TMI Blog2016 (4) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... faction are not fulfilled in this case. Further, the CBDT, Circular No: 24/2015 dt. 31/12/2015 has made its applicability to pending litigation as well. In view of the above factual and legal matrix of the case, we uphold the ground raised that the orders of assessments for Asst. years 2006-07 and 2007-08 passed u/s 143(3) r.w.s. 153C of the Act are without jurisdiction. - Decided in favour of assessee - ITA No. 5113 to 5114 /MUM/2009, ITA No. 5067 /MUM/2009 - - - Dated:- 24-2-2016 - SHRI JASON P. BOAZ (AM) AND SHRI RAM LAL NEGI (JM) For The Appellant : Shri. Chetan Karia For The Respondent : Shri. Subachan Ram ORDER PER BENCH These are Cross appeals by Revenue and the assessee for Asst. year 2007-08 and an appeal by revenue for Asst. year 2006-07, all directed against the common order CIT(Appeals), Central-VII, Mumbai dt. 02/07/2009. Since these appeals having interconnected issues, were heard together, they are being disposed off by way of this common order. 2. The facts of the case, briefly, are as under:- 2.1 The assessee is a firm in the Haresh Patel Group and was engaged in the development of a project by the name of Giriraj Horizon, at Khar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,20,00,000/- plus + 21,12,500(for shop no. 3) 3.1 On appeal, the Ld. CIT(A) upheld the addition of ₹ 1,50,00,000/- made towards cash receipts on sale of flats as admitted by the assessee for Asst. year 2007-08. As regards the addition made towards cash receipts in respect of sale of shops, (i) The Ld. CIT(A) observed that the assessee had sold only 9 shops in the Asst. year 2007-08 and restricted the addition towards on money in respect of the sale these 9 shops. (ii) The Ld. CIT(A) observed that there was no evidence of on money receipts in the earlier year and therefore deleted the addition of ₹ 40,00,000/- made in respect of cash receipts on sale of 2 shops. (iii) The Ld. CIT(A) held that there is no basis for adopting on money receipts of ₹ 20 lakhs per shop and directed that for Asst. year 2007-08 the on money receipts on sale of these 9 shops is to be computed @ ₹ 21,12,500/- per shop, as per the sale available in the diary for shop no. 3. 4. Aggrieved by the order of the CIT(A) Central-VII, Mumbai for Asst. year 2006- 07 and 2007-08 dt. 02/07/2009, both the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Asst. year 2007-08 6.1 The grounds of appeal raised by revenue are as under:- I. In the facts and circumstances of the law the Ld. CIT(A) erred in reducing the addition made on account of unaccounted income as on money from 26 shops to 9 shops. II. In the facts and circumstances of the law the Ld. CIT(A) erred in not accepting the fact that there was an unaccounted sale of 26 shops which was established during the assessment proceedings. III. The appellant craves leave to add, amend, alter or delete any or all the grounds of appeal, if need be. IV. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A), Central VII, Mumbai may be set aside and that of the Assessing Officer restored. 6.2.1 The assessee, in its appeal for Asst. year 2007-08, has raised the following grounds:- 1. (a) The learned CIT(Appeals) erred in law and facts in confirming the action of Assessing Officer in estimating undisclosed income to the extent of ₹ 1,90,12,500/- with respect to sale of shops during the previous year. (b) The learned CIT(Appeals) erred in appreciating the fact that no incriminating evidence was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stage of appellate proceedings. In support of this contention, the Ld.AR placed reliance on the following judicial pronouncements:- (i) NTPL vs. CIT (1998) 229 ITR 383(SC) (ii) Ahmadabad Electricity Co. Ltd., 199 ITR 351(Bom) 7.3 The Ld. DR opposed the admission of the additional grounds raised by the assessee. 7.4.1 We have heard the rival contention and perused and carefully considered the issues raised and the material on record; including the judicial decisions cited. We find that the additional grounds raised by the assessee are purely legal grounds and since the same go to the very root of the matter, we are inclined to admit the same for consideration and adjudication in this appeal. 7.4.2 It is a settled principle that a legal question/issues can be raised at the appellate state and such a question need not be raised as a ground. It is also a settled principle that when a legal question/issues is raised, the Tribunal has to consider the same in accordance with law and cannot refuse to entertain the same. As all the facts relating to the additional grounds taken before us are already on record, we are inclined to entertain the additional grounds which are pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153A. Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to 5[subsection (1) of] section 153A shall be construed as reference to 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. 8.2.2 The scope of Section 153C of the Act has been well explained in the decision of the Hon ble Madhya Pradesh High Court in the case of CIT vs. M/s. Mechmen, ITA No. 44/2011 and others dt. 10/07/2015. On the cited case also, search action u/s 132 of the Act was conducted against the partners of the firm and survey u/s 133A of the Act was conducted at the business premises of the firm. The Assessing Officer issued notice u/s 153C of the Act and completed the assessment u/s 143(3) r.w.s.143 (3) of the Act. The Hon ble High Court held that the proceedings u/s 153C of the Act should emanate from search action u/s 132 of the Act. The relevant paragraph dealing with the scope of Section 153C of the Act are extracted hereunder:- 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning thereby the Assessing Officer is to record a satisfaction to the effect that such jewellery or document so seized does not belong to the searched person but to some other person referred to in section 153A of the Act. Thus, the prerequisite of section 153C is that the Assessing Officer making the assessment of the searched person has to satisfy himself that some material found during the course of search and seizure belongs to some person other than the searched person. Then the Assessing Officer making the assessment of searched person has to hand-over the said incriminating material belonging to some person other than the searched person to the Assessing Officer having jurisdiction over the said other person. Thereafter, the Assessing Officer having the jurisdiction over the person other than the searched person shall issue a notice u/s 153C to such other person and assess his income in terms of the provisions of section 153A of the Act. Thus, the notice u/s 153C of the Act is to be issued only after recording of satisfaction. The assumption of jurisdiction to issue notice and frame assessment under section 153C read with section 153A is acquired by the Assessing Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment records of the concerned person/parties to the effect that no satisfaction has been recorded by the Assessing Officer of the searched person. This finding of the learned Commissioner of Income tax (Appeals) has not been controverted by the department by bringing any positive material on record. Accordingly, applying this proposition of law, the assumption of jurisdiction and framing of assessment in the instant cases by the Assessing Officer u/s 153C were bad in law. 79 80 81. We have deliberated upon the contentions of the learned CIT DR, Shri K.K. Singh and learned counsel for the assessee, Shri H.P. Verma, with regard to interpretation of recording of satisfaction while assuming jurisdiction u/s 153C of the Act. Even in the new scheme of framing of assessment in case of search cases, the legislature has clearly stipulated the requirement for recording of satisfaction while assuming jurisdiction to issue notice and frame assessment u/s 153C of the Act which requires that satisfaction to be recorded with reference to the documents and other materials found during the course of search belonging to a person other than the searched person. Prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch. Even for that reason, no action under Section 153C could have been initiated against the respondent. The respondent submits that the Assessing Officer who seized or requisitioned the material during the search of a person referred to in Section 153A as also the Assessing Officer having jurisdiction over the respondent have acted without jurisdiction. 9. Reliance was placed on the judgments of the Supreme Court and of different High Courts by the counsel appearing for the parties to buttress their arguments. The two decisions of the Supreme Court are in respect of scope of Section 158BD. In case of Manish Maheshwari Vs. Assistant Commissioner of Income Tax another and in the case of Commissioner of Income Tax-III Vs. Calcutta Knitwears . Even the Tribunal has referred to the decision of the Supreme Court on the scope of Section 158BD as no direct judgment of the Supreme Court on Section 153C was referred to. Besides the Supreme Court decisions on Section 158BD, reliance has been placed on the decisions of different High Courts with reference to the same provisions on Section 158BD. To wit, Amity Hotels (P) Ltd. and others Vs. Commissioner of Income Tax and others date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any other person, the conditions precedents wherefor are: (i) Satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (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 AO 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 searched or whose documents and other assets had been requisitioned under Section 132A of the Act. 13. In a recent decision of the Supreme Court in the case of Commissioner of Income Tax-III Vs. Calcutta Knitwears (supra), although the question considered was at what stage the Assessing Officer must record his satisfaction as envisaged in Section 158BD. The observed thus:- 38. Having said that, let us revert to discussion of Section 158BD of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonstrative material is germane to the assessing officers satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person. 42 . 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or requisitions the items (books of account or other documents or any assets for Section 158BD; and money, bullion, jewellery or other valuable article or thing or books of account or documents for Section 153C), is expected to handover those items to the Assessing Officer having jurisdiction over such other person and thereafter the Assessing Officer having jurisdiction has to proceed against such other person within his jurisdiction. Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be satisfied that the items belongs or belong to the person other than the person referred to in Section 153A. That satisfaction of the concerned Assessing Officer is a sine qua non. The consequences flowing from the action to be taken on the basis of such information handed over to the Assessing Officer having jurisdiction, for the assessee, who is a person other than the person referred to in Section 153A, is drastic of assessment or reassessment of his income falling within six assessment years. 16. Suffice it to observe that the dissimilarity of the form of two provisions would make no difference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recent case of Commissioner of Income Tax-III Vs. Calcutta Knitwears (supra), would apply on all fours mandating satisfaction of the Assessing Officer(s) dealing with the case at the respective stages referred to in Section 153C. 22 . 23 In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail. 8.2.3 The Hon ble Apex Court in the case of M/s. Calcutta knitwears in CA No. 3958 of 2014, in the context of Section158BD had at paras 41,42,and 44 of its order held as under:- 41. We wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. 8.2.4 The CBDT has accepted the above decision of the Hon ble Apex Court in the case of Calcutta Knitwears in Civil Appeal No: 3958 of 2014 dt. 12/03/2014 and consequently issued CIRCULAR NO. 24/2015 dt. 30/12/2015 (in F.No. 279/Misc/140/2015/ITJ) on the subject of recording of satisfaction note u/s 158BD/153C of the Act. This CBDT Circular reads as under:- CIRCULAR NO. 24/2015 F.No.279/Misc./140 /2015/ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 31st December, 2015 Subject: R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the orders of assessment that the incriminating documents in the form of diaries were found during the survey proceedings undertaken in the business premises of the assessee firm. It is therefore clear that the concerned documents/diaries did not emanate from out of seizures made in the course of search action. In this factual matrix of the case on hand, we find that the essential condition of section 153C of the Act is not fulfilled. Further, the Assessing Officer vide letter dt. 16/10/2015 has admitted that the satisfaction note for initiating the proceedings u/s 143(3) r.w.s.153C of the Act is not available on record., but has stated that it was the same Assessing Officer for initiation of the proceedings u/s 143(3) r.w.s 153C of the Act. Therefore, we find that the twin conditions (i) that the incriminating documents should have been found during the course of search action u/s132 of the Act and (ii) that the Assessing Officer should have recorded his satisfaction are not fulfilled in this case. Further, the CBDT, Circular No: 24/2015 dt. 31/12/2015 has made its applicability to pending litigation as well. In view of the above factual and legal matrix of the case, we uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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