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TMI Blog2018 (7) TMI 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of addition ofRs. 90 lacs received as share capital from Mridul. 3. That without prejudice under the facts and circumstances, both the lower authorities erred in law as well as on merits in making and sustaining addition of Rs. 90 lacs u/s. 68 for share capital received from Mridul." 2. The brief facts of the case are that a search and seizure operation was conducted on 19.10.2011 at the business premises of M/s. Jainco Group of cases comprising M/s. Jainco Promoters Pvt. Ltd. wherein some documents were seized. Amongst the seized documents, a trial balance sheet in the name of appellant alongwith documents relating to share allocation transactions between the appellant and M/s. Mridul Securities Pvt. Ltd. Based on the above documents seized, the Assessing Officer received a satisfaction note of DCIT, Central Circle Ghaziabad dated 21.02.2014. Consequent upon this satisfaction note, the Assessing Officer of the assessee also recorded a satisfaction note on 03.03.2014 and issued notice u/s. 153C of the Act to the assessee. In response, the assessee stated that the return filed originally may be treated to have been filed in response to the notice u/s. 153C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he satisfaction note dated 03.03.2014 recorded by the A.O. of the assessee; that on the basis of these satisfaction notes, no legally valid proceedings u/s.153C can be initiated. The ld. AR also invited our attention to the satisfaction note dated 21.02.2014 recorded by the Assessing Officer of the searched person, which reads as under : "Satisfaction for initiating proceedings u/s.153C of the I.T. Act, 1961 Date: 21.02.2014 A search & seizure operation u/s.132 was conducted on 19.10.2011 at the premises of Jainco Group of cases comprising M/s Jainco Promoters (P) Ltd. & others at G-10, Plot No.6, Aditya Commercial Complex, Preet Vihar, Delhi-92. The seized documents from the above premises contains document, Page No.127 to 148 of LP-2 which is trial balance in the name of M/s Lucky Fashions (P) Ltd. for F.Y.2009-10. I have gone through the seized documents. I am satisfied that the document pertains to M/s Lucky Fashions (P) Ltd. Therefore, the assessee comes under the purview of section 153C of the Income Tax Act, 1961. Therefore, proceedings under section 153C are required to be initiated in this case. The jurisdiction of the case lies with the Assessing Officer - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for F.Y.2009- 10, however there is no trial balance in the said seized papers. It has been further contended that the A.O. of the assessee also, in his satisfaction note dated 03.03.2014, adopted the findings of the satisfaction note dated 21.02.2014 which is evident from the said satisfaction note where A.O. of the assessee recorded as "In view of the details of satisfaction note received I am satisfied that it is a fit case for issue of notice u/s.153C for the assessment year 2010-11". It has been stated that the foundation and the basis of initiation of proceedings u/s.153C is the satisfaction note, which mentions wrong and non-existent facts. It has been contended that on the basis of such wrong facts, no valid proceedings u/s.153C can be initiated. The Ld. AR further submitted that this shows the total non application of mind by both the satisfaction recording authorities. It is also a case of pure mechanical initiation of proceedings u/s.153C. The contention made is that such satisfaction notes do not provide legally valid jurisdiction for initiation of proceedings u/s.153C of the I.T. Act. The Ld. AR, again, by referring to both the satisfaction notes as stated above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record. The Ld. D.R. admitted that as per the satisfaction note dated 21.02.2014 recorded by the A.O. of the searched person, the nature of documents seized in search on M/s Jainco Promoters Pvt. Ltd. & Ors. at G-10, Plot No.6, Aditya Commercial Complex, Preet Vihar Delhi, have been identified as the trial balance in the name of Lucky Fashions Pvt. Ltd. for F.Y.2009-10. The Ld. D.R. also did not dispute that the A.O. of the assessee, as he was then, vide his satisfaction note recorded on 03.03.2014 absolutely took the findings of satisfaction note dated 21.02.2014 as the reasons for issuance of notice u/s.153C for the A.Y.2010-11. The Ld. D.R., also did not dispute that the seized pages namely Pg. No.127 to 148 of LP-2, did not contain any trial balance in the name of Lucky Fashions Pvt. Ltd. for F.Y.2009-10. However he contended that it can be probably a typographical error in the satisfaction note dated 21.02.2014 recorded by the A.O. of the searched person. It has been contended by the Ld. D.R. that although in satisfaction note dated 03.03.2014 recorded by A.O. of the assessee, the findings of satisfaction note dated 21.02.2014 are the basis for satisfaction of the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, the addition of Rs. 90 lacs has been validly made by the A.O. and correctly confirmed by the Ld. CIT (A). 6. We have considered the rival submissions and have gone through the entire material available on record including the findings reached by both the authorities below. The assessee, has contested that under the facts and circumstances, initiation of proceedings u/s.153C is illegal and unsustainable in law, consequentially the impugned assessment order is also illegal. The assessee has contested the addition of Rs. 90,00,000/- made by the A.O. u/s.68 of the I.T. Act on merits also. For the sake of convenience, we first proceed to examine the validity of initiation of proceedings U/s.153C of the Act w.r.t. the satisfaction note dated 21.02.2014 recorded by the A.O. of the searched person and the satisfaction note dated 03.03.2014 recorded by the A.O. of the assessee. Before we examine the issue in the above light, we think it proper to mention that the provisions of section 153C of the IT Act 1961 stipulate that where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized or requisitioned belongs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer of the assessee would not acquire a legally valid jurisdiction to initiate proceedings u/s. 153C of the Act. 7. The Ld. D.R. contended that this appears to be a typographical error which should not be given any weightage at all for deciding the validity of initiation of proceedings u/s.153C w.r.t. satisfaction note. We do not find substance in the contention of the ld. DR that it was a sheer typographical mistake. Once, the Assessing Officer of the searched person made a mistake in mentioning the documents in the satisfaction note, and forwarded some other documents pertaining to share transactions to the Assessing Officer of assessee, the Assessing Officer of the appellant was also required to verify and examine those documents and then to record his own satisfaction for issuing notice u/s. 153C of the Act. However, he also did not refer recovery of any such documents in his own satisfaction note dated 03.03.2014, as reproduced above, but recorded his satisfaction absolutely relying on the satisfaction note of the Assessing Officer of searched party. Such a grave discrepancy which hits the acquisition of jurisdiction at the threshold of initiation of procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incriminating in nature and prima facie represented undisclosed income" While holding as above, Hon'ble Karnataka High Court has taken support from plethora of other decisions as referred to in the said decision. Further, the legislature has never intended to provide a blanket license to the revenue for initiating proceedings u/s.153C in the cases of all such assessees of whom the documents are found and seized in search of a 3rd party. The documents found and seized should be prima facie of incriminating nature for providing the jurisdiction to initiate proceedings u/s.153C on such persons. In this case, following the ratio of IBC Knowledge Park Pvt. Ltd. (Supra) and for the other reasons as deliberated above, we hold that in the absence of a finding in the satisfaction notes for the documents found and seized are of incriminating nature, no legally valid proceedings u/s.153C can be initiated. In the present case, undisputedly, there is no such finding. In view of all the above discussion, we are, therefore, of the considered opinion that the initiation of proceedings u/s.153C cannot be validated on this count too. Accordingly, the proceedings u/s.153C and consequential assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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