TMI Blog2022 (11) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... nd adjudicating the legal ground challenging the validity of proceeding carried out u/s. 153C of the Act. CIT(A) has quashed the assessment order u/s. 153C of the Act on the ground that the ld. AO failed to record the satisfaction note - The pre-condition for carrying out proceedings u/s. 153C is that if the ld. AO of the searched person and the ld.AO of the other person in whose name incriminating material is found are different, then firstly satisfaction note is prepared by the ld. AO of the searched person mentioning the details of search material not belonging to the searched person but belonging to the other person . Such satisfaction note along with seized material is passed over to the ld. AO of other person . Thereafter, the ld.AO of the other person is again required to prepare the satisfaction note stating that such seized material belongs to other person , who is under his jurisdiction. In the instant case before initiation of proceeding u/s. 153C of the Act the ld. AO has not prepared the satisfaction note. This fact has been admitted by the revenue authorities before us also. Circular No. 24/2015 dt. 31-12-2015 issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which was completed on 15-12-2015, wherein certain additions were made. 5. In the second round the assessee during the course of appellate proceedings before the ld. CIT(A) raised the additional ground challenging the exercising of the jurisdiction by the ld. AO u/s. 153C of the Act for initiating the proceedings without prior recording a satisfaction note , which was a pre-condition to invoke the jurisdiction u/s. 153C of the Act. This additional ground was admitted by the ld. CIT(A) and after examining the facts of the case, it was found that the ld.AO has not recorded his satisfaction prior to initiation of proceedings u/s.153C of the Act. Therefore, the ld. CIT(A) following the CBDT Circular No. 24 of 2015 dt. 31-12-2015 held the assessment order dt. 15- 12-2015 framed u/s. 153C/263/143(3) of the Act as invalid and bad in law and quashed the same. 6. Being aggrieved, the revenue is now in appeal before this Tribunal raising various grounds of appeal as follow:- AY 2007-08 2010-11: [ (i) On the facts and circumstances of the case, the Ld. CIT(A) is not justified in facts as well as in law in quashing the original assessment order dated 21.03.2013 pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) The appellant craves leave to add, alter or amend any or all of the grounds of appeal before or during the course of appeal. 7. The Ld. Departmental Representative vehemently argued supporting the order of the AO and also stated before us that the Ld. CIT(A) erred in admitting the additional ground in the second round. He also submitted that the assessee has not challenged the validity of assessment proceeding u/s. 153A/143(3) of the Act in the first round and therefore, cannot raise any such legal issue in the second round of assessment proceedings. 8. Per contra, the Ld. Counsel for the assessee referring to the written submissions submitted that the Hon ble Courts have held on various occasions that such legal issue can be raised at any stage and even in the second round of proceedings also. Further, he submitted that the revenue has failed to furnish any proof that the ld. AO that satisfaction note was prepared by the ld. AO before initiation of proceedings u/s. 153C of the Act. Therefore, the ld. CIT(A) has rightly quashed the assessment proceeding u/s. 153C of the Act. 9. We have heard the rival contentions and perused the material placed on record before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. We further find support from the similar ratio laid down in the case of Inventors Industrial Corporation Ltd Vs. CIT (194 ITR 548). Hon ble Gujarat High Court in the case of P.V.Doshi Vs. CIT (113 ITR 22), Delhi Tribunal in the case of Lairy Distributors P.Ltd Vs. DCIT (74 taxman.com 122). 12. In view of the above cited judgments, we find force in the submissions of the ld. Counsel for the assessee and fail to find any merit in the grounds raised by the revenue that the ld. CIT(A) erred in admitting and adjudicating the legal ground challenging the validity of proceeding carried out u/s. 153C of the Act. 13. As regards remaining grounds of the case are concerned, we find that the ld. CIT(A) has quashed the assessment order u/s. 153C of the Act on the ground that the ld. AO failed to record the satisfaction note. We find that before us the revenue has also failed to rebut this fact that satisfaction note was not prepared by the ld. AO regarding the incriminating material found in the course of search at the business/residential premises of Mr. Vishal Agarwal, which belonged to the assessee (M/s. Surendra Kumar Agarwal-HUF). The pre-condition for carrying out proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/ not pressed if it does not meet the guidelines laid down by the Apex Court. 14. On perusal of the above referred CBDT Circular, which has been issued after following the judgment of the Hon ble Supreme Court in the case of M/s. Calcutta Knitwears (supra) in Civil Appeal No. 3958 of 2014 dated 12-3-2014 [ 2014] 43 taxmann.com 446(SC) and also considering the consistent view taken by various Hon ble Courts, we find that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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