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2015 (12) TMI 1115 - ITAT DELHI

2015 (12) TMI 1115 - ITAT DELHI - TMI - Validity of assessment u/s 153C - Held that:- No satisfaction has been recorded in the case of searched person and the satisfaction, if any, recorded in the case of other person will not cure the defect because it is necessary that the satisfaction must be recorded by the AO of the searched person and thereafter the documents are to be handed over to the AO of other person and this position will not alter even if the AO for the searched person and the othe .....

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eparate orders each dated 20.01.2015 of ld. CIT(A)-III, Gurgaon. 2. The issue involved in these appeals are common and the appeals were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. First we will deal with the appeal in ITA No. 1695/Del/2015 for the assessment year 2009-10. Following grounds have been raised in this appeal: "1. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the asse .....

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ordingly 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 ₹ 4,42,00,592/- instead of loss of ₹ 1,15,89,312/- as returned by the assessee. 4a. On the facts and circumstances of the case and in l .....

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,623/- made by the assessing officer as alleged unexplained expenditure u/s 69C. 6. 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 deduction of expenses of ₹ 1,54,96,623/-. 7. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of ₹ 4,42,00,592/-(Rs.2,87,03,969/- & ₹ 1,54,96,623/- ) made by the assessing officer. 8. On the facts and circumstances .....

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f the Income Tax Act, 1961 (hereinafter referred to as the Act). 5. Facts of the case in brief are that a search and seizure operation was conducted at the premises of Sh. Ved Prakash Bharti Group on 08/09.04.2010, the residential premises of Sh. Ved Prakash Bharti, a Director of the assessee company were also covered on 08.04.2010. A survey u/s 133A of the Act was also conducted at the business premises of the assessee at Karnal and at New Delhi. During the course of survey various documents we .....

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. Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the validity for notice u/s 153C of the Act and submitted that the first pre-requisite of invocation of provisions of Section 153C of the Act is that there must be satisfaction by the AO of the searched person, that the documents found and seized during the course of search belonged to "other person" against whom notice u/s 153C of the Act is proposed to be issued. It was further submitted that as per th .....

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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 .....

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. that he is recording satisfaction in his capacity as A.O. of any searched person. II. The fact that the A.O. is recording satisfaction in his capacity as A.O. of 'assessee' (a person other than searched person) is evident from the top of the satisfaction note wherein in the column of name and address of the assessee - it is the assessee's name and address which has been mentioned. Thus the assessing officer has recorded the satisfaction as assessing officer of the assessee, has rec .....

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me Tax-III/New Delhi vide order F.No. CIT-III/Delhi/Centralization/2012- 13/2455, dated 15.01.2013." From the above it is apparent that the A.O. is referring to his jurisdiction as that of assessee's case and not that of 'any searched person'. Your honour will appreciate that for recording satisfaction u/s 153C, the assessing officer of searched person need not be the assessing officer of "person other than the searched person". By referring to his jurisdiction over th .....

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officer of person other than the searched 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. L .....

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ere 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 Ved Prakash Bharti and date of search is 08/09.04.2010. The assessing officer was having jurisdiction over the assessee since at least February 2011 when notice u/s 153A was issued to Ved Prakash Bharti u/s 153A. Thus the asses .....

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.02.2013 in his capacity as A.O. of assessee only after jurisdiction over the assessee was transferred/vested in him in Jan 2013. In view of the above it is submitted that the notice u/s 153C issued by the A.O. is without jurisdiction and is bad-in-law. The said notice is liable to be quashed and accordingly the assessment order passed on the foundation of the such notice is also liable to be quashed." 7. The ld. CIT(A) considered the submissions of the assessee but did not find merit by ob .....

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These were issues not taken up before the AO and is coming for the first time before me. Be that as it may, I find that the assessee has attached a copy of the satisfaction note at page 34 of the paper book. For sake of easy reference I am reproducing the same, from which it is abundantly clear that the legal issue raised by the assessee has no substance. Name and address : M/s Super Malls (P) Ltd., Sector-of the assesse 12, HUDA, Karnal, Regd. Officer at 51 - Transport Centre, Punjabi Bagh, Ne .....

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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. .....

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proceedings. During the statement of Sh. Ved Prakash Bahrti at the time of search, he has also stated that these documents pertain to him and M/s Super Mall (P) Ltd., Karnal in which he is Director. In view of the above and as per the provisions of sub-section (1) of Section 153C of the Act, I am satisfied that the document seized from the residence of Sh. Ved Prakash Bharti belongs to a person i.e. Super Mall (P) Ltd., other than the person referred in section 153A. Accordinlgy it is directed t .....

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ocuments were impounded/seized after taking printouts from the Pen Drives and on confronting the same; the Director Shri Ved Prakash Bharti surrendered ₹ 7 crores in the hands of the assessee company and ₹ 8 crores in his individual hands. The printouts of the pen drive revealed transactions relating to sale of shops/office pertaining to M/s Super Malls Pvt. Ltd., bearing sr. no., name of the purchaser, shop no. booking amount in cash and cheque, brokerage etc. So the nature of the c .....

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of the considered opinion that the assessee's contentions are unfounded, and therefore fail in Grounds of Appeal no. 1 to 3." 8. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submission made before the authorities below and 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 .....

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at 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 Act are without jurisdiction. It was .....

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person other than searched person) is evident from the top of the satisfaction note wherein in the column of name and address of the assessee - it is the assessee's name and address which has been mentioned. Thus the assessing officer has recorded the satisfaction as assessing officer of the assessee and not as the assessing officer of searched person. III. The fact that the A.O. is recording satisfaction in his capacity as A.O. of 'assessee' (a person other than searched person) is .....

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t but the AO of the searched person is not empowered to issue notice u/s 153C of the Act or to give a direction for issuance of notice u/s 153C of the Act because this authority lies solely with the AO of "the other person". It was stated that in the last para of the so called satisfaction note, the AO mentioned that "accordingly it is directed to issue such person (M/s Super Malls Pvt. Ltd.) notice and reassess income in accordance with the provisions of Section 153A of the Act&q .....

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ceedings" 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, a .....

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as having jurisdiction over Sh. Ved Prakash Bharti i.e. searched person. However, the AO in his capacity as AO of Ved Prakash Bharti never recorded the satisfaction which was recorded on 22.02.2013 in his capacity as AO of assessee only after jurisdiction over the assessee was transferred/vested in him in January 2013. It was stated that the satisfaction note had been recorded by the AO in his capacity as AO of the assessee (the other person) stands conclusively established from the order sheet .....

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Delhi ITAT Order dated 27.02.2015 ITA No. 4944 to 4948 of 2013) DCIT Vs Aakash Arogya Mandir (P) Ltd. (2015) 58 Taxmann.com 293 (Delhi-Trib). Pr. CIT Vs Aakash Arogya Mandir Pvt. Ltd. (Delhi High Court order dated 28.07.2015) ACIT Vs Command Detective & Securities (P) Ltd. (Delhi ITAT order dated 09.10.2015) ACIT Vs Inlay Marketing Pvt. Ltd., ITA Nos. 4200 to 4202/Del/2012 order dated 14.11.2014 DCIT Vs Extra Marketing Pvt. Ltd. (2015) 3 TMI 1012 (ITAT Delhi) Pepsi Foods (P.) Ltd. Vs ACIT (2 .....

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nexure-III from the vehicle no. HR06N-0063 parked in front of the residence of Sh. Ved Prakash Bharti and some documents as per Annexure-A-1 were seized after taking print out from the pen drive and those documents contained the details of cash receipts on account of sale/office by the assessee. She further submitted that the print out of the pen drives revealed the transaction relating to the sale of shops/office pertaining to the assessee bearing sr. No., name of the purchaser, shop no., booki .....

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rs 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 notice .....

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the searched person. The reliance was placed on the following case laws: Fakir Mohd Haji Hasan Vs CIT 247 ITR 290 (Guj) Surjeet Singh Chhabra Vs Union of India AIR 1997 (SC) Banarsi Das Vs Kanshi Ram AIR 1963 (SC) 1165 Param Anand Builders (P) Ltd. Vs ITO (1996) 61 ITD 35 (Mum) Surender Kumar Charanjit Kumar Vs Cit (2006) 282 ITR 78 (P&H) Kim Pharma (P) Ltd. (2013) 258 CTR 454 11. The ld. Counsel for the assessee in his rejoinder submitted that the jurisdiction u/s 153C of Act is an extra o .....

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er stated that no consent can confer jurisdiction upon a court if the court has no jurisdiction and if the AO can have jurisdiction only when he complied with the conditions laid down in the Act, then no consent by the assessee or waiver on his part can confer upon the AO. It was also stated that a mere acquiescence or participation in assessment proceedings cannot confer jurisdiction to an Assessing Officer who lacked jurisdiction. The reliance was placed on the following case laws: Mavany Brot .....

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Ltd. (1996) 220 ITR 398 (Ker) 12. We have 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 valid .....

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ocuments 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 : Provided that .....

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on the provisions contained in Sections 139, 147, 148, 149, 151 & 153 of the Act. On a plain reading of the provisions contained in Section 153C of the Act, it is evident that the AO of the searched person must be satisfied that inter alia any document seized or requisitioned belongs to a person other than the searched person and only thereafter the AO of the searched person can handover such documents to the AO having a jurisdiction over "such other person" (other than the search .....

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hat the documents belonged to other person, those documents are to be handed over to the AO of a person to whom the said documents belonged. On receipt of the material/documents, the AO having jurisdiction on the other person is expected to conduct inquiry and due verification of the relevant facts before issuing a notice to other person under his jurisdiction on the basis of his own inquiry. Therefore, it is clear that firstly satisfaction has to be recorded by the AO who conducted search that .....

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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 t .....

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ew 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 M .....

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fices at M/s Super Mall, Karnal also beside other concerns. These documents are required for assessment proceedings. During the statement of Sh. Ved Prakash Bahrti at the time of search, he has also stated that these documents pertain to him and M/s Super Mall (P) Ltd., Karnal in which he is Director. In view of the above and as per the provisions of sub-section (1) of Section 153C of the Act, I am satisfied that the document seized from the residence of Sh. Ved Prakash Bharti belongs to a perso .....

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rched person i.e. Sh. Ved Prakash Bharti. In the present case, the satisfaction has been recorded by the AO of the assessee (i.e. a person other than the searched person) which is evident from the top of the satisfaction note wherein the assessee's name and address has been mentioned. Therefore, 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 sh .....

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e 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 with .....

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the case of Pepsi Foods Pvt. Ltd. Vs ACIT reported at (2014) 367 ITR 112 held as under: "The Assessing Officer of the person in respect of whom the search was conducted must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the person in respect of whom the search was conducted. It is only then that the Assessing Officer can hand over such document to the Assessing Officer having jurisdiction over such other person (ot .....

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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 document is handed over to the Assessing Officer of the person to whom the document "belongs". Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. I .....

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ot 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 .....

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