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TMI Blog2024 (8) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order u/s 153C/143(3) of the Act is null in the eyes of law. Thus in the light of the Hon ble Supreme Court decision in the Super Mall Pvt Ltd. [ 2020 (3) TMI 361 - SUPREME COURT] AO having not recorded valid satisfaction note in the case of the other person /assessee in this case as required by section 153C of the Act, we find that the AO lacked jurisdiction to frame assessment u/s 153C/143(3) of the Act and therefore assessment framed by him for AY 2008-09 and 2009-10 are held to be without jurisdiction and therefore quashed. Penalties levied under 271AAA pursuant to the quantum assessment framed u/s 153C - Since the foundation for the levy of penalty u/s 271AAA of the Act has been removed, the penalty also falls because the case of the assessee is squarely covered by the legal maxim Sublato fundamental Credit opus meaning in case foundation is removed, the super-structure falls. In Badarimath V/s Tamilnadu [ 2000 (9) TMI 1044 - SUPREME COURT] it was held by Hon ble Supreme Court that once the basis of proceedings is gone, all consequential order acts would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings - penalties levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid satisfaction u/s 153C of the Act. Drawing our attention to page No. 3 of the paper-book wherein the AO had filed the report called for by this Tribunal wherein the AO has admitted that the there is no satisfaction note as such in this case u/s 153C, and tried to justify the same by observing as under: 1. It may be noted that recording of satisfaction in the case of any 153C assessee is required only w.e.f. 01-10-2014 and therefore the said amended provision does not apply to the present assessee. 2. In support of the above facts, reference is made to the following:- 3. Order Sheet noting dated 08-12-2009 of the AO in the case of Shri Dilip B. Patel for proceedings u/s 153C. Copy made available to Shri Dilip B. Patel as per item (ii) of his requisition. 4. Notice dated 27-10-2010 u/s. 142(1) of the Act issued by the AO to the assessee, Shri Dilip Patel specifically seeking explanation with regard to the seized material in the Faria Group to which the assessee belongs (copy enclosed). 5. Assessment order of Shri Vinod Faria for A.Y. 2009-10 dated 28-12-2010 (copy enclosed). 5. Thereafter the Ld. AR also drew our attention to the purported satisfaction note of the AO as contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the assessee. According to the Ld. AR, this reasoning is misplaced and the amendment brought in by Finance Act 2014, w.e.f. 01.04.2014 only reiterated the requirement of law already stated in section 153C of the Act that AO has to record his satisfaction that money, bullion, valuable articles or things or books or documents seized [from during search] belongs to other person (not the searched person/assessee in this case). It was pointed out by the Ld. AR that Parliament inserted pertain/related to (along with belong) only from 01.04.2017 (Finance Act, 2017). Anyway, according to him, perusal of the purported satisfaction note as well as admission of the AO it can be seen that there was no valid satisfaction formed by the AO before issuing notice u/s 153C of the Act and therefore the issuance of notice u/s 153C of the Act dated 09.12.2009 and subsequent framing of assessment u/s 153(A)/143(3) of the Act were invalid and null in the eyes of law. 7. Per contra Ld. DR could not controvert the aforesaid submission of the Ld. AR of the assessee. However the written submission of Ld. DR is reproduced as under: - Brief history of the case: i) The assessee had filed return of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d today After verification of the search/seizure Group of Milan Dalal/Vinod Faria Group (date of search 30.05.2008) it is noticed that the case falls under the provisions of 153C of the I.T. Act 1961. Hence the assessment proceedings pending u/s. 143(3) as on today are hereby abated The Notice u/s. 153C are being issued for A.Yrs 2003-04 to 2008-09 accordingly v) Being aggrieved the Assessee filed an appeal before the CIT (A) and the Ld. CIT (A) passed the appellant order against the assessment order vide appeal no. CIT (A)-40/IT/DCIT(OSD-1) C.R.7/66/13-14 giving part relief to the assessee. vi) The assessee, being aggrieved preferred appeal before Hon'ble ITAT, Mumbai with one of the grounds of appeal as the assessment proceedings are void ab initio as apparently satisfaction for issuing notice was not recorded in this case. A. The first contention of the assessee is Issue of notice u/s, 153C was without recording of satisfaction of assessing officer (AO) of searched person. Hence, assessment is null and void The Ld AR of the appellant has argued that the AQ has not recorded any satisfaction before issuing notice u/s153C of the Act. In this regard, a report was called from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the [Additional Commissioner or Additional Director or Joint Commissioner or Joint Director) who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act . 5 It is clear from the above definition that AO means ACIT/DCIT or ADIT/DDIT etc. When AO has been defined in the Act itself and has been subsequently used in various sections of the Act, meaning given in the definition has to be used to a understand the said authority in other sections including u/s153A or 153C. Therefore, even the Deputy Director of Income tax (Investigation) is also an AO for the purpose of the Act. It is seen from the Appraisal Report prepared by the DDIT (Inv.) and forwarded by the Addl. DIT(Inv) that the assessee's name is specifically mentioned in the list covered u/s. 153C of the Act. It is stated that various incriminating documents belonging /relating to the assessee have been seized. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ratio of Sahara India is not applicable to the present case. 6.2 Be that as it may, it needs to be emphasized that the Addl, CIT or the Range head is involved at every stage of assessment of search cases. The Appraisal Report prepared by the processing ADIT(Inv) is forwarded to him by the AddI. DIT(Inv). The centralization order by the DGIT (Inv.), CCIT and CIT is also intimated to him. He is consulted by the AO while issuing questionnaire to the assessee. Various incrementing materials and the books of account are shown to him by the AO during discussion and his guidance is taken regarding the course of investigation to be carried on to reach the logical conclusion. Once the replies are received and investigation is completed, the matter is again discussed with the AddI. CIT and a draft order is prepared and put up to the AddI.CIT. As stated, it is the culmination of the entire process of passing the search assessment order and not a stand- alone act for the first time. Hence, the Addl.CIT is very much part of the entire process in passing the assessment order. Therefore, the question of application of mind of AddI.CIT before granting approval is not a pertinent issue so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions indicating unaccounted and unexplained investment of assessee and Shri Vinod Faria ; and a note book (note book seized from Shri Vinod Faria marked A-4 and also referred to loose paper no. 23 of Annexure A-I) reflects such dealings, the AO, was of the view that the case of the assessee was covered under provision of section 153Cof the Act, and since pursuant to transfer order u/s 127(2) of the Act dated 23.10.2008, the case of assessee was centralised in his charge and jurisdiction/case assigned to the him, [i.e AO/Shri B D Patil [DCIT (OSD-II) Central Range-7, Mumbai] he made the aforesaid noting in his (AO s) order-sheet dated 08.12.2009, thereafter, he issued notice u/s 153C of the Act on 09.12.2009; and pursuant to which the assessee filed his return income on 17.02.2010. Thereafter the assessment was framed in the case u/s 153C/143(3) of the Act dated 28.12.2010 for AY 2008-09 by making an addition of Rs. 7,62,92,356/- [Rs. 7,64,65,240 1,72,884/-]. And for the AY 2009-10 similarly the AO made addition u/s 153C/143(3) of the Act of Rs. 4,92,260/- vide order dated 28.12.2010. On appeal the Ld. CIT(A) has confirmed the action of the AO. 9. As noted (supra), the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this issue is no longer res-integra as held by the Hon ble Supreme Court in the case of M/s Super Malls Pvt Ltd. V/s Pr. CIT-8 new Delhi [(2020) 423 ITR 281 (SC)] wherein the Hon ble Supreme Court has held as under:- 5.1 As observed hereinabove, the short question which is posed for the consideration of this Court is, whether there is a compliance of the provisions of Section 153C of the Act by the Assessing Officer and all the conditions which are required to be fulfilled before initiating the proceedings under section 153C of the Act have been satisfied or not? 6. This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food (P.) Ltd. (supra). has held, before issuing notice under section 153C of the Act, the Assessing Officer of the searched person must be satisfied that, inter alia, any document seized or requisitioned belongs to a person other than the searched person. That thereafter, after recording such satisfaction by the Assessing Officer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, then the requirement of section 153C of the Act is fulfilled. In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself. (Emphasis Supplied) 10. We also take note of the Circular No. 24/2015 issued by the CBDT after taking note of the decision of the Hon ble Supreme Court M/s Calcutta Knitwear [362 ITR 373] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to us even though Circular No. 24 of 2015, (though issued on 31.12.2015 i.e, prior to the order of judgement of Hon ble Supreme Court in Super Malls), would apply to the present appeal because CBDT in Paragraph 5 of the Circular (supra) had directed the department to either withdraw or not press the issue in pending litigation in cases where the recording of satisfaction did not meet the guidelines laid down by the Hon'ble Supreme Court referred to in paragraph 2 of the aforesaid Circular M/s Calcutta Knitwears). Further, the Circular clearly states that the CBDT had accepted the position that the guidelines laid down by the Hon'ble Supreme Court in the case of Calcutta Knitwear (supra) while dealing with the provisions of Section 158BD of the Act, shall also apply to proceedings under Section 153C of the Act. 12. Be that as it may, in this case as noted AO of the searched person and the other person /assessee in this case are the same. Therefore, the AO before usurping the jurisdiction u/s 153C of the Act has to record one-satisfaction note as clarified by the Hon ble Supreme Court in the case of M/s Super Mall Pvt Ltd. (supra) wherein the Hon ble Supreme Court has cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is satisfaction that any money, bullion, jewellery or other valuable articles belongs to assessee or things or books of account or documents seized pertains/relates to the assessee which is the jurisdictional fact required to be made by AO in order to usurp jurisdiction u/s 153Cof the Act which is clearly absent in this case and therefore on this legal issue itself the assessee has to succeed and we hold that AO did not record valid satisfaction before issuing notice to assessee u/s 153C of the Act dated 09.12.2009. Therefore, AO did not had requisite jurisdiction to issue notice to assessee u/s 153C of the Act dated 09.12.2009. Therefore, subsequent framing of assessment order u/s 153C/143(3) of the Act is null in the eyes of law. 13. Before we part, we take note of the written submission of Ld. DR (only in respect of this legal issue) that recording of the satisfaction note is not requirement of law and that requirement came only with effect from 1.10.2014 which is erroneous because before the amendment was made in section 153C of the Act vide Finance Act 2014, the requirement of law to record satisfaction before usurping jurisdiction u/s 153C of the Act has been sine qua non as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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