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M/s. KBL Layout Versus Dy. Commissioner of Income Tax

Validity of assessment u/s 153C - necessity of satisfaction note for initiating the action - Held that:- As it is apparent that the CIT (Appeals) has reproduced the reasons recorded/satisfaction note for initiating the action under Section 153C of the Act however, it is not clear whether the satisfaction was recorded in the assessment proceedings of the searched person or it was recorded by the Assessing Officer at the time of initiating the proceedings under Section 153C of the Act. As we have .....

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cord has been produced before us to ascertain the correct factual position of the satisfaction recorded by the Assessing Officer. Accordingly, in the facts and circumstances of the case, we set side this issue to the record of the CIT (Appeals) for deciding the same by giving a detailed factual finding as well as the validity of assessment under Section 153C of the Act to the extent of the enhancement of assessment made by the CIT (Appeals). Since the jurisdictional issue has been set aside to t .....

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nt Year 2006-07. 2. The assessee has raised the following grounds : " 1. The order of the authorities below in so far as it is against the Appellant, is opposed to law. weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies itself to be assessed on a sum of ₹ 1,11,22,908/- as against a sum of ₹ 16,20,956/- as declared by the appellant under the facts and circumstances of the case. 3. Without prejudice, the .....

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under the facts of the case. 7. The authorities below failed to appreciate that the conditions mentioned under section 132 of the Act did not exist and consequently the search itself is not valid on the facts and circumstances of the case. 8. The authorities below erred and ought to have satisfied themselves that the mandatory conditions for action under section 132 exist and then only issued notices for assessments on the facts and circumstances of the case. Thus the authorities below ought to .....

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les of natural justice under the facts and circumstances of the case. 11. The appellant denies itself liable to be levied to interest under section 234 A, 234B and 234C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with section 234A,234B and 234C of the Act. .....

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tate. A search was carried out under Section 132 of the Income Tax Act, 1961 (in short 'the Act') in the case of C R Lakshminarayana and Sri K.B. Lakshman group on 6.10.2009 and consequent to search proceedings of the assessee's case was centralised. During the course of search certain documents were seized. A notice under Section 153C of the Act was issued to the assessee. In response the assessee filed its return of income on 2.9.2011 declaring total income of ₹ 16,20,956 as .....

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e. However on appeal, the CIT (Appeals) has enhanced the assessment and determined the income of the assessee at ₹ 1,11,22,908. 4.1 The assessee has also raised the grounds for validity of assessment under Section 153C under Ground No.9. This issue goes to the root of the matter. Therefore we first take up the jurisdictional issue of validity of assessment under Section 153C of the Act. The assessee has also raised this issue in the additional ground filed vide petition dt.8.6.2016. 5. The .....

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rised Representative has pointed out that the CIT (Appeals) has though reproduced the satisfaction note in the impugned order however it is not clear in whose assessment record this satisfaction was recorded by the Assessing Officer. Thus the learned Authorised Representative has submitted that even otherwise the satisfaction is required to be recorded in the assessment record of the present searched as well as the record of the assessee before initiating action under Section 153C of the Act. He .....

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ssessee. On receipt of the record the Assessing Officer is also required to record the satisfaction before initiating the proceedings under Section 153C of the Act. In support of his contention, he has relied upon the judgment of Hon'ble Supreme Court in the case of CIT Vs. Calcutta Knitwears (2014) 362 ITR 673 (SC) as well as the decision of the Hon'ble Delhi High Court in the case of CIT Vs. RRJ Securities Ltd. (2016) 380 ITR 612 (Del). Hence the learned Authorised Representative has s .....

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arate satisfaction is required once a satisfaction is recorded by the Assessing Officer. He has thus contended that in this case the mandatory condition of recording satisfaction has been complied with by the Assessing Officer before initiating the proceedings under Section 153C of the Act. 7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the recording of satisfaction is a mandatory condition before initiating the proceedings under .....

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income of the person other than the searched person. The Hon'ble Supreme Court in the case of CIT Vs. Calcutta Knitwears (supra) while considering the validity of initiating the proceedings under Section 158BD has held in paras 43 & 44 as under : " 43. In the lead case, the assessing officer had prepared a satisfaction note on 15.07.2005 though the assessment proceedings in the case of a searched person, namely, S.K. Bhatia were completed on 30.03.2005. As we have already noticed, t .....

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of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158BC. Further, the interpretation placed by the Courts below by reading into the plain language of Section 158BE(2)(b) such as to extend the period of limitation to recording of satisfaction note would run counter to the avowed object of introduction of Chapter to provide for cost-effective, effic .....

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edings 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." Thus it is clear that for initiating the proceedings under Section 158BD of the Act satisfaction note is sine qua and must be prepared by the Assessing Officer before he transmits the record to the other Assessing Officer who has j .....

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the AO. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the AO to be satisfied that the assets/documents se .....

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e with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized. 38. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income." The Hon'ble High Court has held that the Assessing Officer is requir .....

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tiating the proceedings under Section 153C of the Act. In the case on hand, the CIT (Appeals) has recorded the satisfaction note and disposed of the issue as under : "2) Whether jurisdiction u/s.153C was correctly invoked. This issue has not been elaborated. In any case, the records have been perused and it is observed that pursuant to search and seizure in the case of C R Lakshminaryana and K B Lakshman group of cases, action under Section 153C were initiated in the case of the appellant. .....

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f search in the case of Sri C R Lakshminarayana and K B Lakshman group the following books/documents were found and seized u/s.132. Exhibit I.D. Page Nos. A/KBL/03 131 to 138 A/KBL/04 1 to 5 A/KBL/05 5 to 8 On a scrutiny of the above documents seized it is seen that the above materials belongs to M/s. KBL Layout, I am satisfied that action under Section 153C has to be initiated in the case of M/s. KBL Layout for the A.Ys 2004-05 to 2009-10. Hence, issue notice u/s.153C." The appellant has n .....

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