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Asstt. Commissioner of Income Tax, Central Circle-09, New Delhi Versus M/s Nanu Nidh Overseas Pvt. Ltd. and Vica-Versa

2016 (7) TMI 851 - ITAT DELHI

Assessment u/s 153C - Disallowance made by the AO u/s 37 - Held that:- No satisfaction was drawn by the AO before issuing the notice u/s 153C of the Act while making the assessment of the searched Sh. Jatinder Pal Singh, Director of the assessee company and the ld. CIT(A) had given a categorical finding that no satisfaction note was found on record of Sh. Jatinder Pal Singh, however, satisfaction note was drawn in the case of the assessee in its assessment record. Therefore, the notice issued u/ .....

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assessment years 2008-09 to 2010-11 and the cross appeals by the department and the assessee for the assessment year 2011- 12 are directed against the separate orders each dated 29.09.2013 of ld. CIT(A)-XXXII, New Delhi. 2. Since the issues involved in all these appeals are common which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. At the first instance, we will deal with the appeal in ITA No. 6572/Del/2013 for the asse .....

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al before or during the course of the hearing of the appeal. 4. From the aforesaid grounds it would be clear that the main grievance of the department in this appeal relates to action of the ld. CIT(A) in holding the notice issued u/s 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act) as bad in law. 5. The facts of the case in brief are that the assessee during the year under consideration was engaged in the business of providing Business Auxiliary services and also earned inc .....

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d director of the assessee company and a cash of ₹ 15,74,000/- was found, out of which ₹ 15,00,000/- were seized including a sum of ₹ 10,00,000/- belonging to the assessee company. The AO recorded a satisfaction note and issued a notice u/s 153C of the Act and served the same on the assessee. In response to the said notice, the assessee filed a letter dated 19.02.2013 stating that the return filed u/s 139(1) of the Act for the assessment year 2008-09 on 30.09.2008 be treated as .....

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today the 11-09-2013 is against order u/s. 143(3) red with section 153C of I.T. Act, 1961 dtd. 28/03/2013 passed by DCIT, Central Circle-9, New Delhi. The above said assessment was on the basis of satisfaction note recorded on 07/02/2013 by DCIT, Central Circle-9, New Delhi as a consequence of search proceedings in the case of Sh.J.P. Singh. There was search operation u/s. 132 of the Income Tax Act, 1961 on 22/4/10 at the residence of Sh. Jitender Pal Singh, director of the company. On the basi .....

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/1, Vasant Vihar, New Delhi. 1. During the course of assessment proceedings in the case of Sh. Jatinder Pal Singh PAN: AIPPS9874G for the assessment year 2011-12, it was noticed that during the search and seizure operation u/s. 132 of the Income Tax Act, 1961, undertaken on 22.4.2010 pursuant to authorization u/s. 132 in the case of Sri Jatinder Pal Singh, R/o D-6/13, Vasant Vihar, New Delhi, cash of ₹ 15,75,000/- was found out of which cash of ₹ 15,00,000/- was seized from the above .....

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Faridabad where I intended to sell the land in small plots" 2.1 In answer to question No. 27, Sh. Jatinder Pal Singh states as under: "The cash belongs to both the companies and my personal cash but the computer on which books of accounts are maintained have been seized by the CBI and physical print out have not been taken hence I am not in a position to explain the same" 3. The case of M/s. Nav Nidh Overseas Pvt. Ltd. and M/s. Nav Nidh Motels Pvt. Ltd. have been, centralized to t .....

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Commissioner of Income Tax Central Circle-9, New Delhi Notices u/s. 153C of the Income Tax Act, 1961, are hereby issued for the assessment years 2005- 06 to 2010-11 At the outset, we may submit that the said satisfaction note is not relevant for the year under reference as the satisfaction note was only in respect of seizure of cash from Sh. Jitender Pal Singh. The issue of seized cash is relevant for assessment year 2011-12 and same has been considered by Assessing Officer also in assessment ye .....

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account or documents seized and belonging to the assessee. In any case, the satisfaction note referred to in the assessment order u/s. 153 being not relevant for the year under reference, the issue of notice u/s. 153C is illegal and without jurisdiction. 7. The reliance was placed on the following case laws: Jai Steel (India) Vs ACIT 259 CTR 281 (Raj.) ACIT Vs Asha Kataria (ITAT, New Delhi ITA No. 3105, 3106, 3107/Del/2011). Dinesh Tobacco Industries Vs DCIT 88 DTR 329 (JD.) Sh. Vikram Khandelw .....

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153C, the following conditions are required to be fulfilled: (i) The Assessing Officer is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account or document seized or requisitioned belong to a person other than the person with respect to whom search was initiated. (ii) The books of account, document or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such person. (iii) The Assessing Officer shall .....

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regarding the books of account, documents or assets seized belonging to some other person is required to be formed by such Assessing Officer. It is the Assessing Officer of the searched person while appraising or scrutinizing all the seized material of the person has to be satisfied that a part of the seized material did not belong to the person searched but to some other person. In the present case, i.e. in the case of the appellant no search u/s 132 of the IT Act 1961 was carried out by the Di .....

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as seized by the department. On the basis of the replies given by the director Sh. Jatinder Pal Singh in his statement recorded u/s 132(4) on the date of search i.e. 22.4.2010, the Assessing Officer opined and was satisfied that ₹ 10,00,000/- "belonged" to the appellant company. However, on perusal of the assessment record of Sh. Jatinder Pal Singh, i.e. the person who was searched and assessed u/s 153A, I find that the AO ignored the legal pre-requisite to drawn the satisfaction .....

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he director of the company which he subsequently retracted on the ground that it was his personal money. Therefore, the pre-requisite of recording or drawing a satisfaction for initiation of proceedings u/s 153C of the I.T. Act, 1961 was not adhered to by the AO. It is also seen that the AO did not confront the director of the appellant company regarding the contradictory statement given. In these circumstances the ownership of the cash cannot be said to be ascertained to be "belonged" .....

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risdiction of the Assessing Officer on such other person, other than the person searched. From the material on record it is seen that no document or books of account were seized from the director's residence "belonging" to the appellant company. It was stated in the assessment order that during the course of search proceedings the appellant company was asked to produce the copies of the ITRs and books of account which he failed. Subsequently, during post search enquiries again the .....

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ated 17.8.2010 by the CIT-Delhi- V, New-Delhi. Therefore the jurisdiction of the appellant case was conferred/transferred on the DCIT- Central Circle-9, New Delhi on 17.8.2010.The jurisdiction to initiate proceedings u/s 153C would operate only when the seized material was handed over to the present Assessing Officer who was assigned the jurisdiction of the appellant company. From the material on record, I find that the seized material was handed over to the DCIT Central Circle-9 on 07.12.2010. .....

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s 153C, but there is time limit for completion of assessment or reassessment u/s 153C as prescribed under 153B. Period of limitation has been provided in this section with reference to the date on which the books of account, or document or asset seized are handed over under the first proviso to section 153B. Therefore in the present case the time limit for completion of proceedings u/s 153C would commence from the end of the financial year i.e. after 31.3.2011 in which such money, which belonged .....

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erial was seized from the residence of the director of the appellant company, pertaining to the appellant company. (b) No warrant of authorization was issued in the name of the appellant company to initiate search operation u/s 132 against the appellant company with its address. (c) The ownership of cash of ₹ 10,00,000/- belonging to the appellant is doubtful as it is based on the contradictory statements of the director of the appellant company and such statement is not corroborated with .....

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. Jatinder Pal Singh u/s 153A regarding the appellant's case as no such satisfaction note was found on record of Sh. Jatinder Pal Singh. However, satisfaction note was drawn in the case of the appellant in its assessment record. Although the AO is common in both the cases, yet there is no transfer of such note from the file of the searched person to the file of the other person. Therefore, the prerequisite condition for issue of notice u/s 153C is not adhered to legally. Proceedings u/s 153C .....

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ession of the statement recorded regarding the initial ownership of a cash of ₹ 10,00,000/- as stated by the director of the appellant company on 22.4.2010 which he subsequently retracted during post search enquiry on 18.5.2010.There no time limit for issue of notice u/s 153C and in this case notice was issued on 8.2.2013 after 20 months, while assessing the case of .Sh. Jatinder Pal Singh u/s 153A. Therefore, the time limit for completion of this assessment commenced u/s 153C after 31.03. .....

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independent enquiry by the Assessing Officer. (g) The additions made were the disallowance of the entire expenses u/s 37 of the IT. Act, 1961 without being supported by any incriminating document found at the time of search at the residential premises of Sh. Jatinder Pal Singh belonging to the appellant. 7.1.7 In view of the above discussion, and also relying on various case laws referred by the AR of the appellant, in my opinion the issuance of notice u/s 153C of IT Act 1961 is bad in law. 9. .....

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d by the ld. CIT(A) as illegal and without jurisdiction. The reliance was placed on the judgment of the Hon ble Jurisdictional High Court in the case of Pr. CIT & Ors. Vs Nikki Drugs & Chemicals Pvt. Ltd. & Ors. (2016) 236 Taxman 305. 11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that a search took place at the residential premises of one of the director of the as .....

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e Hon ble Jurisdictional High Court in the case of Pr. CIT & Ors. Vs Nikki Drugs & Chemicals Pvt. Ltd. & Ors. (supra) held as under: The first step for initiation of proceedings under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, .....

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nd if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act. Section 153A of the Act requires that a notice be issued to the person sought to be assessed, calling upon the said assessee to file his return of income in respect of each year falling within the specified six AYs. In present case, the ITAT specifically reco .....

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efore forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In High Court opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over t .....

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3C of the Act. The Assessee's contention that despite its request such note had not been disclosed during the assessment proceedings has also not been controverted. In the circumstances, the categorical finding of the ITAT that it was an admitted fact that the assessing officer of the searched persons had not recorded a satisfaction note, cannot be interfered with. 13. A similar view has been taken by the Hon ble Jurisdictional High Court in the case of Pepsi Foods Pvt. Ltd. Vs ACIT (2014) 3 .....

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" in the order or the note would not meet the requirement of the concept of satisfaction as used in section I53C. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the person in respect of whom the search was conducted was satisfied that the seized documents belonged to another person. On going the contents of the satisfaction note, no "satisfaction" of the kind required under section 153C could be discerned. Thus, the .....

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from the fact that there was no disclaimer on the part of the J group in so far as the documents were concerned. Secondly, the finding of photocopies in the possession of a person in respect of whom search was conducted does not necessarily mean and imply that they belong to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the J group might be the owner of the photocopies of the documents it was quite possible .....

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