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TMI Blog2024 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... similar arguments on this issue. Accordingly, for the sake of convenience and brevity, we dispose all the appeals by this consolidated order. 2. Before we advert to the grounds taken in these appeals, it would first be relevant to cull out the basic facts of the case. The appellants before us are noted to be the directors of M/s Pothys Pvt. Ltd., which is engaged in textile business. According to the AO, during the course of search in the premises of M/s Pothys Pvt. Ltd., certain cash ledgers were found in a pen drive which was printed and seized vide annexure ANN/SP/PPL/LS/S-2. According to AO, the data in this Annexure contained information that these directors had spent unaccounted monies in cash for on-money payments towards acquisition of certain immovable properties. The AO noted that Shri S.Pothiraj, in his statement recorded u/s. 132(4) of the Act, had admitted that, the unaccounted income was inter alia represented in the form of unaccounted investments made in properties. The AO of the searched person (M/s.Pothys Pvt. Ltd.) accordingly recorded his satisfaction on 10-09-2018 that the aforementioned seized material containing the details of on-monies paid on acquisition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. and correlated the details of the properties found in the relevant seized material. The Ld. AR pointed out that, since the partnership firm is not a juridical person, the immovable properties owned and belonging to the partnership firm, M/s Pothy's was held in the joint names of the partners. The Ld. AR thus vehemently contended that, the notings in question pertained to the partnership firm and not the individual appellants. 6. To further corroborate his contention, the Ld. AR placed before us copy of the order passed by the Settlement Commission at Chennai in the matters of M/s Pothys and M/s Pothys Pvt. Ltd. dated 09-11-2020. He showed us that, these entities had offered substantial undisclosed income which was telescoped against the unaccounted cash investments in immovable properties and unaccounted expenditure found in the relevant seized material including Annexure ANN/SP/PPL/LS/S-2. The Ld. AR thus argued that the satisfaction recorded by the AO was unjustified as the immovable properties in question belonged/pertained to M/s Pothys/M/s Pothys Pvt Ltd and that the unaccounted investment made in these properties had already been offered & taxed in their hands befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO inter-alia to validly usurp jurisdiction u/s. 153C of the Act without satisfying the mandatory condition precedent prescribed by Section 153C of the Act i.e. the AO has not recorded a valid satisfaction note before assumption of jurisdiction u/s 153C of the Act. In order to adjudicate this legal challenge, let us first have a look at the schematic framework of Section 153C of the Act. 11. We note that Section 153A of the Act is a special provision for assessment of an assessee in case of search or requisition in accordance to section 132 or 132A of the Act after the 31st day of May, 2003; and section 153C of the Act is a special provision for assessment of income of 'any other person' means a third party who is not searched by the department will be assessed u/s. 153A of the Act, provided the AO is satisfied that - (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs 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. 12. So, from a co-joint reading of section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who has not been searched by the department, the safe-guard stipulated by the Parliament has to be scrupulously followed or it will be fatal. 13. The rationale behind the above discussed exercise is because, the special provision for persons who are subjected to search u/s. 132 of the Act, would be triggered only against the searched party u/s. 153A of the Act; and if any valuables of a third party is found in the searched premises which belongs, or books/documents pertain/relate to a third party is found, then third party's assessment for six years would be subject to assessment/re-assessment as per section 153C/153A of the Act, so the safeguards prescribed by the statute has to be scrupulously followed. Therefore, it has to be kept in mind that satisfaction of AO before proceeding against a person which has not been searched cannot be done in a casual manner. The satisfaction of Assessing Officer should be based upon cogent material. The reason for it is that section 132(4A)(i) of the Act clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search, it may be presumed that such document belongs to such per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding column. The Ld. AR showed us that the specific details of the properties mentioned therein are the immovable properties acquired by and reflected in the regular books of accounts of the partnership firm, M/s Pothys. For instance, he brought to our notice that Property No. 37 - Paramankeni mentioned in the cash ledger correlates with the details of properties set out in the Schedule to Balance Sheet as on 31.03.2016 of M/s Pothys. Likewise, the Ld. AR correlated and matched the details of all other immovable properties found mentioned in the seized material with the details of immovable properties set out in the regular books of accounts of M/s Pothys. The Ld. AR also pointed out that the cheque component in relation to these properties was paid out of the monies belonging to the partnership firm. It was also brought to our notice that, these immovable properties were acquired in the names of the partners of the partnership firm for the reason that, the partnership firm is not recognized as a separate legal entity or a juridical person in the eyes of law and therefore the conveyances for these properties were executed in the names of the partners for and on behalf of the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered view, shows that, the satisfaction recorded by the AO of searched person (M/s.Pothys/M/s.Pothys Pvt Ltd) as well as the AO of the appellant viz., third party was based on incorrect assumption of fact that, the purported seized material related to the appellant, which as noted in the foregoing, is factually erroneous. Hence, the assertion of the AO in the satisfaction note that these are incriminating material qua the assessee doesn't have any basis whatsoever, so the finding of fact by AO in this respect in the satisfaction note is held to be factually perverse. 19. We find that this issue has been dealt with by the Hon'ble Apex Court in the case of CIT Vs Singhad Technical Education Society (397 ITR 344), and while doing so their Lordship has upheld the decision of the Hon'ble Bombay High Court reported in 378 ITR 84 by observing that, unless and until the AO can establish document-wise (or asset wise) correlation between what has been seized from the 'Searched person' - and - how the same is incriminating in nature qua each of the assessment years in question for which jurisdiction u/s. 153C is sought to be invoked for the 'other Person' - the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. 9. We are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of Hon'ble Apex Court (supra), we hold that the satisfaction note prepared by the AO does not satisfy the requirement of law as stipulated u/s. 153C of the Act, as the relevant seized material did not pertain to the appellant nor did it contain anything incriminating against the appellant. Accordingly, the notice issued under section 153C of the Act without satisfying the condition precedent as discussed (supra), is legally unsustainable, and therefore, the very assumption of jurisdiction under section 153C of the Act, in these AYs 2014-15 & 2016-17 are held to be bad in law and hence the consequent impugned assessment orders are null in the eyes of law. 22. The next legal challenge raised by the assessee is that, the addition/s impugned in unabated AYs 2014-15 & 2016-17 were not based on any incriminating material found in the course of search and therefore has urged that the same be deleted. In order to adjudicate the same, we first recapitulate the facts as already noted by us earlier. 23. In the present case, search had been conducted upon the Pothys Group (searched person) on 18-10-2016 i.e., in AY 2017-18. The satisfaction note was however drawn out by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under section 153-C of the Act are rightly set aside by the High Court. However, Shri N Venkataraman, learned ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd.[2023] 149 taxmann.com 399 (SC), more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under section 153-A of the Act have been saved. 2. As observed hereinabove, as no incriminating material was found in case of any of the Assessees either from the Assessee or from the third party and the assessments were under section 153-C of the Act, the High Court has rightly set aside the Assessment Order(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with the relevant sworn statements and the seized material. Having examined the same carefully, it is noted that the seized material also did not contain anything which incriminated the appellant or suggested that he had made unaccounted investment in immovable properties on his own account. It is also noted that, when confronted with the document marked as Annexure ANN/SP/PPL/LS/S-2, Mr. Balasubramanium, key employee of the searched person had specifically stated that, the cash payments found mentioned therein were towards the property purchased for M/s Pothys (partnership firm). As far as the statement of Mr. S Ramesh, Director of M/s Pothys Pvt. Ltd. is concerned, it is noted that he had only stated that the notings include cash paid for purchase of properties. Since he had nowhere stated that these notings pertained to him, the presumption was that it related to the searched person i.e. M/s Pothys/Pothys Pvt. Ltd. 29. As far as the reliance placed by the Ld. CIT, DR on the decision rendered by this Tribunal in appellant's own case for AY 2017-18 is concerned, it is found to be distinguishable as the said AY was an abated assessment year and the decision was rendered by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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