TMI Blog2017 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... Per Jason P. Boaz, A.M. These appeals by the assessee are directed against the orders of the CIT(A)-40, Mumbai dated 26.09.2013 for assessment years 2005-06 and of the CIT(A)-52, Mumbai dated 24.11.2015 for A.Y. 2006-07. Both appeals, having certain common/connected issues, were heard together and are being disposed off by way of this common order for the sake of convenience. 2. In these appeals, the assessee has raised the following grounds: 2.1 for A.Y. 2005-06 1. The learned CIT (Appeals) has erred in law and on the facts in the circumstances of the case in holding notice issued under Sc. 153C of the act as valid and consequential erred in law in holding the assessment made under Sec.153C of the Act as valid. Without prejudice to the above, 2. Learned CIT (Appeals) has erred in law and on the facts in the circumstances of the case in upholding the estimate on of unaccounted sale partly of ₹ 43,06,287/- out of ₹ 1,09,37,871/- estimated by AO. 3. Learned CIT (Appeals) has erred in law and on the facts in the circumstances of the case in upholding the estimated addition of ₹ 6,54,030/- towards Gross profit on the unaccoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 132 of the Act in the case of a person other than the assessee, i.e. from his brothers premises. 3.1.2 The learned A.R. further submits that the AO has not recorded his satisfaction to the effect that the he is relying on incriminating books of account or documents found and seized in the course of search at the premises of person other than that of the assessee and therefore the assumption of jurisdiction by the AO under section 153C of the Act is invalid and consequently the orders of assessment made under section 143(3) r.w.s. 153C of the Act for both assessment years 2005-06 and 2006-07 are bad in law and consequently required to be cancelled. In support of this proposition the learned A.R. of the assessee submitted that even after several opportunities afforded by the Bench, the learned D.R. for Revenue was unable to produce the relevant record to prove that the AO had recorded his satisfaction for initiating proceedings under section 153C of the Act in the case on hand. The learned A.R. of the assessee then drew the attention of the Bench to the AO s letter dated 24.11.2016; wherein at para 2(ii) on page 1 thereof the AO acknowledges that only action under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the orders of assessment for assessment years 2005-06 and 2006-07 be quashed since the validity of AO s assumption of jurisdiction for issue of notices under section 153C of the Act, in the absence of recording satisfaction notes, for the same cannot be upheld. 3.2 Per contra, the learned D.R. for Revenue supported the orders of the learned CIT(A) upholding the validity of assumption of jurisdiction by the AO under section 153C of the Act. 3.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The issue for consideration and adjudication before us is the validity of AO s assumption of jurisdiction for issue of notice under section 153C of the Act and consequent validity of orders of assessment under section 143(3) r.w.s. 153C of the Act dated 29.12.2008 for assessment years 2005- 06 and 2006-07. On an appreciation of the facts on record, it is seen that this legal issue was raised by the assessee before the concerned CIT(A) as a ground of appeal in A.Y. 2006-07 and as an additional ground of appeal in the A.Y. 2005-06. In both these assessment years the arguments, facts put forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Despite these opportunities being afforded, Revenue has failed to produce satisfaction notes recorded by the AO for proper assumption of jurisdiction of issue of the notices under section 153C of the Act. All that has been filed by Revenue before the Bench is the AO s letter dated 24.11.2016, which confirms at para 2(ii) thereof that there was no search under section 132 of the Act conducted on the assessee, but a survey under section 133A of the Act was conducted at his business premises on 28.06.2008 and at para 2(v) confirms that certain papers relating to undisclosed sales, purchases, expenses were found in survey proceedings. At para 3(b) of this letter, the AO admits that after verification of the case records page by page and order sheets, there is no record available to establish that satisfaction notes were recorded by the transferor and/or transferee officer for assumption of jurisdiction for issue of notices under section 153C of the Act for the concerned assessment years. In this factual matrix of the case before us, we are of the considered opinion and are constrained to draw the conclusion that the AOs concerned have not recorded any satisfaction, which is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be relevant and therefore extract the CBDT Circular (supra) hereunder: - CIRCULAR NO. 24/2015 [F.No.279/Misc./140 /2015/ITJ] SECTION 153C, RAD WITH SECTION 158BD, OF THE INCOME TAX ACT, 1961 SEARCH AND SEIZURE ASSESSMENT OF INCOME IN CASE OF OTHER PERSON RECORDING OF SATISFACTION NOTE UNDER SECTION 158DB/153C OF SAID ACT CIRCULAR NO. 24/2015 [F.No.279/Misc./140 /2015/ITJ] DATED 31-12-2015 The issue of recording of satisfaction for the purposes of section 158BD/1 53C 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 12.3.20 1 4(available in NJRS at 2014-LL-0312-5 1) 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 158131). The Hon'ble Court held that it satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal matrix of this case, we hold that since the AOs concerned (i.e. transferor/transferee AOs) have not recorded any satisfaction notes for proper assumption of jurisdiction for issue of notices under section 153 of the Act, the said notices issued under section 153C of the Act on 08.06.2017 for both assessment years 2005-06 and 2006-07 are held to be invalid and consequently the resultant orders of assessment for these two assessment years passed under section 143(3) r.w.s. 153C dated 29.12.2008 are bad in law and are both cancelled. We hold and direct accordingly. Consequently, ground No. 1 of assessee s appeal is allowed. 4. Grounds No. 2 to 4 Without prejudice on merits 4.1 In view of the finding rendered by us allowing ground No. 1 of assessee s appeal, thereby addressing the assessee s grievance by cancelling the orders of assessment for assessment years 2005-06 and 2006-07 as bad in law in view of the fact that since no satisfaction notes were recorded by the concerned transferor/transferee AOs for proper assumption of jurisdiction for issue of notices under section 153C of the Act rendering the said notice invalid, these alternative grounds on merits, raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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