9911796707
TMI Blog2024 (3) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C of the Income Tax Act, 1961 [the Act] and thus impugn the notice dated 07 March 2023 referable to that provision. The petitioner, in addition, also impugns the orders dated 22 September 2023 as well as 01 March 2024 and 06 March 2024 passed by the respondents disposing of various objections which came to be submitted by the petitioner. For the sake of convenience, reference to facts and the position of material before us would be as appearing on W.P.(C) 4268/2024 being Item 93 on our board when we reserved orders. 2. The Section 153C action is based on searches which were conducted upon four individuals in April, 2019. According to the writ petitioner, on the basis of the material which was gathered in the course of those searches, the Assessing Officer [AO] of the searched persons also drew corresponding Satisfaction Notes for initiation of proceedings against the petitioner in terms of Section 153C of the Act on various dates the details whereof are set out in a tabular form as under:- Sr. No. Date of supply of satisfaction notes Date of satisfaction note Particulars Recorded by whom Assessment Years i) 30.6.2023 6.3.2023 Common satisfaction note Deputy Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng material that may have been found in respect of each of the AYs' in respect of which proceedings under Section 153C are proposed to be initiated. According to learned senior counsel, in the absence of an explicit reference to the incriminating material or asset that may have been discovered year wise and a failure to establish a connection between such material and the total income of each of the six AYs', invalidates the initiation of action under Section 153C of the Act. 6. It was then submitted by Dr. Singhvi that a combined Satisfaction Note as drawn by the AO in the present case would not satisfy the statutory requirements of Section 153C of the Act. According to learned senior counsel, for the purposes of undertaking an assessment in respect of the relevant AY or AYs' based on material gathered in the course of the search, the AO is obliged to draw a Satisfaction Note independently in respect of each of the AYs'. According to Dr. Singhvi, this would be the position which would flow from the judgment rendered by the Supreme Court in Commissioner of Income Tax-III, Pune vs. Singhad Technical Education Society (2018) 11 SCC 490. 7. It was then contended that the commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act: or (b) in the course of the assessment proceedings under section 158BC of the Act: or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other 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 satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dr. Singhvi, who appeared for the petitioners as well as Mr. Hossain, learned counsel representing the respondents, we note that undisputedly insofar as AYs 2014-15, 2015-16 and 2016-17 are concerned, final assessment orders had come to be framed in respect of the petitioner in December 2018. These petitions are, therefore, undisputedly not concerned with abated assessments. 11. Section 153C firstly contemplates the abatement of all inconclusive assessments and which may have been pending finalization on the date of commencement of action under the aforesaid provision. Insofar as "concluded assessments" are concerned [and that expression being meant to describe those cases where regular assessment may have either been concluded or where the time for initiating action under Sections 143 or 153 would have passed], the AO must be satisfied that any money, bullion, jewellery, valuable article or thing belonging to or any books of account, documents seized or requisition pertaining to a person other than the searched person found in the course of the search would have a bearing on the determination of the total income of that person for six assessment years or the relevant assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years immediately preceding the AY relevant to the financial year in which the search took place is wholly untenable. 14. These aspects are in any case no longer res integra having been duly considered by this Court as well as the Supreme Court right from the time judgment came to be rendered in SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax (2012) SCC OnLine Del 1898 and ending with the authoritative pronouncement of the Supreme Court in Commissioner Income Tax vs. Jasjit Singh 2023 SCC Online SC 1265. More importantly, the precedents rendered in the context of the First Proviso to Section 153C have unequivocally held the same not merely intended to deal with the subject of abatement but also determinative of the relevant date for the purposes of computation of the six or the ten assessment years as the case may be. The Supreme Court in Jasjit Singh has explained the scope and ambit of that provision in the following terms:- "8. In SSP Aviation (supra) the High Court inter alia reasoned as follows:- "14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the question of abatement. 10. This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts." 15. Though not so articulated, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e desist from reproducing its contents here bearing in mind the nature of the evidence that has been alluded to therein coupled with the detailed reference that it makes to identified individuals and personages. Our hesitation to do so also flows from the fact that assessment proceedings are yet to be concluded and we would not like to cause any accidental prejudice to any party. 18. However, and on a prima facie examination, it is evident that the respondents appear to have collated substantial and concrete evidence warranting further scrutiny and examination under the Act. For the limited purposes of indicating the material on the basis of which we find, prima facie, that the Satisfaction Note refers to material pertaining to the three AYs' in question we set out a tabular statement with appropriate cross references:- S.No. Incriminating Material PDF Page No. [Reference to W.P (C) No. 4268/2024] Search 1 - Kakkar - Miglani Group A. Evidences related to use of unaccounted cash in Lok Sabha Election 2019 PDF 336 1. Cash of Rs. 1.90 crores from premises of Lalit Kumar Chhallani along with statements recorded under Section 132(4) of the Act PDF 337 2. Seized mobile of La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und in the laptop of Lalit Chhallani seized from his residential premises * Excel sheet found which mentions AICC has given 33 crores * Sheet named "BREF" which shows updated position of receipts, expenses and cash in hand PDF 545 PDF 549 PDF 564 15. File "Expense.doc" containing date wise payments and receipts found at the premises of Ashwin Sharma during the search in case of Prateek Joshi PDF 550 16. Corroborative evidences PDF 565 C. Evidences related to MP Assembly Election 2013 PDF 568 17. Note named 'Receipts' found from the Iphone of Himanshu Sharma seized at premises from Delhi PDF 568 18. File "Statement of Money Received for MP Election Candidate.docx" found from the laptop of Himanshu Sharma PDF 570 Search 2: MEIL Group 19. Handwritten diary of PV Sunil seized from his residence of PV Sunil corroborated with statements * Entry in diary showing amount of INR 3,75,00,000 paid at Akbar Road on 28.02.2019 * Entry in diary showing amount of INR 2,00,00,000 paid at Akbar Road on 07.03.2019 * Entry in diary showing amount of INR 1,36,00,000 paid at Akbar Road on 29.03.2019 * Entry in diary showing amount of INR 1,65,00,000 on 03.04.2019 and INR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms part of the Satisfaction Note also captures details of disbursements made to candidates vying in upcoming elections together with signed receipts. There is a detailed reference to payments allegedly made to MPs'/MLAs' and candidates. The said note also carries material seeming to suggest payments and contributions made by government departments and corporations, liquor manufacturers, industry entities and individuals to the petitioner. 20. The petitioner has woefully failed to establish that the material which forms the bedrock for recordal of satisfaction is not founded on any data, material evidence or documentation pertaining to AYs' 2014-15, 2015-16 and 2016-17. In fact no submission in this respect was either addressed or iterated. We note that the cumulative impact of the material which had been gathered in the course of the search and which was also duly noticed in the Satisfaction Note has also been collated in the form of a chart which stands extracted in the Section 142(1) notice dated 01 March 2024. The said chart is extracted hereinbelow:- AY Amount (in Crores) 2020-21 Rs. 12.70 2019-20 Rs. 348.78 2018-19 Rs. 4.19 2017-18 Rs. 6.27 2016-17 Rs. 32.44 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion bearing in mind the indubitable fact that Section 153C of the Act represents the power conferred upon the AO to commence a process of assessment or reassessment for a block period of ten assessment years in the maximum. The procedure as prescribed in Section 153C is part of a distinct statutory regime pertaining to search assessments which came to be introduced in the Act by virtue of Finance Act, 2003 and intended to act as a substitute to the procedure which was otherwise envisaged under Chapter XIV-B. 23. For the purposes of invoking Section 153C of the Act it is incumbent upon the AO to be satisfied that the material gathered in the course of the search and pertaining to the non-searched person would have a bearing on the determination of the total income of such other person either for six AYs' or for the relevant AY or AYs'. Since the provision itself requires and enables the AO to undertake an assessment for a block period of ten years, it would clearly not be incumbent upon it to draw separate or independent satisfaction notes for each AY. A composite Satisfaction Note would suffice the requirements of Section 153C of the Act provided it embody details of the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an anathema provided it rests on material which pertains to the AYs' which are sought to be reopened. 26. We in this respect also bear in mind the lucid explanation of the procedure liable to be adopted under Sections 153A and 153C as came to be enunciated by the Court in Commissioner of Income Tax (Central) -III Vs. Kabul Chawla 2015 SCC OnLine Del 11555. "37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person under Sections 132 or 132-A of the Act. Under Section 158-BD of the Act, if an officer is satisfied that there exists any undisclosed income which may belong to any other person other than the searched person under Sections 132 or 132-A of the Act, after recording such satisfaction, may transmit the records/documents/chits/papers, etc. to the assessing officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of the said other documents relating to such other person, the jurisdictional assessing officer may proceed to issue a notice for the purpose of completion of the assessments under Section 158-BD of the Act, the other provisions of Chapter XIV-B shall apply. xxxx xxxx xxxx 37. The Tribunal and the High Court are of the opinion that it could only be prepared by the assessing officer during the course of the assessment proceedings under Section 158-BC of the Act and not after the completion of the said proceedings. The courts below have relied upon the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 158-BC of the Act; (b) along with the assessment proceedings under Section 158-BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158-BC of the Act of the searched person." 28. It becomes pertinent to note that Calcutta Knitwears was principally concerned with the correctness of the decision of the ITAT and the High Court which had held that since the Satisfaction Note had been prepared after proceedings under Section 158BC of the Act had been brought to a close, the same would be contrary to the mandate of Section 158BD of the Act. It becomes pertinent to note that Section 158BC which stood comprised in Chapter XIV-B and was part of the family of provisions dealing with block assessments had envisaged a procedure for parallel assessments being undertaken in respect of the person searched. Chapter XIV-B as it stood at the relevant time contemplated and en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une 3, 2002, immediately after the satisfaction note was recorded to the present assessee. Having regard to the declaration of law made by the Supreme Court which specified three possible points in time when notice under section 158BD can be issued to third party/assessee, on the basis of material found on the premises of the searched person, the period of five months spent by the Assessing Officer of the searched person in finalizing the satisfaction note, can be said to have been proximate to the assessment proceedings. We also recollect the decision of this court in CIT v. Raghubir Singh Garg (I. T. A. No. 1420 of 2010, decided on August 27, 2014) (2015) 4 ITR-OL 256 (Delhi). In that case, the search took place on August 29, 2002, and the satisfaction note was recorded on January 16, 2003, i.e., within a period of four-and-half months. The court was of the opinion that the satisfaction note could be upheld. Following the said decision it is held that there was no delay in issuance of notice under section 158BD in the facts of the case." 18. In light of the aforementioned position of law this court finds that the delay of 5 months in the issuing of notice by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the flow of proceedings in the form of a chart which is extracted hereinbelow:- Sr.No. Date of notice u/s Compliance by assessee Reply dated Remarks i) 7.3.2023 153C 5.4.2023 Requesting for satisfaction note and related documents as stated in para 4 to 6 of the Reply ii) 28.6.2023/30.6.2023 Communication along with satisfaction note running into 307 sheets recorded by your good self as AO of the assessee on 6.3.2023 (No seized material/statements/panchnamas were supplied) --- --- iii) 4.8.2023 142(1) 17.8.2023 Returns of income filed declaring Nil income in response to notices dated 7.3.2023 u/s 153C of the Act 31.8.2023 i) It was submitted that there is no independent satisfaction note prepared for each of the assessment years. It was also submitted that it is trite law that, there cannot be a common satisfaction note for all seven assessment years and, satisfaction note must be an independent satisfaction note satisfying the statutory preconditions provided in the Act for each of the assessment years. Reliance was placed on the judgment of Hon'ble Apex Court in the case of CIT v. Singhad Technical Education Societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer of the searched persons for Assessment Years 2014-15 to 2020-21. A copy of enclosures relied upon documents and copy of relevant part of statements attached. ii) It was submitted that enclosures were partial copies and relied upon documents and partial copies of statements. iii) It was thus submitted that satisfaction note satisfying the statutory preconditions provided in the Act for each of the assessment years separately. iv) It was also submitted that complete enclosures, complete copy of relied upon and complete statements be provided was not met. 4.10.2023 Further it was also submitted that the information apparently to voluminous and bulky and thus requires considerable time i.e. three-month time. v) 9.10.2023 142(1) 1.11.2023 i) It was submitted that satisfaction notes recorded both by the Assessing Officer of the searched persons and Assessing Officer of the assessee as supplied do not contain any DIN No. and therefore such satisfaction notes are contrary to CBDT Circular No. 19/2019 and therefore not in accordance with law. Reliance is placed on the judgment of Hon'ble Bombay High Court in the case of Ashok Commercial Enterprises v. ACIT in Writ Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT v. Brandix Mauritius Holdings Ltd. reported in 456 ITR 34 iv) It was submitted that assessee hastens to add here that the satisfaction notes as supplied are common satisfaction notes for all seven assessment years namely Assessment years 2014-15 to 2020-21 and therefore contrary of judgment of Apex Court in the case of CIT v. Singhad Technical Education Society reported in 397 ITR 344. It is thus reiterated to satisfy the burden imposed by establishing not only that the documents alleged to be relating/pertaining to the assessee are 'incriminating' but must also be shown that such document wise with the assessment years under consideration v) It was again requested that the following material be supplied to enable the assessee to furnish its objections: i) Copy of panchnamas prepared on the searched persons: ii) Copy of documents seized from the searched persona and, relied upon in the satisfaction note allegedly pertaining to assessee or containing any information allegedly relating to assessee; and iii) Copies of statements recorded of the searched person, if any, in respect of above alleged documents seized from the search persons. vii) 14.11.2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2015-16 dated 17.1.2024 (comprising of 42 sheets) AY 2016-17 dated 17.1.2024 (comprising of 42 sheets) AY 2017-18 dated 17.1.2024 (comprising of 43 sheets) AY 2018-19 dated 17.1.2024 (comprising of 43 sheets) AY 2019-20 dated 17.1.2024 (comprising of 42 sheets) AY 2020-21 dated 17.1.2024 (comprising of 42 sheets) 29.1.2024. 29.1.2024 It was submitted that kindly dispose of the objections raised in reply dated 22.1.2024 xi) 31.1.2024 142(1) of the Act AY 2014-15 dated 31.1.2024 (comprising of 22 sheets) AY 2015-16 dated 31.1.2024 (comprising of 22 sheets) AY 2016-17 dated 31.1.2024 (comprising of 22 sheets) AY 2017-18 dated 31.1.2024 (comprising of 23 sheets) AY 2018-19 dated 31.1.2024 (comprising of 23 sheets) AY 2019-20 dated 31.1.2024 (comprising of 22 sheets) AY 2020-21 dated 31.1.2024 (comprising of 23 sheets) 12.2.2024 12.2.2024 It was also submitted that the information apparently to voluminous and bulky and thus require considerable time i.e. two weeks time xii) 8.2.2024 Additional Satisfaction notes for Assessment year 2014-15 and 2016-17 recorded on 6.2.2024 by the learned Deputy Commissioner of Income Tax, Central Circle-2(3), Bengaluru ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
