TMI Blog2016 (5) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... has not recorded a valid satisfaction before initiating section 153C proceedings in question. The impugned assessment is accordingly quashed. - Decided in favour of assessee - IT(SS)A Nos.01, 02 & 03/Ahd/2011, IT(SS)A Nos.89, 90 & 91/Ahd/2011, C.O. Nos.56, 57 & 58/Ahd/2011 - - - Dated:- 22-4-2016 - SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER For The Assessee : Shri S.N. Soparkar, A.R. For The Revenue : Smt. Vibha Bhalla, CIT (D.R.) ORDER PER S.S. GODARA, J.M. This batch of 9 cases pertains to a single assessee Shri Shailesh R. Daxini. Relevant assessment years are from 2005-06 to 2008-09. The CIT(A)-I, Ahmedabad has passed his different orders under challenge; all dated 22.11.2010 in cases nos.CIT(A)-I/CC.1(1)/358/2009-10, CIT(A)-I/CC.1(1)/359/2009-10, CIT(A)- I/CC.1(1)/360/2009-10 CIT(A)-I/CC.1(1)/361/2009-10; assessment year-wise respectively. First assessment year 2005-06 involves assessee s appeal IT(SS)A No.01/Ahd/2011. Next assessment year 2006-07 contains assessee s appeal IT(SS)A No.02/Ahd/2011 and C.O. No.56/Ahd/2011. The latter has been filed in Revenue s cross appeal IT(SS)A No.89/Ahd/2011. Third assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reveals that assessee s all three Cross Objections suffer from delay of 3 days in filing. Learned department representative is fair enough in not opposing assessee s condonation petition comprising of his solemn averments seeking to condone the impugned delay. We accordingly accept the same. Assessee s cross objections stand admitted for adjudication. 4. We called all these cases together for hearing. Learned representatives are in agreement that assessee s appals/cross objections raise a common fundamental question testing legality of initiation of impugned section 153C proceedings in the four impugned assessment years. They state that this legal question goes to root of the matter in all cases. We take up assessee s appeal IT(SS)A No.01/Ahd/2011 for assessment year 2005-06 as the lead case in these facts and circumstances. 5. We come to the relevant facts first. This assessee trades in shares and commodities. He carried out his business through a broker M/s. Kunvarji Commodities Brokers Pvt. Ltd. (in short M/s KCBPL ). The department conducted a search in the latter s case on 25.03.2008. It allegedly came across incriminating material in the nature of documents, books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Bank of India of Sailesh R. Daxini. Page 85 is the copy of PAN card of the assessee. From the above it is clear that the said documents belong to Shri Shailesh R. Daxini, for which I am satisfied. Further, annexure A-64 and A-65 are seized document containing computer data. These documents also contain document being computer data belonging to Mr. Shailesh R. Daxini. Based on the above seized data, it has been found that Mr. Shailesh R. Daxini has suppressed income amounting to ₹ 1,29,67,176/- in F.Y.2005-06 and income amounting to ₹ 1,35,30,671 in F.Y.2006-07 by adopting the methodology of client code modification carried out with the connivance of the broker Kunwarji Commodities Brokers Pvt. Ltd. This has been done by taking over loss of other persons as well as transferring their profit to other persons and thereby the assessee has evaded payment of taxes. This has resulted in escapement of income assessable to tax. From the above it is clear that the said documents belong to Mr. Shailesh R. Daxini for which I am satisfied. Therefore, in view of the provision of Sec.153C (1) r.w.s.153A of the I.T. Act I am satisfied that proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Court, Baroda vide compromise decree dated 03.10.2000. As per the MOU dated 01.11.1996, Shri Lalit M.Patel and Shri Champak M.Patel acquired the right in the land of M/s.HEMPL and they have made total cash payment of ₹ 37 lacs and unaccounted demand draft of ₹ 1 crore to the Court Receiver appointed by the Hon'ble High Court of Mumbai. Shri Jayesh Dave entered into a Court Settlement Decree on 30.09.2000 with Shri Upendra N.Patel, Shri Lalit M.Patel Shri Champak M.Patel for ceding their rights in the land of M/s.HEMPL and they received 1,20,000 Sq.ft of land of M/s.HEMPL. The Sale Deed was executed in the name of Shri Upendra N.Patel only for ₹ 5.60 lacs only, which was much below the market rate. Hence, long term capital gain had accrued to Shri Upendra N.Patel, which has not been offered for taxation. Since, these facts could be discovered from the various MOUs seized during the course of search in the Jayraj Group, the notices u/s.158BD are issued to the assessees. The incriminating papers referred to are A-15, pages 99- 95, A-41 pages 36-39, A-3/5 pages 138 to 146, A-57 pages 122 to 158, A-35 pages 66-87J A-2 pages- 1, A-15 pages 75 76 and others of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person ; and (iii) the Assessing Officer 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. 10. That the Special Bench of the ITAT in the case of Manoj Aggarwal (supra) has considered the above decision of the Hon ble Apex Court and also other decisions of various Courts and examined in detail the conditions which are to be satisfied before the issue of notice under Section 158BD. The Special Bench held as under: Section 158BD provides for assumption of jurisdiction to make a block assessment in the case of a person not searched and against whom no proceedings have been initiated. It cannot be said that such jurisdiction can be assumed without recording satisfaction. It has tote noted that the proceedings under section 158B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outer limit for recording such satisfaction. This is for the reason that the satisfaction has to be recorded by the Assessing Officer examining the material in the case of the person searched and he will have to find out whether there is any undisclosed income at all unearthed which again can only be in the course of such proceeding. After finding that there is undisclosed income, he will have to give a finding as to whether such income belongs to the person searched and this too has to be in the course of the said proceeding only. If he finds that any or all of such income belongs to a person not searched, then he has to record such finding in this behalf and takes follow-up action as envisaged in section 158BD which again has to be only in the course of section 158BC proceeding and, hence, if no such satisfaction is recorded in course of section 158BC proceeding, then assumption of jurisdiction under section 158BD is not possible. In the circumstances, the absence of the words 'in the course of the proceeding in the section is no material to the issue in the context of the said section itself. 11. Let us examine the facts of the assessee s case in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned a search and seizure action has taken place in the case of the assessee. iv) At the end of the notice, the AO has mentioned since this fact could be discovered from the various MOUs seized during the course of search in Jayraj Group, the notices u/s.158BD are issued to the assessees . This noting clearly proves that the reason was recorded by the AO of Shri Lalit M. Patel and not of the AO of Jayraj group. If the satisfaction has been recorded by the AO of Jayraj Group cases, he would have mentioned that during the course of search in the case of the assessee, various MOUs belonged to Shri Upendra N. Patel, Shri Lalit M. Patel Shri Champak M. Patel were found. The same are being forwarded to their AO for taking action under Section 158BD in their cases. In view of the above, we are of the opinion that the satisfaction was recorded by the AO of the assessee and not by the AO of the person searched. As per the decision of the Hon ble Apex Court in the case of Manish Maheshwari (supra) as well as Special Bench decision in the case of Majoj Aggarwal (suipra), the satisfaction is to be recorded by the AO of the persons searched that too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of assessee as well as the searched party. He is accordingly supposed to have all the relevant information as to in whose case the impugned incriminating material is to be used for the purpose of assessing undisclosed income based on the alleged incriminating material. Learned departmental representative files on record decision of another bench in ITA Nos.1832 to 1834/Kol/2014 in the case of KPC Medical College Hospital vs. DCIT decided on 24.06.2015 observing as under :- 16. There is built-in fallacy in the arguments of the ld. counsel for the assessee. The fallacy became evident if the argument if tested by envisioning to the facts of the present case. There is no dispute that notice under section 153C was issued by the AO after recording the satisfaction extracted supra. The AO is the same AO who has jurisdiction over the searched person as well as the other person i.e. the assessee. Let us take a situation, the AO was examining the file of Shri Bhaskar Ghosh. On perusal of his statement recorded under section 132(4) coupled with the fact of cash found during the course of search and buttressed by the Managing Director (Finance) of the KPC Group of companies, visua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The argument of the ld. Departmental Representative was that if AO of the searched person and the assessee is the same it does not make any difference whether satisfaction is recorded in the case of the searched person or the other person. The ITAT had arrived at a conclusion that satisfaction was recorded while taking up the cases of other person. This conclusion has been drawn on the basis of material supplied under query made as per RTI Act. It is a factual issue. We are conscious of this fact but we have dealt with the facts in the present case and observed that satisfaction was recorded by the AO while scrutinizing the papers of the searched person. It is very difficult to create a distinction to find out when such satisfaction was recorded when files of both the assessees are lying open upon the table of A.O. The ITAT, Delhi Bench had drawn inference on the basis of facts available in that case. It had not interpreted any provision. We have considered this aspect under the fore going paragraph. Therefore, we do not find any merit in the first fold of submission made by the ld. counsel of the assessee. 11. The Revenue accordingly seeks to validate the impugned satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove stated dual satisfaction exercise before initiating section 153C proceedings. We find that neither the jurisdictional tribunal s decision nor that of Kolkata bench (supra) deviate from this principle. The former deals with a situation wherein the department carried out a search in case M/s. Jairaj group, followed by Assessing Officer s action recording satisfaction forming basis for initiating section 153C proceedings in case of a third party without following the first hurdle of satisfaction that the money, bullion or jewellery etc. belonged to some third person and not the searched party. The latter decision precedes a step further. It holds that the Assessing Officer in case of searched and third party is the same. And it is very difficult to create a distinction to find out when such satisfaction was recorded since both files were lying together on the assessing authority s table. It is therefore clear to us that there is no distinction on legal principle of the satisfaction precondition before initiation of section 153C proceedings in both these decisions. The latter decision is of the view that the timing of this satisfaction being recorded in case of searched assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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