9911796707
TMI Blog2025 (2) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the Apex Court.
Therefore as per the CBDT Circular dated 31.12.2015 of Circular No.24/2015 in fact all these appeals should have been withdrawn by the Revenue as the circular issued by CBDT binding the Revenue.
At no stretch of imagination, it can be stated that, even without a separate satisfaction note pertains to the other person by the Assessing Officer of the searched person such a proceedings under Section 153C can be invoked and completed. Hence, the view taken initially by CIT (Appeals) confirmed and concurred with the same by the ITAT in the order impugned are all in consonance with the settled legal proposition. Therefore no hesitation to hold that, absolutely there has been no infirmity attached with the orders passed by the ITAT which is impugned herein. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favour of the assessee by accepting the ground raised by the assessee as an additional ground that, for want of satisfaction report to be recorded by the Assessing Authority of the searched person even in respect of the other person, the proceedings u/s 153C gets vitiated. (ix) Along with these Appeals, the Appeals against the assessment made pursuant to the revision order under Section 263 of the Act also were disposed. Therefore totally 14 appeals were disposed by the common order of the CIT (Appeals) dated 20.12.2013. Against the said 20.12.2013 order of the CIT (Appeals) as the Revenue lost in all those appeals on the sole ground of non recording of the satisfaction report by the Assessing Authority of the searched person, insofar as the other person who is the assessee herein, the Revenue preferred 14 Appeals before the ITAT. (x) All those 14 Appeals were disposed by the common order, dated 28.10.2013 by the ITAT in favour of the assessee and against the Revenue. (xi) In fact, the assessee had also filed cross-objections which were also disposed by the ITAT along with the Revenue's Appeal, on 28.10.2013. Since number of appeals were disposed by the order, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations of the employees to the banks constituted prima facie evidence for the actual salary payments and the burden of proof to show that such expenditure was not actually incurred was on the assessee?" 4. To have an easy understanding, the following tables would explain the number of Tax Case (Appeals) covered in this batch of cases relates to the Assessment Years arising out of ITA Nos. disposed by the ITAT, Chennai. A. Batch- I - Against common order of ITAT dated 26.02.2010 S.No TCA No. of 2010 Against ITA No. of 2008 A.Y Issue 1 1005 577 1999-00 Unexplained expenditure u/s. 69C of salary payments. 2 1006 910 2000-01 3 1007 911 2001-02 4 1008 912 2002-03 5 1018 913 2003-04 6 1019 914 2004-05 7 1020 915 2005-06 B. Batch-II - Against common order of ITAT, dated 28.10.2023 TCA 1066, 1067, 1068, 1069/2015 relating to A.Ys : 1999-00 & 2000-01 already withdrawn Sl.No TAC No. of 2015 Against ITA No. of 2013 A.Y Remarks Issues 1 1070 997 2001-02 2nd round of litigation w.r.t. issues remanded by ITAT to AO in ITA Nos.910-915/2008. Whether the ITAT is right in holding that there is no 'satisfaction note" placed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT (Appeals) and therefore such an additional ground was also taken into consideration for decision. 7. The CIT (Appeals) since had passed a detailed order, whereby the CIT (Appeals) had satisfied that there has been no satisfactory note specifically recorded by the Assessing Officer of the searched person and therefore on that ground itself, it was held by the CIT (Appeals) that the Assessing Authority has not got the jurisdiction to proceed against the assessee, who is the other person, by initiating action under Section 153C of the Act. 8. That was the only reason based on which, the CIT (Appeals) decided the cases in favour of the assessee and against the Revenue. Aggrieved over the same, since Appeals were filed in I.T.A.Nos.993 to 1005 of 2013 etc., batch by the Revenue before the ITAT, all those ITA's were heard and disposed by the common order of the ITAT dated 28.10.2023, which is impugned in all these Appeals of the year 2015. 9. Pursuant to the direction given by this Court by order, dated 24.09.2024, when the cases again came up for hearing on 23.10.2024, the learned Senior Standing counsel appearing for the Revenue had produced the relevant papers arising ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the files could not be produced as it is to be traced. 14. In this context, it is to be noted that, assuming that in all the six years, a similar note has been prepared by the Assessing Authority of the searched person, such a note could be made useful for the purpose of initiating action against the searched person under Section 153A of the Act. 15. However, here the question is, the Assessee being the category of other person and action had been initiated against the assessee only under Section 153C of the Act, whether a satisfactory note to that effect has been recorded by the Assessing Officer or Authority insofar as the other person also in the file of the such searched person? without which, whether the Assessing Authority can proceed against the assessee being the other person under Section 153C of the Act is the only question to be answered in this batch of cases. 16. In this context, Dr.S.Muralidhar, learned Senior counsel appearing for the respondent assessee by relying upon various decisions of the Hon'ble Supreme Court and other High Courts have pointed out that, even if there is one Assessing Authority for both the searched person and other person, in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d based on the law settled by the Courts, infact the CBDT issued a circular in Circular No.24/2015, whereby it has been made clear that, even the pending litigation with regard to recording of satisfaction note under Section 158BD/Section 153C should be withdrawn / not pressed if it does not meet the guidelines laid by the Apex Court. Therefore the learned Senior counsel would contend that, in fact the Revenue should have withdrawn the cases as per the decision of the CBDT circular which in fact was issued by the CBDT pursuant to the law settled by the Hon'ble Supreme Court. Therefore absolutely there has been no scope for entertaining even these Appeals at this juncture, therefore all these appeals filed by the Revenue are liable to be dismissed and the question of law raised in this batch of appeals are to be answered in favour of the assessee and against the Revenue, he contended. 21. On the contrary, Mr.Karthik Ranganathan, learned Senior Standing counsel appearing for the Revenue has argued that, when a search has been made under Section 132 of the Act, if incriminating documents and materials are seized from the premises of the searched person and some of such materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that there is no specific requirement in Section 153C of Income Tax Act, 1961, that reasons / satisfaction note has to be recorded by the Assessing Officer before initiating proceedings under Section 153C. When the provisions were newly introduced in 2003, the CBDT issued a Circular explaining the new provisions. In this Circular No.7, there is no such reference to recording of satisfaction. Normally recording of satisfaction is prescribed in the section itself whenever the same is warranted. In the absence of specific provision, recording of satisfaction is not mandatory, however the Assessing Officer has recorded the reasons for initiation of proceedings under Section 153C before issue of notice under Section 153C. 28. These grounds raised before the ITAT was answered by the ITAT in the impugned order by following the earlier order passed in this regard in para 9 of the ITAT's order, where the ITAT has held that, so far as jurisdiction under Section 153C is concerned, the CIT (Appeals) by following various decisions including Tribunal's decision in assessee's group cases has held that, the Assessing Officer has not assumed valid jurisdiction under Section 153C because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted under Section 132, or documents or assets have been requisitioned under Section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefor are : (i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person. 8. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened." 32. The Hon'ble Apex Court has held in Manish Maheshwari that, the condition precedent for invoking the provisions of Section 158BD thus are required to be satisfied before the provisions of Chapter XIV-B are applied in relation to any person other than the person whose premises had been searched under Section 132 or whose documents and other assets had been requisitioned under Section 132A. The Supreme Court has also held in that case that, a taxing statute as is well known must be construed strictly by relying upon the Judgment of the Supreme Court in Sneh Enterprises v. Commissioner of Customs reported in (2006) 7 SCC 714. It was further held by the Supreme Court that, law in this regard is clear and explicit. The notice in question issued under Section 158BD did not record any satisfaction on the part of the Assessing Officer. The documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in this matter. 33. Therefore what has been held in the said case in Manish Maheshwari (cited supra) is not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, if the Assessing Authority are two different persons, however in case if the Assessing Authority is one and the same for both searched person and other person, such a requirement may not be required at all. 38. However, this position has been made clear after several Judgments of the Apex Court by the CBDT in its Circular No.24/2015 dated 31.12.2015. For a easy reference, verbatim, the entirety of the Circular is reproduced herein : "Section 153C, Read with Section 158BD, of the Income-Tax Act, 1961 - Search and Seizure - Assessment of Income in case of other person - Recording of Satisfaction Note under Section 158BD/153C of Said Act Circular No.24/2015 [F.No.279/Misc./140/2015/ITJ] Dated 31.12.2015. The issue of recording satisfaction for the purposes of section 158BD/153C has been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s. Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014, dated 12.03.2014 [2014] 43 taxmann.com 446 (SC) (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording of satisfaction note may be brought to the notice of all for strict compliance and the Circular has further made it clear that, it is clarified that even if the Assessing Officer of the searched person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 42. Though circular issued by the CBDT is not binding on the Courts, however it is binding on the Officers, therefore in fact these Appeals which are revolving with the one and only issue of satisfactory note to be recorded in this regard before initiating action under Section 153C and the old analogous provision is Section 158BD, are liable to be withdrawn by the Revenue itself. However for the reasons best known to them, they pressed upon the matters and therefore hearing went on and are being disposed by deciding the issue once again in this order. 43. Almost similar view has been taken by the Delhi High Court in Pepsi Foods (P) Ltd., v. Assistant Commissioner of Income-tax reported in (2014) 52 taxmann.com 220 (Delhi). This has been confirmed by the Hon'ble Supreme Court in the matter of Assistant Commissioner of Income-tax v. Pepsin Foods (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of CIT vs. Calcutta Knitwears, (2014) 6 SCC 444 has held that the recording of satisfaction note is prerequisite and the same must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person. Several Hon'ble High Courts have held that the provisions of Section 153C of the Act are pari materia to the provisions of Section 158BD of the Act, which was the subject matter of interpretation before the Hon'ble Supreme in the case of CIT vs. Calcutta Knitwears (supra). The aforesaid reliance are squarely applicable to the present case on hand in the given facts and circumstances of the case wherein certain incriminating materials were found during the course of search against the respondent / Assessee as alleged. ... ... ... 60.In the facts of the present case, it is an admitted position that the satisfaction note was not recorded by the Assessing Officer of the searched person and thus, the Income Tax Appellate Tribunal passed an order quashing the assessment on account of lack of jurisdiction to proceed against the respondent / assessee under Section 153-C of the Act. The said order does not suffer from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shwari (supra) are applicable to the given facts and circumstances of the case. These judgments were followed by the Income Tax Appellate Tribunal to hold that the notice issued by the AO under Section 153-C of the IT Act deserves to be quashed and accordingly had proceeded to quash the assessment orders framed by the Assessing Officer under Section 153-C read with Section 143(3) of the Income Tax Act. Accordingly, the additional ground was allowed in all the seven years. The said finding has been challenged in this appeal by urging various grounds by the appellant / Revenue. But the grounds proposed for framing substantial questions of law and referred to certain provisions of the IT Act which has been extracted supra, but the grounds urged for preferring an appeal by the appellant / Revenue do not have any substance even for contending that it requires for dwelling in detail to refer to each one of the substantial questions of law. The judgment rendered by the Tribunal does not suffer from any infirmity or absurdity to call for interference the said judgment and further no warranting circumstances arise. Consequently, these appeals deserve to be rejected." 46. However none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer which is form part of the file had been produced before this Court for perusal and remaining years, according to the affidavit filed by the Officer concerned, those files are not available and it was also stated during the argument by the learned Senior Standing counsel appearing for the Revenue that similar note must have been prepared in other Assessment Years also. 49. Be that as it may, the language used in the note as stated supra has made very clear that the satisfaction note has been recorded by the Assessing Officer only in respect of the searched person to initiate proceedings under Section 153A alone and in the complete absence of any satisfaction note recorded by the Assessing Officer of the searched person pertains to the other person who is the assessee herein, the said Judgment cited by the learned Senior Standing counsel appearing for the Revenue in Super Malls (P) Ltd., case also would not apply to the present case, because in the said case, since the Assessing Officer for both searched person and other person is one and the same, he was satisfied that the documents seized from searched person belong to assessee which was specifically mentioned in satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
