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2015 (12) TMI 304

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..... en though the minutes of the Board meeting form a part of the record of the Assessee. We find no infirmity with the view taken by the ITAT in this regard. Thus, notwithstanding the controversy whether the assessing officer of the searched persons had recorded his satisfaction that the specified seized documents belonged to the Assessee, the initiation of proceedings under section 153C of the Act, in respect of the Assessee would be without jurisdiction. - Decided in favour of assessee. - ITA 422/2015, ITA 524/2015, ITA 381/2015, ITA 389/2015, ITA 410/2015, ITA 419/2015, ITA 653/2015, ITA 720/2015, ITA 735/2015, ITA 793/2015 - - - Dated:- 3-12-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Ms. Suruchi Aggarwal, Senior Standing counsel with Ms. Lakshmi Gurung For the Respondent : Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar and Mr. Gautam Jain JUDGMENT Vibhu Bakhru, J. 1. The Revenue has filed these appeals under Section 260A of the Income Tax Act, 1961 (hereafter the Act ) impugning a common order dated 29th October, 2014 passed by the Income Tax Appellate Tribunal (hereafter the ITAT ) in a batch of two hundred and eighty .....

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..... e funds were further invested by the SVP Group of companies to purchase lands for new projects as well as for booking bogus expenses, as site development charges, for inflating the cost of construction. In addition to the four companies forming the core of the SVP Group, warrants for search and seizure operations were also issued in respect of twenty other companies. 6. The assessing officer categorized the 106 companies, which had invested in the share capital of the aforesaid four companies of the SVP Group during the AYs 2003-04 to 2009-10 into 3 groups tabulated in Table-I, II and III. Table-I shareholders consisted of 20 companies which had been subjected to search and seizure operations under Section 132 of the Act; Table-II shareholders comprised of 12 companies against whom proceedings were initiated under Section 153C of the Act consequent to the search conducted on SVP Group and other Table-I shareholders; and Table- III shareholders comprised 74 companies. The Assessee, in the present case, is one of the 12 companies that was not subjected to search but was assessed under Section 153C of the Act. 7. The assessment order records that a notice under Section 153C of t .....

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..... eved by the assessment orders, preferred appeals before the CIT(A), inter alia, challenging the assumption of jurisdiction under Section 153C of the Act. The Assessee alleged that the initial notice claimed to have been issued on 14th May, 2010 had not been issued and that was the reason why a notice was subsequently issued on 8th November, 2010. It was further claimed that the Assessee was not afforded sufficient time to respond to the notices. However, despite paucity of time, the Assessee had responded to the questionnaires and the AO s observation that the Assessee was not co-operative or had not provided the details asked for, was incorrect. The Assessee also contested the jurisdiction of the AO to frame an assessment under Section 153C of the Act as it was contended that the assessing officer of the searched person had not recorded his satisfaction that any money, bullion, jewellery or other valuable article or thing or books of accounts or documents, seized or requisitioned belonged to the Assessee. It was contended that in the absence of such satisfaction, the AO could not have assumed jurisdiction to commence proceedings under Section 153C of the Act. The Assessee further .....

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..... 1 is being issued for the assessment years 2003-2004 to 2008-2009. 10. The Assessee disputed that the documents referred to in the satisfaction note belonged to the Assessee. It was submitted that although some of the documents emanated from the Assessee, the same were forwarded to SVP Builders India Ltd. in connection with the investment made by the Assessee in the share capital of that company. Therefore, the said documents no longer belonged to the Assessee. Insofar as the share certificates are concerned, it was contended that some of the documents alleged to be share certificates were not share certificates but counter foils of the share certificates issued by SVP Builders India Ltd. and the other share certificates seized pertained to shares that had already been sold by the Assessee and, therefore, the certificates no longer belonged to the Assessee. 11. During the course of the proceedings before the CIT(A), the Assessee also furnished affidavits of various persons who had invested in the Assessee Company either by applying for shares or by lending money as short term loans. 12. The CIT(A) observed that the balance sheet of the Assessee did not reflect any physi .....

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..... e, deleted the additions made under Section 68 of the Act. Accordingly, the ITAT allowed the appeals preferred by the Assessee and rejected the appeals preferred by the Revenue. The Revenue being aggrieved by the same has preferred the present appeals. 15. The principal controversy involved in the present appeals relate to the question of assumption of jurisdiction by the AO under Section 153C of the Act. Admittedly, the Assessee was not one of the entities that were subjected to the search and seizure operation under Section 132 of the Act. The assessments were also framed under Section 153C of the Act; although the assessment orders reflect that the assessments were framed under Section 143(3)/153A(b) of the Act, the orders passed by the CIT(A) indicates the same to be a typographical error. Section 153C of the Act provides for assessment/reassessment in cases where assets/documents have been found during the search and seizure operations and the same do not belong to the searched person(s). Section 153C of the Act reads as under: 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Asse .....

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..... come has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice 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 manner provided in section 153A. 16. It is apparent from the above that the first step for initiation of proceedings under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, he is required to transfer the assets or documents, whic .....

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..... under Section 153C is the same, the assessing officer is required to record his satisfaction that the assets/ documents seized belong to a person (the assessee) other than the searched person. In CIT v. Mechmen 11-C: (2015) 60 taxmann.com 484 (M.P.) a Division Bench of the Madhya Pradesh High Court had expressed the above view in the following manner:- 18. The concomitant of this conclusion, is that, the legal position as applicable to Section 158BD regarding satisfaction in the first instance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction; and in the second instance of the Assessing Officer having jurisdiction whilst sending noticee to such other person (other than the person referred to in Section 153A), must apply proprio vigore. The fact that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items t .....

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..... had, in fact, recorded the necessary satisfaction note. However, the learned counsel for the Revenue could not confirm whether such note was prepared prior to the initiation of the proceedings under section 153C of the Act. The Assessee s contention that despite its request such note had not been disclosed during the assessment proceedings has also not been controverted. In the circumstances, the categorical finding of the ITAT that it was an admitted fact that the assessing officer of the searched persons had not recorded a satisfaction note, cannot be interfered with. 19. The next controversy relates to the question whether the documents seized during the search conducted under section 132 of the Act on SVP Group of companies belonged to the Assessee. The details of the documents are indicated in the satisfaction note quoted hereinbefore. 20. The Assessee disputed that the said documents could be stated to be belonging to the Assessee. Insofar as the resolutions, affidavits, counter foils of the income tax returns, copies of the incorporation certificate, Memorandum of Association, resolutions, affidavits, and share application forms are concerned, the Assessee explained th .....

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