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2016 (11) TMI 1241 - ITAT PUNE

2016 (11) TMI 1241 - ITAT PUNE - TMI - Assessment u/s 153C - Held that:- In the absence of any satisfaction recorded by the Assessing Officer of the searched person before initiating proceedings under section 153C of the Act against the assessee i.e. before handing over the documents relating to the assessee and starting the proceedings under section 153C of the Act, the assessment proceedings completed against the assessee under section 153C of the Act are invalid, hence, the same are held so. .....

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ee against separate orders of CIT(A) relate to different years, which are as under:- Sr No ITA No. Appellant Respondent Assessment year Date of order of CIT(A) Section under which appeal filed 1 1996/PN/2012 Om Properties & Developers, MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune - 411001 PAN: AABFO6235E DCIT, Central Circle 1(1), Pune 2008-09 30.04.2012 143(3) r.w.s 153C 2 1125 .....

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red Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune - 411001 PAN: AAMFA4202C 2008-09 15.12.2011 143(3) r.w.s. 153C 5 1123/PN/2012 Rajkumar Aswani, MZSK & Associates, (Formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune - 411001 PAN: AEXPA7340C DCIT, Central Circle 1(1), Pune 2007-08 15.12.2011 143(3) r.w.s. 153A 6 1127/PN/2012 Shrichand Aswani MZSK & Associates, (Formerly S .....

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1125/PN/2012 and 1126/PN/2012 has raised jurisdictional issue against initiation of proceedings under section 153C of the Act which read as under:- 1. On facts and circumstances prevailing in the case and as per provisions of the Act it be held that, the initiation of proceedings u/s. 153C is not in accordance with the provisions of the Act and without complying the ingredients and requirements of the said section. The assessment framed u/s.153C therefore, be held as not tenable in the eyes of l .....

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jurisdiction under section 153C of the Act. First of all, no reasons were recorded for initiating the proceedings under section 153C of the Act. The second issue which has to be seen is whether any documents were seized and forwarded to the Assessing Officer. The third limb was whether the documents seized were incriminating and fourth limb was whether such documents relate to the year under appeal. He stressed that the satisfaction recorded by the Assessing Officer in-charge of the searched pe .....

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fore us. He further pointed out that notice under section 153C of the Act was issued to the assessee, in response to which proceedings were taken up against the assessee. However, the Assessing Officer of the searched person, has failed to record satisfaction before initiating proceedings under section 153C of the Act. He fairly admitted that the Assessing Officer of the searched person i.e. the partner of assessee firm and the assessee firm was the same, but since certain documents were impound .....

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ct, but same principle has been applied by the Delhi Bench of Tribunal in Bhawna Bhalla & Anr. Vs. ACIT & Anr. (2016) 46 CCH 577 (Del - Trib), where the proceedings were initiated under section 153C of the Act. He further stated that even CBDT has clarified that recording of satisfaction note should be strictly complied with, even if the Assessing Officer of the searched person and other person is one and the same. 5. The learned Departmental Representative for the Revenue on the other h .....

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of real estate. Search and seizure operations under section 132 of the Act were carried out on 13.08.2008 against the partners of assessee firm and no such action was against the assessee itself i.e. against M/s. Om Properties & Developers and M/s. Aswani Associates, who are appellants before us. Though survey under section 133A of the Act was carried out in the group cases of the assessee on 13.08.2008 itself but the proceedings initiated against the assessee firm were under section 153C o .....

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d in sections, 139, 147, 148, 149, 151 and 153 of the Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belonged to a person other than the person referred to in section 153A of the Act, then such books of account or documents or assets seized or requisitioned, shall be handed over to the Assessing Officer having jurisdiction over such persons. Under the said sect .....

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st such other person and the provisions of Chapter shall apply accordingly. In other words, in case during the course of search on a person A certain documents, books of account or assets are found and / or seized, which do not belong to searched person but belong to third party, then in case the Assessing Officer of searched person is satisfied that such assets or documents seized belongs to such other person, then the documents, books of account or assets would be handed over to such Assessing .....

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ch other person. Thus, the satisfaction note is to be recorded by the Assessing Officer who is in-charge of the searched person and before handing over the records to the Assessing Officer, who has jurisdiction over such other person, documents or assets relating to whom were found during the course of search. The Hon ble Supreme Court further held that the satisfaction note could be prepared at either of the following stages : (a) at the time of or along with the initiation of proceedings again .....

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:- 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 for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the sa .....

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ilar/pari-materia 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 purpose of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that ev .....

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not meet the guidelines laid down by the Apex Court. 10. The Circular issued by the CBDT has recognized that the satisfaction note is a pre-requisite for initiating proceedings under section 158BD of the Act, which is to be prepared by the Assessing Officer before he transmits the record to other Assessing Officer, who has jurisdiction over such other person under section 158BD of the Act. It is also provided in the said Circular that where the Assessing Officer of the searched person and the o .....

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lines of the Hon ble Supreme Court would apply to proceedings under section 153C of the Act, for the purpose of assessment of income of other than the searched person. The CBDT has accepted this view categorically. Further, directions have been given by CBDT vis -à-vis filing of appeals on the issue of recording of satisfaction note and it is being directed that the pending litigation with regard to recording of satisfaction note under section 158BD / 153C of the Act should be withdrawn o .....

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er section 133A of the Act was carried out in Aswani group cases on 13.08.2008. Admittedly, no search and seizure operations under section 132 of the Act were carried out against the assessee. During the course of search, certain documents were found which as per search team related to the assessee before us and an appraisal report was prepared by the search party in this regard. The Assessing Officer in-charge of the searched person and the assessee were the same. Notice under section 153C of t .....

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rs immediately preceding the assessment year relevant to the previous year in which search action was conducted. The assessee in this regard was issued show cause notice. Admittedly, the assessee has filed return of income in response to the said notice issued under section 153C of the Act. However, the assessee now before us has raised the issue of non-recording of satisfaction by the Assessing Officer who was in-charge of the searched person, before handing over the documents to the Assessing .....

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ame. Admittedly, in the present case before us, no such satisfaction was recorded. The Assessing Officer vide report dated 19.05.2016, has intimated that the case records of M/s. Om Properties and Developers and M/s. Aswani Associates for assessment year 2007-08 were received and after verification of the said case records, it was found that the satisfaction note for issuance of notice under section 153C of the Act for assessment year 2007-08 was not available in case records. The plea of learne .....

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Assessing Officer of the searched person before initiating proceedings under section 153C of the Act against the assessee i.e. before handing over the documents relating to the assessee and starting the proceedings under section 153C of the Act, the assessment proceedings completed against the assessee under section 153C of the Act are invalid, hence, the same are held so. Accordingly, the assessment order passed under section 143(3) r.w.s. 153C of the Act does not stand and the same is annulle .....

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