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2015 (3) TMI 607 - ITAT DELHI

2015 (3) TMI 607 - ITAT DELHI - TMI - Validity of the initiation of proceedings u/s 153C - whether in absence of any incriminating seized document in the case of respondents, assessment framed u/s. 153C of the I.T Act for the year under consideration, is time barred, bad in law and deserve to be quashed? - Held that:- Since the facts of the present case are identical to the facts involved in the case of M/s Tanvir Collections Pvt. Ltd. Vs ACIT wherin [2015 (3) TMI 345 - ITAT DELHI] wherein held .....

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: ITA No. 4799/Del/2014, CO No. 370/Del/2014, CO No. 371/Del/2014, CO No. 372/Del/2014, CO No. 373/Del/2014, CO No. 374/Del/2014,ITA No. 4870/Del/2014 - Dated:- 5-3-2015 - Sh. N. K. Saini And Sh. C. M. Garg JJ. For the Appellant : Sh. Kapil Goel, Adv. For the Respondent : Smt. A. Misra, CIT DR ORDER Per Bench: The appeals by the Department and the Cross-objections by the assessee are directed against the order dated 16.6.2014 for the assessment year 2003-04, separate orders each dated 17.6.2014 .....

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challenged the validity of the initiation of proceedings u/s 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act). 3. First we will deal with the Cross Objection of the assessee in CO No. 370/Del/2014. Following grounds have been raised in this appeal: 1. (a). That the Ld. AO was not justified to assume the jurisdiction u/s. 153C of the I. T. Act in this case since the proceedings were beyond the period of six years prior to the date of recording of satisfaction u/s. 153C of the .....

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ssessment, the assessment framed u/s. 153C of the I. T. Act is time barred, bad in law and deserves to be quashed. 3. That the Ld. AO was not justified to ignore the fact that the assessment proceedings for the year under appeal were not pending on the date of recording of satisfaction u/s 153C of the I. T. Act and accordingly these proceedings did not abate in proceedings u/s 153C of the I. T. Act and the assessment being time barred, bad in law deserves to be quashed. 4. That the Ld. AO was no .....

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0.12.2010 being the fag end of the time- barring period upto 31.12.2010 without any reasonable cause. (b) That the Ld. AO was not justified to frame the assessment without issue of statutory notice u/s 143(2) of the I. T. Act and the assessment being against provisions of law may kindly be quashed. (c) That the Ld. AO was not justified to ignore the procedure to be followed for affixture of notice and the assessment framed by way of illegal affixture of notice u/s 142(1) of the I. T. Act may kin .....

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document against the business results for the year. 7. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT (A)-II, has failed to appreciate that the Ld. AO was not justified to ignore the submissions of the respondents that assessment u/s. 153C of the I.T Act be restricted to assessment in respect of seized documents of incriminating nature in the case of the respondents for the year under consideration and in absence of any incriminating seized document in the .....

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the Ld. CIT (A)-II, still relying on these books/book results for the purpose of calculating the peak from the entries in the cash book and for bank book of the respondents, amounting ₹ 7,97,069/- for the relevant year under consideration. A) That on the facts and on the circumstances of the case and the provisions of law, the Ld. CIT (A)-II, has erred in sustaining the addition of ₹ 7,97,069/- as unexplained Investment/Expenditure, ignoring the fact that the same are duly reflected .....

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he preceding years. D) That the Ld. CIT (A)-II, did not give sufficient opportunity of being heard to the respondents. 10. That the Ld. CIT (A)-II, has erred in ignoring the remand report, explanation given, evidences, additional evidences and material placed and available on record. The same has not been properly considered and judicially interpreted and the same do not justify the additions made. The additions have been sustained with preset mind of the Ld. CIT (A)- II and her order is based o .....

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ted in the law. 13. That the respondents crave the right to add, amend, append, delete any or all grounds of appeal. 4. From the above grounds it would be clear that the assessee mainly challenged validity of the assessment order passed u/s 153C of the I.T. Act 1961 (hereinafter referred to as the Act) on account of jurisdiction. The facts related to this issue in brief are that a search operation was conducted on 20.10.2008 on Sh. B. K. Dhingra Smt. Poonam Dhingra, M/s Madhusudan Buildcon Pvt. .....

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o HUF in existence as there is no male member in the family. However, the assessment was framed u/s 153C/144 of the Act by the AO at an income of ₹ 1,04,98,770/-. 5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the assumption of jurisdiction u/s 153C of the Act on the plea that it is a time-barred, the assessment proceedings for the year under consideration were not pending on the date of recording of satisfaction and hence it did not abate for the purpo .....

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ssessee and there is no condition of satisfaction on the existence of incriminating documents for assumption of jurisdiction u/s 153C of the Act. However, on quantum addition, the ld. CIT(A) allowed part relief to the assessee. 6. Now the department is in appeal against the relief allowed to the assessee and the assessee had filed Cross Objection against the action of the ld. CIT(A) in confirming the addition made by the AO in part and justifying the action of the AO in initiating the proceeding .....

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dings have been given in paras 10 & 11 which read as under: 10. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the adjudication by the ITAT Delhi Bench H , New Delhi in the case of M/s Tanvir Collections Pvt. Ltd., Indira Park, Palam Colony, New Delhi Vs ACIT, CC-21, New Delhi in ITA No. 2421/Del/2014 (supra), in the said case also the pr .....

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anvir Collections Pvt. Ltd. In the said case the issue has been decided in favour of the assessee and the relevant discussion and findings have been given in paras 12 to 27 of the order dated 16.01.2015 which are reproduced as under: 12. Let us examine the facts of the instant case more elaborately. It is seen that some satisfaction was recorded, a copy of which is available on page 4 of the paper book, as under :- Satisfaction Note for issuing Notice u/s 153C of the I.T. Act, 1961 in the case o .....

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zed by Party R-2, are found to belong to M/s Tanveer Collection Pvt. Ltd., RZ-126, West Sagar Pur, Shankar park, New Delhi. I have examined the above mentioned documents/papers and provision of section 153C is invokeable in this case. As the undersigned is also the jurisdictional AO of M/s Tanveer Collection Pvt. Ltd., RZ-126, West Sagar Pur, Shankar Park, New Delhi. This satisfaction note is recorded and is placed in the file before issuing notice u/s 153C. ACIT, Central Circle - 17, New Delhi .....

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ts of the above satisfaction note leave nothing to doubt that it was recorded by the AO of the assessee before taking up the assessment u/s 153C of the Act pursuant to the search conducted on Shri B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. Pages 5-7 of the paper book are the copies of the reply furnished by the Dy. Commissioner of Income-tax, Central Circle-17, New Delhi to Shri B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd., under the provis .....

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es given by the Department to the persons searched, it is manifest that there is no satisfaction note available/recorded in respect of other entities . On a conjoint reading of the Satisfaction note and replies given by the Department to the persons searched under the RTI Act, it clearly emerges that no satisfaction was recorded by the AO in the cases of the persons searched u/s 132(1) of the Act (i.e. Shri B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd.) that some books .....

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recording satisfaction by the AO, which condition in her opinion stood satisfied, by virtue of it having been recorded by the common AO. 16. In our considered opinion, this contention advanced on behalf of the Revenue is devoid of merit. We fail to comprehend as to how the requirement of recording satisfaction by the AO of the person searched provided by the statute can be substituted with anything else. There is an underlying rationale in providing for recording of such satisfaction by the AO o .....

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h of these documents belong to the person searched and to the others and thus handed over to the concerned AOs of the person searched and others for making assessment. As it is only the AO of the person searched who can reach a conclusion that some of the documents etc. do not belong to the person searched but to some other person, the legislature has provided for recording of such satisfaction by the AO of the person searched. It is not permissible under the law to require the AO of the other p .....

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sfaction in the case of the persons searched is concerned. What is relevant for this purpose is not the identity of the person assessing but his position and the capacity. When the law requires the AO of the person searched to record the necessary satisfaction, it is the AO having jurisdiction over the person searched who is obliged to record such satisfaction in the capacity of that AO and that too in the case of the person searched. The mere fact that the AO of the person searched and the asse .....

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ction of the AO of the other person. This contention also fails. 18. At this stage, it is relevant to note that the legislature has substituted the latter part of section 153C(1) by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014. The hitherto part of subsection (1) : and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person ………referred to in sub-section (1) of section 153A. has been substitut .....

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ubstitution has the effect of now making it mandatory for the AO of the other person also to record satisfaction that the books of account or documents, etc., have a bearing on the determination of the total income of such other person before embarking upon the exercise of his assessment or reassessment. Therefore, now under the law, w.e.f. 1.10.2014 it has become obligatory not only for the AO of the person searched to record satisfaction before handing over books of account or documents, etc., .....

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AO of the other person to start with the proceedings for making assessment or reassessment. 20. The ld. DR contended that recording of satisfaction by the AO of the assessee at the most can be treated as a technical mistake and hence should not eclipse the assessment. Relying on certain judgments, the ld. DR submitted that the technicalities cannot be allowed to prevail in the course of indulgence of justice. 21. We agree in principle that technicalities cannot come in the way of dispensation o .....

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ssed by the Delhi Benches of the Tribunal, namely, ACIT vs. Inlay Marketing Pvt. Ltd. (ITA No.4200/Del/2012), etc. and DCIT vs. Aakash Arogya Mandir Pvt. Ltd. (ITA No.5437/Del/2013), etc., in which the notices and the consequential assessments u/s 153C, under identical circumstances, have been quashed. The ld. DR contended that the above referred two Tribunal orders are per incurium and should not be followed. The main reason for declaring the tribunal orders as per incurium was the nonconsidera .....

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h belong to a person other than the searched person and there is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must conclusively reflect or disclose any undisclosed income. We find that there is no such controversy before us as was there before the Hon ble High Court. It is not the case of the assessee before us in this ground that the documents etc. found from the p .....

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t reproduction as under: - It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in Section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person .....

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e basis. 25. Even otherwise, the judicial discipline requires a subsequent bench to the follow an earlier order of a coordinate bench on the point. It is only if the subsequent bench feels itself unable to concur with the view taken earlier that it is required to refer the case for consideration by a special bench. In our considered opinion, these two orders of the co-ordinate benches are perfectly in accordance with law. 26. Coming back to facts of the instant case, it is palpable that the AO o .....

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ment on the assessee as void ab initio. 27. The reliance of the ld. DR on some decisions on other legal issues or merits is of no consequence in view of the lack of jurisdiction of the AO to proceed with the assessments u/s 153C of the Act. In view of our decision on the first legal issue, there is no need to espouse the other grounds taken by the assessee dealing with other legal issues or merits. 11. Since the facts of the present case are identical to the facts involved in the case of M/s Tan .....

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