TMI Blog2016 (8) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the order of the Commissioner of Income Tax (Appeals)-II all dated 1/10/2013 passed in the First Appeal No. 320 to 325/ 2010-11 for Assessment Year 2003-04 to 2008-09. The assessee has also filed cross objections challenging the impugned orders of the CIT(A) on legal issue by mainly alleging that the assessment proceedings for the periods under consideration was not pending on the date of recording satisfaction u/s 153 C of the Income Tax Act, 1961 Act and since the same did not abate, the proceedings u/s 153C of the Act are bad in law and deserve to be quashed as the A.O of the searched person did not record any satisfaction in the present cases. 2. First of all, as agreed by the parties, we take up Cross- Objections of the assessee for hearing. The Ld. Counsel of the assessee pointed out that no satisfaction has been recorded in the case of searched person i.e. Shri B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Bulidcon Pvt. Ltd, therefore, initiation of proceedings u/s 153C of the Act against the assessee was illegal assumption of jurisdiction u/s 153C of the Act is bad in law. The Ld. Counsel drew our attention towards order of ITAT, Delhi E Bench dated 27/4/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has directed all the revenue officers that in the cases where satisfaction note has not been properly recorded by the A.O of the searched person then the same should not be pressed before the Tribunal and other higher forums. The Ld. Counsel placing reliance on the decision of Hon ble Jurisdictional High Court of Delhi in the case of R.R. J. Securities reported in 380 ITR 612 (Delhi) submitted that where no satisfaction has been recorded in the case of person searched then initiation of proceedings u/s 153C of the Act is void ab initio and bad in law and thus assessment order framed u/s 153C read with section 143(3) of the Act should be quashed. The Ld. Counsel vehemently pointed out that the CIT(A) was not correct and justified in dismissing the legal contentions of the assessee. Therefore, Cross-Objections of the assessee in this regard may kindly be allowed and assessment order passed without any valid jurisdiction and bad in law should be demolished and quashed. 6. Replying to the above, the Ld. Departmental Representative reiterated its written submissions and submitted that the Assessing Officer of the person searched and other person is same in the present case, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Bhatia (Supra) the Assessing Officer has powers u/s 153A of the Act to make assessment for all the six years and to compute total income of the assessee, including undisclosed income notwithstanding that return for these years have already been processed or assessment has been completed. 6. The Ld. Counsel of the assessee also placed rejoinder to the above submission of the Ld. CIT DR and contended that the assessee did not challenge the power of the A.O to make assessment for all the six years given u/s 153A of the Act but these powers can validly be assumed only after when the A.O of the searched person records his satisfaction that the document etc which belongs to the other persons have been found during the search and seizure operation and therefore, he find it necessary and appropriate to handover these documents etc to the A.O of the other person, to whom the document etc belongs. The Ld. Counsel again drew our attention towards Para 10 at Page 6 7 of the Tribunal order in the case of Bhawna Bhalla (Supra) and submitted that in the similar set of facts and circumstances the ITAT Delhi Bench G in the case of ACIT vs. M/s Sheild Home Pvt. Ltd (Supra) held that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi-74, PAN No. AABC14819D for Assessment Year 2003-04 to 2008-09, in view of above starting lines and facts, noted by the A.O, we have no hesitation to hold that this satisfaction note has not been recorded by the A.O of the searched person and it has been recorded by the A.O in the capacity of the A.O of other person i.e M/s Ivan Infotech Pvt. Ltd. We may also point out that in the present case even if A. O of the person searched and other persons are the same then also we are inclined to hold that the said satisfaction note has been recorded by the A.O in the capacity of the other person and not in the capacity of the A. O of the persons searched . Therefore, contention of the Ld. CIT DR is dismissed. Secondly, we are also in agreement with the contention of the Ld. Counsel of the assessee that before the CIT(A), the assessee in grounds Nos. 1 to 3 challenged the validity of initiation of proceedings u/s 153C of the Act and when the Revenue filed appeal challenging the impugned order of the CIT(A) wherein First Appellate Authority dismissed legal contentions and relief was granted to the assessee on merits, then the assessee can validly reagitate the legal grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment records from 2003-04 to 2008-09 it is noticed there is no satisfaction note available/recorded in respect of the other entities i.e other persons. These RTI replies have been addressed to the person searched i.e. Shri B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Bulidcon Pvt. Ltd., which clearly states that no satisfaction note has been recorded in the file of person searched by the A.O of the person searched. 11. In the light of above noted conclusion and after considering the submissions of both the sides and after carefully gone through the material available on record, we observe that the identical issue on the similar facts and circumstances have been adjudicated by the ITAT Delhi A Bench in the case of Bhavna Bhalla Vs. ACIT (Supra) by following the decision of ITAT Delhi Bench G in the case of ACIT Vs. M/s Shield Homes Pvt. Ltd.(Supra) after considering the ratio of the decision of Hon ble Jurisdiction High Court of Delhi in the case of R.R.J. Securities Ltd. (Supra) and Circular of CBDT dated 31/12/2015 (supra) with following conclusions: 10. We have considered the submissions of both the parties and carefully gone through the material av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 153C of the Act is for the AO of the searched person to be satisfied that the assets or documents seized belong to the assessee (being a person other than the searched person). The AO of the assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings underSection 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the assessee to whom such assets/documents belong. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, the assessee other than the person searched - in accordance with provisions of Section 153A of the Act. (emphasis by underlining supplied by us) From the above, it is evident that Hon'ble Jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD / 153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court. 9. From the above, it is evident that the CBDT has accepted that the decision of Hon'ble Apex Court in the case of M/s Calcutta Knitwears in Civil Bhawna Bhalla Appeal No.3958 of 2014 dated 12th March, 2014 issued for the purpose of Section 158BD would be squarely applicable for the purpose of proceedings u/s 153C. The Circular also observed that recording of satisfaction note is a pre-requisite and the satisfaction must be prepared by the Assessing Officer before he transmits the record to the other Assessing Officer who has jurisdiction over such other person. In paragraph 4, it has been further clarified that such satisfaction note is essential even if the Assessing Officer of the searched person and the other person is the one and the same. Admittedly, in the case of the assessee, no such satisfaction is recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een decided in favour of the assessee, no finding is given on the issues raised on merit. Accordingly appeal of the assessee for the assessment Bhawna Bhalla year 2003-04 is allowed and Cross appeal of the department is dismissed. The facts involved in the other appeals of the assessee for the assessment years 2004-05 to 2008-09 in ITA Nos. 2814 to 2817/Del/2014 are identical to the facts involved in ITA No. 2813/Del/2014 for the assessment year 2003-04. Therefore, our findings given in the former part of this order shall apply mutatis mutandis for the assessment years 2004-05 to 2008-09. Accordingly, appeals of the assessee for the said assessment years are allowed. 12. Before us on specific query from the Bench the Ld. Counsel of the assessee as well as CIT DR have not disputed that the facts of the present case are similar to the facts involved in the case of Bhawna Bhalla (Supra) and M/s Sheild Homes Pvt. Ltd (Supra). Therefore, respectfully, following the said orders dated 25/4/2016 and 24/2/2016 the initiation of proceedings u/s 153C of the Act in the present assessee s case for all six assessment years are held to be void ab initio and invalid and accordingly the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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