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2016 (8) TMI 49 - ITAT HYDERABAD

2016 (8) TMI 49 - ITAT HYDERABAD - TMI - Validity of assessment u/s 153C - Held that:- The satisfaction recorded by the A.O. is lacking in material particulars and only the cryptic mechanical direction was issued for issuance of notice U/s 153C of the Act without recording of proper satisfaction. Ironically, in the present note, the word “satisfaction" has also not been used by the AO. Therefore, there is no question of even the cryptic of mechanical recording of satisfaction also. In the light .....

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/02/2014 passed by the ld. CIT(A)-6, Hyderabad for the A.Y. 2003- 04 to 2008-09. The Common grounds taken by the revenue as well as the assessee in appeals are as under:- Grounds in Revenue s appeals. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the additions by following the ratio laid down in the case of All Cargo Global Logistics 137 ITD 287 without going into the merits of the issues. 2. The appellant prays that the order of the CIT(A) on .....

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s not correct and bad in law. 3. The CIT(A)-VI, Hyderabad ought to have adjudicated all the grounds which are on merits against the order passed U/s 143(3) r.w.s. 153C of the Income Tax Act, 1961 towards the additions/disallowances made for the A.Y. 2003-4 which is not correct, not justified and bad in law. 4. The CIT(A)-VI, Hyderabad erred while passing the order wherein the order of the A.O. is erroneous, unjust and contrary to the facts of the case and the grounds submitted has not been adjud .....

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profit has to be taken on the basis of the average and the same should be followed in the case of the appellant. 7. Alternatively, the income returned by the appellant company may please be accepted for the purpose of taxation. 8. The CIT(A)-VI, Hyderabad erred while passing the order wherein the A.O. is erred in disallowing of ₹ 8,692/- towards prior period expenses to arrive the total income without giving the opportunity to the appellant company. 9. The CIT(A) -VI, Hyderabad erred whil .....

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bove persons. Hence, the disallowance are not warranted. 11. The CIT(A) -VI, Hyderabad erred while passing the order, wherein the A.O. erred by disallowing raw block cutting and dressing charges of ₹ 31,25,000/- as the additional income of the appellant the grounds which has not been adjudicated and which is not correct and not justified. 12. The CIT(A) -VI, Hyderabad erred while passing the order wherein during the course of assessment proceedings, the appellant company has already submit .....

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le initiating penalty proceedings U/s 271(1)(c) of the I.T. Act, 1961 on the contention that the assessee company has concealed income which is not correct and not justified. 15. The CIT(A) -VI, Hyderabad erred while passing the order wherein the assessee company has not concealed any income or furnished inaccurate particulars of information. Hence, penalty proceedings U/s 271(1)(c) is not correct and not justified. 16. The CIT(A) -VI, Hyderabad erred while passing the order wherein only the add .....

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ional Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine the question of law which though not arose before the A.O. but arose before the ITAT for the first time. 19. The ld. CIT(A) erred in upholding the order of the A.O. by invoking the provisions of section 153C of the Act for the assessment year 2003-04, there being no satisfaction recorded by him as well as by the A.O. having jurisdiction over the company searched. 20. The ld. CIT(A) ought to have annu .....

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company and is assessed to income tax. For the A.Y. 2003-04, due date for filing the return was 30/11/2003 and the assessee has filed the return of income on 02/8/2004. The said return was processed U/s 143(1) of the Income Tax Act, 1961 (in short the Act). Similarly, the assessee filed return of income for the A.Y. 2004-05 on 01/10/2004 and the return was processed U/s 143(1) on 31/3/2005 and thereafter scrutiny assessment was taken place and the order U/s 143(3) of the Act was passed on 29/08 .....

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8 and the intimation U/s 143(1) of the Act was received on 13/08/2010. 2.1 The revenue has conducted a search and seizure operation in the case of M/s Midwest Granites Pvt. Ltd. group on 24/07/2008. It is alleged that during the search, some material/documents were recovered connected with the assessee. The ld A.O. based on the said documents, issued notice U/s 153C of the Act on 27/08/2010 requiring the appellant to file return of income for the A.Ys. 2003-04 to 2008-09. In response to the said .....

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ee. The assessee has submitted that the assessee has furnished all the details to the ldA.O.. The ld A.O. referred the matter for the special audit U/s 142(2A) of the Act for the year under consideration (2003-04) with a view to safeguard the interest of revenue and also for other Assessment Years. The special audit submits its report on 24/6/2010. On the basis of the said report of the Special audit, the ld A.O. issued summons U/s 131 of the Act on dated 01/7/2011 and also issued fresh notice U .....

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r for other Assessment years. 3. Being aggrieved by the order of the ld A.O., the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) after discussing Section 153A and the judgments has concluded as under:- Vide the above discussion and decided case laws, it has been decided that jurisdiction in search cases is two way; i) one in case of concluded assessment, whether under section 143(3) or 143(1), where date of issue of notice U/s 143(2) has expired and ii) the other in respect of .....

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8-09, the ldCIT(A) has held as under:- 4.9 Coming to the facts of the case, the assessments for the assessment years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 were unabated and treated to have been concluded. It is also evident from the assessment orders that assessing officer has not specifically pointed out to any availability of seized/incriminating material related to the assessee found during the search proceedings conducted in case of MGPL or the directors of the group compan .....

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ified and are directed to be deleted. Since, the additional ground raised on legal issue has been decided in favour of the appellant, it is reasonable to hold that it is not necessary to adjudicate on the various additions made in assessment order, on merit. 4. Now the revenue as well as the assessee are in appeal before us. In fact during the course of argument, basic ground which has been taken by the ld AR for the assessee was that: The ld A.O. was erred in invoking the provisions of Section .....

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ursuance thereto, the ld DR has produced entire ordersheet. The satisfaction recorded in the ordersheet by the ld DCIT CC-7, Hyderabad wasas under:- Search and seizure operations were conducted in case of M/s Midwest Granites Pvt. Ltd. Grou on 24/07/2008. This case is notified to DCIT, Central Circle-7, Hyderabad. Search operations conducted in the group includes the case of M/s Victorian Granites Pvt. Ltd. wherein documents relating to the assessee were found. As such the case comes under secti .....

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xmann.com 220 (Delhi), Hon ble A.P. High Court in the case of CIT Vs M/s Shettys Pharmaceuticals & Biologicals Ltd. (2015) 57 taxmann.com 283. Besides, the ld AR has also relied upon various other judgments. The relevant paragraphs of the judgment relied upon by the ld AR as under:- (i) The Hon ble Gujarat High Court in the case of Vijaybhai N. ChadraniVs. ACIT (2011) 333 ITR 0436 (ii) The Hon ble Allahabad High Court in the case of CIT VsGopi Apartment (2014) 365 ITR 0411 (iii) The Hon ble .....

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n over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized fro .....

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n inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in .....

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no relevance insofar as the present case is concerned. In that case certain documents were said to have belonged to the petitioners therein but a plea had been taken that as the land, in relation to which the documents were, no longer belonged to the petitioners therefore the said documents could not be regarded as belonging to the petitioners. That is an entirely different situation and the facts of that case are clearly distinguishable from the facts of the present case. Insofar as the decisio .....

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the Assessing Officer's satisfaction is with regard to undisclosed 'income' belonging to a person other than the searched person. It is obvious that such satisfaction under Section 158BD by its very nature has to be prima facie and tentative. The same methodology cannot be imported into Section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Of .....

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lsLtd.[2015] 57 taxmann.com 282 (Andhra Pradesh) has held as under:- 6. It is therefore clear that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized .....

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hGoud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding u/s. 153C of the I.T. Act." 7. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized m .....

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find any element of law to be decided. 5. On the basis of the above said contention, it was submitted that there was no application of mind by the A.O. of the company searched and also by the ld. A.O. of the assessee and the A.O. has mechanically and stereo type manner issued the notices U/s 153C of the Act. It was further contended that the ld. A.O. before issuing the notice U/s 153C must apply his mind on the documents seized and record his satisfaction in unequivocal manners that the document .....

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the assessment proceedings initiated pursuant to the notice U/s 153C of the Act in the light of the order passed in the case of SHETTY PHARMACEUTICALS & BIOLOGICAL LTD. (supra). 6. On the other hand, the ld DR has submitted that the Hon bleA.P. High Court in the case GopalLalBadruka Vs. DCIT (2012) 253 CTR 80 (AP) andHon ble High Court of Karnataka in the case of Camara Housing Development Co. Vs DCIT (2014) 49 taxmann.com 98 (Kar) has discussed the scope of the abated and unabated proceedi .....

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HARMACEUTICALS & BIOLOGICAL LTD. (supra) has clearly held that the recording of satisfaction by the A.O. is precondition for invoking the provisions and is not a mere formality because the recording of satisfaction postulate the application of mind, consciously as to the documents seized must be belonging to any other persons other than the persons referred to in Section 153A of the Act. Similarly, the Hon ble Delhi High Court in the case of Pepsi Foods P. Ltd. Vs. ACIT (supra) has held that .....

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