TMI Blog2017 (4) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion and precedent, in our considered opinion, the assessee deserve to succeed on this account and the assessments are liable to be quashed on account of lack of validity of jurisdiction. Accordingly we set aside the orders of the learned CIT(Appeals) on this aspect of jurisdiction and quash the assessments by holding that requisite satisfaction was not recorded before issue of notice u/s 153C. - Decided in favour of assessee - I.T.A. Nos. 382 & 383/Nag/2014, I.T.A. Nos. 391 & 392/Nag/2014 - - - Dated:- 22-3-2017 - Shri Shamim Yahya, Accountant Member And Shri Ram Lal Negi, Judicial Member Assessee by : Shri K.P. Dewani. Department by : Shri A.R. Ninawe. ORDER Per Bench These are cross appeals by the assessee and the Revenue emanating out of the orders of learned CIT(Appeals)-III, Nagpur for assessment years 2008-09 and 2009-10 respectively. Since the issues are connected and the appeals were heard together, these are being disposed of by this common order. Common grounds of appeal raised in assessee s appeal read as under : 1. The notice issued under section 153C of Income Tax Act, 1961 is illegal, invalid and bad in law. Thus consequent assessment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. During the course of search certain documents were found. These were observed by the AO to be related to the assessee. Hence proceedings u/s 153C were initiated against the assessee. During the course of assessment the assessee objected as to the validity of notice u/s 153C. However, the AO rejected this contention holding that the notices were issued to the assessee on the basis of incriminating evidence found and seized during the course of search and seizure operation and only after recording proper satisfaction that proceeding u/s 153C was initiated. Thereafter on merits the AO made the additions by concluding as under : In view of above facts and discussions, it is clear that the unrecorded payments mentioned in the diary are actually the receipts of the Artefact group. As mentioned before, the assessee JV was the independent consultant on the projects of NHAI which were undertaken by Ashoka Buildcon group, hence, the unrecorded receipts are to be added to the income of the assessee. As per the table given above, the assessee has received ₹ 1,21,00,000/- during the year from Ashoka group and this is added to assessee s income as its undisclosed income. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been denied or rebutted by the A.R. of the appellant. Further, the AO. has made the addition of ₹ 1.71 crores based upon the seized documents, as is evident from the assessment order passed. Besides, it has already been observed that the AO. had a bonafide belief that the seized documents were incriminating in nature and had also properly recorded his satisfaction vide the above mentioned 'Satisfaction Note'. Therefore I do find any infirmity in the action of the AO. as regards the legality of the issuance of the notice u/s.153C of the I T Act. Therefore this ground of appeal raised by the appellant is hereby dismissed. 4. With regard to the merits of the addition, learned CIT(Appeals) accepted the contention that addition was based upon inference and not supported by legal evidence on record. Hence he deleted the addition on merits. 5. Against the above order the Revenue and assessee are in cross appeals before us. 6. First we deal with the appeal by the assessee wherein the validity of notice u/s 153C has been challenged. 7. Learned counsel of the assessee made written as well oral submissions. The written submissions are as under : A Satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Sinhgad Technical Education Society vide order dated 25/03/2015. ii) (2011) 57 DTR 0241 (Pune) Sinhgad Technical Education Society vs. ACIT iii) ITAT order in ITA Nos.8628 - 8633/M/201 0 in the case of M/s. Dhananjay International Ltd. vide order dated 12/10/2015. iv) ITAT order in ITA No.959/PN/2010 in the case of Bharati Vidyapeeth Medical Foundation vide order dated 28/04/2011. v) Hon'ble Bombay High Court order in ITA No.923 of 2012 in the case of Bharati Vidyapeeth vide order dated 11/09/2014. vi) ITAT order in ITA No.917/PN/2010 in the case of Bharati Vidyapeeth vide order dated 28/04/2011. vii) ITAT order in IT(SS)A Nos.84-86/Kol/2011 in the case of Trishul Hi-Tech Industries vide order dated 24/09/2014. viii) ITAT order in ITA No.472/Coch/2013 in the case of M/s. Royal Cartons P. Ltd. vide order dated 16/09/2015. F) The satisfaction notice as observed in the file of assessee refers to documents seized from the residence/office premises of M/s. Artefact Project Ltd. group of cases for issue of notice u/s 153C of LT. Act 1961 It is observed that it is no satisfaction in terms of provision of section 153C of IT Act 1961 mandatorily required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Manish Maheshwari vs. CIT. I) AO. in the assessment order at para 5 has observed that proper satisfaction has been recorded for issue of notice u/s 153C of I.T. Act 1961. AO. has not provided copy of satisfaction for issue of notice uls 153C in the course of assessment proceedings. No incriminating documents were found in the course of search at the premises of M/s Artefact Projects Ltd. Observation of AO. that notice has been issued pursuance to incriminating evidences found during the course of search at M/s. Artefact Projects Ltd. is factually incorrect. Consequent satisfaction as well as issue of notice u/s 153C of I.T. Act 1961 is not in accordance with law. J) Issue covered in the favour of assessee by decision of Hon'ble ITAT, Nagpur Bench, Nagpur. i) ITA Nos.146, 147 148/Nag/2014 in the case of Mansi Commodities Pvt. Ltd. vide order dated 19/12/2016 8. Per contra learned D.R. relied upon the orders of the authorities below on the issue of validity of notice u/s 153C. 9. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that the satisfaction of the AO of the searched persons as envisaged u/s 153C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st limb of argument in this regard is that there is no valid satisfaction in the case of the person searched that incriminating material found may relate to the assessee in whose case action has been taken u/s 153C. The search records of the searched person, namely, M/s Artefact Projects Ltd. were called for and examined. No satisfaction note whatsoever was found recorded in the case of the searched person. Neither any satisfaction was mentioned in the order sheets nor any satisfaction note was found in the file which was not numbered. The fact that no satisfaction note is there in the case of the searched person is also evident from the finding of the learned CIT(Appeals) in his appellate order reproduced herein above wherein he also has referred to the satisfaction note which is recorded in the case of the assessee and not in the case of the searched person. 12. In this regard we can gainfully refer to the provisions of section 153(1) as under : Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 'satisfaction' is recorded by the AO of the person searched and such documents or assets seized, etc., are handed over to the AO of the 'other person', that the later AO acquires jurisdiction to make assessment or reassessment of the 'other person.' It is, therefore, clear that the AO of the 'other person' can acquire jurisdiction to assess or reassess income of the 'other person' only when the AO of the persons searched records satisfaction in his case (searched person) before handing over money, bullion, jewellery, etc. to him. So, what emerges is that the recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person' to acquire jurisdiction. Unless such jurisdictional fact is satisfied, there can be no question of making assessment or reassessment of the 'other person.' In the case of Anil Kumar Ors. vs. UOI Ors. Reported in 155 Taxman 659 (5C), the Hon'ble Apex Court observed that A jurisdictional fact is a fact which must exist before a court, a tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has laid down that for the purpose of Section 15880 of the Act, recording of a satisfaction note is a prerequisite and thesatisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person uls 15880. The Hon'ble Court held that the 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 searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BO 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 purposes of assessment of income of other than the searched person. This view has been accepted by CBOT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er law this has to be done in that manner alone and not other way (See Nazir Ahmed v. King Emperor). We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided. Conclusion: Recording of satisfaction of AO(s) is pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind dconsciously as documents seized must be belonging to any other person other than person referred to in S. 153-A. ii) Hon ble High Court of Madhya Pradesh High Court decision in the case of CIT vs. Mechmen in ITA No. 44/2011, ITA No. 45/2011 others vide order dated 10-07-2015. In this case the relevant exposition from the Hon ble High Court is as under : Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be satisfied that the items belongs or belong to the person other that the person referred to in Section 153A. That satisfaction of the concerned Assessing Officer is a sine qua non. The consequences flowing from the action to be taken on the basis of such information handed over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n light of the Circular No. 24/2015 dated 31st December, 2015 issued by the Central Board of Direct Taxes on the subject Recording of satisfaction note under Section 158BD/153C of the Act , these appeals are not pressed These appeals are, accordingly, dismissed as not pressed. 16. From the above case laws and CBDT Circular, it is evident that recording of requisite satisfaction in the case of a searched party is a sine qua non for assuming jurisdiction for the issue of notice u/s 153C even if the AO of the searched person and the assessee are same. It is abundantly clear from the records in the case of the searched person that there is no requisite satisfaction granting the AO jurisdiction for issuing notice to the assessee u/s 153C of the I.T. Act. No satisfaction note whatsoever is found in the case of the searched person, namely, M/s Artefact Projects Ltd. In absence of any satisfaction note in the case of M/s Artefact Projects Ltd. that any seized material belonging to the assessee has been found which is incriminating in nature which is to be handed over to the AO of the assessee, the jurisdiction assumed in this case is illegal and the same deserves to be quashed. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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