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TMI Blog2025 (1) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961. It is very apparent from the two satisfaction notes before us that none of the alleged incriminating documents has been examined or the contents of these documents analysed in a manner to show that how these alleged documents have any bearing on the determination of total income of the assessee for a particular year for which the reassessment was initiated by issuance of notice u/s 153C r.w.s. 153A of the Act. In the case of Canyon Financial Services Ltd. Vs. ITO [ 2017 (7) TMI 539 - DELHI HIGH COURT] has held that where satisfaction notes recorded by Assessing Officer of assessee and Assessing Officer of searched person were identically verdict carbon copy proceeding could not be initiated against assessee u/s 153C. When the satisfaction notes are compared with the notice u/s 142(1) of the Act along with the annexure having analysis of the seized material, it appears that at the time of assumption of jurisdiction by way of recording the satisfaction, the AO of the assessee before us had not applied his mind while issuing the notic. CIT(A) has erred in law by not appreciating that the impugned assessment orders in both the years were based on illegal assumption of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the searched person (Central Circle-16, Delhi) on 02.12.2020 and books of account or seized documents purportedly pertaining to the assessee were received by the Jurisdictional AO of the assessee on 02.03.2021. Thereafter, satisfaction note for issuance of the notice u/s 153C of the Act was recorded by the AO of the assessee on 17.06.2021. 2.2 Ld. Counsel has submitted that satisfaction note recorded for the purpose of section 153C of the Act, is done after the delay of unreasonable period of more than 17 months from the date of completion of assessment in the case of the searched person, Sh. Paras Mai Lodha. The satisfaction was recorded for the AYs 2011-12 to 2017-18 by calculating the six assessment years from the date of search i.e., 28.06.2016, rather than from the date of handing over of the seized documents to the AO of the assessee on 02.03.2021, which would have covered the AYs 2015-16 to 2020-21. 2.3 Notice u/s 153C of the Act for the impugned assessment year was issued to the assessee on 17.06.2021 against which the return of income was filed by the assessee on 15.07.2021 declaring the same income as was declared in the original return of income. Thereafter, notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized data showing undisclosed income of the assessee; vi. any other corroborative material in the possession of the AO relating to such impugned transactions. 4. Ld. DR has however relied the orders of ld. Tax authorities. 5. In this regard, we find substance in the contention of ld. Counsel, that Section 153C of the Act, mandates that for initiating the valid proceedings u/s 153C of the Act, recording of clear and positive satisfaction by the Assessing Officer of the searched person that any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to or documents or books of account seized or requisitioned pertains to or any information contained therein relates to a person other than the searched person, is the sine qua non. Further, once the Assessing Officer of the searched person is so satisfied, he is required to transfer the assets or documents, which he believes belong to/pertain to/relate to the other person, to the Assessing Officer having jurisdiction over that other person. Thereafter, the Assessing Officer of the other person after receiving the books/documents/assets has to apply his mind as to whether the assets, books, and docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the third person. The material itself should not be vague, indefinite, distinct or remote. If there is no rational intangible nexus between the material and the satisfaction that a third person has undisclosed income , the conclusion would not deserve acceptance. In such a case the satisfaction is vitiated. Relevant paras of the aforesaid decision are reproduced below: 21. The word 'satisfaction' has not been defined in the Act. The 'satisfaction' by its very nature must precede before the papers/documents are sent by the Assessing Officer of the person searched to the Assessing Officer of the third person. Mere use or mention of the word 'satisfaction' in the order/note will not meet the requirement of concept of satisfaction as used in section 158BD. The satisfaction has to be in writing and can be gathered from the assessment order, if it is so mentioned/recorded, or from any other order, note or record maintained by the Assessing Officer of the person searched. The word satisfaction refers to the state of mind of the Assessing Officer of the person searched, which gets reflected in a tangible shape/form when it is reduced into writing. It is the conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f there is no rational or intangible nexus between the material and the satisfaction that a third person has 'undisclosed income', the conclusion would not deserve acceptation. Then the satisfaction is vitiated. It is to this limited extent that the satisfaction can be gone into and examined. The satisfaction though subjective, must meet the aforesaid criteria. 7. Attention was also invited to the decision of the Hon ble Supreme Court in the case of CIT Vs. Singhad Technical Education Society [2017] 397 ITR 344 (SC) which held that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and the documents which were seized must establish co-relation, document-wise, with the Assessment Years which were sought to be reopened u/s 153C of the Act. Relevant paras of the decision are reproduced as under: 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed. Section 153C neither mandates nor envisages a mechanical exercise of power. It was also held that it is only once Assessing Officer of non-searched entity is satisfied that material coming into its possession is likely to have a bearing on determination of total income that a notice under section 153C would be issued and abatement would thus be a necessary corollary of that notice. Relevant paras of the decision are reproduced hereinunder: 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six A Ys' immediately preceding the AY pertaining to the search year or for the relevant assessment year . 51. Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the relevant assessment year . 64. In our considered view, abatement of the six AYs' or the relevant assessment year'' under Section 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a document belonging to the Assessee, which has no bearing on the assessments of the Assessee for the years preceding the search, was seized from the possession of the searched persons 38. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act. (ii) Hon ble High Court of Delhi in case of Index Securities Pvt. Ltd. [2017] (86 taxmann.com 84) [04.09.2017] [Paras 31 32]: 31. As regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the AYs whose assessments are sought to be reopened, the decision of the Supreme Court in Sinhgad Technical Education Society (supra) settles the issue and holds this to be an essential requirement. The decisions of this Court in RRJ Securities and ARN Infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed up for scrutiny and finalised by an assessment order under Section 143 (3) of the Act. The payments of commission to RGEPL to the tune of Rs. 4.95 crores as reflected in the ledger account was already disclosed in the Petitioner's accounts which were examined while finalising the regular assessment. Therefore, the ledger account could not have led the AO to be satisfied that any income had escaped assessment for the AY 2010-11 19. The net result is that neither of the documents mentioned in the Satisfaction Note could have formed a valid basis for the AG to initiate proceedings against the Petitioner under Section 153 C of the Act for AY 2010-11 or any of the other years as proposed. (iv) Hon ble High Court of Delhi in case of Refam Management Services Pvt. Ltd. [2016] 386 ITR 693 (Delhi): It is apparent from the above that the only document seized during the search in question was a cheque book pertaining to the Assessee which reflected issue of cheques during the period August 2008 to October 2008, relevant to the AY 2009-10. The facts and the questions of law that arise in these appeals are similar to the facts and the controversy involved in RRJ Securities Ltd. (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on notes before us that none of the alleged incriminating documents has been examined or the contents of these documents analysed in a manner to show that how these alleged documents have any bearing on the determination of total income of the assessee for a particular year for which the reassessment was initiated by issuance of notice u/s 153C r.w.s. 153A of the Act. It will be beneficial here to reproduce the concluding part of the satisfaction note for issue of notice u/s 153C of the Act recorded by the AO of the assessee:- On making further enquiry on ITD/e-filing portal, it is also noticed that the assessee filed ITR for A.Y. 2011-12 to 2017-18 which does not commensurate with the transactions entered into the assessee. Therefore, the transactions need to be verified. After examining the documents and perusing the ITR of the assessee, I am satisfied within the meaning of section 153C r.w.s. 153A and 158BD of the Act that the documents have bearing on the determination of total income of Sh. Rajiv Aggarwal (PAN: AAFPA3687G) for A.Y. 2011-12 to 2017-18. Hence, notices u/s 153C r.w.s. 153A is being issued to the assessee for A.Y. 2011-12 to 2017-18. 12. In the case of Canyon Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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