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Bhawna Bhalla Versus Asstt. Commissioner of Income Tax, Central Circle-21, New Delhi and Deputy Commissioner of Income Tax, Central Circle-21, New Delhi Versus Bhawna Bhalla

2016 (6) TMI 30 - ITAT DELHI

Validity of the assessment framed 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. Thus the initiation of the proceedings u/s 153C in the assessee’s case are held to be invalid and accordingly the assessment framed, thereafter u/s 153C of the Act is quashed. - Decided in favour of assessee - ITA Nos. 2813 to 2817 & 5293/Del/2014, ITA No. 38 .....

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eing disposed off by this consolidated order for the sake of convenience and brevity. 3. The grounds raised in ITA No. 2813/Del/2014 for the assessment year 2003-04 in assessee s appeal read as under: 1. That on the facts and circumstances of the case and the provisions of law, the Ld CIT Appeals has failed to appreciate that the notice issued u/s 153C and assessment order passed by the Ld. AO u/s 153C/ 143(3) is illegal, time barred, bad in law, without jurisdiction and wrong on facts. The addi .....

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me Tax Act in this case are bad in law and deserves to be quashed. 3. That on the facts and circumstances of the case and the provisions of law, the Ld CIT Appeals has failed to appreciate that the assessment framed by Ld AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s 153C of the Act and as such the assessment being bad in law deserves to be quashed. 4. That on the facts and circumstances of the case and the provisions of law, the Ld CIT App .....

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5. That on the facts and circumstances of the case and the provisions of law, the Ld CIT Appeals has erred in not admitting the additional evidences i.e. confirmations, confirmed copies of accounts of all the parties filed during the appellate proceedings and also in not considering the remand report of the AO. 6. That on the facts and circumstances of the case and the provisions of law, the Ld CIT Appeals has erred in holding the conclusion that the 'audited books' notwithstanding, the .....

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CIT Appeals has erred in sustaining the addition of ₹ 23,72,454/- as unexplained Investment/Expenditure, ignoring the fact that the same are duly reflected/entered in the books of the accounts of the appellant for the year under consideration; B) That the Ld CIT Appeals has wrongly calculated the amount of ₹ 23,72,454/- for the purpose of sustaining addition as unexplained Investment/Expenditure; C) That the Ld CIT Appeals has ignored the concept of 'Real Income' and wrongly .....

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the additions made. The additions have been sustained with preset mind of the Ld. CIT Appeals and her order is based on surmises, conjectures and suspicion. 9. That on the facts and the circumstances of the case and the provisions of law, the various observations and findings of the Ld CIT Appeals and Ld AO in the impugned appellate order and assessment order, respectively, are irrelevant and vitiated in the law. 10. That the Appellant craves the right to amend, append, delete any or all grounds .....

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6. Facts related to this issue in brief are that a search & seizure action u/s 132 of the Act was carried out in the cases of Sh. B. K. Dhingra, Smt. Poonam Dhingra, M/s Mayank Traders (P) Ltd. and M/s Horizon (P) Ltd. on 20.10.2008 and during the course of search at their residential premises at F-6/5, Vasant Vihar, New Delhi, certain documents belonging to the assessee were seized. On the basis of documents so found belonging to the assessee, proceedings were initiated u/s 153C r.w.s. 153A .....

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he relief allowed to the assessee. The ld. Counsel for the assessee at the very outset stated that during the course of search no incriminating material was found. Therefore, the assessment framed u/s 153C of the Act was bad-in-law. It was pointed out that this issue is covered by the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs RRJ Securities Ltd. reported at 380 ITR 612 and the decision of the ITAT Delhi Bench in the case of ACIT Vs Shield Home Pvt. Ltd. in ITA Nos.4 .....

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the AO before the issuance of notice u/s 153C of the Act. 10. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issue having similar facts has been adjudicated by the ITAT Delhi Bench G , New Delhi in the case of ACIT Vs M/s Shield Home Pvt. Ltd. (supra) wherein the relevant findings have been given in paras 6 to 10 which read as under: 6. We have considered the rival submissions and have peruse .....

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ground relating to validity of Section 153C before the CIT(A) which is evident from page 1 & 2 of learned CIT(A) s order wherein grounds of appeal raised by the assessee are reproduced. From the plain reading of those grounds of appeal, it is clear that the assessee 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 groun .....

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rtment has intimated that no satisfaction note is recorded in the case of Shri B.K. Dhingra and Smt. Poonam Dhingra. Copy of such information is placed at page 4, 5 & 6 of the assessee s paper book. Learned CIT-DR also could not produce any satisfaction having 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 proceedin .....

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is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the assessee to whom such assets/documents belong. Section 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 o .....

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person searched. The CBDT, vide Circular No.24/2015 dated 31st December, 2015, held as under:- Subjects: Recording of satisfaction note under section 158BD/153C of the Act - reg.- The issue of recording of satisfaction for the purposes of section 158BD/153C has 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 .....

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e assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 3. Several High Courts have held that the provisions of section 153C of the Act are 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 .....

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rding of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does 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 Marc .....

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ed person and the other person is the one and the same. Admittedly, in the case of the assessee, no such satisfaction is recorded by the Assessing Officer of the person searched. In paragraph 5 of the above Circular, the CBDT has directed the Revenue authorities to withdraw the appeal if there is no recording of the satisfaction note in the light of above judgment. In our opinion, the above decision of Hon'ble Jurisdictional High Court and the Circular of the CBDT are squarely applicable to .....

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t since, in our opinion, 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. (supra) and the Circular of CBDT No.24/2015 dated 31st December, 2015 .....

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