TMI Blog2017 (3) TMI 1536X X X X Extracts X X X X X X X X Extracts X X X X ..... inating material while framing the assessment u/s 153A of the Act was not valid and also in the absence of the satisfaction recorded by the AO of the searched person, the assumption of jurisdiction u/s 153C of the Act in the case of persons other than searched person was also not valid. - Decided in favour of assessee. - ITA Nos. 6208 & 6209/Del/2014, ITA Nos. 6228, 6230 & 6231/Del/2014, ITA Nos. 6210 to 6213/Del/2014, ITA Nos. 6232 to 6234/Del/2014, ITA Nos. 6225 to 6227/Del/2014, ITA Nos. 6214 & 6215/Del/2014, ITA Nos. 6235 to 6237/Del/2014 - - - Dated:- 24-3-2017 - Beena Pillai (Judicial Member) And N. K. Saini (Accountant Member) For the Assessee : Rano Jain (Adv.), Ashish Goyal (CA), Ashish Chadha (CA) For the Revenue : S. S. Rana (CIT DR) ORDER The cross appeals by the assessee and the department and the appeals by the assessee are directed against the separate orders of the of ld. CIT(A)-XXXII, New Delhi as per following details: S.No. Assessee A.Y. Appeal No. Assessee Appeal No. Department Order of the CIT(A) dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of ₹ 3,20,00,000/- made by the AO on account of share application money under section 68 of the Act. 3(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the above addition rejecting the explanation and evidences brought on record by the assessee to prove the identity, creditworthiness of the shareholder and genuineness of the transaction. (ii) That the addition had been made without pointing out any defect or irregularity in the evidences filed by the assessee. 4. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the said addition despite the fact that the same has been made on the basis of material and evidences collected at the back of the assessee without giving it an opportunity to rebut the same in clear violation of the principle of natural justice. 5. On the facts and circumstances of the case, learned CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the authorities below in brief are that the assessee was engaged in the business of a Builder and Developer of Real Estate. A search and seizure operation u/s 132 of the Act was conducted by the Investigation Wing of the department in Victory Group of cases (Main Jagat Group) its directors, other individuals and connected associates at business residential premises on 14.09.2010. A survey operation u/s 133A of the Act was also conducted on the business premises of the assessee on 14.09.2010. The AO issued the notice u/s 153A of the Act on 04.11.2011 for the assessment years 2005-06 to 2010-11. The assessee informed the AO that no action u/s 132 of the Act was initiated against the assessee. The AO verified the same and found the said version of the assessee as correct. Accordingly, the aforesaid notices issued u/s 153A of the Act were withdrawn vide letter dated 26.06.2013 and the assessee was informed accordingly. Thereafter, a satisfaction note u/s 153C of the Act was drawn on 27.02.2013 and the notices u/s 153C of the Act were issued for the assessment years 2005-06 to 2010-11. In response, the assessee vide letter dated 05.03.2013 stated that return of income alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessments. 6. The Ld AO disregarded the all principles of Natural Justice just brushed aside all objections/case laws and went ahead in making Assessments. 7. Now Comes the most bizarre Part of total disregard of Principles of Natural justice, which was itself evident from the questionnaire issued on 5.3.2013 (even without waiting to receive return of income U/s 153C of I.T. Act which was 6th march 2013 as the date given to/file Return of Income in pursuance to notice u/s 153C of I.T. Act on 27.02.2013. 8. The Ld AO went ahead and framed the Assessment where additions were made u/s 68 of I.T. Act on a/c of share application money received from one and all treating the same as bogus by giving reference to some third party statement, references no such Statements/enquiries reports were ever shown or confronted to Appellant Company and surprisingly one excel sheet which is nothing but detail of investments received by Appellant company has been made part of order as base for making Addition U/s 68 of I.T. Act. The Ld AO Seriously misunderstood the contents of such statements and is relying on those documents/compilation statements which were never ever shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 153C of the Act and he did not carry out any such exercise as mentioned in Section 153C(1) of the Act with proper application of mind, therefore, initiation of proceedings u/s 153C of the Act was not proper and was bad-in-law. The relevant findings had been given by the ld. CIT(A) in paras 8 to 8.1.12 of the impugned order which read as under: 8. I have gone through the facts of the case and considered the written submissions, details filed in the paper book of the appellant. I have also perused the citation of various case laws relied upon by the appellant in support of the contentions raised in grounds of appeal. Section 153C of the I T Act, 1961 reads as under: 153C. 1(1)] 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 or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person. The conditions precedent for invoking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act. 8.1.1 The language of section 158BD and section 153C needs to be elaborated and appreciated while addressing the legal position of section 153C of the IT Act, 1961. Section 158BD reads as under: 158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed [under section 158BC] against such other person and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O of the person searched as well as handing over the books of account or other documents or assets seized to the AO of such other person is present in both the sections. To this extent the decision of the Hon'ble Apex court in the case of Manish Maheswari is applicable while interpreting the provisions of section 153C. 8.1.4 In the backdrop of the above legal position, during the course of appeal proceedings I have called for the assessment record of the appellant company and found that the AO recorded the satisfaction note in the file of the appellant company as under: Satisfaction u/s 153C of the Income Tax Act 1961 in the case M/s Victory Dwellings Pvt. Ltd. PAN-AACCV2862N 208. Gupta Tower. Azadpur Commercial Complex. Azadpur. Delhi-110033. During the course of assessment proceedings u/s 153A in the case of Sh. Pramod Gael, it is noticed that search and seizure operation u/s 132 was undertaken on 14.09.2010 in the case of Sh. Pramod Goel, Smt Savita Goel, and Sh. Ashish Gael at EN33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Dwellings Pvt. Ltd. were found and seized from the above premises. Page no. 96 to 98 of Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons and the Assessing Officer is duty bound to carry out the exercise, as under: a. As an Assessing Officer of the person searched he should have recorded a satisfaction note during the course of assessment proceedings u/s 153A in the case of Sh. Pramod Goel in his file. b. After recording such satisfaction note in the file of Sh. Pramod Goel i.e. (the person searched) the same should have been placed in the file of such other person i.e. the appellant company M/s Victory Dwellings Pvt. Ltd. c. Then in the capacity as an Assessing Officer of such other person, he should have taken cognizance of the satisfaction note and thereafter issued a notice u/s 153C of the IT Act, 1961. 8.1.9 On perusal of the assessment folder of Sh. Pramod Goel, I find that such an exercise of recording the satisfaction note during the assessment proceedings u/s 153A was not carried out and there is no satisfaction note found on record. On the other hand the Assessing Officer recorded the satisfaction note in the file of such other person, i.e. the appellant company M/s Victory Dwellings Pvt. Ltd. This fact is contrary to the provisions and does not satisfy the condition for assuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the balance sheet, profit and loss account or schedule A for the year ended 31.03.2010 and no income was detected as undisclosed/unaccounted for the year under consideration from this document. Therefore, this document cannot be said to be incriminating on the basis of which action u/s 153C was taken by the Assessing Officer. In support of this inference, I rely upon the decision of the Hon'ble ITAT in the case of Singhad Technical Education Society Vs ACIT in ITA No. 114 to 117/PN/10. 8.1.12 Reference is also made here to the Proviso to section 153C which stipulates as under: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [subsection (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:]. 20. The above proviso refers to second proviso to sub-section (1) of Section 153A, That Section 153A(1) and its first and second provisos read as under:- 153A. [(1)] Notwith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note in the file of the person searched and thereafter such satisfaction note along with the seized document or books of account is to be placed in the file of such other person. The date on which this exercise is completed would be considered as the date of receiving books/documents by the Assessing Officer having jurisdiction over such other person. After considering and examining the facts of the instant case, I am of the opinion that the Assessing Officer did not appreciate the legal frame and the conditions laid down u/s 153C and he did not carry out any such exercise as mentioned above as mandated by the said section with proper application of mind and therefore initiation of proceedings u/s 153C are not proper and bad in law. 9. The ld. CIT(A) although considered the initiation of assessment proceedings u/s 153C of the Act as bad in law, however, on the merit of the case the ld. CIT(A) sustained the addition of ₹ 2,50,00,000/- representing the share capital shown in the name of 7 companies, namely, M/s ANG Finvest P. Ltd., M/s Bhavani Vanijya P. Ltd., M/s Bhavani Portfolio P. Ltd., M/s Ganadhipati Traders Credits P. Ltd., M/s Jajodia Finance P. Ltd., M/s Jemtec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents was raised by the AO. Therefore, in the absence of any incriminating material found during the course of search no addition could have been made in the assessment completed u/s 153C of the Act. The reliance was placed on the following case laws: CIT Vs RRJ Securities Ltd. (2016) 380 ITR 612 (Del.) CIT Vs Kabul Chawla in ITA No. 709 713/2014 order dated 28.08.2015 (Del. H.C.) DCIT Vs Smt. Geeta Devi Aggarwal in ITA No. 1906/Del/2013 order dated 03.10.2016 (ITAT, Del.) ACIT Vs Sh. Devender Kumar Aggarwal in ITA Nos. 3554 3555/Del/2012 order dated 30.09.2016 (ITAT, Del.) ACIT Vs Sunkan Travels Pvt. Ltd. in ITA Nos. 559 to 564/Del/2012 order dated 27.07.2016 (ITAT, Del.) Narsi Creations Vs DCIT in ITA No. 3186, 3188 to 3194 of 2013 order dated 10.05.2016 (ITAT, Del.) Nageshwar Investment Ltd. in ITA No. 5393/Del/2012 (ITAT, Del.) Natural Products Bio Tech Ltd. Vs DCIT (2015) 153 ITD 58 (Del. Trib.) Andaman Timber Industries Vs CCE in Civil Appeal No. 4228 of 2006 order dated 02.09.2015 (Hon ble SC) Prakash Chand Nahata Vs Union of India 163 CTR 310 (SC) Kishan Chand Chellaram Vs CIT 125 ITR 713 (SC) CIT Vs SMC Share Brokers Ltd. 288 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no search and seizure operation u/s 132 of the Act was initiated against the assessee, he withdrew the notice issued u/s 153A of the Act. Thereafter, the AO issued the notice u/s 153C of the Act on the basis that the documents pertaining to the assessee were fund from the premises of the searched person. The said documents were the copies of balance sheet, profit and loss account and schedule A (advances against supplier). In the present case, the AO assumed the jurisdiction u/s 153C(1) of the Act, the provisions contained in the said Section read 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 or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s Victory Dwellings Pvt. Ltd. were found and seized from the above premises. Page No. 96 to 98 of Annexure A-1 of Party V-2 is a copy of the Balance sheet, Profile loss account, Schedule-A (Advance against suppliers) pertaining to M/s Victory Dwellings Pvt. Ltd, for the financial year ending 31.3.2010. The case of M/s Victory Dwellings Pvt. Ltd. was centralized with this office vide F. No. CIT-Delhi-VI/Centralization/2011-12/648 dated 22.6.2011 issued by the CIT, Delhi-VI, New Delhi. I am therefore satisfied that the documents seized,, as referred to above, belong to M/s Victory Dwellings Pvt. Ltd. warranting action u/s 153C in this case. On perusal of the aforesaid satisfaction note, it is crystal clear that the said satisfaction was recorded by the AO in the proceedings relating to the assessee i.e. M/s Victory Dwellings Pvt. Ltd. and not in the case of Sh. Pramod Goel in whose case search and seizure operation u/s 132 of the Act was undertaken on 14.09.2010. Therefore, the jurisdiction assumed by the AO without recording the satisfaction in the case of the searched person was not valid. 16. Now the CBDT vide Circular No. 24/2015 dated 31.12.2015 clar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is crystal clear that even if the AO of the searched person and of the other person is one and the same then he is required to record his satisfaction in the case of searched person. In the present case, it is an admitted fact that the AO of the searched person has not recorded any satisfaction rather the satisfaction is recorded by the AO of the other person i.e. the assessee which is evident from the satisfaction note, copy of which is placed at page no. 21 of the assessee s paper book. Therefore, the assessment framed in the hands of the assessee was not valid. Moreover, from the observation of the AO in the satisfaction note also it is crystal clear that no incriminating material was found, the addition was made only on the basis of the copy of balance sheet, profit and loss account and schedule of advances against supplies pertaining to the assessee, those documents were already in the knowledge of the department as the same were furnished alongwith the regular return of income. Therefore, those documents by no stretch of imagination can be said to be incriminating as those were made out of the regular books of accounts of the assessee and the return of income was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the findings of the search and any other material existing or brought on the record of the Assessing Officer, (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. It has further been held that On the date of the search the assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 19. In view of the aforesaid discussion, we are of the confirmed view that the additions made by the AO in the absence of incriminating material while framing the assessment u/s 153A of the Act was not valid and also in the absence of the satisfaction recorded by the AO of the searched person, the assumption of jurisdiction u/s 153C of the Act in the case of persons other than searched person was also not valid. In that view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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