TMI Blog2010 (11) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... 53C was issued and the assessee filed return of income accordingly, thereafter assessments were framed u/s 153C. The assessee has challenged the legality of the assessment made u/s. 153C/143(3) of the IT Act for all the assessment years on the plea that no satisfaction was recorded by the Assessing Officer of searched person. In an appeal filed before CIT(A) attention was invited to the provisions of sec. 153C, which reads as under:- 1 . Notwithstanding anything contained in sec. 139, sec.147, sec.148, sec.149 , sec. 151 and sec. 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 sec. 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 person notice and assess or reassess income of such other person in accordance with the provisions of sec. 153A]. [Provided that in case of such othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer of the searched person) has to issue the notice u/s. 158BD and has to assess the undisclosed income of such other person. The provisions of sec. 158BD were minutely examined by the honourable Supreme Court in the case of Manish Maheshwari vs ITAT as reported on (2007) 208 CTR 97 S.C. The copy of the said decision was also placed on record, which was followed in the same spirit by Delhi court in the case of New Delhi Auto Finance (P) Ltd vs CIT as reported on (2008) 300 ITR 83 Delhi. As per ld. AR it may be seen that the Apex court has laid own that the assessing officer making the assessment of the searched person, has to record in writing the specific objective satisfaction (and it is mandatory) that the undisclosed income found by him on the basis of seized material, belongs to some person other than the searched person. Since the provisions of sec. 153C are para materia with the provisions of sec. 158BD with regard to requirement of satisfaction the law laid down by the S.C. in the case of Manish Maheshwari shall apply with full force for initiation of proceedings u/s. 153C. Further contention of ld. AR was that the word satisfied also appears in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, which was found during the course of search at the premises of the directors, which satisfied or could have satisfied the assessing officer or any prudent common man that the said material is incriminating and that it belongs to the assessee and that it reflects the escaped income of the assessee . The Apex Court in the decision cited supra has laid down that the searched person has to be confronted with the seized material and when the searched person denies that the seized material belongs to him then opportunity has to be given to the other person and the assessing officer has to satisfy that the seized material belongs to some particular person, other than the searched person and he has to record his satisfaction before proceedings u/s. 153C against such other person. As per learned AR, no such satisfaction has been recorded before initiation of the proceedings and even on perusal of the assessment order does not give any inkling about any such incriminating documents belonging to the assessee found during the course of search at the premises of the directors. The order of CIT(A), Jabalpur in the case of the firm Hotel Sonam and Smart Bar, Sagar in appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction is a must. But at the same time, it is also to hold that it does not mean that required satisfaction could be highly subjective, not open to scrutiny by the appellate authorities. The minimum requirement to justify the invoking of sec. 153C is that at least it should be possible to gather a satisfaction- there should be some seized record pertaining to the assessee which had been found in a search action. Further the same should have also been confronted to the assessee. But during the assessment proceedings no seized record pertaining to the assessee was confronted to him. What was confronted were the documents impounded during the survey action conducted at its office. In view of these facts, it is held that the invoking of section 153C against the assessee was bad in law. The proceedings so initiated, therefore, is held to be void ab-initio and all the assessments therefore, are declared abinitio null void . 10. As per ld. AR there is absolutely no incriminating material belonging to the assessee found during the course of search at the premises of the searched person and there is no satisfaction or even the basis for satisfaction to issue a notice u/s. 153C and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory and in case of failure of the Assessing Officer to record such satisfaction in the case of searched person showing that these are incriminating materials and belonged to the assessee will render the assessment so framed as nullity. In terms of decision of Hon'ble Supreme Court in the case of Manish Maheshwari (supra), the searched person has to be confronted with the seized material and when the searched person deny that seized material belonged to him, then opportunity has to be given to the other person and the AO has to satisfy that the seized material belongs to some particular person other than the searched person and he has to record his satisfaction before proceedings u/s 153C against such other person. In the instant case before us, no such satisfaction was recorded before initiation of proceedings and even the assessment order so framed does not give any inkling about any such incriminating documents belonging to the assessee as found during course of search at the premises of the partners. On the basis of this legal ground, the ld. CIT(A) annulled the assessment after having the following observations :- I have gone through the assessment order and the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her associate M/s. Arun Excello, which is not incriminating at all. LPS-8 P1-34 Chart and copies of the bills in the name of Techno Pharma Exports raised by the appellant, which are appearing in the regular books of account of the appellant. LPS-13 a. Agency agreement between TPF GTV b. Copies of cheques and covering letter from GTV Chennai Bhopal as internal correspondence. c. Copies of form 8 13 filed before ROC. d. Correspondence between GTV and TPF NHDC regarding completion of work. e. Copy of loan sanction to other party. f. Rough reconciliation papers of GTV figures appearing in the books of account. g. Rough sheet showing tax liability of Mahesh Agrawal. h. Statement of assets, liabilities and Mahesh, Veena and Dinesh Agrawal as on 27.3.2002. LPS-15 Proposal between Mahesh Dinesh Agrawal group for transfer of shares in the companies and firms. From the above chart, I have no hesitation to hold that these papers are not incriminating and that mot of them do not belong to the appellant. I also find that no addition or even observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I hold that the invoking of Section 153C against the assessee was bad in law and the notice issued u/s 153C was illegal. The proceedings u/s 153C is ab initio null and void. The assessment made in consequence to such notice u/s 153C for all the assessment years are hereby quashed and accordingly, the ground no.1 of the appeal is allowed. 13. Various additions made on merit were partly deleted by the learned CIT(A) after having the following observations which have been dealt with in terms of ITA Nos. as under :- 14. ITA No. 182/Ind/08 So far as the ground relating to rejection of books of accounts is concerned, the learned Commissioner of Incometax (Appeals) made the following observations :- I have gone through the assessment order and the submissions of the AR. I find force in the submissions of the assessee which are supported by the abovesaid court decisions. I agree with the AR that a/c books of the assessee should not be rejected without any basis. However, I am of the opinion that there is some material and then the additions relating to said material may be made in the hands of the assessee. In the result, the ground of the appeal is partly allowed. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 918/- in the asmt. Year 2004- 05, ₹ 95,66,324/- in the asmt. Year 2005-06 and ₹ 1,04,16,240/- in the asmt. year 2006-07. Accordingly, Ground No. 5 6 for assmt. Year 2003-04 and Ground No. 4 5 for all other assmt. years are allowed. 16. The addition of ₹ 2,60,146/- made by the Assessing Officer u/s 69C of the Act on account of bogus fabrication expenses purchases was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- On perusal of the above said sections, it may be seen that the additions u/s 69C can be made when it is found by the Assessing Officer that the appellant has incurred the expenditure and he is unable to explain the source of such expenditure. In the instant case, the Assessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. On perusal of the assessment order for all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12 cases, involving about 40 assessments the Assessing Officer has recorded identical stereo type satisfaction by stating that during search actions carried out in December 2003 in the cases of Santosh Kumar Sahu and Others incriminating documents pertaining to each of the years were found and seized whereas the fact is that in some of the years of some of those concerns were not in existence. However, these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is becausae of the reason that on a plain reading of sec. 153C, it does not transpire that recording of a satisfaction is a must. But at the same time, it is also to hold that it does not mean that required satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial seized from the residence of Shri Dinesh Agrawal produced before me by the AR. The Seized papers are named as LPS-1 and they contain 34 pages. I minutely examined each and every paper and I find that none of these papers belong to the assessee and can be said to belong to the assessee. I also find that no addition or even observations has been made by the Assessing Officer in any of the order right from assmt. Year 2000-01 to 2006-07 in connection with any material found during the course of search. When no material relating to the assessee has been found from the searched person no action u/s 153C can be initiated against the assessee. In these circumstances, it appears that the requirements of section 153C are not fulfilled as claimed by the AR. The AR has heavily relied upon the Hon ble Supreme Court decision in the case of Manish Maheshwari. The said decision has been rendered in relation to the provisions of section 158BD, which are identical to the provisions of section 153C as per detailed submissions of the assessee. I do not find that with regard to satisfaction both the sections are identical and it should be mandatory to record the satisfaction before the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in line with other firms of the concerns of the group. I have seen the copy of the notice issued u/s 131 on 23.11.2007 to SRD steel which is said to have been sent by the AO calling for confirmation of the sales made by him. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u/s 133(6) no adverse inference can be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme Court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I fin that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gets the relief of ₹ 2,60,146/- in the assmt. Year 2000-01, ₹ 1,44,293/- in the assmt. Year 2001-02, ₹ 1,40,415/- in the assmt. Year 2002-03, ₹ 4,56,898/- in the assmt. Year 2003-04, ₹ 7,24,223/- in the assmt. Year 2004- 05, ₹ 11,07,451/- in the assmt. Year 2005-06 and ₹ 6,59,164/- in the assmt. Year 2006-07. In the result, ground no. 6 for all assmt. years are allowed. 20. ITA No. 184/Ind/08 The learned Commissioner of Incometax (Appeals) quashed the assessment proceedings initiated by the 153C of the Act with the following observations :- I have carefully considered the facts on record and the submissions made by the rival parties. First of all, it is noted that the section 153C affects the substantive rights of a person in so far as a person, who has not been searched is made yto face the harsh consequences of reopening of six years cases. This section thus cannot be given a liberal interpretation since if it is so done, then the proceedings under this section can be initiated against a person not searched merely on the ground that some account or even a bank statement of the person has been found in a search action. If in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminating material belonging to the appellant found during the course of search at the premises of the searched person and there is no satisfaction or even the basis for satisfaction to issue a notice u/s 153C and no satisfaction is recorded by the Assessing Officer before the issue of notice u/s 153C and, therefore, the notice issued u/s 153C is illegal, invalid and untenable- in law and therefore, it is requested that the assessments made on the basis such illegal notice be kindly quashed. I have gone through the assessment order and the submissions of the AR. In a nutshell the AR has stated that the notice u/s 153C is issued without recording the satisfaction before the issue of notice and thsat no incriminating material belonging to the assessee was found during the search of any person or premises. In support of his claim he has relied upon the following decisions :- (vi) Manish Maheshwari vs. ITAT as reported on (2007) 208 CTR 97 S.C. (vii) New Delhi auto Finance (P) Ltd. Vs. as reported on (2008) 300 ITR 83 Delhi. (viii) CIT vs. S.G. Angidi Chettiar as reported on (1962) 44 ITR 739 S.C. (ix) D.M. Mansari vs. CIT as reportedon (1972) 86 ITR 557. (x) Bhawant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial belonging to the assessee has been found in the search. In fact, there was no material which could have satisfied the Assessing Officer to issue the notice u/s 153C and no satisfaction has been recorded. In view of these facts, I hold that the invoking of section 153C against the assessee was bad in law and the notice issued u/s 153C was illegal. The proceedings u/s 153C is ab-initio null and void. The assessment made in consequence to the illegal notice u/s 153C for all the assmt. years are hereby quashed and accordingly, the ground no. 1 of the appeal is allowed. 21. So far as the ground relating to rejection of books of accounts is concerned, the learned Commissioner of Incometax (Appeals) made the following observations :- I have gone through the assessment order and the submissions of the AR. I find force in the submissions of the assessee which are supported by the abovesaid court decisions. I agree with the AR that a/c books of the assessee should not be rejected without any basis. However, I am of the opinion that there is some material and then the additions relating to said material may be made in the hands of the assessee. In the result, the ground of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smt. Year 2003-04, ₹ 1,15,61,918/- in the asmt. Year 2004- 05, ₹ 95,66,324/- in the asmt. Year 2005-06 and ₹ 1,04,16,240/- in the asmt. year 2006-07. Accordingly, Ground No. 5 6 for assmt. Year 2003-04 and Ground No. 4 5 for all other assmt. years are allowed. 23. The addition of ₹ 1,40,415/- made by the Assessing Officer u/s 69C of the Act on account of bogus fabrication expenses purchases was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- On perusal of the above said sections, it may be seen that the additions u/s 69C can be made when it is found by the Assessing Officer that the appellant has incurred the expenditure and he is unable to explain the source of such expenditure. In the instant case, the Assessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. On per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153C there has to be some material on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12 cases, involving about 40 assessments the Assessing Officer has recorded identical stereo type satisfaction by stating that during search actions carried out in December 2003 in the cases of Santosh Kumar Sahu and Others incriminating documents pertaining to each of the years were found and seized whereas the fact is that in some of the years of some of those concerns were not in existence. However, these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is becausae of the reason that on a plain reading of sec. 153C, it does not transpire that recording of a satisfaction is a must. But at the same time, it is also to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153C. I have also gone through the material seized from the residence of Shri Dinesh Agrawal produced before me by the AR. The Seized papers are named as LPS-1 and they contain 34 pages. I minutely examined each and every paper and I find that none of these papers belong to the assessee and can be said to belong to the assessee. I also find that no addition or even observations has been made by the Assessing Officer in any of the order right from assmt. Year 2000-01 to 2006-07 in connection with any material found during the course of search. When no material relating to the assessee has been found from the searched person no action u/s 153C can be initiated against the assessee. In these circumstances, it appears that the requirements of section 153C are not fulfilled as claimed by the AR. The AR has heavily relied upon the Hon ble Supreme Court decision in the case of Manish Maheshwari. The said decision has been rendered in relation to the provisions of section 158BD, which are identical to the provisions of section 153C as per detailed submissions of the assessee. I do not find that with regard to satisfaction both the sections are identical and it should be mandatory to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing observations :- I have gone through the assessment order as well as the submissions of the appellant. During the course of survey at the premises of the appellant unsigned draft copy of the profit and loss account for the financial year ended on 31.3.2003 was found which reflected the ales at ₹ 2,93,20,720/-while the final accounts reflected the sales of ₹ 2,83,47,179/- and undoubtedly there is the difference of ₹ 9,73,541/-. I agree with the AR that the correct sales are only of ₹ 2,83,47,179/-, which have been worked out after removing the mistake. Some of the mistakes have been specifically pointed out by the AR in his submissions. It leaves the difference of ₹ 1,12,287/-. The AR could not give any explanation even before me for the said difference of ₹ 1,12,287/- and, therefore, I do not have any alternative but to sustain the addition of ₹ 1,12,287/-. The appellant gets a relief of ₹ 8,61,254/-. The result ground of appeal No. 4 for assmt. Year 2003-04 is partly allowed. 27. The addition of ₹ 50,45,344/- (inadvertently taken at ₹ 15,77,577/- in computation of income) made by the Assessing Officer u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, these disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 99,23,043/- in the asmt. Year 2000-01, ₹ 80,73,129/- in the asmt. year 2001-02, ₹ 37,45,739/- in the asmt. Year 2002-03, ₹ 50,45,344/- in the asmt. Year 2003-04, ₹ 1,15,61,918/- in the asmt. Year 2004- 05, ₹ 95,66,324/- in the asmt. Year 2005-06 and ₹ 1,04,16,240/- in the asmt. year 2006-07. Accordingly, Ground No. 5 6 for assmt. Year 2003-04 and Ground No. 4 5 for all other assmt. years are allowed. 28. The addition of ₹ 4,56,898/- (inadvertently taken at ₹ 2,28,449/- in computation of income) made by the Assessing Officer u/s 69C of the Act on account of bogus fabrication expenses was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- On perusal of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been searched is made yto face the harsh consequences of reopening of six years cases. This section thus cannot be given a liberal interpretation since if it is so done, then the proceedings under this section can be initiated against a person not searched merely on the ground that some account or even a bank statement of the person has been found in a search action. If in such a case invoking of section 153C is held to be justified, then this section can become a ready took for reopening six year cases on any pretext of a person, who had some dealing with the person searched. The ld. AR has argued that before invoking section 153C there has to be some material on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12 cases, involving about 40 assessments the Assessing Officer has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises. In support of his claim he has relied upon the following decisions :- (xvi) Manish Maheshwari vs. ITAT as reported on (2007) 208 CTR 97 S.C. (xvii) New Delhi auto Finance (P) Ltd. Vs. as reported on (2008) 300 ITR 83 Delhi. (xviii) CIT vs. S.G. Angidi Chettiar as reported on (1962) 44 ITR 739 S.C. (xix) D.M. Mansari vs. CIT as reportedon (1972) 86 ITR 557. (xx) Bhawant Finance Co. Ltd. Vs. CIT as reported on (2006) 280 ITR 412 Delhi. I have called for the complete record of the appellant as well as the searched persons. I find that no satisfaction has been recorded by the Assessing Officer before the issue of notice u/s 153C. I have also gone through the material seized from the residence of Shri Dinesh Agrawal produced before me by the AR. The Seized papers are named as LPS-1 and they contain 34 pages. I minutely examined each and every paper and I find that none of these papers belong to the assessee and can be said to belong to the assessee. I also find that no addition or even observations has been made by the Assessing Officer in any of the order right from assmt. Year 2000-01 to 2006-07 in connection with any material found during the course of search. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions of the AR. I find force in the submissions of the assessee which are supported by the abovesaid court decisions. I agree with the AR that a/c books of the assessee should not be rejected without any basis. However, I am of the opinion that there is some material and then the additions relating to said material may be made in the hands of the assessee. In the result, the ground of the appeal is partly allowed. 31. The addition of ₹ 1,15,61,918/- made by the Assessing Officer on account of unexplained purchases u/s 69C of the Act was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- I have gone through the assmt. order as well as the written submissions of the appellant. I find that the Assessing Officer has treated the purchases made from the SRD Steel (P) Ltd. as bogus. He also treated 1/4th portion of other purchases also as bogus for all the asst. years as indicated in the chart above. He has given the reason that even after a notice u/s 131 to M/s SRD Steel nobody attended on their behalf and the other parties i.e. Kathuria trade company and Tirupathy Steel Traders also did not attend in compliance to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. On perusal of the assessment order for all the assessment years and the detailed submissions of the AR, I find that the Assessing Officer has made the disallowance of 1/5th of the fabrication expenses in a very casual manner. In the assessment year 2000-01, he simply states that 1/5th of the fabrication expenses are bogus. In other assmt. years ,he states that he is making the disallowance on the basis the reason given by him in the assmt. Year 2000-01. I have seen that the appellant has maintained the regular books of accounts which have been duly audited. Whenever the appellant made the payment to the fabricators proper deductions of TDS has been made and substantial payments to the fabricators are made through the cheque. On these facts, it is very difficult to maintain the disallowance made by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is that in some of the years of some of those concerns were not in existence. However, these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is becausae of the reason that on a plain reading of sec. 153C, it does not transpire that recording of a satisfaction is a must. But at the same time, it is also to hold that it does not mean that required satisfaction could be highly subjective not open to security by the appellate authorities. The minimum requirement to justify the invoking of sect. 153C is that at leasat it should be possible to gather a satisfaction there should be some eized record pertaining to the assessee which had been found in a search action. Further the same should have also been confronted to the assessee. But during the assessment proceedings no seized record pertaining to the assessee was confronted to him. What were confronted were the ocuments impounded during the survey action conducted at its office. In view of these facts, it is held that the invoking of section 153C against the assessee was bad in law. The proceedings so initiated, therefore, are held to be void ab initio and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AR. The AR has heavily relied upon the Hon ble Supreme Court decision in the case of Manish Maheshwari. The said decision has been rendered in relation to the provisions of section 158BD, which are identical to the provisions of section 153C as per detailed submissions of the assessee. I do not find that with regard to satisfaction both the sections are identical and it should be mandatory to record the satisfaction before the issue of notice u/s 153C, if it is necessary to record the satisfaction before the issue of notice u/s 158BD. In this connection, I have also seen the appellate order of my ld. Colleague CIT(A)-1, Jabalpur in the case of M/s Hotel Sonam Smart Bar, Sagar on 22.11.2007 in appeal No. ACIT-Sagar/116 to 122, which has been passed on the facts identical with the facts of the assessee. In the said case also there was a search against the partners and survey in the case of the firm and no material belonging to the firm was found from the premises of the partners, where the search was conducted. I am satisfied that on plain reading of section 153C, it may not be necessary to record the satisfaction but at least there should be some material to give satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.11.2007 to SRD steel which is said to have been sent by the AO calling for confirmation of the sales made by him. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u/s 133(6) no adverse inference can be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme Court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I fin that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, these disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 99,23,043/- in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the following observations :- I have carefully considered the facts on record and the submissions made by the rival parties. First of all, it is noted that the section 153C affects the substantive rights of a person in so far as a person, who has not been searched is made yto face the harsh consequences of reopening of six years cases. This section thus cannot be given a liberal interpretation since if it is so done, then the proceedings under this section can be initiated against a person not searched merely on the ground that some account or even a bank statement of the person has been found in a search action. If in such a case invoking of section 153C is held to be justified, then this section can become a ready took for reopening six year cases on any pretext of a person, who had some dealing with the person searched. The ld. AR has argued that before invoking section 153C there has to be some material on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AR. In a nutshell the AR has stated that the notice u/s 153C is issued without recording the satisfaction before the issue of notice and thsat no incriminating material belonging to the assessee was found during the search of any person or premises. In support of his claim he has relied upon the following decisions :- (xxvi) Manish Maheshwari vs. ITAT as reported on (2007) 208 CTR 97 S.C. (xxvii) New Delhi auto Finance (P) Ltd. Vs. as reported on (2008) 300 ITR 83 Delhi. (xxviii) CIT vs. S.G. Angidi Chettiar as reported on (1962) 44 ITR 739 S.C. (xxix) D.M. Mansari vs. CIT as reportedon (1972) 86 ITR 557. (xxx) Bhawant Finance Co. Ltd. Vs. CIT as reported on (2006) 280 ITR 412 Delhi. I have called for the complete record of the appellant as well as the searched persons. I find that no satisfaction has been recorded by the Assessing Officer before the issue of notice u/s 153C. I have also gone through the material seized from the residence of Shri Dinesh Agrawal produced before me by the AR. The Seized papers are named as LPS-1 and they contain 34 pages. I minutely examined each and every paper and I find that none of these papers belong to the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 of the appeal is allowed. 38. So far as the ground relating to rejection of books of accounts is concerned, the learned Commissioner of Incometax (Appeals) made the following observations :- I have gone through the assessment order and the submissions of the AR. I find force in the submissions of the assessee which are supported by the abovesaid court decisions. I agree with the AR that a/c books of the assessee should not be rejected without any basis. However, I am of the opinion that there is some material and then the additions relating to said material may be made in the hands of the assessee. In the result, the ground of the appeal is partly allowed. 39. The addition of ₹ 1,04,16,240/- made by the Assessing Officer on account of unexplained purchases u/s 69C of the Act was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- I have gone through the assmt. order as well as the written submissions of the appellant. I find that the Assessing Officer has treated the purchases made from the SRD Steel (P) Ltd. as bogus. He also treated 1/4th portion of other purchases also as bogus for all the asst. years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above said sections, it may be seen that the additions u/s 69C can be made when it is found by the Assessing Officer that the appellant has incurred the expenditure and he is unable to explain the source of such expenditure. In the instant case, the Assessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. On perusal of the assessment order for all the assessment years and the detailed submissions of the AR, I find that the Assessing Officer has made the disallowance of 1/5th of the fabrication expenses in a very casual manner. In the assessment year 2000-01, he simply states that 1/5th of the fabrication expenses are bogus. In other assmt. years ,he states that he is making the disallowance on the basis the reason given by him in the assmt. Year 2000-01. I have seen that the appellant has maintained the regular books of accounts which have been duly aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I fin that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, these disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 1,44,35,348/- in the asmt. Year 2000-01, ₹ 54,50,311/- in the asmt. year 2001-02, ₹ 41,89,509/- in the asmt. Year 2002-03, ₹ 50,71,321/- in the asmt. Year 2003-04, ₹ 86,76,720/- in the asmt. Year 2004- 05, ₹ 1,34,29,335/- in the asmt. Year 2005-06 and ₹ 1,85,35,284/- in the asmt. year 2006-07. Accordingly, Ground No. 4 for all other assmt. Years are allowed. 42. The addition of ₹ 2,88,660/- made by the Assessing Officer u/s 69C of the Act on account of unexplained bogus fabrication expenses was deleted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 84,228/- in the assmt. Year 2001-02, ₹ 2,18,832/- in the assmt. Year 2002-03, ₹ 4,38,626/- in the assmt. Year 2003- 04, ₹ 9,17,836/- in the assmt. Year 2004-05, ₹ 12,32,726/- in the assmt. Year 2005-06 and ₹ 20,24,982/- in the assmt. Year 2006-07. In the result, ground no. 5 for all assmt. years are allowed. 43. ITA NO. 203/IND/2008 The addition of ₹ 54,50,311/- made by the Assessing Officer u/s 69C of the Act on account of unexplained bogus purchases was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- I have gone through the assmt. order as well as the written submissions of the appellant. I find that the Assessing Officer has treated the purchases made from the SRD Steel (P) Ltd. as bogus. He also treated 1/4th portion of other purchases also as bogus for all the asst. years as indicated in the chart above. He has given the reason that even after a notice u/s 131 to M/s SRD Steel nobody attended on their behalf and the other parties i.e. Kathuria trade company and Tirupathy Steel Traders also did not attend in compliance to the notice u/s 133(6) and therefore, he disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. After perusal of the assessment order for all the assessment years and the detailed submissions of the AR, I find that the Assessing Officer has made the disallowance of 1/5th of the fabrication expenses in a very casual manner. In all the assmt. Years,he states that he is making the disallowance on the basis the reasons given by him in the assmt. Year 2000-01 in the order for the Asst. Year 2000-01 he stated that he sent the notices to some of the fabricators but notices sent to the following fabricators were received back without service. These fabricators are as under :- 5. M/s R.A. Fabricators 6. Shree Balaji Fabricators 7. D.D. Fabricators 8. Alak Industries. The assessee has filed the copies of account of all the fabricators before the Assessing Officer and has also produced the same before me the copies of accounts for the A.Y. 2000-01 are filed before me and are on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme Court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, these disallowance cannot be sustained. Accordingly, the appellant gets the relief of ₹ 1,44,35,348/- in the asmt. Year 2000-01, ₹ 54,50,311/- in the asmt. year 2001-02, ₹ 41,89,509/- in the asmt. Year 2002-03, ₹ 50,71,321/- in the asmt. Year 2003-04, ₹ 86,76,720/- in the asmt. Year 2004- 05, ₹ 1,34,29,335/- in the asmt. Year 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain the disallowance of the 1/5th of the fabrication expenses asmade by the Assessing Officer in all the assmt. Years and accordingly, the disallowance for all the assmt. Years are removed. In the result, appellant gets the relief of ₹ 2,88,660/- in the assmt. Year 2000-01, ₹ 84,228/- in the assmt. Year 2001-02, ₹ 2,18,832/- in the assmt. Year 2002-03, ₹ 4,38,626/- in the assmt. Year 2003- 04, ₹ 9,17,836/- in the assmt. Year 2004-05, ₹ 12,32,726/- in the assmt. Year 2005-06 and ₹ 20,24,982/- in the assmt. Year 2006-07. In the result, ground no. 5 for all assmt. years are allowed. 47. ITA NO. 205/IND/2008 The addition made by the Assessing Officer on account of unexplained bogus purchases u/s 69C of the Act amounting to ₹ 50,71,320/- was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- I have gone through the assmt. order as well as the written submissions of the appellant. I find that the Assessing Officer has treated the purchases made from the SRD Steel (P) Ltd. as bogus. He also treated 1/4th portion of other purchases also as bogus for all the asst. years as indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions u/s 69C can be made when it is found by the Assessing Officer that the appellant has incurred the expenditure and he is unable to explain the source of such expenditure. In the instant case, the Assessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. After perusal of the assessment order for all the assessment years and the detailed submissions of the AR, I find that the Assessing Officer has made the disallowance of 1/5th of the fabrication expenses in a very casual manner. In all the assmt. Years,he states that he is making the disallowance on the basis the reasons given by him in the assmt. Year 2000-01 in the order for the Asst. Year 2000-01 he stated that he sent the notices to some of the fabricators but notices sent to the following fabricators were received back without service. These fabricators are as under :- 13. M/s R.A. Fabricat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he group. I have seen the copy of the notice issued u/s 131 on 23.11.2007 to SRD steel which is said to have been sent by the AO calling for confirmation of the sales made by him. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u/s 133(6) no adverse inference can be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme Court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenvat credits. The charge of the Assessing Officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and, therefore, these disallowance cannot be sustained. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer. I have seen that the appellant has maintained the regular books of accounts which have been duly audited. Whenever the appellant made the payment to the fabricators proper deductions of TDS has been made and substantial payments to the fabricators are made through the cheque. On these facts, it is very difficult to maintain the disallowance of the 1/5th of the fabrication expenses asmade by the Assessing Officer in all the assmt. Years and accordingly, the disallowance for all the assmt. Years are removed. In the result, appellant gets the relief of ₹ 2,88,660/- in the assmt. Year 2000-01, ₹ 84,228/- in the assmt. Year 2001-02, ₹ 2,18,832/- in the assmt. Year 2002-03, ₹ 4,38,626/- in the assmt. Year 2003- 04, ₹ 9,17,836/- in the assmt. Year 2004-05, ₹ 12,32,726/- in the assmt. Year 2005-06 and ₹ 20,24,982/- in the assmt. Year 2006-07. In the result, ground no. 5 for all assmt. years are allowed. 51. ITA NO. 207/IND/2008 The addition made by the Assessing Officer on account of unexplained bogus purchases u/s 69C of the Act amounting to ₹ 1,34,29,335/- was deleted by the learned Commissioner of Incometax (Appeals) after maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 52. The addition of ₹ 12,32,726/- made by the Assessing Officer u/s 69C of the Act on account of unexplained bogus fabrication expenses was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- On perusal of the above said sections, it may be seen that the additions u/s 69C can be made when it is found by the Assessing Officer that the appellant has incurred the expenditure and he is unable to explain the source of such expenditure. In the instant case, the Assessing Officer has not found any expenditure which can be said to be unexplained. In fact, the appellant has shown the expenditure in the form of fabrication expenses and the ld. Assessing Officer is of the opinion that the appellant has not incurred the expenditure on fabrication. On the above facts, it may be seen that the provisions of sec. 69C of the IT Act are not attracted. After perusal of the assessment order for all the assessment years and the detailed submissions of the AR, I find that the Assessing Officer has made the disallowance of 1/5th of the fabrication expenses in a very casual manner. In all the assmt. Years,he states that he is making t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on their behalf and the other parties i.e. Kathuria trade company and Tirupathy Steel Traders also did not attend in compliance to the notice u/s 133(6) and therefore, he disallowed all the purchases made from SRD steel and also disallowed 1/4th portion of other purchases as in line with other firms of the concerns of the group. I have seen the copy of the notice issued u/s 131 on 23.11.2007 to SRD steel which is said to have been sent by the AO calling for confirmation of the sales made by him. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u/s 133(6) no adverse inference can be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme Court in the case of Anees Ahemad sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers in the assmt. Year 2000-01 before me as a sample which were also available before the Assessing Officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable items and claims Cenv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of account of all the fabricators before the Assessing Officer and has also produced the same before me the copies of accounts for the A.Y. 2000-01 are filed before me and are on record. I find that the above said fabricators have never worked for the assessee as evident from record available before the Assessing Officer. I have seen that the appellant has maintained the regular books of accounts which have been duly audited. Whenever the appellant made the payment to the fabricators proper deductions of TDS has been made and substantial payments to the fabricators are made through the cheque. On these facts, it is very difficult to maintain the disallowance of the 1/5th of the fabrication expenses asmade by the Assessing Officer in all the assmt. Years and accordingly, the disallowance for all the assmt. Years are removed. In the result, appellant gets the relief of ₹ 2,88,660/- in the assmt. Year 2000-01, ₹ 84,228/- in the assmt. Year 2001-02, ₹ 2,18,832/- in the assmt. Year 2002-03, ₹ 4,38,626/- in the assmt. Year 2003- 04, ₹ 9,17,836/- in the assmt. Year 2004-05, ₹ 12,32,726/- in the assmt. Year 2005-06 and ₹ 20,24,982/- in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred by the lower authorities in their respective orders and by the respective counsels during the course of hearing before us. From the record we find that the search was carried out at the residential premises of directors/partners of these concerns and not at the premises of these concerns. After the search was carried out at the residence of directors/partners of these associate concerns, assessment was framed in respect of these concerns u/s 153C of the Act on the plea that incriminating material was found during the course of search at the residence of partners/directors. The assumption of power by the Assessing Officer u/s 153C of the Act for framing the assessment is subject to the condition that the Assessing Officer assessing the search party, is satisfied that the jewellery or other valuable articles or things or books of accounts or documents or assets, seized or requisitioned, pertain to some person other than the person referred to in section 153A, then the books of accounts or the documents or assets seized or requisitioned, shall be handed over by the Assessing Officer of searched person to the Assessing Officer having jurisdiction over such other person and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were examined in detail by the Hon ble Supreme Court in the case of Manish Maheshwari; 208 CTR 97. The said Hon ble Supreme Court decision was followed by the Hon ble Delhi High Court in the case of New Delhi Auto Finance Limited; 300 ITR 83. The Hon ble Supreme Court has laid down a proposition that the Assessing Officer making the assessment of the searched person has to necessarily record in writing the specific objective satisfaction which is mandatory to the effect that the undisclosed income found by him, on the basis of seized material, belongs to some person other than the searched person. Insofar as the provisions of section 153C of the Act are in pari materia with the provisions of section 158BD of the Act with regard to the requirements of recording necessary satisfaction by the Assessing Officer of searched person, the law laid down by the Hon ble Supreme Court in the case of Manish Maheshwari (supra) shall apply with full force in case of initiation of proceedings u/s 153C. The assumption of jurisdiction and framing of assessment by the Assessing Officer u/s 153C without recording such satisfaction is void ab initio. Applying the proposition of law laid down by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out. Our attention was drawn to various lists prepared as a part of appraisal note duly mentioning the names of the persons along with their addresses, date of search, who are appearing in the warrant of authorization u/s 132. A list was also prepared to show the premises wherein survey was undertaken u/s 133A of the Act. In the appraisal note, a list was also given where action u/s 153C of the Act was intended to be initiated. As per the learned CIT DR, such list comprises of the persons other than the person at whose premises search is being carried out in respect of the documents found at such places which pertain to the person other than person against whom action u/s 132 was undertaken. As per the learned CIT DR , it is not only the Officer framing the assessment should be considered as Assessing Officer for recording satisfaction but the other Officers involved in the search and survey like ADIT/DDIT should also be considered. Our attention was also drawn to the provisions of sub-section (7A) of section 2 defining the Assessing Officer to mean Assistant Commissioner, Deputy Commissioner, Assistant Director, Deputy Director or the ITO, who is vested with the relevant jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires the Assessing Officer s satisfaction to the effect that valuables, seized documents found during the course of search, which belong to a person other than a person searched and the procedure of handing over of these documents/valuables, etc. to the Assessing Officer having jurisdiction over such other person and thereafter obligation of the Assessing Officer of such other person to proceed against each such other person and issue such other person notice and thereafter to assess or reassess the income of such other person in accordance with the provisions of section 153A of the Act. As per the learned counsel for the assessee, copy of such satisfaction note should be given to the assessee whereas the appraisal note, as referred by the learned CIT DR, is a confidential document prepared by the department for their internal use and copy of which is not handed over to the assessee. Such appraisal report is a secret document prepared by the department and which is not open to the assessee, therefore, cannot be treated at par with the satisfaction note as contemplated u/s 153C of the Act with regard to the documents seized during the proceedings u/s 132, which is alleged to be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, which is a mandatory requirement. What is the legislative intent of such satisfaction and in what manner it should be recorded has been dealt with in the judicial pronouncements in the cases of Manish Mahehwari and G.K. Drive Shaft by the Hon ble Supreme Court. Accordingly, we are not inclined to agree with the proposition that the appraisal note prepared by the department should be treated as a satisfaction note as required to be recorded in terms of section 153C of the Act so as to empower the Assessing Officer to assume jurisdiction to issue notice and thereafter frame assessment u/s 153A read with section 143(3) of the Act. 82. In view of the above discussion, we do not find any infirmity in the order of the learned Commissioner of Incometax (Appeals) who has quashed the assessment framed u/s 153C of the Act. Further, the detailed finding recorded by the learned Commissioner of Incometax (Appeals) with respect to recording of satisfaction has not been controverted by the department by bringing any positive material on record. We, therefore, do not find any infirmity in the order of the learned Commissioner of Income tax (Appeals) quashing the assessments framed u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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