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TMI Blog2016 (10) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... he I. T. Act by contending that no satisfaction was recorded by the A.O. in the case of searched person that the incriminating material found during the course of search belongs to the assessee and therefore, the assessment completed u/s 153C of the Act is illegal. The bench directed the learned DR of the revenue to place the copy of satisfaction recorded in the case of the searched person that the incriminating material seized during the course of search pertains to the assessee and the hearing was adjourned to 03.08.2016. The hearing was again adjourned ton 10.08.2016 and then to 23.08.2016 and again to 26.08.2016 to enable the DR to file the required satisfaction. On 26.08.2016, hearing was concluded with the liberty to the DR to file written submissions on or before 02.09.2016. On 07.09.2016, learned DR of the revenue filed written submissions and submitted that in view of "All India Bandh" on 02.09.2016, the said written submissions be accepted on 07.09.2016. We accept the same and consider it for deciding this technical aspect first i.e. validity of assessments u/s 153C read with section 144. 4. In course of hearing on 26.08.2016, both sides agreed that the facts on this tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O of 153C cases losses jurisdiction over the earliest 2 A.Y s. on which he may possess seized records. On the other hand, he assumes jurisdiction over 2 new A.Ys. on which there are no seized records. There can be no assessments for the latest 2 years based on seized documents transferred. Therefore, the argument of the assessee that the 1st 2 years assessments are void are not logical vis-a-vis the provisions of the Act. b) Note on opportunity of being heard (Refer pg. 4 of report of DCIT) The report of DCIT elaborates that the assessee had not filed return of in response to notice u/s 153C even under protest and that all orders for the batch of 6 Assessment Years were best judgement assessments u/s 144 r.w.s. 153C based on material available on record due to total non-cooperation of assessee during assessment proceedings. c) Note on Transportation Expenses ( Refer pg. 4 to 6 of report of DCIT) The report of DCIT elaborates that AO had sent two showcause notices dated 01/03/2013. The assessee replied on the same issue vide letter dated 16/03/2013 received on 21st March, 2013 (Page 32 to 34 of Paper Book) and raised the question of cross examination on 21st M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income. In this regard the following case laws are relied upon: 1. SSP Aviation Ltd. Vs DCIT [2012] 20 taxmann.com 214 (Delhi) (HC) 2. All Cargo Global Logistics Ltd. [20 12] 23 taxmann.com 103 (Mum) (SB) 3. CIT Vs Chetan Das Lachman Das [2012] 25 taxmann.com 227 (Delhi) (HC) (B) In the following case laws courts have held that that satisfaction is to be made with respect to the ownership of the documents and not regarding the undisclosed income: 1. ACIT Vs Panchuram Deshmukh & Ors (ITAT Bilaspur) 33 TTD 53 V. NON - COMPLIANCE BY THE ASSESSEE TO THE NOTICE ISSUED u/s 153C FOR FILING RETURN OF INCOME AND TO THE NOTICES ISSUED DURING THE SCRUTINY PROCEEDINGS u/s 153 C A very crucial aspect in this case is the complete noncooperation and non-compliance by the assesse to the statutory notices issued. (1) The assessee did not file any Return of Income in response to the notices issued u/s 153C. (2) The assessee did not file any submissions during the course of proceedings u/s 153C before the A.O. (3) The assessee did not file any evidence before the CIT(A) in support of the contentions raised. VI. DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has recorded satisfaction In the case of the assessee. (iv) The eventuality of an assessing officer of the person covered under provisions of Section 153BC being the same as the officer of the person covered under provisions of Section 153 BD is not examined by the Hon'ble Supreme Court in the case of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC). (v) It is humbly submitted that judgments must be read as a whole and observations in judgments should be considered in the context in which they are made and in the light of questions that were before the court. In CIT v. Sun Engineering Works Pvt. Ltd.(198 ITR 297) the Supreme Court observed: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re brought into statute w.e.f 1-6-2003. 2. Secondly, the facts in the case of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC) are different from that of the assessee as the officer of the person covered under provisions of Section 158BC was different from the officer of the person covered under provisions of Section 158BD and therefore the issue of "transmission of records" (refer Para 39) came up before the Hon'ble Court and consequently the issue of the "who should recording of satisfaction" and "at what point of time the satisfaction should be recorded was also considered". In this context the Hon'ble court stated that the satisfaction can be recorded at any of the 3 stages - (1) At the time of initiation of proceedings u/s 158BC, (2) along with the proceedings U/S 158BC and (3) immediately after concluding the proceedings U/S 158BC. 3. The aforesaid decision of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC) is NOT applicable to the case of the assesse for the following reasons: (i) as the assessments of the assessee are completed under different provisions of the statute as they which relate to the new search assessment procedure as contained under sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the statute. Submitted for kind consideration." 2. We also reproduce the satisfaction note dated 14.12.2012 which has been submitted by the ld. DR of revenue along with her written submissions. The same is as under:- "Recording of satisfaction note before issuance of notice under section 153C: Name of the assessee: Sri Gali Janardhana Reddy (Ay: 2005-06 to 2010-11) A search u/s. 132 was conducted on 25/10/2010 in the case of Mr K. Raghvacharyulu at flat No.402, Kakateeya Residency, Kappagal Road, Bellary. During the course of the search, following documents/books of account belonging to Sri Gali Janardhana Reddy were seized and the contents are explained in brief as below- RB/1 Page No.2 This page contains application filed by Mr G Janardhana Reddy before the Returning Officer while contesting for the election to the Member of Legislative Council in the State of Karnataka. RB/1 Pages 27-32 These pages contain details of Assets (movable, immovable, assets etc) belonging to Mr Janardhana Reddy, his spouse and dependents. RB/1Pages 116-121 This contain instruments of Partnership deed entered on 8.1.2006 between Sri B Srininivas Reddy, Sri Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said satisfaction note that "Issue notice u/s. 153C of the Income-tax Act", because such notice u/s. 153C of the Act is not required to be issued in the case of searched person, but in the case of the other person i.e., the present assessee. In our considered opinion, even if the AO of assessee and the searched person is one and the same, then also, the satisfaction note has to be recorded by the AO in his capacity as AO of the searched person and not in his capacity as AO of the other person in whose case notice u/s. 153C is required to be issued. 4. In the light of the above facts, now we examine the applicability of the Tribunal's order cited by the ld. AR of assessee having been rendered in the case of Shri Vinod Kumar Chaurasia v. ACIT (supra). In that case, the judgment of Hon'ble Allahabad High Court has been cited before the Tribunal rendered in the case of CIT v. M/s. Gopi Apartment in ITA No.60 of 2014. The relevant portion of the judgment of the Hon'ble Allahabad High Court rendered in the case of CIT v. M/s. Gopi Apartment has been reproduced by the Tribunal in that case on pages 5 & 6 of that order and the same is reproduced hereinbelow for the sake of ready referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirement of handing over of the books of account or documents or assets seized or requisitioned, as is mentioned in Section 153C nor there was any necessity of recording a prior satisfaction before proceeding to assess the 'other person'. The satisfaction subsequently recorded in the assessment order in respect of the 'other person' was sufficient compliance of provisions of Section 153C, which, in any case, was procedural in nature. The A.O. of both the proceedings, being the same, he was neither required to handover the documents to another Assessing Officer nor he had to record any satisfaction for the purpose of any other Assessing Officer since same Assessing Officer of the same designation is having jurisdiction over both the persons, i.e. 'searched person' and the 'other person' (not searched). Sri Agrawal relied upon a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax Vs. Classic Enterprises, (2013) 358 ITR 465." It was contended that the Tribunal was not justified in quashing the notice under Section 153C, instead of deciding the question on merits as to whether additions are to be made and/ or to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A." The aforesaid provision is contained in Chapter- XIV of the Income Tax Act, which contains the procedure for assessment. A somewhat similar provision exists in Section 158BD under Chapter XIV-B, which contains the procedure for assessment of searched cases, which reads as under: "158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other 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 [under section 158BC] against such other person and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person. 44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. 45. We are informed by Shri Santosh Krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act, therefore, the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Officer of such 'other person', thereafter followed by issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153C. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act." The ratio of the judgment in Manish Maheshwari's case also applies to the provisions of Section 153C and to the facts of this case. In the instant case, a categorical finding has been recorded by the C.I.T. (Appeals) and the I.T.A.T. that there is no material showing the recording of satisfaction by the Assessing Officer of the 'searched person' prior to issuance of notice under Section 153C to the respondent assessee, i.e. 'the other person'. It was the admitted case of the Revenue before the C.I.T. (Appeals) and the I.T.A.T. that though the Assessing Officer (of the other person) in the assessment order had stated that satisfaction for issuing notice under Section 153C was recorded, however, on examination, recording of such satisfaction alleged to be recorded by the Assessing Officer was not available. In view of the legal position, as already discussed above and the admitted factual position as aforesaid, we are unable to accept the contentions of Sri Agrawal. We are also of the view that plea, which is being raised in this appeal, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Supreme Court, as already referred, the reliance placed by Sri Agrawal on the aforesaid judgment does not cut much ice." 6. Now it is clear from the record that satisfaction by the Assessing Officer of the searched person was not recorded before initiating proceedings under section 153C of the Act against the assessee and the impugned issue is squarely covered by the aforesaid judgment of the jurisdictional High Court. We, therefore, have no hesitation in holding that since the assessment was framed consequent to the proceedings initiated under section 153C of the Act, without recording satisfaction by the Assessing Officer of the searched person, the assessment is bad in law and deserves to be quashed. We accordingly set aside the order of the ld. CIT(A) and quash the assessment framed under section 153C read with 143(3) of the Act." 5. From the above Tribunal's order, it is seen that the Tribunal has not only followed the judgment of Hon'ble Allahabad High Court rendered in the case of M/s. Gopi Apartment (supra), but the Tribunal has also considered and followed the judgment of Hon'ble Apex Court reported in the case of Calcutta Knitwears (supra) and the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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