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TMI Blog2024 (12) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2022-23, the AYs 2014-15 and 2015-16 are outside the provisions of section 153C of the Act. Therefore, it is a settled position of law relevant for assessment year under consideration. Mandation of recording satisfaction - AYs 2016-17 to 2020-21 - We observed that the satisfaction recorded under section 153C is recorded without there being any reference to any specific assessment year and most of the informations were based on survey proceedings carried out in the case of the assessee. Further there is no reference to any seized material which may have bearing on the determination of total income of the assessee relevant assessment year-wise. The statutory requirement requires the AO to record the satisfaction based on the particular seized material considered as incriminating material and records satisfaction having bearing on the other person as well as relating to relevant assessment year for the purpose of revision of income of the relevant assessment years. AO has not recorded the satisfaction as per rule of law. See Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] as held Satisfaction Notes also fail to record any reasons as to how the material dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res, namely, Annexure A-1 to A-5. Further statements u/s 132(4)/131(1A) of the Act were recorded on oath from many persons including directors of the assessee. 5. The Assessing Officer observed that on perusal of said incriminating documents, satisfaction was duly recorded for initiating proceedings u/s 153C of the Act in the case of the assessee for AYs 2010-11 to 2020-21. The case of the assessee was centralized u/s 127 of the Act. Accordingly, notices u/s 153C were issued and served on the assessee. In response, assessee filed its return of income for AY 2014-15 on 26.10.2021 declaring total income of Rs.66,85,880/-. Subsequently, other notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, ld. AR for the assessee appeared and submitted the informations as called for. 6. The assessee is a Private Limited Company incorporated in the year 2003 as per provisions of the Companies Act having its registered office at 13-D, Gopala Tower, Rajendra Place, New Delhi-110 008. It is engaged in the business of the Travel Agency, providing travel related and other ancillary services to its clients. During the assessment proceedings, based on the soft data and state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o International Air Transport Authority (IATA) o Indian Association of Tour Operators (IATO) o Travel Agent Association of India (TAAI) o Travel Agent Federation of India (TAFI) The revenue streams of the Company are as follows : o Ticketing o Passport Visas o Hotel Booking o Customized services o Domestic train bookings o Travel Insurance arrangements However, sometimes our customers request us to arrange forex currency, so that they get all the services under one umbrella. In order to retain our clients we refer our clients to the forex agents. We are not trading in foreign currency. In lieu of the reference made to the forex agents we receive referral income from forex agent in case, the deal is executed. In order to determine the rate of our introduction or referral income there are two registers seized from the residence of Ramesh Hemrajani and Munish Hemrajaui at 38/19, East Patel Nagar, New Delhi -110008 as Annexure - 3 and Annexure - 7. The total income earned from the forex transactions in the registers given below : Annexure No. Referral Income in INR as per seized registers (A) Total Forex transaction in INR (B) Percentage of referral income i.e. A/B*100 Annexure 3 2409 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer analysed the event management income and after analysing the submissions of the assessee, he determined the profit rate relating to event management/facilitation fees income @ 4%. Accordingly he proceeded to make the addition of Rs.21,10,083/- out of management/facilitation fee income of Rs.5,27,52,082/-. Further, he observed that certain transactions found in spread sheets in the Pen Drive which contained the details of total funds received and total expenditure incurred by the assessee, this income was also not recorded by the assessee in its books of account and the assessee was asked to explain the same by issuing a show-cause notice which also reproduced by the Assessing Officer at page 29 of the order. After considering the submissions of the assessee, he proposed an addition of Rs.20,00,516/-. 9. Aggrieved, assessee preferred an appeal before the ld. CIT (A) and ld. CIT(A) dismissed the appeal of the assessee due to non-compliance to various notices/opportunities allowed to the assessee. Ld. CIT (A) dismissed the appeals filed by the assessee by relying on the facts available on record. 10. Aggrieved, assessee is in appeal before us raising following grounds of appeal :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case and in law, the satisfaction note(s) recorded u/s 153C of the Act are bad-in-law and without jurisdiction and, accordingly, the assessment proceedings initiated on the foundation of such satisfaction note(s) and also the consequent assessment order passed are liable to be quashed and CIT(A) erred in not holding so. 11. At the time of hearing, ld. AR for the assessee submitted that the search was conducted in the case of Sushen Mohan Gupta and others on 02.01.2020 and based on above search, the case of the assessee was initiated u/s 153C of the Act. He submitted that the Assessing Officer recorded the satisfaction for AYs 2014-15 to 2019-20 on 30.09.2021. Therefore, the relevant search assessment in the case of the assessee is AY 2022-23. That be the case, the six years relevant for revision of AYs relevant for AYs 2016-17 to 2019-20. Therefore, AYs 2014-15 and 2015-16 are outside the provisions of section 153C of the Act. 12. Coming to other AYs under consideration, he submitted that the Assessing Officer has not recorded satisfaction year-wise rather recorded a satisfaction in single consolidated satisfaction. In this regard, he relied on the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the other person . In the present case, this statutory requirement has not been fulfilled. 3. The submission by the Ld. DR that during the course of assessment proceedings, the assessee admitted certain commission income is totally out of context. The issue before your honour is with regard to validity of initiation of assessment proceedings u/s 153C of the Act. The foundation/jurisdiction for initiation of proceeding u/s 153C is the satisfaction note recorded u/s 153C of the Act. If the satisfaction note recorded u/s 153C is not in accordance with law, the assessment order passed on the foundation of such satisfaction note will also not survive. Moreover, in the assessment order, the assessing officer cannot go beyond the satisfaction recorded u/s 153C of the Act. In the present case, the assessing officer has made the addition on account of commission income whereas in the satisfaction note there is no reference to any commission income. 4. The satisfaction recorded by the AO u/s 153C of the Act is bad in law and contrary to apex court decision in the case of Commissioner of Income Tax-III, Pune Versus Sinhgad Technical Education Society 2017 (8) TMI 1298 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding precedent in respect of the aforesaid proposition as would be evident from the Supreme Court noticing that the material disclosed pertained only to AY 2004-05 or thereafter and that consequently the Section 153C action initiated for AYs 2000-01 to 2003-04 would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities. - - - - - - - - - - - - - - - - - - - - - - - - 62. Hypothetically speaking, it may be possible for the material recovered in the course of a search having the potential or the probability of constituting incriminating material for more than one assessment year. However, even if such a situation were assumed to arise, it would be incumbent upon the AO to duly record reasons in support of such a conclusion. The Satisfaction Notes would thus have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and thus warranting the drawl of Section 153C proceedings for years in addition to those to which the material may be directly relatable. 63. On an overall consideration of the structure of Sections 153A and 153C, we thus fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining to the year of search and the relevant assessment year . It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to have a bearing on the determination of the total income that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs or the relevant assessment year would follow the formation of that opinion and satisfaction in that respect being reached. 67. On an overall consideration of the aforesaid, we come to the firm conclusion that the incriminating material which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeding initiated in the present case of the appellant company before your honour is liable to be quashed. 6. There is yet another reason because of which the notice issued u/s 153C in this case is liable to be quashed as there is no year wise satisfaction note recorded. With regard to submission of the Ld. DR that in the case of DCIT V Sunil Kumar Sharma (supra), there was no issue for consideration as to whether separate satisfaction note was required to be recorded, it is submitted that this is factually erroneous. The issue before the Hon ble High Court was whether the notice u/s 153C issued was valid and in that context the issue of consolidated satisfaction note was specifically argued which is evident from para 36 of the decision of High Court which is as under: 36. Further, learned Senior Counsel argued that satisfaction note is required under Section 153C of the Act for each Assessment Year and in the impugned proceedings, consolidated satisfaction note has been recorded for different Assessment Years which vitiates entire assessment proceedings. In this regard, he placed reliance on the judgment of the Hon ble Apex Court in the case of L K VERMA v. HMT AND ANOTHER, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Raja Varshney vs. DCIT (supra) relied upon by ld. AR for the assessee, it is held as under :- 12. On perusal of the satisfaction note it reveals that same was recorded on 10-10-2022 by the AO after giving the findings that the seized assets and documents /digital data and information relates to assessee and it is a fit case for initiating proceedings u/s 153C r.w.s153A of the Act for the A.Y. 2015-16 to 2020-21. The AO has issued the notice u/s.143(2) of the Act. On the similar facts, the coordinate Bench of the Tribunal in the case of Jasjit Singh (supra), it was held that the date of receiving of the seizes documents would become the date of search and six 11 years period would be reckoned from this date. In the case of Jasjit Singh held as under :- 15. We find that an identical issue has been decided by Delhi Bench of the Tribunal in the case of DSL Properties P. Ltd. (supra) in favour of the assessee accepting the similar contention of the assessee. Similar view has been expressed by the Delhi Bench of the Tribunal in the case of V.K. Fiscal (supra) holding that the date of receiving of the seized documents would become the date of search and six years period would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years immediately preceding the assessment year relevant to previous year in which search is conducted. As per proviso to section 153C, the date of search is to be substituted by the date of receiving the books of account or documents or assets seized by the AO having jurisdiction over such other person. Ld. DR has stated that since the AO of the person searched and the AO of such other person was the same, no 14 handing over or taking over of the document was required. That section 153C(1) and its proviso have to be read together in a harmonious manner. While interpreting section 153C, we have already held that for initiating valid jurisdiction u/s 153C, even if the AO of the person searched and the AO of such other person is the same, he has to first record the satisfaction in the file of the person searched and thereafter, such note alongwith the seized document/books of account is to be placed in the file of such other person. The date on which this exercise is done would be considered as the date of receiving the books of account or document by the AO having jurisdiction over such other person. Though while examining the facts of the assessee's case we have arrived at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search conducted on one person u/s 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 AO has to first be satisfied u/s 153C, which provides for the assessment of income of any other person, Le., 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 17 document to the AO having jurisdiction over the other person. Thereafter, the AO 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 section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has recorded the satisfaction as a single consolidated satisfaction note, which constitutes 17 pages, was placed on record in the paper book. On careful consideration, we observed that the Assessing Officer has recorded the satisfaction summarily. We are inclined to reproduce the satisfaction note in paras 10 and 12 as under :- 10. The assessee as per its own submission filed before the investigation wing during post search proceedings had admittedly furnished following details of its cash transactions : As it is already stated that we received cheque, RTGS as well as cash against the sale various travel related services and duly record the receipts on the books of Blue Ocean Travesl Private Limited whether it is by cheque or by RTGS or though cash. The total amount received against sale in the year 2018-19 was Rs.53,18,28,738/-, in the year 2017-18 the figure was Rs.41,56,10,247/-, in the year 2016-17 it was Rs.44,60,30,811/-, in the year 2015-16 was Rs.58,13,88,829/-, in the year 2014-15 the figure was Rs.46,21,90,673/-, in the year 2013-14 was 45,07,03,172/-. The above mentioned figures include cash, cheques and RTGS, the bifurcation of which is as under :- Year T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded documents, has been claimed by any assessee in the case of Sushen Mohan Gupta Group cases. A satisfaction in this regard has been recorded in the assessment records and is placed in the file of Sh. Sushen Mohan Gupta (being the lead case of Sushen Mohan Gupta group) for AY 2020-21. Also, the relevant Survey Folder (including their annexures) as well as the above referred statements of various employees of M/s Blue Ocean Travels Private Limited (PAN: AACCB3915C) have been perused and have been considered before drawing the above satisfaction that the seized/impounded documents/digital material did not pertain to and the information contained therein did not relate to the person searched (i.e. Sushen Mohan Gupta Group). 18. Further we observed that the satisfaction recorded under section 153C is recorded without there being any reference to any specific assessment year and most of the informations were based on survey proceedings carried out in the case of the assessee. Further there is no reference to any seized material which may have bearing on the determination of total income of the assessee relevant assessment year-wise. The statutory requirement requires the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to have a bearing on the determination of the total income . It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs immediately preceding the AY pertaining to the year of search and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to have a bearing on the determination of the total income for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs years immediately preceding the assessment correlatable to the search year or the relevant assessment year as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above. 20. Similarly, the Hon ble Delhi High Court while considering the similar issue in the case of Saksham Commodities Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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