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2015 (3) TMI 837 - ITAT DELHI

2015 (3) TMI 837 - ITAT DELHI - TMI - Validity of assessment framed u/s 153C - recording of satisfaction by the Assessing Officer of searched person - assessee submitted that the information furnished by the Revenue under the Right to Information Act, reveals that the AO of the searched party has not recorded any satisfaction. - Held that:- In 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 Office .....

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sessee that no satisfaction was recorded by the Assessing Officer of the searched party, this contention is supported by the reply of Revenue furnished under Right to Information Act. It is expected that the Assessing Officer should be careful in complying with the mandate of law to avoid loss to exchequer. Accordingly the ground raised by the assessee in cross objection, that the proceedings initiated under Section 153C is bad in law is allowed. The assessment framed u/s 153C read with section .....

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er of cross objections by the Assessee are directed against the separate orders of Ld. Commissioner of Income Tax (Appeal)-II, New Delhi in short here in after refer to as the CIT(A) dated 4th Separate, 2013 and 5th September, 2013 respectively and pertaining to the Assessment Years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 respectively. All the appeals of the Revenue and cross objections of the Assessee raises identical grounds and arise from the similar facts and circumstances, t .....

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Revenue has raised the following grounds : "1. The Commissioner of Income Tax (Appeal) erred in law and on facts in deleting the addition of ₹ 15,01,580/- on account of unexplained purchase u/s 69C of the Act. 2. The Commissioner of Income Tax (Appeal) erred in law and on facts in deleting the addition of ₹ 4,62,316/- on account disallowance of expenditure. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alt .....

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dditions made are unjust, unlawful and arbitrary and are made against the principles of natural justice. 2. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT(A) has failed to appreciate that the Ld. AO was not justified to ignore the submissions of the appellant that the assessment proceedings for the year under appeal was not pending on the date of the recording of satisfaction u/s. 153C and since the same didn't abate, the proceedings u/s. 153C of the I .....

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has failed to appreciate that the Ld AO was not justified to ignore the submissions of the appellant that assessment u/s 153C of the Income Tax Act be restricted to assessment in respect of seized documents of incriminating nature in the case of the appellant for only theyear to which said documents relates to, and in absence of any such incriminating seized document in the case of appellant; assessment framed u/s. 153C of the I.T. Act for the year under consideration, is bad in law and deserve .....

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ntries in the cash book of the appellant for the relevant year. 6. That in view of the facts and circumstances of the case, CIT (A) has erred in disregarding the purchases of ₹ 15,01,580/-, the sales and the expenses of ₹ 4,62,316/- claimed by the assessee company. 7. A) That on the facts and on the circumstances of the case and the provision of law, the Ld. CIT (A) has erred in wrongly directing the AO to work out the peak from the entries in the cash book of the appellant company f .....

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ny for the relevant year, without granting the credit of the peak of FINANCIAL transactions as per the cash book for the preceding years. 8. That on the facts and on the circumstances of the case and the provision of law, the CIT (A) has erred in ignoring the fact that the AO has erred both on facts and in law, in using statement of various persons without giving a copy of the same and opportunity to cross examine. 9. That on the facts and circumstances of the case, the various observations and .....

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njectures and suspicion. 11. That on the facts and circumstances of the case the interest charged u/s 234A and 234B has been wrongly and illegally charged and in any case is highly excessive. 12. That the respondent craves the right to amend, append, delete any or all grounds of appeal." 3. Briefly stated facts are that a search action under Section 132 of the Income Tax Act, 1961 (herein after refer to as the Act) was carried out at the business and residential premises of Shri B.K.Dhingra .....

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nditure and investment amounting to ₹ 15,01,580/- and 4,62,316 respectively. Against this the Assessee filed an appeal before Ld. CIT(A) who after considering the submissions of the Assessee rejected the grounds raised against the validity of proceedings under Section 153C, however on merit Ld. CIT(A) modified the Assessment order by directing the AO to work out the peak from the enteries in the cash book of the Assessee for the relevant year and make a singular addition of the said amount .....

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assuming jurisdiction for making assessment under 153C read with section 143(3) of the Act. He submitted that under the identical facts the Assessment framed u/s 153C of the Act has been quashed by the co-ordinate Benches of this Tribunal following the judgment of Jurisdictional High Court rendered in the case of Pepsi Foods (P) Ltd. Vs. ACIT [2014] 52 taxman.com 220(Delhi). Therefore, he requested that the matter may be decided on this ground alone. Ld. CIT(DR) submitted that he has no objectio .....

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than the person referred to in Section 153A, then the books of accounts or documents or assets or requisitioned shall be handed over to the Assessing Officer having jurisdiction of such other person and that the Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with provision of Section 153A of the Act. Therefore, the satisfaction as envisage under Section 153C of the Act, would conf .....

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n law deserves to be quashed." We proceed to decide this ground first, to examine whether in the absence of satisfaction note, by the AO of the searched party the proceedings initiated u/s 153C and assessment framed thereunder are bad in law and as such the assessment so framed is unsustainable and nullity in the eyes of law. 5. ARGUMENTS OF THE ASSESSEE Ld. Counsel for the assessee submitted that the information furnished by the Revenue under the Right to Information Act, reveals that the .....

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hat no satisfaction is recorded by the AO of the searched party hence in the light of ratio laid by the Hon'ble Delhi High Court in the case of Pepsi co Food (P) Ltd. (supra) the assessment as framed u/s 153C read with section 143(3) deserves to be quashed. 6. ARGUMENTS OF REVENUE : Sh. Gunjan Prasad Ld. CIT(DR), vehemently argued that there is no requirement under the law of recording of satisfaction by the Assessing Officer of searched person. The satisfaction of Assessing Officer of the s .....

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entire assessment cannot be annulled on the basis of technical defect. He submitted that technicalities should not hold the dispensation of justice, and cannot be allowed to benefit a wrong doer. He further pointed out that the assessee is blowing hot and cold at the same time. He submitted that Ld. CIT(A) in para 4.3 of the impugned order has categorically recorded that the Assessee has no objection with regard to initiation of proceeding u/s 153C of the Act. He submitted that under these fact .....

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ent of the parties. He further submitted that in view of the binding precedents of the Jurisdictional High Court and the co-ordinate benches of this Tribunal the Assessment framed under Section 153C of the Act cannot be sustained. He submitted that the assessment so framed is without Authority of law and deserves to be quashed. 7. We have heard the rival contentions, perused the material available on record, gone through the orders of the Authorities below and case laws cited by the Respectives .....

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y, proceedings were initiated in the case of the assessee company u/s 153C read with section 153A of the I.T.Act. The case of assessee was initially centralized with ACIT, Central Circle-7 u/s 127 of the I.T.Act by Commissioner of Income Tax, Delhi-IV, New Delhi vide order F.No. CIT-IV/Cent./121/2009-10/1343 dated 30.07.2010. Notice u/s 153C dated 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 .....

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t to Information Act no such satisfaction was recorded. The contents of reply furnished by Revenue reads as under :- "2. From the assessment records of Sh. Bhupesh Kumar Dhingra, which is covered under section153A, for the Asstt. Years from 2003-04 to 2008-09 (Block period) it is noticed that there is no 'satisfaction note'available/recorded in respect of other entities. 3. In case you intend to file the appeal, you may file the same before the Addl. Commissioner of Income Tax, Cent .....

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9, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person 3a[and that Assessing Officer shall proceed against each .....

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tiation of the search under section 132 or making of requisition under section 132A in the second proviso to 82[sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.] 83[(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Office .....

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e under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the .....

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riod, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years imm .....

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h under section 132 or making of requisition under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the .....

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tax shall be chargeable at the rate or rates as applicable to such assessment year. Ld. CIT(DR) during the counsel of hearing also drew attention to Section 148 (2) of the Act, which reads as under:- 8. The Revenue has raised four fold objections against quashing the assessment order. Firstly, it was argued that there is no requirement under the law that the satisfaction should be recorded. The satisfaction can be inferred by implication, had the intent of legislation been so, the word record a .....

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pect of initiation of proceedings. Now the assesse cannot be allowed to blow hot and cold at the same time. Thirdly, it was contended that the provision should be literally construed. There is no scope of adding of new word and or imparting a new meaning, when there is no ambiguity, this being well settled proposition of law. Lastly, it was contended that technicalities should not come in the way of dispensation of justice. It was submitted that non recording of satisfaction is only a technical .....

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eing illegal and nullity in the eyes of law. The brief synopsis as filed is reproduced herein below for the sake of clarity :- "Before the Hon'ble Income Tax Appellate Tribunal, 'C' Bench, New Delhi In the matter of Instronics Limited F-345, Lado Sarai, New Delhi-110030 PAN : AAACI0163R Vs ACIT, Central Circle -21 Room No. 344, ARA Centre, Jhandewalan Extension, New Delhi - 110055 Assessment Years: 2003-2004 to 2008-09 ITA Nos.6336/Del/2014 to 6341/Del/2014 (Filed by Assessee on .....

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ied to assessee company dated 30.09.2010 (Paper Book for the AY. 2003-04 to AY. 2008-09, Page No. 11) "Satisfaction Note for issuing notice u/s. 153C of I.T. Act, 1961, in the case of M/s. Instronics Limited, 192C, J&K Pocket, Dilshad Garden, New Delhi, PAN : AAACI0163R for AY. 2003-04 to 2008-09. "30.09.2010: In the case of Sh. B.K.Dhingra, Smt. Poonam Dhingra and M/s Mayank TRADERS Pvt. Ltd., M/s Horizon Pvt. Ltd. search & seizure took place u/s. 132 on 20.10.2008. The unders .....

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Delhi, this satisfaction note is placed in the file before issueing notice u/s. 153C. Sd/- 30.09.2010 ACIT, Central Circle-17, New Delhi Reasons for aforesaid satisfaction note is not valid to assume the jurisdiction u/s 153C of the Act: That it is not recorded by specified authority that is AO of raided party during assessment proceedings which is fortified from: a) RTI replies dated 10.06.2013 & 28.06.2013 (pages 12 to 15 of Paper Book for the AY. 2003-04 to AY. 2008-09). b) On the very ne .....

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ingra, Smt. Poonam Dhingra and Mls. Mayank Traders Pvt. Ltd., Horizon Pvt Ltd. search & seizure took place u/s. 132 on 20.10.2008; ................ Secondly, documents/papers at pages 1 to 39 of Annexure A-87, Annexures A-96, A-97, A-98 and A-99, are found to belong to M/s. Instronics Ltd.," where multiple parties are mentioned (3 in no.); ii)" which sufficiently proves that instant note is recorded by AO of present assessee and is not the requisite "satisfaction" by any .....

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ges 145 to 166) have quashed the similar proceedings being nullity for lack of jurisdiction. In these precedents, Coordinate bench decisions, Hon'ble Jurisdictional High Court and Apex Court decisions are dilated at length. So it is respectfully preyed that for sake of justice, same may please be applied in present case also. It is noteworthy here that order of Delhi ITAT in DSL Properties case reported at 60 SOT 88 was applied in above cases. This order is followed in many other decisions b .....

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) (Case Law Paper Book Pages 17 to 24) is noteworthy. 2.2 That instant note is recorded mechanically and without application of mind: It is vivid from aforesaid note that same is recorded without even narrating and describing the nature of documents and their FINANCIAL implications and only Annexure numbers are loosely and vaguely mentioned which do not meet the basic criteria of any objective and rational "satisfaction". That is there no clear finding in aforesaid note on i) nature of .....

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cording of satisfaction by specified authority (being AO of a raided party) and for total lack of clarity of nature of documents seized and how treated to be belonging to, makes the instant proceedings null and void and the given note at page 1 cannot be treated as valid for assumption of jurisdiction. Jurisdictional and other available Hon'ble High Court Judicial Pronouncements: Issue is no longer res integra Noticeably, there are at least Four High Court Decisions (including two from juris .....

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d. (supra) ii) Akash Arogya Mandir Pvt. Ltd. (supra) iii) Tanvir Collections Pvt. Ltd. and iv) DSL Properties Pvt. Ltd. and our prayer(Supra). In aforesaid connection, it is very respectfully submitted that it is trite law that after various high court decisions on the issue, no question of debate and per incuriam and special bench can arise as it is held in Coordinate bench decision reported at 69 TTJ 550 (applied by Pune ITAT in Aurangabad resorts reported at 118 ITD 1/111 TTJ 741) that once a .....

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epsico supra) on non existing and extraneous grounds, respectfully submitting, it is urged that once the decision of jurisdictional high Court exists on an issue, it is settled position in law as declared by the Supreme Court in the case of East India Commercial Co. Ltd. vs. Collector of Customs AIR 1962 (SC) 1793 that the law declared by the High Court is binding on all authorities and tribunals within the State. Lastly, we humbly draw your honors kind attention to recent constitution bench ord .....

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issue is covered in favor of assessee on legal jurisdictional grounds there is no need to enter into merits at all is supported by Bombay High Court decision in case of M/s. Petroleum India International, Mumbai order Dated: 19th November, 2012 in Income Tax Appeal No. 2660 of 2009 wherein it is held that "Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case" Not .....

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o stage it is controverted that seized documents found during search are fully disclosed and accounted. PARA 17 of aforesaid decision as applies to present case in favor of assessee: '"The section merely enables the Revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the approp .....

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is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by section 153A in an attempt to ensure that the income reflected by the document has been accounted for by such other person. If he is so satisfied after obtaining the returns from such other person for the six assessment years, the proceedings will have to be closed. If the returns filed by the other person for the period of six years does not show that the income reflected in the documen .....

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03-04 to 2009-10 'Devi Dayal Petro Chemicals Pvt. Ltd., order dated 10-9-2014.' (Refer Case Law Paper Book Pages 67 to 7 ) has observed that "Therefore, the Assessing Officer will drop the proceedings initiated under Section153 of the years to which the seized documents do not belong. For the year to which the seized documents belonged, he will verify whether the transaction reflected by the seized documents is duly accounted for in the books of account. If the transactions are duly .....

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riminating material found during the search" iii) Pune bench ITAT in Bharati Vidyapeeth Foundation duly approved by Bombay High Court on 10/06/2014 ITA No. 959/PN/10 to 967/PN/10 in turn based on Pune ITAT order reported at Singhad Technical Education 140 TTJ 233) iv) Pune bench ITAT in D.Y.Patil Pratshthan order dated 7/9/2012, ITA No. 1586/PN/2011 to 1591/PN/2011 Since in the instant case certain documents belonging to the assessee trust have been found during the course of search in the .....

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DR, therefore, in ivew of the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. (Supra) further proceedings should have been closed by the AO. Otherwise it will cause undue harassment to the assessee. In our opinion, the AO in the garb of proceedings u/s 153C cannot make roving and fishing enquiries after assessee proves that entries recorded in the documents sized from the search party which belong to the assessee are already reflected in the regular books of account .....

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assessee cannot be put to undue harassment. Since the assesssee succeds on this preliminary issue we refrain ourselves from adjudicating the other grounds by the assessee as well as the revenue on merit. Decisions referred : i) Jai Steel (India) vs. ACIT: 259 CTR (Raj) 281 ii) CIT vs. Murli Agro Products Ltd. I.T.A. No. 36 of 2009 (Bom.) High Court order dt. 29.10.2010 iii) CIT vs. Chetan Dass Lachman Dass; 77 DTR (Del) 25 iv) CIT vs. Anil Kumar Bhatia; 352 ITR 493 (Del) v) Sanjay Agarwal; ITA .....

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No. 4200/Del/2012 (identical fact setting) (Case Law Paper Book Pages 78 to 128) xvi) V.K.Fiscal, ITA No. 5460/Del/2013 xvii) Parsvnath Developers Ltd. vs. DCIT, 5188/Del/2013 xviii) Special Bench of the ITAT in the case of All Cargo Global Logistic Ltd. vs. CIT; 137 ITD 287 (Mumbai) (S.B.) xix) Delhi ITAT Bench, 'D'Bench New Delhi, Kurele Paper Mills Pvt. Ltd. 14.11.2014 (Case Law Paper Book Pages 172 to 186) xx) ITAT, Delhi 'A' Bench, Anjoo Kashyap Order dated 19.12.2014 xxi) .....

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;ble Delhi High Court in the case of Pepsi Foods (P) Ltd. Vs. Assistant Commissioner of Income Tax [2014] 52 taxman. Com 220 (Delhi) in para 6 of the judgment has held as under :- "6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched perso .....

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Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessar .....

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g Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody WP(C) 415/2014 & Ors. Page 10 of 15 else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". Further the Hon'ble Delhi High Court held .....

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lhi High Court in the case of Pepsi Food (P) Ltd. Vs. ACIT (Supra) has held that the satisfaction note by the AO searched party is a condition precedent for issuance of notice u/s 153C of the Act. In the light of judgment of the Hon'ble Delhi High Court, we cannot accept the argument of Revenue that no satisfaction is required to be recorded or the satisfaction can be inferred by implication i.e. from the conduct of Assessing Officer of the searched party and it would be sufficient if the AO .....

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oreover, we cannot ignore the mandate of the statutory provision under the garb of technical defect. 10. Ld. Counsel for the Assessee has relied on the decision of the decision of the co-ordinate Bench of this Tribunal in the case of Tanvir Finance & Leasing Ltd. Vs. DCIT in Cross objection nos. 268 to 271/Del/2014 (in ITA Nos. 14 to 17/Del/2014) Wherein under the identical facts has observed as under :- "We duly appreciate the concern of the Ld. DR for the exchequer. But we are reminde .....

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" Respectfully following the decision of Hon'ble co-ordinate Bench, we hereby reject the contention Ld. CIT(DR) that non recording of satisfaction is only a technical defect, and the assessment cannot be annulled on this basis. 11. During the course of hearing Ld. CIT(DR) has relied upon the judgment of the Hon'ble Kerla High Court rendered in the case of DR. K.M.Mahboob Vs. DCIT(Supra). This argument of the Assessee has been considered by the Hon'ble co-ordinate Bench rendered .....

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roceeding u/s 153C which was not done in that case. Accordingly, the Hon'ble co-ordinate Bench was pleased to quash the Assessment Proceedings. In the case in hand also the assessee company is within the territorial jurisdictional of the Hon'ble Delhi High Court. The facts are identical, no contrary view of the Hon'ble Delhi High Court or the Hon'ble Supreme Court brought to our notice by the Revenue. Therefore, we do not see any reason to take any contrary view, therefore, we ar .....

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e have no option but to accept the contention of Ld. Counsel for the assessee that no satisfaction was recorded by the Assessing Officer of the searched party, this contention is supported by the reply of Revenue furnished under Right to Information Act. It is expected that the Assessing Officer should be careful in complying with the mandate of law to avoid loss to exchequer. 13. Accordingly the ground raised by the assessee in cross objection, that the proceedings initiated under Section 153C .....

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