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2016 (3) TMI 53 - ITAT DELHI

2016 (3) TMI 53 - ITAT DELHI - TMI - Validity of the issue of notice u/s 153C - Held that:- The first and foremost step for initiation of proceedings u/s 153C i.e., the recording of the satisfaction by the Assessing Officer of the person searched is missing, the proceedings are invalid and, therefore, the other arguments of the assessee need not be examined in detail. We, therefore, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of RRJ Securities Ltd. (2015 .....

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Per Bench These appeals by the Revenue and the cross-objections by the assessee are directed against the order of learned CIT(A)-II, Delhi dated 14th July, 2011. 2. At the time of hearing before us, it is submitted by the learned counsel that by way of cross-objections, the assessee has challenged the validity of the issue of notice u/s 153C of the Income-tax Act, 1961 and consequently, the validity of the assessment order passed in pursuance thereto. Therefore, the cross-objections of the asse .....

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s, it is submitted by the learned counsel for the assessee that this issue is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. RRJ Securities Ltd. - [2015] 62 taxmann.com 391 (Delhi) and CIT Vs. Kabul Chawla - [2015] 234 Taxman 300 (Delhi). He pointed out that in pursuance to the RTI application, the Revenue has informed the assessee that no satisfaction note is recorded by the Assessing Officer of the person searched. Such intimation is placed at .....

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;ble Jurisdictional High Court, the initiation of proceedings u/s 153C is not sustainable. 5. Learned CIT-DR, on the other hand, relied upon the order of learned CIT(A) and he stated that this ground was not raised before the CIT(A). Before the CIT(A), the assessee has raised the general ground about the validity of notice u/s 153C which has rightly been decided by the CIT(A) in favour of the assessee. If the assessee wanted to raise another ground relating to Section 153C, he could have raised .....

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before issue of notice u/s 153C. He, therefore, submitted that the order of learned CIT(A) on this point may be sustained and the assessee s cross-objections should be rejected. 6. We have considered the rival submissions and have perused the relevant material placed before us. Learned CIT-DR has contended that the ground raised by the assessee before the learned CIT(A) with regard to validity of Section 153C was different than the ground raised before the ITAT. Therefore, in effect, the assesse .....

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ssessee raised the ground relating to validity of initiation of proceedings u/s 153C as well as the consequential assessment order passed by the Assessing Officer. That once a ground is raised, then fresh arguments relating to such ground can always be taken at any stage. Therefore, the contention of learned CIT(A) that the assessee is raising the fresh ground is untenable. 7. Now, coming to the merit of the validity of notice u/s 153C, we find that the search had taken place at the residence of .....

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been recorded by the Assessing Officer of the person searched. Hon'ble Jurisdictional High Court in the case of RRJ Securities Ltd. (supra) at paragraph 13 held as under:- 13. The first and foremost step for initiation of proceedings under Section 153C of the Act is for the AO of the searched person to be satisfied that the assets or documents seized belong to the assessee (being a person other than the searched person). The AO of the assessee, on receiving the documents and the assets seiz .....

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n 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, the assessee other than the person searched - in accordance with provisions of Section 153A of the Act. (emphasis by underlining supplied by us) 8. From the above, it is evident that Hon'ble Jurisdictional High Court has held in clear words that first and foremost step for .....

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s been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon bl .....

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e substantially similar/parimateria to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further cl .....

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es not meet the guidelines laid down by the Apex Court. 9. From the above, it is evident that the CBDT has accepted that the decision of Hon ble Apex Court in the case of M/s Calcutta Knitwears in Civil Appeal No.3958 of 2014 dated 12th March, 2014 issued for the purpose of Section 158BD would be squarely applicable for the purpose of proceedings u/s 153C. The Circular also observed that recording of satisfaction note is a pre-requisite and the satisfaction must be prepared by the Assessing Offi .....

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