TMI Blog2019 (6) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... required u/s 153C before transmitting books of accounts or other assets belongs to or relates to other than the searched person was not recorded by the AO of searched person as required u/s 153C consequently, the whole proceedings including assessment order passed u/s 143(3) r.w.s. 153C of the Act, is bad in law and liable to be quashed. Hence, we quashed the assessment order passed by the AO u/s 143(3) r.w.s. 153C for AY 2003-04 to 2006-07. AY 2007-08 - As per the provisions of section 153A r.w.s 153C of the Act, AY 2007-08, ought to have been completed u/s 153C of the Act. This also means that the AO of the person searched ought to have record satisfaction as required u/s 153C that any money or bullion, jewellery or other valuable articles or thing are seized or requisitioned belongs to or any books of accounts or documents seized or requisitioned pertains or pertains to any person other than the person referred to in section 153A. Since the AO of the searched person has not recorded satisfaction as required u/s 153C before handing over books of accounts or assets of other person, the whole proceedings including assessment order passed u/s 143(3) r.w.s. 153C for AY 2007- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant denies its liability for such penalty. 3. The assessee had also taken addition grounds of appeal for all assessment years. The additional grounds of appeal for AY 2003-04 is reproduced hereunder:- On the facts and in the circumstances of the case and in law, the additions made are beyond the scope of provisions of section 153A/153C and hence invalid and the same ought to be deleted. 4. The brief, facts of the case are that the assessee is engaged in the business of running rolling process unit at Bellary in Karnataka. A search action u/s 132 of the Income Tax Act, 1961(hereinafter the Act ) was conducted on 10/11/2006 at various business/residential premises of the companies/directors/related persons belonging to the Balaji group of cases. The principal flagship company of the group is Balaji Yarn Ltd. which is engaged in the business of trading in non-ferrous metals and chemicals at Mumbai, Aligarh and Agra. The group had setup steel manufacturing plants in the name of Karnataka Strips Pvt. Ltd. and United Galva Pvt. Ltd. at Bellary in Karnataka. The search action revealed that six companies of the group had indulged in the dubious act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmed the additions made by the AO towards disallowance of depreciation and also disallowance of share issue expenses under the provisions of section 35D of the Act. In so far as, legal issue raised by the assessee challenging validity of assessment passed u/s 143(3) r.w.s. 153C of the Act, the Ld. CIT(A) held that there was no merit in the contention of the assessee that such satisfaction should have been recorded in the cases searched and not in the case of the assessee, because the Assessing Officer having jurisdiction over the assessee and the AO having jurisdiction over the searched person or one and the same. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 7. The first issue that came up for our consideration from assessee appeal is legality of assessment completed u/s 143(3) r.w.s. 153C of the Act. 8. The Ld. AR for the assessee submitted that the Ld. CIT(A) was erred in not appreciating the facts in the light of provisions of section 153C of the Act, and also the decision of the Hon ble Supreme Court in the case of CIT vs M/s Calcutta Knitwears, Ludhiana (2014) 362 ITR 673(SC) where the procedure for issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that the said note has been prepared by the AO of the assessee before issue of notice u/s 153C of the Act, which is evident from the fact that this is an order sheet entry dated 11/08/2008, which is taken from the file of the assessee and also in the heading of the order sheet it is mentioned that reasons recorded prior to issue of notice u/s 153C of the Act. Therefore, it is very clear from the above that there is no satisfaction by the AO having jurisdiction over the searched person, consequently, whole proceedings including assessment framed u/s 143(3) r.w.s.153C of the Act is bad in law and liable to be quashed. 9. The Ld. DR, on the other hand, submitted that there is no merit in the contention raised by the Ld. AR for the assessee that even if the AO of the searched person and the other person is one and the same, a separate satisfaction is required to be recorded before issue of notice u/s 153C of the Act, because the law is very clear as per which the AO of the searched person is required to record satisfaction before handing over books of accounts and other asset requisitioned during the course of search, but belonged to person other than the searched pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Act. It is also not in dispute that the AO of the searched person and other person is one and the same. In this factual background, the issue needs to be resolved is whether, a separate satisfaction as required u/s 153C of the Act shall be recorded by the AO before handing over books of accounts and other assets found during the course of search but belongs to other person and also before issue notice u/s 153C of the Act, even though the AO of the searched person and other person is one and the same. As per provisions of section 153C(1) of the Act, where the Assessing Officer is satisfied that, any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 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 notice and assess or reassess the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of such other person, then he shall proceed to assess or reassess the income of the other person in accordance with the provisions of section 153A of the Act. From the reading of above provisions of the Act in conjunction with observations of the Hon ble Supreme Court in the case of CIT vs M/s Calcutta Knitwears (supra), it is very clear that the AO having jurisdiction over searched person must record satisfaction before handing over the books of account or assets of other person and also the AO of other person must record satisfaction before issue of notice u/s 153C of the Act. This legal position has been accepted by the Department and accordingly issued a circular vide Circular No.24/2015 dated 31/12/2015, where the CBDT referring to the decision of the Hon ble Supreme Court in the case of CIT vs M/s Calcutta Knitwears (supra), clarified the position of law that recording of a satisfaction is pre-requisite and the satisfaction note must be prepared by the AO before he transmits the record to other AO who has jurisdiction over such other person . The CBDT further clarified in para-4 of said circular that even if the AO of the searched person and the other person is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the provisions of section 153A r.w.s 153C of the Act, AY 2007-08, ought to have been completed u/s 153C of the Act. This also means that the AO of the person searched ought to have record satisfaction as required u/s 153C of the Act that any money or bullion, jewellery or other valuable articles or thing are seized or requisitioned belongs to or any books of accounts or documents seized or requisitioned pertains or pertains to any person other than the person referred to in section 153A of the Act. Since the AO of the searched person has not recorded satisfaction as required u/s 153C of the Act, before handing over books of accounts or assets of other person, the whole proceedings including assessment order passed u/s 143(3) r.w.s. 153C of the Act for AY 2007-08 bad in law and liable to be quashed. Hence, we quashed assessment order passed u/s 143(3) r.w.s. 153C of the Act for 2007-08 12. The assessee has challenged issues involved on merits for all assessment years. Since, we have quashed assessment order passed u/s 143(3) r.w.s. 153C of the Act, for all assessment years, grounds taken by the assessee challenging issues involved on merit become academic in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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