TMI Blog2015 (8) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.No. CIT (C)- II/CENT/2010-11/1029 dated 19/10/2010. In response to the notice u/s 153C, the assessee filed a return for assessment year 2003-04 on 06.09.2010 declaring income of Rs.Nil. A copy of the panchnama, reasons for issuing notice u/s 153C and jurisdiction order dated 19.10.2010 u/s 127 of the Act were dispatched to the assessee on 12.11.2010 as sought by the assessee. In response to the notice, the assessee took part in the proceedings The AO found that the assessee company belonged to the Thapar Group of cases and one of the main allegations against the group was that several concerns had been floated by the group with dummy Directors and shareholders. He observed that these concerns were basically capital formation concerns which had build up huge reserves and surpluses over the years and these reserves and surpluses were declared invested in stocks of textiles. He further found that as and when cash was required, the stocks were sold and the money was utilized for other purposes as per required. Against this background, the AO analysed the facts of the case. The AO opened the assessment under the provisions of section 153C for the assessment year 2003-04. The AO notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in cash. The items purchased sold were textile fabrics. The name and style of the textiles fabrics were Denim, Fabrics K-III Super Fine (N), Fabric (PS), Fabric (PS) Embroidery, Fabric (PS) Excel, Fabrics, Kashmiri Fabrics-I, Kashmiri Fabrics-I (D), etc. From these items, the AO observed that the assessee was not dealing in branded items and there was no name of any company in these products. He further observed that the purchases sales were within M/s Thapar Homes Group of cases. He found that in inventories of Fabric Textile Goods shown in the balance sheet, the closing stock of last year stood at ₹ 12,02,09,649/- and this year the figure was ₹ 12,02,38,599/- which was almost the same. Therefore, he observed that the purchases sales were only out of current year transactions which were held unverifiable and bogus. The AO further observed that it was highly improbable that with a huge stock inventory of goods which change in fashion and taste, the assessee had to make sales from fresh purchases only. The AO observed that the preponderance of probability suggested that the stocks were not genuine but since these were declared prior to 01.04.2002, no action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment framed by Ld. AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s. 153C of the LT. Act and as such the assessment being bad in law deserves to be quashed. 4. 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 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 the year 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 LT. Act for the year under consideration, is bad in law and deserve to be quashed. 5. That on the facts and circumstances of the case and the provision of law, the Ld CIT (A) has erred in holding the conclusion that the 'audited books' notwithstanding, the book results are required to be rejected, since the narrations are artificial, sham and not reflective of the actual business / commercial transactions. However, the Ld CIT (A) still relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l grounds of appeal. 5. At the outset of the hearing, the ld. AR for the assessee assailed before us from the grounds of cross objection that satisfaction of the AO of the searched person as envisaged under section 153C of the Act has not been recorded, before initiating the proceedings against the assessee u/s 153C of the Act, which vitiated the entire impugned assessments, so we deem it fit to deal with the said ground first because it goes to the root of the matter i. E., by raising this ground the assessee has questioned the very assumption of jurisdiction of AO to initiate proceedings under section 153C of the Act. 6. Ld. AR for the assessee submitted that in the present case, there is no satisfaction recorded by the AO of the raided party, as admitted by the department in RTI replies placed at pages 3 to 5 of the paper book ; and the satisfaction note, at pages 1 2 of the paper book, is one recorded by the AO of the present assessee/other person. He submitted that the same is held to be invalid on same facts in the following cases :- (i) Delhi ITAT, H Bench order in the case of Tanveer Collections 168 TTJ 145; (ii) Delhi ITAT, C Bench order in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything contained in section 139, section 147, section 148, section 149, 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 and that 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 the provisions of section 153A. 9. From the above provision, it is clear that where the AO of the person searched is satisfied that any money, bullion, jewellery, books of accounts or other documents etc., belong to a person other than the person searched, then, such documents or assets, etc., shall be handed over to the AO of the other person and the later AO shall proceed against such other person to assess or reassess his income. A bare perusal of the provision indicates that before handing ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and (iii) the AO has proceeded under s. 153C against such other person. The conditions precedent for invoking the provisions of s. 153C, thus, are required to be satisfied before the provisions of said section 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 s. 132A. That the recording of satisfaction by the AO having jurisdiction over the person searched is an essential and prerequisite condition for bestowing jurisdiction to the AO of the other person. 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 2 of the paper book, as under :- Satisfaction Note for issuing Notice u/s 153C of the I.T. Act, 1961 in the case of M/s. Satkar Road Lines Pvt. Ltd, Kasra No.34/7, Village Dera Mandi, Tehsil Mehraull, New Delhi Pan No. AABCS7676J for A.Y. 2003-04 to 2008-09. 05.07.2010 Documents at pages 91 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of account or documents etc. belonging to the assessee were found which were handed over to the AO of the other person (i. E. the assessee). The Satisfaction note as reproduced above has been prepared by the AO of the assessee. 13. The ld. DR was of the opinion that since the AO of the persons searched and the assessee is same, it does not make any difference whether the satisfaction is recorded in the case of the persons searched or other person. He emphasized on the factum of recording satisfaction by the AO, which condition in his opinion stood satisfied, by virtue of it having been recorded by the common AO. 14. This particular argument of the revenue was answered by the Coordinate Bench in the case of M/s. Tanvir Collections Pvt. Ltd. Vs. ACIT, Central Circle 21, New Delhi in ITA No.2421/Del/2014 order dated 16.01.2015 as under :- 16. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, obliterate the requirement of law necessitating the recording of satisfaction in the case of the person searched that money, bullion, jewellery, etc., found from the person searched belongs to the other person. What is crucial to note is capacity of the AO and not his identity. In view of the fact that when the statutory stipulation is for recording the satisfaction by the AO of the person searched, then, it cannot be substituted with the satisfaction 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 sub-section (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 substituted as under : - 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonconsideration of the judgment of the Hon ble jurisdictional High Court in judgment in the case of SSP Aviation Ltd. VS. DCIT (2012) 252 CTR (Del) 291. 23. Let us examine the case of SSP Aviation Ltd. (supra) for evaluating the contention that the instant assessment be declared as per law. The Hon ble High Court in that case has held that the Assessing Officer having jurisdiction over the searched person should be satisfied that the valuable article or books of account or documents seized during the search 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons belonged to the assessee. The absence of such satisfaction, in our considered opinion, failed to confer any valid and lawful jurisdiction on the AO of the assessee to proceed with the matter of the assessment u/s 153C of the Act. We, ergo, set aside the initiation and the ensuing assessment 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. 28. In the result, the appeal is allowed. 15. In the light of the said ratio-decidendi of the aforesaid order of the Tribunal, the ld counsel for assessee, submitted that the first step itself has not been fulfilled. So according to the ld counsel, the issuance of notice u/s 153C is illegal. 16. We also take note of the recent judgement of the Hon ble jurisdictional High Court in a similar case in Pepsico India Holiday (P) Ltd Vs. ACIT (2014) 50 Taxmann. Com 299 (Delhi), after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Officer, Ward-Ill (2), Ahmedabad to the Assessing Officer of the petitioner at Bareilly. All the requirements of Section 153(c) were complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jewellers, Bareilly - the petitioner. The ownership and consignment of the petitioner was also confirmed by the Assessing Officer of the petitioner at Bareilly. The Income Tax Officer, Ward-Ill (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner s Assessing officer to proceed under Section 153(c) of the LT. Act. 21. After the assessment of the person in respect of whom search action was carried out is completed, the officer under Section 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the Assessing Officer on such person. The satisfaction in such case is in respect of the material and disclosures of the person with which the articles or assets are foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that 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 .... In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i. E., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction of Hon ble Delhi High Court in view of the case law of Pepsi Foods (P) Ltd, therefore, we held that recording of satisfaction by AO of searched persons is a necessary pre condition for initiation of proceedings u/s 153C which has not been done in the present appeals. Therefore, we quash the assessment proceedings being illegal. Thereafter, we find that the department went in appeal before the Hon ble High Court of Delhi against the aforesaid order ( P. R. Commissioner of Income Tax, Central-II) vs. Aakash Arogya Mandir Pvt. Ltd.) (page 65) wherein, the Hon ble High Court, while dismissing the appeal of the Revenue, held as under :- 8. The Revenue has not placed any material to dispute the factual finding of the ITAT that the requirement of the law explained by this Court in Pepsi Foods regarding the recording of satisfaction by the AO even in respect of the searched person was not fulfilled. Consequently, the fact that it was the same AO both for the searched person and the Assessee makes no difference to the consequence of non-compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. 20. Since we have quashed the notice u/s 153C of the Act itself, the other grounds are not adjudicated being academic. 21. As the facts and circumstances in the case of the assessee in other five assessment years i. E. 2004-05 to 2008-09 are similar to assessment year 2003-04, we order that the impugned assessment orders passed u/s 153C in assessment years 2004-05 to 2008-09 are also a nullity. 22. Before we part with this order, we were wondering whether during search, revenue authorities can resort to carte-blanche seizure of anything and everything from the premises of the raided party without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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