TMI Blog2018 (6) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... tika Group of Companies and satisfaction note is anti dated. No satisfaction note has been recorded on the date of issue of notice under section 158BD of the Act dated 31.05.2005. The satisfaction note supplied to the assessee on 27.01.2006 is thus, anti-dated and had not been recorded on the date purported i.e., 31.05.2005. Our findings are based mainly on reasons that in the case of person searched, no incriminating material was found against the assessee, therefore, there were no reason to record satisfaction under section 158BD of the Act in the case of the person searched. - Decided in favour of assessee - I.T (S.S) A. No. 36/Del./2010 - - - Dated:- 19-6-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L. P. Sahu, Accountant Member For the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of satisfaction note was duly provided to the assessee and the assessee filed its letter dated 10.05.2006. The assessee disputed the observation of the A.O. that the satisfaction note was recorded in the case of Vatika Group of cases. The A.O. did not deal the aforesaid objections of the assessee so raised before completion of the assessment proceedings. It was submitted that copy of the said satisfaction note had been served upon the assessee on 27.01.2006 whereas the satisfaction note was recorded on 31.05.2005 and no reason have been explained for the delay of over 7 months for providing such satisfaction note to the assessee. The satisfaction note served upon the assessee clearly shows that it was recorded in the case of Shri. Anupam Nagalia (assessee). It was, therefore, submitted that no satisfaction note was recorded in the case of the person searched i.e., M/s. Vatika Group of Companies. The assessee relied upon the decisions of Hon ble Supreme Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341 and others. On the basis of these decisions, the assessee has objected to the initiation of the proceedings under section 158BD, since no satisfaction note whatsoever w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 158BD of the Act are not legal, valid and accordingly, quashed. The findings of the Ld. CIT(A) in paras 4 to 4.9 of the order are reproduced as under : 4. I have gone through the facts of the circumstances of the issue as well as judicial pronouncements relied upon by the appellant. Section 158BD of the Act provides as under: Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132 A. 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 against such other person and the provisions of this Chapter shall apply accordingly. 4.1. On plain reading of the aforesaid statutory provisions contained in section 158BD of the Act, it will be seen that, it has been provided that, where the Assessing Officer of the searched person is satisfied that, any undisclosed income belongs to any person, other than the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer having jurisdiction in the matter. A large number of decisions of various High Courts have been cited at the Bar. We would, at the outset, refer to a decision of the Gujarat High Court in Khandubhai Vasantji Desai v. Deputy CIT [1999] 236 ITR 73. Therein, it was clearly held (page 85) This provision indicates that where the Assessing Officer who is seized of the matter and has jurisdiction over the person other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of section 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided person reaches such satisfaction that any undisclosed income belongs to such other person over whom he has not jurisdiction, then, in that event, he has to transmit the material to the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion where the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the per son with respect to whom search was made . It is significant that the term 'satisfied* is not used in a vacuum but along with the w o r d s 'that any undisclosed income belongs to other than the person with respect to whom search was made.... , and the words in the context are undisclosed income' and ' belongs to' which clearly indicate that at that point of time when satisfaction i s recorded by the Assessing Officer the undisclosed income is to be identified. Further , the said expression does not stop there. It further uses the expression belongs to any person, other than the person with respect to whom search was made which indicates that the undisclosed income identified by the Assessing Officer is found to be belonging to the other person. It would thus mean that at the stage of recording, the Assessing Officer has reached a finding that undisclosed income has been detected as a result of search and also further that such income belongs to the person not searched. All these constitute findings and not a more belief held by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized documents reveals that assessee had unaccounted income under the following heads :- I Remuneration- Annexure A-11. pages 33, 34, 37 and 38 reveals receipt of unaccounted remuneration by Sh. Anupam Nagalia. II Profit in Danisco Deal - Annexure A-l reveals receipt of unaccounted profit from business deal with M/s Danisco Ingredients (India) Pvt. Ltd. III Investment in assets - Annexure A-l. page 65 reveals unaccounted investment in l and at Rajpur Road . Dehradun amounting to ₹ 5 5 lacs, at Village Bhondsi (Manan a) amounting to ₹ 18 lacs and immovable properties comprising loans and advances, investment in shares and deposits, jewellery etc. amounting to ₹ 48 lacs. IV Unaccounted loan Annexure A-2, page 1,2,3, 5, 6,8,10,13, 15 and 21 reveals transactions on account of loan s not disclosed for the purpose of income tax. In view of the facts stated above and material available in the form of seized documents, I am satisfied that Sh. Anupam Nagalia had undisclosed income for the block period 01.04.1997 to 08.05.2003 which was not disclosed in the regular return of income. Therefore, notice u/s 158BC read with Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri S.K. Jain had to record his satisfaction that undisclosed income in respect of transactions with the assessee was that of the assessee and handover the relevant part of the seized material to the A.O. having jurisdiction over the matter, namely, the second mentioned A.O. It appears to us that such note and material were transmitted to the first mentioned A.O. who issued a notice under section 158BC read with 158BD to the assessee. However, nothing was found in the case of Shri Praveen Mittal whose A.O. recorded the satisfaction note on the basis of submissions made in his case before him. As nothing was seized from him. nothing was transmitted by the A.O. of Shri Praveen Mittal to the second mentioned A.O., who happens to be the same officer. Thus, in view of the decision in the case of Manish Maheshwar (supra), it is held that pre-conditions required to be satisfied before assuming jurisdiction under section 158BD in the case of the assessee were not satisfied. Learned DR has not been able to show or refer to any material which was seized in the case of Shri Praveen Mittal so as to authorize his A.O. to record satisfaction in the case of the assessee. Thus, we are in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under section 158BC of the Act since firstly initiation of proceedings was undisputedly under section 158BD of the Act and moreover, limitation for framing assessment under section 158BC of the Act expired on 31.5 2005 which is the date on which, notice under section 158BD of the Act was issued to the appellant. The order of assessment in dated 21.05.2007, which is then clearly barred by limitation. In light of the above. I hold that, the proceedings initiated under section 158BD of the Act were not legal, valid and are therefore quashed. 2.5. It may be noted that the impugned order of the Ld. CIT(A) was challenged by the Department before ITAT, A-Bench in IT(SS)A.No.36/Del./2010 along with C.O.No.380/Del./2010 of the assessee. The Tribunal vide Order dated 11.07.2014 dismissed the Departmental Appeal as well as Cross Objection filed by the assessee. The Revenue preferred appeal before the Hon ble Punjab Haryana High Court against the order of the Tribunal in Income Tax Appeal No.55 of 2015 which is decided vide Judgment dated 06.01.2016 and the matter is remanded to the Tribunal to examine it afresh and record reason based findings. The directions of the Hon ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, satisfaction note was recorded as per law. There is no mention in Section 158BD to record satisfaction in writing. The A.O. can record satisfaction for issuing notice under section 158BD in the case of person searched even after completion of block assessment in the case of the searched person. The Ld. D.R, therefore, submitted that order of the Ld. CIT(A) may be reversed. The Ld. D.R. further submitted that assessment record of the assessee and person searched cannot be produced for inspection of the Court because same are not available. 5. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the Ld. CIT(A). Learned Counsel for the Assessee referred to PB-14 which is notice under section 158BD dated 31.05.2005 issued by Shri P.K. Singh, ACIT, Circle-20, New Delhi who is the same Officer recorded satisfaction on 31.05.2005. The said notice was issued without satisfaction note supplied to the assessee. PB-15 is letter of the assessee dated 11.06.2005 in which the assessee requested the A.O. to furnish note of satisfaction which is required to be recorded in writing as has been held by the Hon ble Delhi High Court in the case of Amity Hote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by assessee. In the absence of any material, no satisfaction as is required under section 158BD could have been recorded. The A.O. has failed to initiate valid proceedings against the assessee. The satisfaction note is an afterthought and ante- dated and prepared after submissions made by the assessee. No explanation have been given in this regard by the department. No satisfaction have been recorded by the A.O. in the case of the person searched. Therefore, no interference is called for in the matter. PB-365 is submission of the assessee in detail which have not been rebutted by the department in which the assessee has similarly explained that there were no incriminating material found during the course of search against the assessee in the case of Vatika Group of Companies and satisfaction note is anti dated. He has relied upon decision of Hon ble Supreme Court in the case of Tapan Kumar Dutta vs. CIT, West Bengal (2018) 92 taxmann.com 367 (SC) in which, in para-11, it was held as under : 11. A perusal of Section 158BD of the IT Act makes it clear that the Assessing Officer needs to satisfy himself that the undisclosed income belongs to any person other than the person wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfaction note is not valid and is anti- dated, therefore, assumption of jurisdiction by A.O. under section 158BD is illegal and invalid. 6. We have considered the rival submissions and perused the material on record. Before proceeding further, we may note that when the matter was re-fixed for hearing on merits before the Tribunal, the Tribunal vide order dated 13.12.2017 in view of background of the case as noted above and in order to ascertain the correct position of facts as to whether the satisfaction has been recorded in the case of the person searched i.e., M/s. Vatika Landbased Private Limited who was the person searched in terms of Section 132(1) Or it has been recorded in the case of assessee, directed the Ld. D.R. to produce the original record of the said Company in whose case order under section 158BC has been passed and also produce records of the assessee. It was also directed that on the date of hearing, A.O. would present himself with the records so that proper facts can be ascertained and parties are heard at length. The adjournment was given to the department to comply with the order and appeal was adjourned to 19.02.2018 as the date convenient to the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purported to have been made and must have been made after the request made by assessee for supply of the copy of the satisfaction note. The decision of the Hon ble Madhya Pradesh High Court in the case of CIT vs. Tarachand Khushiram (supra) clearly apply to the facts and circumstances of the case. In the said satisfaction note also, the A.O. of the assessee has not recorded any satisfaction that any undisclosed income belong to the assessee. The Ld. D.R. was given ample opportunities to produce the block assessment records in the case of the person searched and the assessee to clarify the position as to in which case satisfaction note have been recorded on 31.05.2005 or on a later date. However, the Revenue Department has failed to produce the assessment records in both the cases. Therefore, an adverse inference shall have to be drawn against the Revenue Department in this regard. These facts clearly show that no satisfaction under section 158BD have been recorded in the case of the person searched i.e., Vatika Group of Companies, which is mandatory for initiating proceedings under section 158BD of the I.T. Act. We also hold that recording of such satisfaction note is also anti-dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that several High Courts have held that provision of Section 153C of the I.T. Act are substantially similar/pari materia to the provisions of Section 158BD of the I.T. Act and, therefore, the above guidelines of the Hon ble Supreme Court applied to the proceedings under section 153C of the I.T. Act for the purpose of assessment of income of other person than the searched person. This view has been accepted by the CBDT. It was further clarified that even if the A.O. 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. 9. Considering the material on record, it is clear that no satisfaction note has been recorded on the date of issue of notice under section 158BD of the Act dated 31.05.2005. The satisfaction note supplied to the assessee on 27.01.2006 is thus, anti-dated and had not been recorded on the date purported i.e., 31.05.2005. Our findings are based mainly on reasons that in the case of person searched, no incriminating material was found against the assessee, therefore, there were no reason to record satisfaction under section 158BD of the Act in the case of the person sear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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