TMI Blog2019 (6) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... TD. [ 2014 (12) TMI 1067 - ANDHRA PRADESH HIGH COURT] we hold that the issue of notice u/s 153C without recording the reasons in the case of searched person renders the notice issued u/s 153C as invalid. Accordingly, we quash the notice issued u/s 153C and the cancel the consequent assessment made u/s 143(3) r.w.s. 153C. Since we have quashed the notice issued u/s 153C and cancelled the consequent assessment, we consider it is not necessary to adjudicate the revenue s appeal which is on quantum of additions and the remaining grounds of appeal raised by the assessee in this appeal. Accordingly, the appeals of the assessee is allowed - I.T.A.No.17/VIZ/2019 , S.A.No.01/VIZ/2019, I.T.A.No.47/VIZ/2019, Cross Objections No.44/Viz/2019 & 49/Viz/2019 - - - Dated:- 26-6-2019 - SHRI V. DURGA RAO AND SHRI D.S. SUNDER SINGH, Appellant by : Shri D.V. Anjaneyulu, AR Respondent by : Shri D.K. Sonowal, CIT DR ORDER Per Shri D.S. Sunder Singh, J. S.A.No.01/Viz/2019 The assessee filed stay application requesting for stay of demand of ₹ 1,01,01,761/-. Since the appeals are taken up simultaneously, the Ld.AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 153C in Ground No.1 and in Ground No.1 of additional grounds. The assessee challenged the validity of issue of notice on the reason that the AO did not follow the procedure prescribed u/s 153C for issue of notice and there was no satisfaction recorded as provided u/s 153C of the Act by the assessing officer of the searched person. The Ld.CIT(A) has called for the remand report and the AO in the remand report submitted that AO of the searched person and that of the assessee are one and the same. Since the search u/s 132 was conducted in the partner s case i.e. R.Venkatramaiah and the incriminating material was found belonging to the assessee, the proceedings u/s 153C were initiated in the case of the assessee, after duly recording the satisfaction as per the notings recorded on the order sheet of the assessee. The CIT(A) viewed that the AO had initiated proceedings u/s 153C of the Act, after duly recording satisfaction in the case of the assessee and clearly mentioning the seized material hence held that the grounds raised by the assessee with regard to validity of notice u/s 153C are not tenable and accordingly dismissed. The appeal of the assessee on the validity of the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. Vs. Commissioner of Income Tax dated 25.05.2017. 9. We have heard both the parties and perused the material placed on record. In the instant case, the contention of the assessee is that the AO has not recorded satisfaction in the case of the searched person for transferring the incriminating material to the AO of the assessee. The Ld.CIT(A) has called for the remand report, in the remand report also, the AO mentioned regarding recording of satisfaction in the case of the assessee, but no mention was made in respect of the satisfaction recorded in the case of searched person i.e. R.Venkatramaiah. The department also did not place any evidence to show that satisfaction was recorded in the case of searched person, R.Venktramaiah, while transferring the incriminating material. As observed from the CBDT Circular No.24/2015 dated 31.12.2015 which is placed in page No.9B of the paper book , the CBDT has given guidelines to all the AOs to record satisfaction even if the AO of the searched person and the other person is one and the same. For the sake of clarity and convenience, we extract para No.4 and 5 of the Circular which reads as under : 4. The gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 153A (Emphasis Supplied) 6. It is therefore clear that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, 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 Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the Seizing Officer. In other words it is not an automatic action. We find satisfaction of two officers is missing. In this connection we set out the text of the order of the Assessing Officer which is as follows: A search and seizure operation u/s. 132 was carried out in the group ease of Dr. T. Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action for transfer of the material found during the course of search and the department did not place any material to substantiate that the AO of the searched person has recorded separate satisfaction for transferring the material to the AO of the assessee and to initiate proceedings u/s 153C. The Ld.DR contended that if the AOs of both the searched person and the assessee are one and the same no separate satisfaction is required to be recoded and relied on the decision Hon ble Delhi High court in case of Instronics Ltd and Ganapati Fincap Services Pvt. Ltd. In the case of Instronics Ltd the Hon ble High Court of Delhi restored the matter back to the file of the ITAT since there is no discussion on whether the documents referred to in the ITAT s order in fact incriminating and the AO of the searched person has recorded the satisfaction that the seized documents belonged to the assessee. The decision of Hon ble High Court of Delhi in the case of Ganapati Fincap Services Pvt. Ltd. Vs. CIT (supra) is against the writ petition and the facts of the assessee s case are distinguishable, therefore, the case laws relied upon by the Ld.DR are not applicable in the assessee s case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C. 13. Similar issue was considered by the coordinate bench of ITAT Ahmedabad in Parshwa Corporation. v. Deputy Commissioner of Income-tax, Central Circle2, Baroda [2017] 88 taxmann.com 43 (Ahmedabad - Trib.) and held that 18. From the above, it is clear no satisfaction is recorded by the Assessing Officer of person searched. The Assessing Officer of assessee did not record any satisfaction prior to issue of notice u/s 153C. The so-called satisfaction recorded in the notice u/s 153C is totally vague. It has not specified which valuable articles/things/books of accounts/documents were found from Shri Rameshbhai B. Shah which belongs to the assessee. In the assessment order the Assessing Officer has mentioned that in the laptop of Shri Rameshbhai B. Shah the data pertaining to the assessee were found and on that basis notices u/s 153C have been issued. However, in the notice u/s 153C, wherein the Assessing Officer is claimed to have been recorded the satisfaction for issue of the notice, there is no mention about such laptop or the alleged data in such laptop which is claimed to be belonged to the assessee. In view of above, we have no hesitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . ------- 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched pers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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