in law and on facts of the case and is liable to be set aside and the order of the AO be restored. 2. The only issue to be adjudicated in the appeals of the Revenue is as to whether the additions made by the Assessing Officer as an unexplained investment being share capital and share premium are sustainable in the absence of incriminating material seized in the course of search. 3. The Ld. Counsel for the assessee submits that additions towards share capital and share premium we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the assessment order. v. The additions made by the A.O. are beyond the scope of jurisdiction of section 153C of Income Tax Act, 1961. The Ld. A.R. of the appellant has also submitted that after the decision of Hon ble Supreme Court in the case of PCIT-III, Pune Vs. Sinhgad Technical Education Society, the law is crystal clear, that issue of notice u/s 153C without incriminating material for the relevant assessment year is legally not sustainable. 5.2 Upon the legal challenge of Id. A.R., the AO, vide this office letter F. No. CIT (A)-IV/KNP/Remand Report/2018-19/171 dated 09.10.2018 was specifically requested to comment on the legal contention of the appellant. The letter of this office is reproduced here-in-under: Sub: Remand; Report u/s 250(4) of the Income Tax Act In the case of M/s. Apple Commodities Ltd. for the A.Y. 2011-12 to A.Y. 2013-14 (3 Years) PAN:AADCA0300K- Regarding- Please find enclosed herewith copies of Submission filed by the appellant before the undersigned on 01.10.2018. Vide above submissions, the appellant has challenged legal validity of the issuance of notice u/s 153C of the Act. It was submitted by (the appellant that appellant has challenged that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of law and various judicial pronouncements including those of Hon ble Apex Court. The assessing officer has not made any rebuttal. As a matter of fact, in the remand report the A.O. has realized that on legal issues the order passed by him is not sustainable and therefore as per para 8 of the remand report the A. O. has mentioned that Quote on the legal issues raised by the appellant your goodself may take appropriate decision in accordance with law Unquote. In view of the above, the orders passed by the Assessing Officer are liable to be quashed on legal issues itself. In view of the above, it is submitted that the additions made by the A.O. are liable to be deleted. 5.5 The appellant has submitted another detailed written submission dated 28.12.2018, which is common for A.Y. 2009-10 to. A.Y. 2014-15, on the satisfaction recorded by the AO, which is reproduced as under: In 1st para of the satisfaction note, the assessing officer has made general observation with regard to business activities of the companies and there is nothing incriminating. 2. In para 2 to 3.2 of the satisfaction Note the A.O. has not referred to any seized document. He has merely referred to certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that in the satisfaction Note, the A.O. has nowhere recorded that these documents belong to the assessee company. Without prejudice to the above, it is submitted that the observation made by the assessing officer are factually erroneous. Page No. 23 to 33 of LP-1 contains draught survey report relating to coal, outgoing message report. These are not even pertaining to the assessee leave alone the question of belonging to the assessee. There is nothing incriminating in these documents. The assessing officer has also not made any addition on the basis of these documents. Similarly Page No. 23 to 33 of LP-2 are copy of Valuation report of Property bearing no. A-248, Defence Colony, Delhi in the name of Mrs. Ruchi Garg done on behalf of State Bank of India. These are also not even pertaining to the assessee leave alone the question of belonging to the assessee. There is nothing incriminating in these documents. The Assessing Officer has also not made any addition on the basis of these documents. 5. In para 5.1 of satisfaction Note the A.O. has referred to page No. 8 9 of annexure LP-3. In this regard it is submitted that in the satisfaction Note, the A.O. has nowhere recorded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for all the A.Y. 2009-10 to A.Y. 2014-15 (6 Years). ii. AO has not mentioned the specific Seized documents, which belongs to the appellant company. Thus, no satisfaction is recorded by the AO of searched person to establish the fact that specific seized document indeed belongs to the appellant company. iii. AO has mentioned in para 4 of the satisfaction note LP-21, LP-22 and LP-1 to LP-18. Further, AO has noted seized document page 23 to 33 of LP-2 in para - 5 of the satisfaction note. AO has also recorded pages 8 9 of IP-3 in para 5.1 of the satisfaction note. However, AO has not recorded the-finding that this seized document indeed belongs to the appellant company and is incriminating in nature. Perusal of these documents reveals that neither they belong to the appellant company nor they are in incriminating nature. AO has not made any addition on the basis of these seized documents. Ld. A.R. of the appellant vide his submission dated 28.12.2018, which is reproduced in para 5.5 of this order, has analyzed each seized document and correctly concluded that neither they belong to appellant nor they are incriminating in nature. iv. Further, AO has not recorded the finding in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act are very specific and clearly explained in the Act. For the sake of clarity, relevant previsions of Act is as under; 153C. [(1)] [Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, 69belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income ]of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges there from is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. Thus, facts of the instant case are squarely cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search belong to the assessee. After analyzing the satisfaction note of the DCIT (Central Circle) the Ld.CIT(A) held that the three conditions enumerated in Section 153C of the Act are not satisfied cumulatively and simultaneously. It is the finding of the Ld.CIT(A) that in the case of the assessee admittedly additions are not based on any incriminating document found as a result of search and AO has not recorded the satisfaction for the relevant assessment years as envisaged u/s 153C of the Act. It is also the observation of the Ld.CIT(A) that in fact no assessment year is mentioned in the satisfaction note recorded by the AO and, therefore, conditions stipulated in Section 153C have not been satisfied cumulatively and simultaneously. Non-satisfaction of any of the pre-conditions mentioned in the provision of Section 153C of the Act would result in notice under 153C legally unsustainable or invalid. The ratio of the decision of the Hon ble Supreme Court in the case of PCIT Vs. Sinhagad Technical Education Society (supra) and the decision of the Hon ble Delhi High Court in the case of Index Security Pvt. Ltd. (86 taxmann.com 84) was rightly applied to the facts of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (Delhi High Court.) iii) ARN Infrastructure India Ltd. Vs. ACIT [2017] 81 Taxmann.com 260 (Delhi) (Delhi High Court). iv) CIT vs. Sarwar Agency P Ltd. 397 ITR 400 v) Apple Sponge and Power Ltd. Vs. DCIT (ITA No. 7638/Del/2018 AY 2015-16) ITAT, Delhi decision dated 25.5.2022. 8.1 The Ld. CIT(DR) strongly supported the findings of the Assessing Officer. 9. We have heard the rival contentions and perused the orders of the authorities below. We find that in this case date of search was 11.11.2014 and the Date of recording of satisfaction u/s. 153C was 02.12.2016. We are of the considered view that in a case of searched person, the block of 6 years for assessments are 6 years immediately proceedings the year of search. As the search u/s. 132 was conducted in the Apple Group on 11.11.2014, hence, the date of search falls in AY 2015-16 in the case of Apple Group. Accordingly, the AO in the case of searched person was empowered to initiate the proceedings u/s. 153A for immediately preceding six years from AY 2009-10 to AY 2014-15. We further observed that in a case of person other than the searched person , provisions of section 153C are applicable and in such case, the block of 6 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is 3 made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153A except in cases where any assessment or reassessment has abated. 8. In SSP Aviation (supra) the High Court inter alia reasoned as follows:- 14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts. 11. For the foregoing reasons, the Court finds no merit in these appeals; they are accordingly dismissed, without order on costs. 9.2 Hon ble Delhi High Court has dealt exactly the similar issue in the case of CIT vs. RRJ Securities Ltd. (2015) 62 taxmann.com 391 (Delhi) wherein, it has been held as under:- 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. 9.3 Further, Hon ble Delhi High Court in the case of ARN Infrastructure India Ltd. Vs. ACIT (2017) 81 taxmann.com 260 (Delhi) has held as under:- 12. The decision in CIT-7 v. RRJ Securities Ltd. (supra) is categorical that under Section 153 C of the Act, the period of six years as regards the person other than the searched person would commence only from the year in which the satisfaction not is prepared by the AO of the searched person and a notice is issued pursuant thereto. The date of the Satisfaction Note is 21st July, 2014 and the notice under Section 153 C of the Act was issued on 23rd July 2014. The previous six AYs would therefore be from AY 2009-10 to AY 2014-15. This would therefore not include AYs 2007-08 and 2008-09. The decision in CIT-7 v. RRJ Securities Ltd. (supra) is also an authority for the proposition that for the proceedings under Section 153C to be valid, there had to be a satisfaction note recorded by the AO of the searched person. 9.4 Hon ble Delhi High Court in the case of Pr. CIT vs. Sarwar Agency P. Ltd. 397 ITR 400 has observed and held as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of that section. 10. We draw support from the decisions of the Hon'ble High Court of Delhi in the case of RRJ Securities Ltd 62 Taxmann.com 391 and ARN Infrastructure India Ltd 81 Taxmann.com 260. 11. Assessment order dated 31.12.2016 is framed u/s 143(3) of the Act for the impugned Assessment Year 2015- 16. In our considered view, this year falls within the period of six years when counted from the date of recording satisfaction note u/s 153C of the Act which is the deemed date of search. 12. The Act has been amended recently by the Finance Act, 2017 with prospective effect i.e. Assessment Year 2018-19. 13. Therefore, we hold that the assessment order framed u/s 143(3) of the Act on the facts of the case is invalid. We, accordingly, hold the assessment order as bad in law. A perusal of the grounds taken before the ld. CIT(A) show that this issue was raised before the ld. CIT(A). Therefore, the submissions of the ld. DR do not hold any water. 14. Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case. 15. In the result, the appeal of the assessee in ITA Nos. 7638/DEL/2018 is allowed. 10. Keeping in view of the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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