TMI Blog2018 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... e. No infirmity in the order of the Ld. CIT(A) in holding that initiation of proceedings under section 153C of the I.T. Act are improper and bad in law. No interference is called for. Ground Nos. 1 and 2 of the appeal of the Revenue are accordingly dismissed. - ITA. No. 6238/Del./2014 - - - Dated:- 27-6-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L. P. Sahu, Accountant Member For Revenue : Shri Vijay Verma, CIT-D.R. For Assessee : Shri Ved Jain, Advocate ORDER PER BHAVNESH SAINI, J.M. This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-XXXII, New Delhi, dated 20.08.2014, for the A.Y. 2008-2009, on the following grounds: 1. The Commissioner of Income Tax (Appeals) erred in law and on facts in upholding the ground of the assessee that provisions of section 153C of the Act could not be applied in the case and initiation of proceedings u/s 153C was not proper and bad in law. 2. The Commissioner of Income Tax (Appeals) erred in law and on facts in holding that for initiating valid jurisdiction u/s 153C, even if the AO of the searched person and the AO of such other person is same, it is mandatory that he has to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search, the Assessing Officer recorded a satisfaction note on 27.02.2013 and issued and served upon the assessee a notice under section 153C of the I.T. Act, 1961. In response to the same, the assessee filed a letter stating that the return filed under section 139(1) may be treated as return filed in response to notice under section 153C of the I.T. Act, 1961. It was claimed, it is filed in protest and objected to initiation of proceedings us 153C of the I.T. Act. However, the contention of the assessee was rejected. The A.O. accordingly completed the assessment under section 143(3) r.w.s.153C of the I.T. Act vide Order dated 28.03.2013 at a total income of ₹ 48 lakhs as against NIL income declared by the assessee-company. The addition was made at ₹ 48 lakhs under section 68 of the I.T. Act on account of unaccounted income which represented the amounts credited in the books of account of assessee as share application money received during the assessment year under consideration. 3. The assessee-company challenged the validity of the proceedings initiated under section 153C of the I.T. Act as well as the addition on merit before Ld. CIT(A). The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person searched is present in both the Sections. To this extent, decision of Hon ble Supreme Court in the case of Manish Maheshwari vs. ACIT and another (supra), is applicable while interpreting the provisions of Section 153C. The Ld. CIT(A) called for the assessment record of the assessee-company and found that the AO recorded the satisfaction note in the file of the assessee-company which is reproduced as under: Satisfaction u/s 153C of the Income Tax Act. 1961 in the case M/s Victory Accommodations Pvt. Ltd. PAN- AACCV3923C 208. Gupta Tower. Azadpur Commercial Complex. Azadpur. Delhi- 11 0033. During the course of assessment proceedings u/s 153A in the case of Sh. Pramod Gael, it is noticed that search and seizure operation u/s 132 was undertaken on 14.09.2010 in the case of Sh. Pramod Goel, Smt. Savita Goel, and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Accommodations Pvt. Ltd. were found and seized from the above premises. Page no. 102 and 103 of Annexure A-l of Party V-2 is a copy of the Balance Sheet, Profit loss account, pertaining to M/s Victory Accommodations Pvt. Ltd. for the fin. year ending 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act. Therefore, satisfaction note recorded in the case of the assessee i.e., other person is not valid under section 153C of the I.T. Act. Ld. CIT(A) also noted that the balance-sheet dated 31.03.2010 is not incriminating in nature. Ld. CIT(A) relied upon the order of ITAT in the case of CIT vs. Sinhgad Technical Education Society in ITA.No.114 to 117/PN/2010 in support of his findings that since no satisfaction note have been recorded in the case of the person searched as required under section 153C of the I.T. Act, therefore, proceedings under section 153C are not proper and bad in law. This issue was decided in favour of assessee. 3.3. The Ld. CIT(A) as regards giving opportunity to the assessee-company held that no sufficient time was given to the assessee-company to represent before A.O. Therefore, he found merit in the grievance of the assessee-company that no proper opportunity was provided to the assessee-company. 3.4. As regards the addition on merit of ₹ 48 lakhs on account of unexplained share application money, Ld. CIT(A) noted that survey was conducted under section 133A at the business premises of assessee-company at Azadpur, in which, some documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Ganapati Fincap Services Pvt. Ltd., vs. CIT dated 25.05.2017 was referred in which it was held that (iv) where the A.O. of the searched person and the other person is the same, such a satisfaction note qua the other person has to be recorded by the A.O. of the searched person prior to the initiation of the proceedings against the other person. This is a sine qua non for triggering the proceedings against the other person under section 153C of the Act. (v) There do not have to be two separate satisfaction notes prepared by the A.O. of the searched person even where he is also the A.O. of the other person. In such event, the A.O. need make only one satisfaction note. That satisfaction note is qua the other person. Further, it is sufficient that such satisfaction note is placed in the file of the other person by the A.O. in his capacity as the A.O. of such other person. 4.1. The Ld. D.R. also relied upon the decision of Hon ble Supreme Court in the case of CIT vs. S. Ajit Kumar in Civil Appeal No.10164 of 2010 dated 02.05.2018 in which search was conducted by the Officer of the Income Tax Department in the premises of the assessee and on the same date, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been recorded in the case of the person searched i.e., Shri Pramod Goel. Further, the balance sheet found during the course of search ending 31.03.2010 did not relate to assessment year under appeal i.e., 2008-2009. Further, the balance-sheet is in public domain and contains list of shareholders which could not be considered as incriminating material. He has submitted that identical issue have been decided by ITAT, Delhi Bench in case of assessee in favour of assessee-company [Victory Accommodation Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 09, New Delhi] reported in 2017-(5)-TMI-1050-ITAT-Delhi for A.Ys. 2009-2010 and 2010-2011. He has relied upon decision of Hon ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) and decision of Hon ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Index Securities Private Limited, Vidya Shankar Investment Private Limited 2017-(9)-TMI-585 (Del.). Learned Counsel for the Assessee submitted that since no satisfaction note has been recorded in the case of the person searched and no incriminating material was found during the course of search against the assessee-company, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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. 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 had been requisitioned under Section 132A of the Act. 6.1. It was further held by the Hon ble Supreme Court in para-16 in the case of Manish Maheshwari (supra) as under : Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 06.02.1996 satisfies the requirements of Section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO 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. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court. 6.4. The Hon ble Bombay High Court in the case of CIT vs. Singhad Technical Education Society (2015) 378 ITR 84 (Bom.) held as under : In terms of section 153C of the Income-tax Act, 1961, the Assessing Officer should be satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A of the Act and he can hand over the seized documents to the Assessing Officer having jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed. (ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment years the assessment was under section 153C of the Act. The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The objection pertaining to the four assessment years in question did not relate to the other tax assessment years, namely, 2004-05 and 2005-06. Nor did this decision have a bearing in respect of assessment for assessment year 1999-2000 or assessment year 2006-07. The necessary consequence would be that the conclusions of the Assessing Officer in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of sections 11 and 12 would not be affected by this judgment. 6.6. The Hon ble Madras High Court in the case of CIT vs. Late J. Chandrasekhar (HUF) (2011) 338 ITR 61 (Mad.) held as under : On the search conducted in the case of A and group on November 25, 2003, material pertainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en complied with in this case before invoking jurisdiction under section 153C. It is added further here that the Assessing Officer has not referred to any seized document or material in the assessment orders on the basis of which, additions on merit have been made. Therefore, the conditions of section 153C as noted above are also not satisfied in this case. Therefore, there is no infirmity in the order of the Commissioner (Appeals) in quashing the proceedings under section 153C. 6.8. The ITAT, Delhi Bench, in the case of assessee for A.Ys. 2009-2010 and 2010-2011 in the matter of Victory Accommodation Pvt. Ltd., vs. ACIT, Central Circle-09, New Delhi 2017 (5) TMI 1050-ITAT-Delhi (supra), on identical facts held as under : Assessment framed u/s 153C - absence of satisfaction note - Held that:- From the plain reading of the Circular No. 24/2015 dated 31.12.2015 issued by the Central Board of Direct Taxes, it is crystal clear that even if the AO of the searched person and of the other person is one and the same then he is required to record his satisfaction in the case of searched person. In the present case, it is an admitted fact that the AO of the searched per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . who recorded satisfaction in the case of assessee passed assessment order under section 143(3)/153C of the I.T. Act. The Ld. CIT(A) also called for the assessment record of the person searched Shri Pramod Goel and it was found that no such satisfaction have been recorded in the case of the person searched relating to the assessee-company. It is, therefore, clear that no satisfaction note as required by Law have been recorded in the case of the person searched i.e., Shri Pramod Goel so as to initiate proceedings against the assessee-company under section 153C of the I.T. Act. It may also be noted here that initially the A.O. proceeded against the assessee-company under section 153A of the I.T. Act, on the premise that search was conducted against the assessee-company under section 132 of the I.T. Act, therefore, he has issued notice under section 153A of the I.T. Act against the assessee-company. When it was found later on, that no search have been conducted in the case of assessee-company, therefore, notice under section 153A was withdrawn. The A.O. of the assessee later on recorded satisfaction note under section 153C of the I.T. Act, which is not valid in Law. The A.O. of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, would not be significant at this stage in view of the findings given above. The addition, on merit, deleted by Ld. CIT(A) is, left with academic discussion only because the proceeding under section 153C have not been validly initiated against the assessee-company. However, we may note in brief that assessee-company filed all the relevant documents before A.O. to prove the existence of the investor companies, their creditworthiness and genuineness of the transaction, on which, A.O. has not made any enquiry. The A.O. simply relied upon report of the Investigation Wing, Kolkata, which is not relevant to the assessee-company. The A.O. did not make any independent enquiry on the documents furnished by the assessee-company. Therefore, Ld. CIT(A), correctly deleted the addition on merit. Since, we have confirmed the order of the Ld. CIT(A) with regard to Ground Nos. 1 and 2 that initiation of proceedings under section 153C is illegal and bad in law, therefore, no further findings are given on merits. In view of the above discussion, the Departmental Appeal stands dismissed. 9. In the result, appeal of the Department is dismissed. Order pronounced in the open Court. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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