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M/s. Parshwa Corporation and Others Versus DCIT, Central Circle-2, Baroda

2015 (10) TMI 2015 - ITAT AHMEDABAD

Validity of the assessment order passed u/s 153C read with Section 153A and 143(3) - Held that:- As per Section 292B, any notice, summons or other proceeding would not be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding provided such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. However, before i .....

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ble by virtue of provision of Section 292B. In view of above, we respectfully following the decision of Hon’ble Apex Court in the case of Manish Maheshwari (2007 (2) TMI 148 - SUPREME COURT OF INDIA) and decision of Lalitkumar M. Patel (2013 (7) TMI 778 - GUJARAT HIGH COURT), hold that the notices issued u/s 153C were invalid; accordingly the same are quashed. Consequently, the assessment orders framed u/s 153C r.w.s. 153A are also quashed. Since the assessment order itself has been quashed, the .....

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Mehta, AR For The Revenue : Shri R.I. Patel, CIT-DR ORDER PER BENCH : This bunch of appeals by different assessees have been filed against different orders of the learned Commissioner of Income-tax (Appeals)-IV, Ahmedabad. Since these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. IT(SS)A Nos. 68 to 73/Ahd/2012 - Assessee s Appeals for Assessment Years 2003-04 to 2008-09 : Assessee - Parshwa Corporation 2 .....

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Act was conducted in the case of Shri Rameshbhai Babulal Shah on 03.04.2008. During the course of search, a laptop which was found from him was seized. In the laptop, Shri Rameshbhai B. Shah maintained books of accounts in Tally Software in respect of 65 companies, including the assessee. The Assessing Officer issued notice u/s 153C r.w.s. 153A of the Income-tax Act to the assessee for all the six Assessment Years, i.e., AYs 2003-04 to AY 2008-09. He referred to the copy of the notice issued u/s .....

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lery or other valuable article/thing or books of account/documents belonging to the assessee was seized from Shri Rameshbhai B. Shah. Such a vague satisfaction is no satisfaction in the eye of law. He further pointed out that in the assessment order the Assessing Officer has mentioned that from the laptop of Shri Rameshbhai B. Shah, the books of accounts of the assessee and other 65 entities were found. Therefore, on that basis the Assessing Officer has taken action u/s 153C in the case of the a .....

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said to belonging to various different persons. He also referred to the reply of the Departmental Representative dated 06.07.2015 alongwith which the Departmental Representative has enclosed the reply of the Assessing Officer dated 06.07.2015. In such reply, the Assessing Officer has referred an affidavit of Shri Rameshbhai B. Shah in support of his contention that the material seized from him was pertaining to various entities and he has also offered the additional income of ₹ 6.5 crores .....

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the laptop. He also mentioned in paragraph no.5.2 that the persons whose names are recorded in the laptop have no role/obligation towards the said circulation of funds. Therefore, he has offered the income of ₹ 6.5 crores in his name before the Settlement Commission; and not for and on behalf of 65 entities. He, therefore, submitted that the affidavit supports the case of the assessee that the data, if any, in the computer of Shri Rameshbhai B. Shah were neither belonging to the assessee n .....

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or books of accounts / documents to the Assessing Officer of such other person to whom such valuable article/thing or books of account/document belongs. Thereafter, the Assessing Officer of such other person has to issue notice u/s 153C. Admittedly, no satisfaction has been recorded by the Assessing Officer of the person searched. No valuable article/thing or books of accounts/documents belonging to the assessee was found from the person searched. Therefore, the basic condition for issuance of n .....

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i Bench, order dated 14.11.2014 in ITA Nos. 4200 to 4202/Del/2012. e) Shri Lalitkumar M. Patel vs. DCIT - ITAT Ahmedabad Bench order dated 30.09.2011 in IT(SS)A No. 61/Ahd/2007. f) DSL Properties (P) Ltd vs. DCIT, (2013) 60 SOT 088 (Delhi) 5. The ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below. He filed written submissions dated 06.07.2015 accompanied by the written submissions of the Assessing Officer, copy of the notice issued u/s 153C and af .....

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iately preceding the assessment year relevant to previous year in which the aforesaid search was conducted was made i.e. from A.Ys. 2003-04 to 2008-09 is required to be assessed / re-assessed, in accordance with the provisions of section 153A r.w.s. 153C of the Act. 6. He further submitted that even if there are some procedural irregularities, the same is curable, in view of the provision of Section 292B of the Income-tax Act. He also relied upon the following decisions:- a) Bharat Ginning & .....

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e person searched and the Assessing Officer of the assessee under appeal was the same, there was no necessity of recording of the satisfaction and handing over of the seized material. He, therefore, submitted that the order of the CIT(A) wherein he has considered all the issues raised by the assessee in this regard should be upheld. 7. In the rejoinder, it was pointed out by the ld. Counsel for the assessee that the assessee has relied upon the decisions of Hon ble Kerala High Court in the case .....

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gencies and Services (supra). He, therefore, submitted that in the subsequent decision the Hon ble Kerala High Court relied upon the decision of Hon ble Apex Court in the case of Manish Maheshwari vs. ACIT and another, (2007) 289 ITR 341 (SC), and held that in the absence of satisfaction recorded u/s 158BD, the issuance of notice u/s 158BC is invalid. The ld. Counsel also pointed out that the decision of ITAT, Ahmedabad Bench, relied upon by the ld. Departmental Representative, is prior to the d .....

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, therefore, reiterated that the notice issued u/s 153C for all the years may be quashed. 8. We have carefully considered the arguments of both the sides and perused the material placed before us. Section 153C of the Incometax Act, 1961 reads as under:- "153C. [(1)] Notwithstanding anything 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 thin .....

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tion 153A:]." 9. From the above, it is evident that action under Section 153C can be taken in respect of any other person than the person searched if the Assessing Officer of the person searched is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents belong to a person other than the person searched. In such circumstances, he shall hand over to the Assessing Officer of such other person money, bullion, jewellery or other valuable a .....

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on under Section 153C. This interpretation of Section 153C by us is supported by the decision of Hon'ble Apex Court in the case of Manish Maheshwari Vs. ACIT and Another - (2007) 289 ITR 341 (SC) wherein their Lordships at page 348 held as under:- "The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in resp .....

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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 searche .....

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vide Tax Appeal No.2077 of 2009, compared the language of Section 153C and Section 158BD at internal page 6 of their order and held as under:- "Section 153C which is similarly worded to section 158BD of the Act, provides 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 153-A he shall proceed ag .....

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rson, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he shall proceed against such other person under section 158BC." 12. From the above and also from the comparison of language of Sections 153C and 158BD, we find that the condition for recording satisfaction by the Assessing Officer of the person searched is present in both the cases. In Section 158BD, the Assessing O .....

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n searched has to hand over the books of account, documents or asset seized to the Assessing Officer having jurisdiction over such other person and thereafter, the Assessing Officer of such other person has to proceed to assess such other person. Thus, the basic condition of recording the satisfaction by the Assessing Officer of the person searched as well as handing over of books of account, other documents or assets seized to the Assessing Officer of such other person is present in both the Se .....

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case of Panchjanyam Management Agencies and Services (supra). The decision of ITAT, Ahmedabad Benches relied upon by the ld. CIT-DR in the case of Bharat Ginning & Pressing Factory (supra) also followed the decision of Hon ble Kerala High Court in the case of Panchjanyam Management Agencies and Services (supra). We find that subsequently the Hon ble Kerala High Court in the case of Dr. T.M. Kuriachan, [2012] 23 taxmann.com 28 (Kerala), considered the decision of earlier Division Bench in the .....

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) is a member, has taken the view that the satisfaction under Section 158BD is only about evidence of undisclosed income of a person other than the assessee searched and there is no requirement to record the same; and such satisfaction being only for transferring the file from one Officer to another, there is no requirement for the Officer transferring the file to record the reason for transfer. Wherever satisfaction is required to be recorded before issuing notice of assessment, the Act specifi .....

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.2B. In fact, Section 158BC does not require the Assessing Officer to record his satisfaction for issuing notice for assessment of undisclosed income for the block period for assessing the assessee searched or whose accounts were called for under Section 132A of the Act. In fact, Section 158BD is only an enabling provision to assess any other assessee other than the searched assessee if in the course of search of another assessee evidence of undisclosed income is received in respect of the asses .....

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hed. The satisfaction required under Section 158BD for the Officer to transfer the material and evidence gathered during search or after requisition of accounts is only to justify transfer of the file to the Assessing Officer, who has jurisdiction to assess the assessee who is not searched but in respect of whose undisclosed income evidence is gathered. In fact, it is absolutely left to the Officer to whom the file is transferred under Section 158BD to consider the transferred evidence and mater .....

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t of the Assessing Officer to whom transfer is made by the Officer who conducted search. Even though the above is our view and we have taken such a view in the decision above referred, the learned counsel for the respondent assessee has referred to the decision of the Supreme Court in Manish Maheshwari v. Asst. Commissioner of Income Tax & Another, reported in 289 ITR 341, wherein the Supreme Court has taken the view that if satisfaction is not recorded by the Assessing Officer for transferr .....

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of Lalitkumar M. Patel (supra) has upheld the decision of ITAT, Ahmedabad Bench in the case of Lalitkumar M. Patel in IT(SS)A No.61/Ahd/2007 (supra). In the aforesaid case also the argument of the Revenue was similar, i.e., when the Assessing Officer in the case of person searched and the assessee in whose case the notice u/s 158BD was issued is the same, there is no requirement of recording of any satisfaction. However, the Hon ble Jurisdictional High Court rejected the Revenue s contention and .....

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of the assessee respondent on the ground that there was no valid satisfaction recorded by the Assessing Officer in case of the person searched prior to issuance of the notice to the assessee respondent. 6. We have heard learned counsel Shri K.M. Parikh for the department who has fervently argued before us that the Assessing Officer Shri A.K. Sinha was the Assessing Officer in case of both, searched and non searched assessees. He also further urged that the satisfaction recorded by the Assessing .....

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s as set out by the Apex court in case of Manish Maheshwari v. Asst. Commissioner of Income-tax and another reported in (2007) 289 ITR 341(SC) have not been fulfilled. He further urged that the Tribunal while dealing with the issue in question has appropriately scanned the entire materials and has rightly arrived at a correct decision which calls for no intervention. 8. On thus hearing both the sides and on examination of the order impugned and the materials produced before us, for the reasons t .....

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132A, the Assessing Officer of the searched person needs to record his satisfaction that undisclosed income belongs to the person, other than the person with respect to whom search was carried out under Section 132 of the Act. He is also required to hand over the books of account or other documents or assets seized, to the Assessing Officer having jurisdiction over such person and thereafter, the Assessing Officer who has the jurisdiction would proceed under Section 158BC against such person who .....

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faction of Assessing Officer in case of Jayraj Group. It had been emphatically argued before us that the Assessing Officer being the same person i.e. Shri A.K. Sinha, such satisfaction when recorded in case of the present assessee should be considered and construed as a due compliance under the provisions and there would not be any occasion to handover the materials to himself being the very officer. 13.As far as second requirement of endowing the papers to the Assessing Officer having the juris .....

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rned in whose case search under section 132 of the Income Tax Act has been carried out by the department. As such an essential requirement prior to initiating the proceedings under section 158BC, has not been fulfilled, the Tribunal is justified in quashing the notice issued against the assessee respondent and the assessment order passed pursuant thereto. As the order of the Tribunal is in consonance with the law laid down on the subject in case of Manish Maheshwari (supra), we find no reason to .....

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e under appeal before us, admittedly, no satisfaction is recorded by the Assessing Officer of the person searched. In fact, no satisfaction is recorded by the Assessing Officer of the assessee under appeal before us, prior to issuing notice u/s 153C. Only in the notice u/s 153C, satisfaction is claimed to have been recorded. For ready reference, we reproduce herein below the copy of the notice issued for Assessment Year 2003-04. NOTICE UNDER SECTION 153 r.w.s. 153a OF THE INCOMETAX ACT, 1961 Dat .....

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sment years immediately preceding the assessment year relevant to previous year in which the aforesaid search was conducted was made i.e., from A.Ys. 2003-04 to 2008-09 is required to be assessed/re-assessed, in accordance with the provisions of Section 153A r.w.s. 153C of the Act. You are, therefore, required to furnish hour return of income under Section 153C of the Income-tax Act, 1961 for A.Y. 2003-04 being one out of the above six assessment years in respect of which you are assessable unde .....

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er of person searched. The Assessing Officer of assessee did not record any satisfaction prior to issue of notice u/s 153C. The so-called satisfaction recorded in the notice u/s 153C is totally vague. It has not specified which valuable articles/things/books of accounts/documents were found from Shri Rameshbhai B. Shah which belongs to the assessee. In the assessment order the Assessing Officer has mentioned that in the laptop of Shri Rameshbhai B. Shah the data pertaining to the assessee were f .....

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ularity in the issuance of notice u/s 153C is a curable defect as provided in Section 292B of the Income-tax Act. We are unable to agree with this contention of the ld. Departmental Representative. Section 292B reads as under:- 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be inva .....

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assessment, notice, summons or other proceeding provided such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. However, before issuing of notice u/s 153C, the satisfaction of the Assessing Officer of the person searched is essential for assuming the jurisdiction u/s 153C by the Assessing Officer of such other person. Therefore, in the absence of satisfaction by the Assessing Office .....

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, hold that the notices issued u/s 153C were invalid; accordingly the same are quashed. Consequently, the assessment orders framed u/s 153C r.w.s. 153A are also quashed. Since the assessment order itself has been quashed, the other grounds of the assessee s appeal which is with regard to determination of the income of the assessee needs no adjudication. IT(SS)A Nos. 28 to 31/Ahd/2012 - Assessee: Shiv Builders IT(SS)A Nos. 32 to 35/Ahd/2012- Assessee: M/s. Padmavati Construction IT(SS)A Nos. 36 t .....

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