TMI Blog2018 (3) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... Cross Objection No.13/Nag/2014 - - - Dated:- 6-3-2018 - Shri G.D. Agrawal, President And Shri Mahavir Singh, Judicial Member Revenue by : Shri R.K. Baral, Senior DR. Assessees by : Shri Rajesh Loya, CA. ORDER Per Bench The appeals by the Revenue, assessee and the cross-objections by the assessee for the assessment years 2004-05 to 2009-10 are directed against different orders of the learned CIT(A)-III, Nagpur dated 21.01.2014 and 28.03.2014. 2. The assessee in its Cross-objection No.18/Nag/2017 has raised the issue as regards the assumption of jurisdiction by the Assessing Officer for framing assessment under Section 153C of the Income-tax Act, 1961 (hereinafter the Act ). The issue is that the assumption of jurisdiction is bad in law and consequent assessment framed u/s 153C of the Act is illegal and void ab-initio. For this, the assessee has raised following ground Nos.1 2 in its cross-objection :- 1. That the order of the learned Assessing Officer is bad in law and wrong on facts and the CIT(A) erred in not setting aside the same. 2. That the notice issued u/s 153C of the Income Tax Act is illegal, invalid and bad in law and the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r paper transactions) Travelling Expenses (Director) : ₹ 1,90,263/- (Since there is no travelling required for paper transactions) Vehicle Maintenance Hire Charges : ₹ 76,300/- (1/3rd expenses are allowed for office work) Consultancy charges : ₹ 8,800/- (Since there is no consultancy work required in paper transactions) Selling expenses : ₹ 5,74,809/- (Since there is no actual/physical sale and purchase of goods) Interest paid to Bank : ₹ 36,08,226/- (Interest expenses are disallowed since the assessee is only carrying out paper transaction and not any actual business) Interest paid to others : ₹ 6,78,972/- (Interest expenses are disallowed since the assessee is only carrying out paper transaction and not any actual business) Bank charges and commission : ₹ 11,12,214/- (Bank charges are disallowed since the assessee is only carrying out paper transaction and not any actual business). 5. Aggrieved, assessee preferred appeal before the CIT(A), who deleted the additions on merits. The CIT(A) recorded his decision at pages 10 to 17 and finally observed that the expenses disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the satisfaction note clearly records only the Annexure seized from the premises of the searched person and there is no observation or conclusion or even prima-facie opinion of the Assessing Officer that the material seized was incriminating in nature or it has bearing on the income of the assessee for which the Assessing Officer has to assume jurisdiction to frame assessment u/s 153C of the Act. The learned counsel also explained that the alleged incriminating/seized documents pertain to assessment year 2009-10 and therefore, the proceedings u/s 153C of the Act for assessment year 2004-05 to 2008-09 are without any basis. Learned counsel for the assessee relied on the decision of Hon ble High Court of Bombay in the case of CIT Vs. Sinhgad Technical Education Society [2015] 63 taxmann.com 14 (Bombay) for the proposition that if the document pertains to some other assessment year, then the proceedings u/s 153C for some other assessment years cannot be initiated. Learned counsel for the assessee also relied on the proposition that satisfaction can be recorded either at the time of initiating proceedings for completion of assessment of a person against whom search was conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the case of the assessee and not while framing assessment of the searched person, clearly reveals that the material seized is pages 44 to 65 of Annexure A-2(25) from the residence of Shri Mukesh Gupta. But, can these be said to be incriminating material when assessee contested that these are entries for purchase of coal by the assessee company and were duly recorded in the books of account and, on the basis of which, no addition is made by the Assessing Officer in the assessment order. According to us, these cannot be treated as incriminating documents. Even otherwise, the satisfaction recorded by the Assessing Officer vide satisfaction note dated 23rd June, 2010 is in the case of the assessee and not in the case of the searched person. This position has been explained by Hon'ble Supreme Court in the case of Calcutta Knitwears (supra) wherein complete procedure for recording of satisfaction has been set out from paragraph 38 to 45 as under :- 38. Having said that, let us revert to discussion of Section 158BD of the Act. The said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld certainly say that before initiating proceedings under Section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Section 148 of the Act where recording of reasons in writing are a sine qua non. Under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reducing long drawn proceedings. 44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either 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; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. 45. We are informed by Shri Santosh Krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act, therefore, the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority. We do not intend to examine the aforesaid contention canvassed by the learned counsel since we are remanding the matters to the High Court fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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