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TMI Blog2015 (12) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law, the notice u/s 153C is illegal & without jurisdiction. The assessing officer has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly the notice u/s 153C alongwith the assessment order passed on the foundation of such notice is liable to be quashed and the Commissioner of Income Tax (Appeals) should have held so. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of assessing officer of completing the assessment at income of Rs. 4,42,00,592/- instead of loss of Rs. 1,15,89,312/- as returned by the assessee. 4a. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of assessing officer of not allowing set-off of loss of Rs. 2,47,96,658/- for the year as claimed by the assessee. b. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of assessing officer of not allowing set-off of loss of Rs. 1,15,89,312/- for the year as claimed by the assessee. 5. On the facts and circumstances of the case and in law, the CIT(A) erred in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 153C of the Act is proposed to be issued. It was further submitted that as per the provisions of Section 132(4A)(i), the presumption is that the documents belong to such person from whose possession, the documents were seized. Therefore, the AO of the searched person is also required to record satisfaction that documents do not belong to the searched person and belonged to other person, but in the present case, no satisfaction had been recorded by the AO of the searched person rebutting the presumption u/s 132(4A)(i) of the Act. The reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of Pepsi Foods India Pvt. Ltd. Vs ACIT (2014) 367 ITR 112. It was further submitted that in terms of provisions of Section 153C of the Act, the satisfaction has to be recorded by the AO of the searched person, even when the Assessing Officer of searched person and the person other than the searched person (against whom proceedings u/s 153C are supposed to be initiated) are the same and that the requirement of recording the satisfaction cannot be avoided and such satisfaction has to be recorded by the Assessing Officer in his capacity as Assessing Officer of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed person. The A.O. of the searched person is not empower to issue notice u/s 153C or to give direction for issue of notice u/s 153C. This authority of issue/giving direction for issue of notice u/s 153C lies solely with the assessing officer of the "other person." As can be seen from the last para of the so called satisfaction note the A.O. has mentioned that _Quote___ "Accordingly it is directed to issue such person (M/s Super Malls Pvt. Ltd.) notice and assess and reassess income in accordance with the provisions of section 153A of the Act.___" Unquote. The aforesaid remarks proves beyond doubt that the satisfaction note has been recorded by the assessing officer in his capacity as the A.O. of the assessee (the other person) and not as the A.O. of searched person because it is only the A.O. of "other person" who can issue/give direction for issue of notice u/s 153C as has been given in the satisfaction note. V. There is yet another fact that establishes that the satisfaction u/s 153C has been issued by the A.O. in his capacity as "A.O." of other person (i.e. the assessee) and not as A.O. of searched person. The searched person in this case as per the satisfaction note is V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Office at 51- Transport Centre, Punjabi Bagh, New Delhi under section 153C of the Income Tax Act, 1961. The jurisdiction of this case has been assigned to this office u/s 127 of Income Tax Act, 1961 by the worthy Commissioner of Income Tax-III, New Delhi vide order F.No. CIT- III/Delhi/Centralization/2012-13/2455 dated 15.01.2013. By virtue of the authorization of the Director of Income Tax (Investigation), Chandigarh, a search & seizure operation u/s 132(1) of the Act was carried out on 08/09.04.2010 at the residential/business premises of Sh. Tejwant Singh & Sh. Ved Prakash Bharti Group of cases, Karnal, Panipat & Delhi and a survey u/s 133A of the I.T. Act, 1961 was also carried out at the business premises of M/s Super Malls (P) Ltd., Karnal & New Delhi. During the course of search on 08/09.04.2010 at residence of Sh. Ved Prakash Bharti who is a Director in the assessee company M/s Super Malls (P) Ltd., Pen drives were found and seized as per Annexure-3 from vehicle no. HR06N-0063 parked in front of the residence of Sh. Ved Prakash Bharti. Some documents as per Annexure A-1 were seized after taking print out of the above said pen drives. These documents contain the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that a search and seizure operation u/s 132(1) of the Act was carried out at the residence of Sh. Ved Prakash Bharti Group of cases on 08/09.04.2010, on the basis of this search, proceedings u/s 153C of the Act were initiated against the assessee by issuing the notice dated 22.02.2013 u/s 153C of the Act but no satisfaction had been recorded by the AO of the searched person and that no document belonging to the assessee was found and seized during the course of search. Therefore, the notice issued u/s 153C of the Act was bad in law and without jurisdiction because there had been no handing over of the seized documents as required u/s 153C before initiation of proceedings under that section. It was stated that the even when the searched person and the person other than the searched person (against whom proceedings u/s 153C of the Act were supposed to be initiated) are the same the requirement of recording satisfaction by the Assessing Officer of the searched person cannot be avoided and such satisfaction has to be recorded by the AO in his capacity as AO of searched person. Therefore, in the absence of such satisfaction, the proceedings initiated u/s 153C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the satisfaction note, the AO has stated that "these documents are required for assessment proceedings" which clearly establishes that the satisfaction has been recorded by the AO of the assessee and not the AO of the searched person. It was stated that had the satisfaction been recorded by AO in his capacity as AO of searched person then there would have been no need for him to mention about the requirements of seized documents because those were already in his possession. It was pointed out that the searched person in this case as per the satisfaction note is Ved Prakash Bharti, and date of search is 08/09.04.2010 and the AO was having jurisdiction over the searched person since at least February 2011 when notice u/s 153A was issued to Sh. Ved Prakash Bharti. Thus, the AO in his capacity as AO of searched person was having possession of all the documents seized during search since at least prior to February 2011. It was contented that the satisfaction note u/s 153C of the Act has been recorded by the AO on 22.02.2013 i.e. after more than 2 years from the period when he was having jurisdiction over Sh. Ved Prakash Bharti i.e. searched person. However, the AO in his capaci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op no., booking amount in cash and cheque, brokerage etc., which clearly shows that it was more than a mere reference of the assessee and it was evident that materials found during the survey were relatable with the materials seized during search, revealing element of income, thereby suggesting undisclosed income of the person other than the searched person. It was contended that the returns of income for the assessment years 2007-08 and 2008-09 were not filed u/s 139(1) of the Act and for the assessment years 2009-10 and 2010-11, unaccounted transactions were found in the course of search/survey. Therefore, the income or loss declared in the returns filed purportedly based on the unreliable books could not be held to be in order and the assessee had surrendered on the basis of documents which were clearly incriminating. It was also submitted that the issue relating to the validity of notice u/s 153C of the Act was never raised before the AO and also a revised return was field in response to notices u/s 153A r.w.s. 153C of the Act. Therefore, the ld. CIT(A) was fully justified in rejecting the contention of the assessee relating to the validity of notice u/s 153C of the Act. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered the submissions of both the parties and gone through the material available on the record. In the present case, it is an admitted fact that a search was conducted at the premises of Ved Prakash Bharti Group of cases on 08/09.04.2012 and also at the residential premises of Sh. Ved Prakash Bharti who is a Director of the assessee company and in assessee's case only a survey u/s 133A of the Act was conducted. The assessee challenged the validity of the assessment on the basis that no satisfaction was recorded in the case of the searched person as per the provisions of Section 153 of the Act. The said provisions read as under: "153C.Assessment of income of any other person.- (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 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 jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the searched person. In the present case, the claim of the department is that the satisfaction was recorded on 22.02.2013. We have perused the copies of the order sheet in the case of the assessee as well as the searched person Sh. Ved Prakash Bharti. In the order sheet entry belonging to Sh. Ved Prakash Bharti, the AO simply stated as under: "Statement of Mr. S. K. Chug recorded." And in the case of the assessee the order sheet entry reads as under: "Notice of 153C issued after recording reasons." 14. From the plain reading of the above notings, it is crystal clear that no satisfaction was recorded by the AO in the case of the searched person, the only satisfaction was recorded in the case of the person "other than the searched person" i.e. the assessee. The contents of the reasons recorded by the AO in the case of the assessee which has been incorporated by the ld. CIT(A) at page nos. 7 & 8 of the impurnged order are as under: "Reasons/Satisfaction note for taking up the case of M/s Super Malls (P) Ltd. Sector-12, HUDA, Karnal Regd., Officer at 51-Transport Centre, Punjabi Bagh, New Delhi under section 153C of the Income Tax Act, 1961. The jurisdiction of this case ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it is clear that the AO of the assessee has recorded satisfaction as Assessing Officer of the assessee and not as the Assessing Officer of the searched person. In the instant case, the AO in order sheet entry dated 22.02.2013 has mentioned that notice u/s 153C issued after recording reasons but the AO of the searched person is not empowered to issue the notice to the person other than the searched person. In our opinion, even if the AO of the assessee and the searched person is the same, satisfaction must be recorded by the AO of searched person. In this regard, the Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs Aakash Arogya Mandir Pvt. Ltd. (copy of which is placed at page nos. 1 to 6 of the assessee's paper book) held in para 8 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrives at the satisfaction that the seized document does not belong to the person in respect of whom the search was conducted but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". It has further been held that: "It was evident from the satisfaction note that apart from saying that the documents belonged to the assessee and that the Assessing Officer was satisfied that it was a fit case for issuance of a notice under section 153C, there was nothing which would indicate how the presumptions which were to be normally raised had been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in section 153C. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the person in respect of whom the search was conducted is satisfied that the seized documents belonged to another person. On going through the contents of the satisfaction note, no "satisfaction" of the kind required under section 153C could be discerned. Thus, the very first step prior to th ..... 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