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Shri Prakash P. Mali Versus ACIT (OSD-1) , Central Range 7, Mumbai

2017 (3) TMI 136 - ITAT MUMBAI

Validity of Assessing Officer’s assumption of jurisdiction u/s 153A - non recording of satisfaction notes - Held that:- We drew support from the clarifications issued by CBDT in its circular No. 25/2015 dated 31.12.2015 which is binding on Revenue to withdraw and not press such cases, as in the case on hand, where the AOs concerned, i.e. transferor and transferee have not recorded satisfaction note for proper assumption of jurisdiction for issue of notice under section 153C. In this view of the .....

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Shri Girish Dave For The Respondent : Smt. Smt. Sasmita Misra ORDER 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 fol .....

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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 unaccounted sales. 4. The learned CIT (Appeals) has erred in confirming the levy of interest under section 234A, 234B, 234C and 234D of the Act. 2.2 for A.Y. 2006-07 1. The learned CIT (Appeals) has erred in law and on the facts & in the circumstances of the c .....

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ed in confirming the levy of interest under section 234A, 234B, 234C and 234D of the Act. 3. Ground No. 1 (for both assessment years 2005-06 and 2006-07) - Validity of Assessing Officer s assumption of jurisdiction under section 153A of the Act and consequent passing of orders of assessment under section 143(3) r.w.s 15C of the Act. 3.1.1 In this ground, for both assessment years 2005-06 and 2006-07, the assessee has challenged the validity of the Assessing Officer s (AO) assumption of jurisdict .....

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vey under section 133A of the Act was conducted on that day at the assessee s business premises at M/s. Junction at 33, Ashish Industrial Estate, Gokhale Road (S), Dadar (W), Mumbai. It is further submitted that in the relevant assessment years under consideration, the entire basis for additions made are the documents evidencing unrecorded sales which were found from the assessee s premises in the course of survey notice under section 133A of the Act on 28.06.2006 and contended that it is not th .....

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ssumption 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 h .....

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ed in Annexure A-1 to A-5 were found at the assessee s premises in the course of survey under section 133A and finally to para 3(b) on page 3 where it is mentioned that after verification of the assessee s case records for, inter alia, the assessment years in question, there is no record available that can be referred to as satisfaction/reasons recorded by the transferor/ transferee AO for initiating proceedings under section 153C of the Act. In support of the proposition canvassed by the assess .....

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o be cancelled, the learned A.R. of the assessee placed reliance on, inter alia, the following judicial pronouncements: - (i) DIT vs. Ingram Micro (India) Exports (P.) Ltd. (2015) 60 taxmann.com 57 (Bombay (ii) Narsi Creations vs. DCIT (2016) 70 taxmann.com 156 (Delhi-Trib) 3.1.3 Reliance was also placed on the CBDT Circular No. 24/2015 (F.No. 279/Misc/140/2015/ITJ) dated 31.12.2015, wherein it has been clarified that recording of satisfaction note by the AO is a prerequisite for assumption of j .....

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M/s. Calcutta Knitwares (2014) 43 taxmann.com 446(SC), neither have these appeals been withdrawn/not pressed. It is prayed that in view of the above factual and legal position of the case on hand, 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 Reve .....

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ection 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 by the assessee were rejected by the concerned CIT(A) and the notices issued under section 153C of the Act were .....

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conducted at his business premises at Junction, 33. Ashish Industrial Estate, Gokhale Road, Dadar (W), Mumbai on the same day. On a perusal of the orders of assessment for both assessment years 2005-06 and 2006-07 dated 29.12.2008, at para 5 thereof, it is stated that notices under section 153C of the Act were issued on 08.06.2007 calling for returns of income for the two years on the basis of seized material. However, from a perusal of these orders of assessment, it is seen that the additions i .....

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e AO had not recorded satisfaction that he is relying on incriminating books of accounts/ documents belong to the assessee found/seized in the course of search under section 132 of the Act at the premises of persons other than that of the assessee and therefore the assumption of jurisdiction by the AO for issue of notices under section 153C of the Act was invalid and consequently the orders of assessment for both assessment years 2005-06 and 2006-07 are bad in law and required to be cancelled. I .....

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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 .....

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sumption of proper jurisdiction under section 153C of the Act. In the case of Narsi Creations (2016) 70 taxmann.com 156 (Delhi-Trib) the ITAT, Delhi Bench has held that while recording of satisfaction by the AO of the assessee is a requisite for assumption of jurisdiction to issue notice under section 153C of the Act, even if the AO of person searched and such other person is same, then also, first while making the assessment in the case of the person searched, the AO has to record such satisfac .....

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the assessee was not searched, in terms of section 153A and 153C of the Act, proceedings can only be validly initiated after the AO records his satisfaction that the seized material pertains to persons other than the searched person(s). It is only then that the persons other than the searched person can be proceeded against. Since there was nothing in the order of assessments and no records of assessment were produced by Revenue to establish that satisfaction was recorded by the AO, the Tribunal .....

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e prepared by the AO before he transmits to the AO who has jurisdiction over such other person under section 158BD/153C of the Act. It is further clarified by this circular that even if the AO of the searched person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the courts. In this regard, we feel it would be relevant and therefore extract the CBDT Circular (supra) hereunder: - CIRCULAR NO. 24/2015 [F.No.279/Misc./140 /2015/ITJ] .....

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al 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 o .....

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ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes 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 even if the AO of the searched person and the "other person" is one and the same, then also he is required .....

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ed above it is evidently and admittedly clear that the AO has not recorded satisfaction notes for proper assumption of jurisdiction for issue of notice under section 153C of the Act in this case. We are therefore of the opinion that the assessee s case is squarely covered by the decision of the Hon'ble Bombay High Court in the case of DIT vs. Ingram Micro (India) Exports (P) Ltd. (supra) and of the ITAT Delhi Bench in the case of Narsi Creations (supra). In coming to this decision, we also d .....

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