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2015 (3) TMI 800 - ITAT DELHI

2015 (3) TMI 800 - ITAT DELHI - TMI - Validity of proceeding u/s 153C - Held that:- The absence of a satisfaction recorded by the Assessing Officer of the searched persons, the Assessment framed u/s 153C of the Act by the Assessing Officer cannot be sustained, as such same is bad in law.

It is observed that the Revenue has not placed any material on record in respect of evidence qua the present assessee collected during the search operation. Moreover, the satisfaction as envisaged und .....

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on, that the proceedings initiated under Section 153C is bad in law is allowed. The assessment framed u/s 153C read with section 143(3) pertaining to the Assessment Year 2003-04 is quashed. - Decided in favour of assessee. - I.T.A. Nos. 2358, 2359, 2360, 2361, 2362, 6362/Del/2014, I.T.A. Nos. 3306, 3307, 3308, 3309, 3310/Del/2014 & 08/Del/2015 - Dated:- 13-3-2015 - Shri G. D. Agrawal And Shri Kul Bharat JJ. For the Appellant : Shri Kapil Goel, Adv. For the Respondent : Shri Syd.Nasir Ali, CIT DR .....

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appeals were taken up for hearing together and are being disposed of by way of a consolidated order for the sake of convenience. 2. At the outset, Ld. Counsel for the assessee submitted that the assessment framed by the A.O. u/s 153C read with Section 143(3) of the I. T. Act, 1961, is a nullity in the eyes of law for want of satisfaction recorded by the A.O. of the searched party. He submitted that from the information sought under Right to Information Act, it is evident that the A.O. of searche .....

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submitted that all these appeals be decided against the Revenue on this ground alone. 3. Since the grounds are identical in all these appeals, of assessee, we take I.T.A. No. 2358/Del/2014 for Assessment Year 2003-04 as a lead case. Since the assessee has raised the question related to jurisdiction of A.O., therefore, we proceed to decide the ground No.3 raised in this appeal which reads as under: 3. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT(A) has f .....

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ve heard the rival contentions, perused the material available on record, gone through the orders of the Authorities below and case laws cited by the Respective Representatives of the parties. We find the opening para of the Assessment order reads as under : Search & seizure action u/s 132 of the I.T. Act was carried out in the cases of Sh. B.K.Dhingra, Smt. Poonam Dhingra & M/s Madhusudan Buildcon Pvt. Ltd. on 20/10/2008 and during the course of search at their residential premises at F .....

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ated 14.09.2010 was issued to the assessee by the ACIT, CC-17, New Delhi requiring the assessee company to file return of income within 15 days of service of the notice. 7.1 From the above it is evident the basis of initiating proceeding u/s 153C is that certain documents belonging to the assessee company were found at the searched premises bearing no. F 6/5 Vasant Vihar, New Delhi in the case of Sh. B.K.Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. belonging to the assessse .....

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t of other entities. 3. In case you intend to file the appeal, you may file the same before the Addl. Commissioner of Income Tax, Central Regnge-2, 3rd Floor, ARA Center, E-2, Jhandewalan, New Delhi within 30 days from receipt of this letter. The above replies supports the contention of Ld. Counsel for the Assessee that no satisfaction was recorded by the AO of the searched party. 7.2. Before adverting to the rival contentions of the parties it would be appropriate to reproduce the relevant prov .....

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er to the Assessing Officer having jurisdiction over such other person 3a[and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years .....

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documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-se .....

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sessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.] 153A. Assessment in case of search or requisition.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after .....

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n were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year .....

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ng to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessm .....

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ion should be recorded. The satisfaction can be inferred by implication, had the intent of legislation been so, the word record as enshrined in Section 148(2) would have been incorporated. Therefore, there is no need of satisfaction note and on the basis of absence of satisfaction note Assessment cannot be annulled. In support of this submission the reliance is placed on the judgment Hon ble Kerala High Court rendered in the case of Dr. K.M. Mehboob Vs. DCIT Anr. (2012) 76 DTR (Ker) 90. Secondly .....

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hould not come in the way of dispensation of justice. It was submitted that non recording of satisfaction is only a technical defect this should not be sole ground for annulling the assessment. It was therefore, contended that the assessment should not be quashed. 9. On the other hand, it is contended by the Assesssee is that issue is no more res-integra and has been decided in favour of the Assessee by the Authoritative Judicial Pronouncement by the Hon ble High Court of Delhi, other High Court .....

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110055 Assessment Years ITA Nos NDOH Vs ACIT, Central Circle -21 Room No. 344, ARA Centre, Jhandewalan Extension, New Delhi - 110055 (Respondent) 2003-2004 to 2008-09 6336/Del/2014 to 6341/Del/2014 (Filed by Assessee on 19.11.2014) Instronics Limited, F-345, Lado Sarai, New Delhi- 110030 2005-2006 to 2008-09, 6553/Del-2014 to 6556/Del-2014, (Filed by Revenue on 29.05.2014) 04.03.2015 Synopsis (Covered Matter) Assessee Company s Cross Appeals inter-alia on legality and validity of proceedings u/ .....

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Horizon Pvt. Ltd. search & seizure took place u/s. 132 on 20.10.2008. The undersigned is the jurisdictional AO of these cases. During the course of search and seizure documents/papers at pages 1 to 38 of Annexure A-87, Annexures A-96, A-97, A-98 and A-99, are found to belong to M/s. Instronics Ltd., 192C, J&K Pocket, Dilshad Garden, New Delhi. I have examined the above mentioned documents/papers and provision of section 153C is invokeable in this case. As the under signed is also the jur .....

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ages 12 to 15 of Paper Book for the AY. 2003-04 to AY. 2008-09). b) On the very next day (01.10.2010) notice u/s 153C is issued; c) Tone and Tenor of Satisfaction note That is there is no remote indication in the given/aforesaid note that same is recorded during the course of assessment of a particular searched person on the contrary, from cursory look it is palpable that same is mere noting by AO of assessee (other person) before issuance of notice u/s 153C. It is supported by i)firstly, Openin .....

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by AO of present assessee and is not the requisite "satisfaction" by any AO of any particular raided party during search assessment u/s 153A. Noticeably aforesaid features clearly establish that there is no valid satisfaction on part of Ld. AO. before issuing notice uls 153C of the Act. On identical facts, Hon'ble Delhi benches of ITAT on three different occasions in cases of Inlay Marketing Pvt. Ltd. (Case Law Paper Book Pages 78 to 128), Akash Arogya Mandir Pvt. Ltd. (Case Law P .....

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SOT 88 was applied in above cases. This order is followed in many other decisions by Hon'ble ITAT. Further it is not known as to why the revenue has not disclosed that at Hon'ble High Court on 05.12.2014 revenue's stay application for DSL ITAT decision has been hitherto jettisoned by Hon'ble Delhi High Court, ITA 583/2013 dated 05.12.2014. Regarding specific satisfaction by AO of raided party and in its absence consequential nullification of proceedings, Hon'ble Delhi High C .....

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t;satisfaction". That is there no clear finding in aforesaid note on i) nature of documents and ii) as to how Ld AO arrived at the satisfaction that same belongs to appellant here which is quite crucial and critical iii) the financial implications of documents on block period. Nothing is comprehensible from the aforesaid note. How can without enumeration of basic documents mere mentioning of Annexure No's can be treated as adequate for arriving at just and valid satisfaction u/s 153C wh .....

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egra Noticeably, there are at least Four High Court Decisions (including two from jurisdictional High Court reported at 367 ITR 673, 367 ITR 112, 270 CTR 467 Pepsi and Pepsico orders (Case Law Paper Book Pages 1 to 16) and other two from Allahabad High Court (Gopi Apartments 366 ITR 411) and Telangana & Andhra Pradesh High Court in Shetty Pharmaceuticals (26.11.2014) ITT A 662 of 2014 and batch) (Case Law Paper Book Pages 31 to 66) where in detailed principles on validity of proceedings U/S .....

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plied by Pune ITAT in Aurangabad resorts reported at 118 ITD 1/111 TTJ 741) that once an authority higher than tribunal has expressed its esteemed views on an issue, normally the decision of higher judicial authority is to be followed, even if higher judicial forum is non jurisdictional High Court (here T & AP High Court in Shetty case and Allahabad High Court in Gopi Apartments). Same view is reiterated in decision of Mumbai bench of ITAT reported at 20 SOT 129. In context of revenue's .....

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ate. Lastly, we humbly draw your honors kind attention to recent constitution bench order of Hon'ble Supreme Court in Vatika case reported at 367 ITR 466 wherein in no unclear words it is categorically held that "Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax" that is where two views are there one which favors the tax payer must be follo .....

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A) as also the ITAT were not justified in dealing with the merits of the case" Note on DELHI HIGH COURT decision in case of SSP Aviation (346 ITR 177) which is relied heavily by revenue at ITAT and CITA. Relevant facts of instant case/documents: i) Our first hand response to Ld. AO. In the month of November, 2010 during assessment proceedings (pages 22 to 28 of Paper Book for the AY. 2003-04 to AY. 2008-09) that seized document are fully disclosed and accounted and nothing is undisclosed as .....

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income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under section 132 of the Act. It is only a first step to the enquiry, which is to follow. The Assessing Officer who has searched the satisfaction that the document relates 'to a person other than the searched person can do nothing except to forward the document to .....

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or the period of six years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position. " Further Supportive case laws where aforesaid decision of Delhi high court in SSP Aviation para 17 is applied: i) In identical fact situation, IN THE INCOME TAX APPELLATE TRIBUNAL DELH .....

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uments is duly accounted for in the books of account. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the Assessing Officer will drop the proceedings initiated under Section 153C" ii) BENCH "A", KOLKATA ,ITAT in Trishul Hi-Tech Industries case order dated 24.09.2014, IT(SS)A Nos. 84-86/KoI/2011 (Refer Case Law Paper Book Pages 197 to 209) has held that "To put it simply this amendment to proviso to section 153C(1) by fi .....

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elonging to the assessee trust have been found during the course of search in the premises of the trustees, therefore, issue of notice u/s. 153C of the Income Tax Act by the AO is a valid notice in view of the decision of Hon ble Delhi High Court in the case of SSP Aviation Ltd. (Supra). However, since all the entries found in those documents have already been reflected in the books of accounts as per the chart furnished by the assessee which have been reproduced at Para 9 of this order and whic .....

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long to the assessee are already reflected in the regular books of account maintained. In this view of the matter and respectfully following the decision of the Hon ble Delhi High Court in the case of SSP Aviation Ltd. (Supra) we hold that the notice issued u/s. 153 is a valid notice. However, since the assessee has satisfactorily explained that entries found in the seized documents are reflected in the regular books of account, further proceedings u/s. 153C will have to be closed and no further .....

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) CIT vs. Anil Kumar Bhatia; 352 ITR 493 (Del) v) Sanjay Agarwal; ITA No. 3184/Del/2013 vi) PACL India Ltd., ITA No. 2637/Del/2010 vii) Kusum Gupta, ITA No. 3312/Del/2009 viii) MGF Automobiles Ltd., ITA No. 4212/Del/2011 ix) Vee Gee Industrial Enterprises, ITA No. 1/Del/2011 x) Asha Kataria, ITA No. 3105-3107/Del/2011 xi) Merigold Merchandise (P). Ltd. ITA No. 2666/Del/2013 xii) Pradeep Kumar, ITA No. 4016/Del/2011 xiii) ACIT vs. Manoj Narain Agarwal; 99 DTR (Del) (Trib.) 279 xiv) Parivar Proper .....

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A Bench, Anjoo Kashyap Order dated 19.12.2014 xxi) ITAT, Delhi F Bench Order, in the case of qualitron Comodities Pvt. Ltd. dated 06.01.2015 (Case Law Paper Book Pages 187 to 196) Submitted please, Sd/- AR Kapil Goel, Adv. 9.1. The Revenue has not disputed the fact that in the case in hand, there is no satisfaction note by the AO of the searched party. The explanation for not recording satisfaction is that law does not envisage that the satisfaction should be recorded. This contention is against .....

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on can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). WP(C) 415/2014 & Ors. Page 9 of 15 Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that th .....

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ine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer .....

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d satisfaction or the words satisfied in the order as the same would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reason as basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched persons. It is pertinent to note here that the Hon ble Delhi High Court in the case of Pepsi Food (P) Ltd. Vs. ACIT (Supr .....

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son to the Assessing Officer of such person. We do not agree with contention of Ld. CIT(DR) that non recording of satisfaction note is merely a technical defect. The satisfaction of the Assessing Officer of the searched party goes to very root of the assumption of jurisdiction by the Assessing Officer of other person for initiating proceeding u/s 153C of the Act. Therefore, we find no merit into this contention of Ld. CIT(DR). Moreover, we cannot ignore the mandate of the statutory provision und .....

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no tax can be collected without authority of law. There can be no assessment in the absence of a proper jurisdiction of the authority. The question of jurisdiction is a very important aspect, which cannot be equated with a technical issue. Similar contention raised by the Ld. DR has been elaborately dealt with by the Tribunal in the case of Tanvir Collections P. Ltd. (supra). We, therefore, do not approve this contention. Respectfully following the decision of Hon ble co-ordinate Bench, we here .....

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el/ 2013 wherein it has been observed that there are conflicting views of Hon ble Delhi High Court and Hon ble Kerla High Court, the Assessee falls into the jurisdiction of Hon ble Delhi High Court in view ratio of Delhi High Court judgment in case of Pepsi Foods (P) Ltd. (Supra), it was held that recording of satisfaction by AO of searched persons is a necessary pre condition for initiation of proceeding u/s 153C which was not done in that case. Accordingly, the Hon ble co-ordinate Bench was pl .....

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ons, the Assessment framed u/s 153C of the Act by the Assessing Officer cannot be sustained, as such same is bad in law. 12. It is observed that the Revenue has not placed any material on record in respect of evidence qua the present assessee collected during the search operation. Moreover, the satisfaction as envisaged under Section 153C is also not placed on record. Therefore, we have no option but to accept the contention of Ld. Counsel for the assessee that no satisfaction was recorded by th .....

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003-04 is quashed. Since we have quashed the assessment on the legal issues. We are not adjudicating the other grounds raised in cross objection 353/Del/2014. The Revenue s appeal in I.T.A. No. 6404/Del/2013 pertaining to the Assessment Year 2003-04 is dismissed, as infructuous. In the result Assessee s cross objection no. 353/Del/2014 is partly allowed as indicated hereinabove. 14. In respect of cross objections numbers also 354 to 358/Del/2014 pertaining to the Assessment Years 2004-05, 2005-0 .....

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Years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. Accordingly, the cross objections nos. 354 to 358/Del/2014 pertaining to Assessment Year 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 are partly allowed in the terms indicated hereinabove and Revenue s appeal in ITA No. 6405 to 6409 for the Assessment Years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 are dismissed, as infructuous. 5. In this case Ld. CIT DR raised another objection that the A.O. of the searched party and the A.O. of the .....

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