TMI Blog2019 (3) TMI 1979X X X X Extracts X X X X X X X X Extracts X X X X ..... of the searched company M/s Sheela Foam Pvt Ltd is noted on top, meaning thereby that the satisfaction was recorded in the case of SFPL on 28.08.2013 when notice u/s 153A was issued to SFPL, but there is no satisfaction recorded in the case of the appellants (Kartik Patel Group hamily members). In this view of the matter, and in terms of the AO s reply that the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee , the satisfaction enclosed with the AO s letter F.No.DCIT/CC- 11/2013-14/1634 dt. 06.01.2014 sent to the assessee cannot be considered as valid satisfaction of the AO. We further note that since the AO has mentioned in his reply dt. 14.01.2016 that The assessment records as available in this office were sent as desired by your goodself, it is necessary to mention that the assessment folders of all the five cases of the group was sent back to the AO on 06.01.2016 and the AO s reply is dt. 14.01.2016. We do not find any reason to interfere in the order of the Ld. CIT(A), wherein it has been held that the satisfaction recorded by the AO and the issuance of notices u/s. 153C of the Act held to be invalid and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel Group and other Patel Group in M/s Sheela Foams Pvt Ltd was Rs. 88.90 crores out of which Rs 52.78 crores was paid thrpugh cheques and the balance amount of Rs. 36.10(Rs. 31.85 crores to Pradhuman Patel Group 4.25 crore to other patel group) crores was paid in cash by the Rahul Gautam Group to the Pradhuman Patel Group and other Patel group. As per seized documents (Page no. 41 to 85 of Annexure - A1, Page no. 20, 21 Annexure A-7, Page no. 12 of Annexure A-5, Page no. 21 of Annexure A-8), it is clearly evident that the group run by Sh.Rahul Gautam, MD of M/s. Sheela Foam Private Limited, has paid huge amount of cash as indicated on the seized documents to Sh. Praduman Patel and his group for purchase of shares. As per the statement of Shri Rahul Gautam (MD of M/s. Sheela Foam Private Limited) vide ques. No. 44 the shares of M/s. Sheela Foam Private Limited were purchased by M/s. Serta India Private Limited from Patel Group. The AO considered the explanation of the assessee and stated that though all these papers have been seized from the office of the company, but they do not belong to the assessee is not acceptable. The seized documents contain details of shares held by Pate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son for his satisfaction that the seized documents belonging to the appellant. He therefore, relies on the ratio of M/s Pepsi foods private limited and held that the assumption of jurisdiction by the learned assessing officer under section 153C of the act is bad in law. He further stated that the AO has merely stated in the satisfaction note that the documents belonging to the assessee were found and seized. He further held that there are no reasons expressed in that satisfaction note in arriving at such a conclusion. He therefore held that satisfaction as required under the law pronounced in Pepsi Foods Private Limited is not coming out of the satisfaction note recorded by the Assessing Officer before issuing notice under section 153C and therefore the action of the learned assessing officer is bad in law as per the above decision of the honourable High Court. Therefore respectfully following the ratio of the honourable High Court in case of Pepsi foods private limited, he held that the assumption of jurisdiction under section 153C by the Assessing Officer was bad in law in as much as he has not stated the basis and reasons for holding that the documents mentioned in the sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The AO in his order dated 28.3.2014 alleging that an amount of Rs. 1,86,42,733/- were received by the assessee in cash from M/s Serta India Pvt. Ltd. for sale of shares of M/s Sheela Foam Pvt. Ltd. He further submitted that the assessee went in appeal before CIT(A) challenging the validity of assessment made in pursuance of notice u/s 153C as well as the merits of the addition. The CIT(A) after considering the detailed submissions made by the assessee and also after a detailed verification in which three remand reports were called from the Assessing Officer, ultimately held that the satisfaction note on the basis of which the assessing officer initiated the proceedings u/s 153C of the Act is bad in law in as much as the same is not a proper satisfaction in terms of various judgments of the jurisdictional High Court as well as the Supreme Court. Further, the documents mentioned in the satisfaction note also do not 'belong to the assessee. The adjudication done by the CIT(A) starts from page 49 of his order at para 4.3 onwards. Relevant findings are at Page 55, Para 4.3.8. It was further submitted that there are twofold contentions which were raised before the Ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contents of the satisfaction note, we are unable to discern any satisfaction of the kind required under Section 153C of the said Act. ii. In the case of Pr. CIT Delhi-18 V. M/s. N.S. Software (Firm), ITA 791/2017, dt. 18 -4-2018. Delhi High Court held as under: 23. This court concurs with the impugned order. In the present case, the Ld. AO has not explained steps taken by him to determine that the seized material belonged to the Assessee Firm. The satisfaction note has been prepared in a standard mechanical format and it does not provide any details about the books of accounts which allegedly belong to the Assessee Firm. Most importantly, a satisfaction note was not recorded by the AO of Sh. Narendra Kumar from whose premises the documents were seized. In light of the decision in Nikki Drugs and Chemicals Pvt. Ltd. it is now a settled proposition of law that even if the Assessing Officer for the person from whose premises the documents are seized is the same as the Assessing Officer for the person to whom the document belongs, separate satisfaction notes must be recorded. Here the AO s note nowhere reflects whether any document seized, on application of his mind, disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document pertained to the other person and it is not necessary to show that the seized mate rial belonged to the other person. This legal position this Court in its recent decision dated 10th 3241/2015 (Canyon Financial Services Ltd. has been explained by 2017 in W.P. (C) No. Income Tax Officer). ii.) In Pepsico India Holdings Private Limited Versus ACIT, [2015] 370 ITR 295 (Del), the hon ble Delhi High Court held as under: 14. First of all we may point out, once again, that it is nobody s case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that 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 referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vendor only because the vendor s name was mentioned in the documents. In the present case, although the photocopies of the documents handed over to SVP Builders India Ltd may be copies of the original documents that belong to the assessee, the said photocopies would belong to SVP Builders India Ltd., as the same were handed over to it in connetion with the investment made by the Assessee. Similarly, a certified copy of the -ssessee s resolution signed by its Directors, would also belong to the SVP Builders India Ltd. even though the minutes of the Board meeting form a part of the record of the Assessee. We find no infirmity with the view taken by the IT AT in this regard. Thus, notwithstanding the controversy whether the assessing officer of the searched persons had recorded his satisfaction that the-specified seized documents belonged to the Assessee, the initiation of proceedings under section 153C of the Act, in respect of the Assessee would be without jurisdiction. vi) In CIT-7 V. RRJ Securities Ltd. And Vica-Versa, [2016] 380 ITR 612, the Hon ble Delhi High Court held as under: 13. The first and foremost step for initiation of proceedings under Section 153C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that Ld. CIT(A) has elaborately discussed the issue in dispute in his impugned order at page no. 49 to 57 vide para no. 4 to 4.4, the relevant findings of the Ld. CIT(A) are reproduced as under:- 4. 'I have considered the submissions of the appellant and the assessment order. Since the grounds on legal points as well as on merits of the additions, and the facts of all the five cases of the Kartik Patel Group family members in appeal are similar/same, all these appeals are decided together for the sake of convenience. 4.1 Ground No. 01 is general and need no separate consideration. 4.2 In Ground No. 02 the appellant has challenged the order u/s 127 of the Act. Since the appellant cannot take this ground before CIT(A), the same is dismissed. 4.3 In ground nos. 03, 04, and 10 the appellant has challenged the jurisdiction for initiation and issuance of notice u/s 153C of the Act on the ground that no proper satisfaction was recorded and because the documents found during search of the searched party did not belong to the appellant, and hence proceedings are unwarranted and void ab-initio, as also on account of adequate opportunity not provided by the AO. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t photocopy of some rough calculation/notings which was unsigned and could not be authenticated as identity of the author of the said paper was never ascertained: these were recovered from the premises of SFPL and the same impugned document has been alleged as belonging to Serta India Private Limited (SIPL) (which later merged in SFPL) and various other persons also; that the same document cannot belong to many persons; that copy of email correspondence between Kartik Patel and Ravinder Singh, staff of SFPL related to sharing of bank details for the . transfer of consideration as agreed and which is duly disclosed in the books of accounts; and that without prejudice, as the above e-mail correspondence was addressed to one and was found from his possession from premises of SFPL it at all can only be presumed to belong to Ravinder singh and not to the appellant; however the AO has considered theses as belonging to assessee without elaborating upon the reasons as to how and why A-1 P-41 belong to the appellant and that such satisfaction which do not clearly spell out and mention the reason and the basis for holding such documents as belonging to other person is not a valid satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was also done from the assessee for enquiring into the nature and status of such documents w.r.t. assessee; that no finding could had been given holding some documents as belonging to 3rd person i.e. other than the party searched; and therefore in the absence of any material for holding that these documents actually belonged to assessee, there was no satisfaction recorded in the case of the searched person that the alleged documents belong to the appellant. Therefore, there can be no question of initiating proceedings under section 153C of the Act in the case of the said other person, the assessee. 4.3.3 It has also been submitted that the AO did not provide copies of all the documents seized from SFPL nor the copies of the statements of Sh Praduman Patel and Shri Rahul Gautam and referred and used against the appellant in the assessment order were provided to the appellant and the assessing officer has primarily relied upon unreliable documents collected behind the back of the assessee thus violating the settled canons/ principles of natural justice, and has submitted that it has been consistently held by various Courts, including the Hon ble Supreme Court and jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even otherwise, the contents of this email are not at all incriminating in nature. The AO vide his letter F.No.ACIT/CC-06/201516/275 dt. 08.06.2015 submit his report/comments wherein he has mentioned that the appellant did not object to the assessment proceedings during the period 29.08.2013 to 28.03.2014 when the assessment proceedings were carried out and order was passed and his reproduced the letter dt. 30.01.2014 of the appellant submitted to the AO. In the very first para the appellant has objected to the basic fact that the papers provided to them and alleged to be belonging to them are part of the documents seized from the premises of the searched party and these papers do not belong to them nor has any nexus with the assessee, and no incriminating material was found from the possession of the assessee and had also referred to the presumption u/s 132(4A) of the Act and had stated that therefore no addition could be made in the hands of the assessee. With regard to the other two points, the AO has reproduced the para-3 of the assessment order, but has not commented on the point no. 1 above. However, the copy of the remand report was provided to the appellant and they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is factually incorrect as mentioned at para 3 page 2 and para 6 page 12 and 13 of the assessment order. Thereafter vide this office letter no. 1246 dt. 15.12.2015 the AO was specifically directed to provide (i) copies of pages -41 to 85 of Annex-A1, pages - 20 and 21 of Annex - A7, page- 12 of Annex-A5, page21 of Annex-A8 (referred at pages-2, 5 7 of the assessment order); pages-15 to 34 of Annex-A2, all pages of Annex-A5, A7 and A8 (referred at page 4 of assessment order); page-35 of Annex-2; (ii) copies of the statements of Shri Pradhmun Patel and Sh Rahul Gautam, whether recorded during the search or survey or u/s 131 of the Act (referred at pages 02, 12 and 13 of the assessment order); give sufficient opportunity to all the appellants / appellants AR, Sh Ridhi Karan Aggarwal, and submit his remand report by 04.01.2016 by incorporating independent findings, if any, and not to quote the portions of the assessment order (which may be referred wherever necessary). The AO was also asked to send the assessment folders with his report. Thereafter the AO provided copies of all the above documents referred to in the assessment order to the appellant on 18.12.2015 and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad merged in SFPL w.e.f 01.04.2010 vide order of the Hon ble Delhi Court dt. 18.10.2011. Accordingly, the Lnd. CIT(A)-31, New Delhi vide his order dt. 31.10.2014 in appeal no. 338/14-15 for AY 2010-11 quashed the order of the AO in the case of SIPL holding that the company was not in existence as on 01.04.2010 following the decision of Spice Infotainment Ltd. vs CIT (2012) 247 CTR 500 (Del) and other decisions. Copy of the assessment order and the CIT(A) s order have been filed. As submitted by the appellantt s AR, the department has not filed 2nd appeal in view of the fact of non-existence of the SIPL as on 01.4.2010. In fact, the appeals of AYs 26-07 to 2012-13 of SFPL are also pending and under proceeding before me. I haver perused the assessment order in these assessment years of SFPL and I find that no reference to any of the seized documents Annx-A1 to A13 in any of the assessment years in the case SFPL and no additions have been made therein which are based on the seized material, particularly in AY 2010-11, and there is no whisper whatsoever as to the payments made by SIPL for purchase of the shares to the different family members of Praduman Patel Group, Himanshu Patel gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily members of the appellant group with entries of Rs. 12.75 crore due to them for 1427280 shares held by them, and out of consideration A Rs.7.30 crore paid and balance of Rs.5.45 crore and out of consideration B of Rs.4.25 crore due, Rs.45 lakh paid and Rs.3.80 crore due. I have examined the seized documents as per Annx.-A5, A7, A8 which are notings in diaries not relevant and not referred/utilized in the assessment order as well as pages 12-35 of Annx.-A2 provided to the appellant by the AO and submitted by the appellant. Pages 15-21 of A2 are receipts dt. 20.12.2009 on revenue stamp given by Sh. Praduman Patel on behalf of himself and that of Smt. Urmila Patel and Sh. Himanshu Patel (both HP group) for payments received from Sh. Rahul Gautam by cheque, pages 27-34 are similar receipts from PP and those of Smt. Renu Patel, Sh. Rohan Patel and Sh. Krish Patel (all of PP group) of payments received by cheque, and pages 22-25 are photocopies of cheques issued to them by Sh. Rahul Gautam. 4.3.8 Thus, in none of the seized documents except for page 41 of Annx.-A1 as mentioned above, there is any reference to payments related to the appellant group nor of any cash payment th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 27.02.2015 which was provided to the appellant vide vl AO s letter F.No.DCIT/CC-11/201314/1634 dt. 06.01.2014 enclosing therewith the satisfaction note and pages 41, 57 to 58 and 67 of Annx-1 seized from SFPL. Beside the issue of whether these documents belong to the appellant and the application of mind on the implication of these'ftdcOments on undisclosed income of the appellant, the satisfaction note enclose with his notice is unsigned, there is no^mention of date of satisfaction and the assessment year, while the satisfaction is stereotype in all the TTve cases Sf'the Kartik Patel family group. On the other hand in the assessment folder the same the same satisfaction note, dt. 29.08.2013 for AYs 2006-07 to 2011-12 and duly signed was found on the note sheet side of the folder (after the note sheets) both this satisfaction notes were forwarded to the AO vide this office letter no. 1269 dt. 06.01.2016 with the following observations: 2. I have perused the assessment folders of these cases forwarded by you with your letter F.No.ACIT/CC06/15-16/1459 dated 30.12.2015. I find that the satisfaction recorded u/s 153C of the Act placed on the note sheet side of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Patel and as page 4 and 6 respectively in the case of Smt. Meenakshi Patel and M/s Kartik Chandulal Patel HUF (in fact the satisfaction in the file of Sh. Kartik Pate! is that of Smt. Meenakshi Patel) - and the correspondence sheets are marked up to pages 187, 411, 192, 194 and 187 respectively which do not include tne satisfaction note on the correspondence side. Besides, on the satisfaction note, both X1 X2, the name of the searched company M/s Sheela Foam Pvt Ltd is noted on top, meaning thereby that the satisfaction was recorded in the case of SFPL on 28.08.2013 when notice u/s 153A was issued to SFPL, but there is no satisfaction recorded in the case of the appellants (Kartik Patel Group hamily members). In this view of the matter, and in terms of the AO s reply that the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee , the satisfaction enclosed with the AO s letter F.No.DCIT/CC- 11/2013-14/1634 dt. 06.01.2014 sent to the appellant cannot be considered as valid satisfaction of the AO. Since the AO has mentioned in his reply dt. 14.01.2016 that The assessment records as available in this office were sent as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndir (P.) Ltd. [2015] 58 taxmann.com 293 (Delhi - Trib.); Tanvir Collections (P.) Ltd. v. Assistant Commissioner of Income Tax, Central Circle-21, New Delhi [2015] 54 taxmann.com 379 (Delhi - Trib.); Deputy Commissioner of Income-tax , Central Circle-5, New Delhi v. Qualitron Commodities (P.) Ltd. [2015] 54 taxmann.com 295 (Delhi - Trib.). In Director of Incometax (IT)- II v. Ingram Micro (India) Exports (P.) Ltd [2015] 60 taxmann.com 57 (Bombay) the Hon ble Bombay High Court have also held that once it was found that there was nothing in assessment order which would indicate that Assessing Officer arrived at satisfaction that seized material pertained to assessee, Tribunal was justified to nullify proceedings and also the decision of the ITAT, F Bench, New Delhi dated 31.12.2018 in similar case in ITA No. 1455-1459/Del/2015 (AY 2010-11) in the case of ACIT vs. Rohan Patel; Himanshu Patel; Praduman Patel; Krish Patel and Urmilla Chandulal Patel. We further find that as regards the satisfaction note is concerned, the assessee had filed a copy thereof at page 11 to 17 of the PB filed on 27.02.2015 which was provided to the appellant vide AO s letter F.No. DCIT/CC-11/201314/1634 dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat remand report stands submitted vide this office letter dated 04.01.2016. Regarding two sets of satisfaction note, it is submitted that the assessments under consideration were completed by predecessor of the undersigned. The assessment records as available in this office were sent as desired by your goodself. Thus, the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee. 5.3 Thus, it is seen that the impugned satisfaction note provided to the assessee vide AO s letter F.No.DCIT/CC-11/2013-14/1634 dt. 06.01.2014 (X1) was unsigned, with no date indicating the date on which satisfaction was drawn, and with no mention of the assessment year for which satisfaction was drawn, while the satisfaction found in the assessment folder is on the note sheet side (X2) - with no page marking on the satisfaction prior to 06.01.2016 when the assessment folders were sent back to the AO by me, but subsequently found marked as page 5 in the case of the appellant and that of Sh. Kartik Patel and Sh. Abhishek Kartik Patel and as page 4 and 6 respectively in the case of Smt. Meenakshi Patel and M/s Kartik Chandulal Patel HUF (in fact the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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