Income Tax Appellate Tribunal - Indore
Dhapubai Jain, vs Assessee
1
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JM AND
SHRI R.C. SHARMA, AM
IT(SS)A No.64/Ind/2007
A.Y. - 2003-04
Smt. Chinta Jain, Ujjain
PAN - ABVRJ 1101 H Appellant
Vs.
ACIT-1(1), Ujjain Respondent
IT(SS)A No.65 & 66/Ind/2007
A.Ys. - 2002-03 & 2003-04
Navin Jain, Ujjain
PAN - ABNRJ 8031 G Appellant
Vs.
ACIT-1(1), Ujjain Respondent
IT(SS)A No.67/Ind/2007
A.Y. - 2002-03
Hiralal Jain, Ujjain
PAN - ABMPJ 1348 P Appellant
Vs.
ACIT-1(1), Ujjain Respondent
2
IT(SS)A No.68/Ind/2007
A.Y. - 2003-04
Smt. Anju Jain, Ujjain
PAN - ABPPJ 7766 A Appellant
Vs.
ACIT-1(1), Ujjain Respondent
IT(SS)A No.69/Ind/2007
A.Y. - 2003-04
Smt. Alka Jain, Ujjain
PAN - ABVRJ 1103 F Appellant
Vs.
ACIT-1(1), Ujjain Respondent
IT(SS)A No.70/Ind/2007
A.Y. - 2003-04
Smt. Dhapubai Jain, Ujjain
PAN - ABMPJ 1349 N Appellant
Vs.
ACIT-1(1), Ujjain Respondent
IT(SS)A No.57/Ind/2007
A.Y. - 2002-03
Late Basantilal Jain
Through L/H Sushil Jain, Ujjain
PAN - ABMPJ 1350 P Appellant
Vs.
3
ACIT-1(1), Ujjain Respondent
IT(SS)A No.62/Ind/2007
A.Y. - 2002-03
Mukesh Ranka HUF, Ujjain
PAN - AAHHM 3221 J Appellant
Vs.
ACIT-1(1), Ujjain Respondent
Assessees by Shri Ravi Sarda, Advocate
Department by Shri Keshave Saxena, CIT(DR) &
Shri Pradeep Kumar Mitra, Sr. DR
ORDER
PER BENCH These appeals are filed by the different assessees against the different orders of ld. CIT(A)-Ujjain, dated 6.3.2007, 1.3.2007, 1.3.2007, 1.3.2007, 6.3.2007,6.3.2207, 1.3.2007, 1.3.2007 & 14.3.2007, respectively, for the AYs as mentioned above in the matter of orders passed u/s 153C/153A of the I.T. Act, 1961.
4Common grounds have been taken in all the appeals. Along with Form No. 36 the assessee filed grounds of appeal wherein the order of the learned Commissioner of Incometax (Appeals) was alleged to be unjustified and bad in law. On merit, the addition made on account of gifts received by the assessee was challenged. Thereafter, the assessee filed additional legal ground with regard to assumption of jurisdiction u/s 153C of the Act. The additional grounds read as under :-
"1. On the facts and in the circumstances of the case, the assessment is bad in law, contrary to facts, without jurisdiction and void ab initio and hence liable to be quashed.
2. On the facts and in the circumstances of the case, the jurisdiction u/s 153C is void ab initio.
3. On the facts and in the circumstances of the case, no satisfaction u/s 153C was recorded.
4. On the facts and in the circumstances of the case, the satisfaction, if any, recorded u/s 153C is bad in law and 5 nothing belonging to assessee was found during search."
2. It was contended by the learned counsel for the assesses that the additional grounds are purely legal in nature and no inquiry on facts is required as all the facts are already on record, hence, the same could be admitted.
3. On the other hand, it was contended by the learned CIT DR that there is delay of 19 months in filing the additional grounds, therefore, the same should not be accepted by the Tribunal. For this purpose, reliance was placed on the decision of ITAT, Indore Bench, in the case of S. Kumar Tyre Mfg. company; 61 ITD
326. He further contended that if the Bench is satisfied and allow the assessee to raise the additional ground, in that case, fresh additional grounds be sent to 6 the the learned Commissioner of Incometax (Appeals) for adjudication as ITAT can adjudicate on the issues which have been decided by the lower authorities as held by the jurisdictional High Court in the case of Tolaram Hassomal; 298 ITR
22. He further submitted that the decision in the case of Tolaram Hassomal (supra) was rendered by the jurisdictional High Court and is binding on the Tribunal, therefore, the Tribunal should restore this ground to the file of the learned Commissioner of Incometax (Appeals) for adjudication.
4. We have considered the rival contentions, carefully gone through the orders of the authorities below and gone through the additional ground raised before us which are purely legal in nature. The additional 7 grounds have been raised to challenge the validity of assessment framed u/s 153C of the Act. No satisfaction has been alleged to be recorded by the Assessing Officer of the person searched to the effect that any income revealed in the search belonged to the assessee. Hon'ble Supreme Court in the case of National Thermal Power; 229 ITR 83 held that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and the assessee should not be prevented from raising the question for the first time before the Tribunal having a bearing on the tax liability of the assessee. Now coming to the decision of the Hon'ble M.P. High Court cited by the learned CIT DR in the case of Tolaram Hassomal (supra) ordere 8 dated 10th March, 2006 wherein it was held that the Tribunal should not accept the additional ground raised before us and should have remanded the matter back to the file of the learned Commissioner of Incometax (Appeals) to decide the appeal afresh on all the issues. The learned counsel for the assessee has also placed on record the decision of the Hon'ble High Court of Madhya Pradesh in the case of Turquise Finance Limited reported in 299 ITR 143 order dated 28th March, 2006 wherein it was held that the Tribunal has power to consider the issue not raised either before the Assessing Officer or before the the learned Commissioner of Incometax (Appeals) but raised for the first time before the Income Tax Tribunal. In this case, an appeal was filed by the 9 department before the Hon'ble High Court alleging the order of the Tribunal admitting additional ground for the first time. Hon'ble High Court after relying on the decision of the Hon'ble Supreme Court in the case of PVAL Kulandageen Chettiar; 267 ITR 654 held that the Tribunal could not be precluded from considering the question of law arising in an assessment proceeding not raised earlier and restricted the issue arising out of the appeal before the Commissioner. It was held that the Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or the learned Commissioner of Incometax (Appeals) but was raised for the first time before the Tribunal. The learned CIT DR has also 10 relied upon the decision of the ITAT, Indore Bench, in the case of S. Kumar Tyre Mfg. Company; 61 ITD 326 wherein it was held that additional Ground cannot be entertained by the Tribunal. In this regard we find that this decision of the Tribunal has been reversed by the M.P. High Court and reported at 13 ITJ 445 wherein it was held that ITAT was not justified in denying to admit additional ground. It was further observed that the issue raised before the Tribunal for the first time was legal in nature the facts of which were already on record. The Tribunal should have accepted the legal ground raised before it for the first time. Thus, the order of ITAT will not support the contention of the learned CIT DR. Hon'ble High Court of Madhya Pradesh in 11 the case of Either Motors reported in 293 ITR 464 have held that additional grounds can be raised before the ITAT even if not raised before the Assessing Officer or the learned Commissioner of Incometax (Appeals). Accordingly, the Tribunal was justified in permitting the assessee to raise additional grounds of appeal even through the issue was not raised before the Assessing Officer or the learned Commissioner of Incometax (Appeals). Similarly, Hon'ble Madhya Pradesh High Court in the case of Steel Ingots; 135 CTR 379 held that additional ground requiring no appreciation of facts, Tribunal should have permitted the assessee to raise the question. It was observed that eventual destination of every litigation is justice and as such technicality should not be 12 permitted to prevail as a speed breaker in the case of dispension of justice. Similar view has been taken by the Hon'ble High Court of Madhya Pradesh in the case of Bhopal Sugar Mills Limited; 233 ITR 429 wherein it was held that there is no prohibition on the power of the Tribunal to entertain an additional ground which according to the Tribunal arises in the matter and for just decision of the case. In view of the above discussion and decision of the Hon'ble Supreme Court in the case of National Thermal Power (supra) and the latest decision of the Hon'ble jurisdictional High Court in the case of Turquise Investment & Finance Limited (supra), which was after the date of decision cited by the learned CIT DR in the case of Tolaram Hassomal (supra), we 13 are inclined to follow the latest decision of the Hon'ble jurisdictional High Court decided after considering the decision of Hon'ble Supreme Court reported at 267 ITR 654. As all the facts relating the additional legal grounds taken before us are already on record, we are inclined to entertain the additional grounds which are purely legal in nature and accordingly proceed to decide the same.
5. The facts, in brief, are that in all these cases, the Assessing Officer issued notice u/s 153C on 27.9.2005 and required the assessee to file return within 20 days from the date of receipt of the notice. The assessee filed return on 29.11.2005. The Assessing Officer assessed the income by passing the order u/s 153C/153A on 30.3.2006. The assessee has challenged 14 the legality of assessment framed u/s 153C of the Act on the plea that no satisfaction was recorded by the Assessing Officer. The assessee has also placed on record copy of notice issued u/s 153C of the Act, copy of application for obtaining satisfaction written to the Assessing Officer and copy of order sheet entries. Attention of the Bench was also invited to the order sheet entry and the Assessing Officer's letter dated 17.1.2011 vide reference no. F.No. ACIT.1(1) /ITAT/ Ujjain/2010-11/6752 filed before us in case of all the appeals, narrating therein a specific finding that there was no requirement for writing of separate "satisfaction note" before the issue of notice u/s 153C of the Act. In view of this letter of the Assessing Officer dated 15 17.1.2011 which was written to the Additional Commissioner of Income Tax, ITAT-1, Indore, the concerned Assessing Officer has clearly written that there is no requirement for writing satisfaction note before the issue of notice u/s 153C of the Act. A copy of this letter was also submitted by the learned CIT DR on asking by the Bench. In view of this letter, it is clear that no satisfaction has been recorded before assuming jurisdiction u/s 153C of the Act.
6. The learned CIT DR placed on record the order of Chhattisgarh High Court in the case of Trilok Singh Dhillon; 17 ITJ 446 wherein it was held that when the Assessing Officer framing the assessment u/s 153A and 153C is the same, there is no requirement of handing over the 16 material by the Assessing Officer of the searched person to the Assessing Officer of the person other than the searched person.
7. The learned CIT DR further submitted that it has been clearly held in the case of Triloksingh Dhillon that the decision of the Hon'ble Supreme Court in the case of Manish Maheshwari is not applicable. We have carefully gone through the order of the Hon'ble Supreme Court in the case of Manish Maheshwari and also perused the notices issued by the Assessing Officer in the case of Manish Maheshwari and find that the notices u/s 158BC and 158BD were issued by the same Assessing Officer. Thus, the observation made in the case of Triloksingh Dhillon to the effect that since the Assessing Officer was 17 the same, there is no requirement of handing over the documents by the Assessing Officer of the searched person to the Assessing Officer of the other person against whom no srearch has been conducted, are not as per the view taken by Hon'ble Supreme Court in the case of Manish Maheshwari (supra).
8. However, in view of the notices placed before us, wherein the Assessing Officer was the same and Hon'ble Supreme Court held that there is a requirement of handing over the documents by the Assessing Officer of the searched person to the Assessing Officer of the other person against whom proceedings u/s 158BD are to be launched, the contention of the learned CIT DR in this respect is not maintainable.
18
9. We find that the decision of the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) is still a good law insofar as in this case the verdict is for recording a satisfaction before issuing notice u/s 153C that such other person had undisclosed income and transmitted material. Hon'ble Chhattisgarh High Court in the above case disginguished the Hon'ble Supreme Court decision in the case of Manish Maheshwari narrating that since the Assessing Officer is the same in proceedings u/s 153A and 153C, there is no requirement of handing over the documents by the Assessing Officer of 153A proceedings to the Assessing Officer of 153C proceedings. In view of the notices placed before us in the case of Manish Maheshwari which arose only out 19 of MP High Court decision, we find that in case of Manish Maheshwari and Indore Construction Company Private Limited; the Assessing Officer was the same which can be very well verifiable from the copy of notices u/s 158BC of Manish Maheshwari and Indore Construction Company Pvt. Ltd. placed before us by the learned counsel for the assessee. As such, the decision of the Hon'ble Chhattisgarh High Court is not at all applicable to the facts of the instant case. In all the instant cases before us, no satisfaction has been recorded by the Assessing Officer which is a mandatory requirement before proceeding u/s 153C.
10. In the case of Krishna Sugar Corporation v. DCIT (2010) 133 TTJ 33 Lucknow, it was held that even when the Assessing 20 Officer in the case of "person searched"
and "other person" is same, satisfaction is to be recorded in the case of "person searched" before taking any action u/s 158BD in the case of other person -
Therefore, the proceedings initiated under section 158BD in the hands of the assessee were invalid. The 'other person' comes into picture only by virtue of satisfaction of the Assessing Officer and therefore the same has to be strictly interpreted. That the powers of the Assessing Officer u/s 158BD cannot be invoked in a light-hearted cursory manner. The recording of satisfaction is not an empty formality but is to be viewed as a legal compulsion based on the material available on such date. In the case of ACIT v. Smt. Mukta Goenka (2011) 21 137 TTJ 249 Jab (TM) it was held that satisfaction should be recorded by the Assessing Officer of the person searched as per the provisions of section 158BD -
Further, the satisfaction recorded by the Assessing Officer has to be objective/judicious satisfaction and not a subjective satisfaction. Satisfaction recorded in the instant case does not fulfil this condition as in no case the Assessing Officer could have examined the seized record on 4.9.2003 and sought assessee's explanation in respect of the seized record
- So called satisfaction recorded on 4.9.2003 by the Assessing Officer is based on assumption and presumption and not on seized record and is not a judicious satisfaction. It is well settled that block assessment proceedings can be initiated 22 only for assessment of undisclosed income found as a result of search and not for verification of capital accretion of source of investment. There is no material on record to show that the Assessing Officer made any inquiry till 4.9.2003 either from the assessee or the person searched.
11. The Hon'ble Calcutta High Court in the case of Subhashchandra Bhaniramka v. ACIT; 320 ITR 349 held that satisfaction must be independent and contains reasons. Satisfaction recorded had to be independent and subjective and not a casual reference to the seized materials. Similarly, Hon'ble Delhi High Court in the case of Anupam Sweets; 321 ITR 485 held that no satisfaction recorded in case of assessee i.e. third person, assessments on assessee not justified and bad in law and 23 without jurisdiction. Similar view has been taken by Delhi High Court in case of New Delhi Auto Finance Pvt. Ltd. 300 ITR 83 wherein it was held that no satisfaction having been recorded in the case of the assessee and therefore the notice issued was vague and show patent non-
application of mind and was not valid.
12. With regard to the mandatory requirement of recording of satisfaction before assuming jurisdiction u/s 153C, the matter has already been dealt with in detail by the coordinate Bench in the case of Chidchid Hydro wherein following was the observation and conclusion of the Bench :-
"78. We have considered the rival contentions, carefully gone through the orders of the authorities below and deliberated on the case laws referred by the lower authorities in their respective orders and by the respective counsels during the course of hearing before us. From the record 24 we find that the search was carried out at the residential premises of directors/partners of these concerns and not at the premises of these concerns. After the search was carried out at the residence of directors/partners of these associate concerns, assessment was framed in respect of these concerns u/s 153C of the Act on the plea that incriminating material was found during the course of search at the residence of partners/directors. The assumption of power by the Assessing Officer u/s 153C of the Act for framing the assessment is subject to the condition that the Assessing Officer assessing the search party, is satisfied that the jewellery or other valuable articles or things or books of accounts or documents or assets, seized or requisitioned, pertain to some person other than the person referred to in section 153A, then the books of accounts or the documents or assets seized or requisitioned, shall be handed over by the Assessing Officer of searched person to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against each of such persons and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A of the Act. The opening word of section 153C speaks that not-with-standing anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is "satisfied" that any money, jewellery or books of accounts or documents seized or requisitioned belongs to a person other than the person referred to in section 153A, meaning thereby the Assessing Officer is to record a satisfaction to the effect that such jewellery or document so seized does not belong to the searched person but to some other person referred to in section 153A of the Act. Thus, the pre-25
requisite of section 153C is that the Assessing Officer making the assessment of the searched person has to satisfy himself that some material found during the course of search and seizure belongs to some person other than the searched person. Then the Assessing Officer making the assessment of searched person has to hand-over the said incriminating material belonging to some person other than the searched person to the Assessing Officer having jurisdiction over the said other person. Thereafter, the Assessing Officer having the jurisdiction over the person other than the searched person shall issue a notice u/s 153C to such other person and assess his income in terms of the provisions of section 153A of the Act. Thus, the notice u/s 153C of the Act is to be issued only after recording of satisfaction. The assumption of jusrisdiction to issue notice and frame assessment under section 153C read with section 153A is acquired by the Assessing Officer only after having been satisfied and such satisfaction is recorded in writing. These provisions of section 153C are in pari materia with the provisions of section 158BD which provides that the Assessing Officer making the assessment of the searched person has to satisfy himself that some undisclosed income found by him belongs to some person other than the searched person and then he or the Assessing Officer having jurisdiction over such other person after receipt of record from the Assessing Officer of the searched person has to issue notice u/s 158BD of the Act and has to assess income of such other person. The provisions of section 158BD of the Act were examined in detail by the Hon'ble Supreme Court in the case of Manish Maheshwari; 208 CTR 97. The said Hon'ble Supreme Court decision was followed by the Hon'ble Delhi High Court in 26 the case of New Delhi Auto Finance Limited; 300 ITR 83. The Hon'ble Supreme Court has laid down a proposition that the Assessing Officer making the assessment of the searched person has to necessarily record in writing the specific objective satisfaction which is mandatory to the effect that the undisclosed income found by him, on the basis of seized material, belongs to some person other than the searched person. Insofar as the provisions of section 153C of the Act are in pari materia with the provisions of section 158BD of the Act with regard to the requirements of recording necessary satisfaction by the Assessing Officer of searched person, the law laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) shall apply with full force in case of initiation of proceedings u/s 153C. The assumption of jurisdiction and framing of assessment by the Assessing Officer u/s 153C without recording such satisfaction is void ab initio. Applying the proposition of law laid down by the Hon'ble Supreme Court, as discussed above, it is quite evident that recording of satisfaction before issue of notice u/s 153C is mandatory and in case where no such satisfaction has been recorded by the Assessing Officer in the case of searched person to the effect that some incriminating material so found belongs to some other person, the assessment framed u/s 153C will be liable to be quashed. However, detailed finding has been recorded by the learned Commissioner of Incometax (Appeals) after examining the assessment records of the concerned person/parties to the effect that no satisfaction has been recorded by the Assessing Officer of the searched person. This finding of the learned Commissioner of Incometax (Appeals) has not been controverted by the department by bringing any positive material on record.27
Accordingly, applying this propostion of law, the assumption of jurisdiction and framing of assessment in the instant cases by the Assessing Officer u/s 153C were bad in law.
79. It was argued by Shri K.K. Singh, the learned CIT DR, that satisfaction note, as stipulated u/s 153C of the Act, is to be seen in the context of satisfaction note prepared by the ADIT in the form of appraisal note after the search is over. He placed on record a copy of the appraisal note which is prepared by the ADIT after the search was over wherein details of search having been carried out along with the survey carried out on the same family members of the group, were duly mentioned along with assertion for issue of notice u/s 153C in cases of assessee not covered by search but where only survey action has been undertaken. It was contended by the learned CIT DR that whenever a search is being planned, on the basis of detailed information collected by the department and after due application of mind, strategies are finalized in respect of places/persons/concerns where search and seizure action u/s 132 of the Act is to be undertaken as well as the places/persons/concerns where action u/s 133A of the Act will serve the purpose. The whole action of search and survey is planned at a time and the department also keeps in mind that there should not be any harassment to the persons/concerns falling in the same group, who are not so important but are very much relevant and associated with the assessee, which necessitated simultaneous survey at their premises, so that nothing is left out. Our attention was drawn to various lists prepared as a part of appraisal note duly mentioning the names of the persons along with their addresses, date of search, who are appearing in the warrant of authorization u/s 132. A list was also 28 prepared to show the premises wherein survey was undertaken u/s 133A of the Act. In the appraisal note, a list was also given where action u/s 153C of the Act was intended to be initiated. As per the learned CIT DR, such list comprises of the persons other than the person at whose premises search is being carried out in respect of the documents found at such places which pertain to the person other than person against whom action u/s 132 was undertaken. As per the learned CIT DR , it is not only the Officer framing the assessment should be considered as Assessing Officer for recording satisfaction but the other Officers involved in the search and survey like ADIT/DDIT should also be considered. Our attention was also drawn to the provisions of sub-section (7A) of section 2 defining the Assessing Officer to mean Assistant Commissioner, Deputy Commissioner, Assistant Director, Deputy Director or the ITO, who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub- section (2) of section 120 or any other provision of this Act and the Additional Commissioner or the Additional Director or Joint Commissioner or Joint Director, who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer. As per the learned CIT DR, under the new scheme of section 153A/C, there is no need to find out undisclosed income, but the assessment is made after the search is carried out to assess or reassess the income of the assessee for the immediately preceding six assessment years and the current assessment year falling upto the date of search. He further contended that under the old scheme of section 158BC/158BD of the Act, the department was to assess the 29 undisclosed income on the basis incriminating documents found during the course of search whereas under the new scheme of section 153A/153C, where a search is initiated u/s 132 or books of accounts or other documents or any assets are requisitioned u/s 132A, then the department has to assess or reassess the total income of such assessee for six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Accordingly, it was pleaded that judicial cognizance given to the language of section 158BD in case of Manish Maheshwari by the Hon'ble Supreme Court insofar as recording of necessary satisfaction is concerned, should not be taken while interpreting section 153C of the Income tax Act under the new scheme of framing assessment in search cases. As per the learned CIT- DR, in the new scheme of the Act, appraisal report amounts to satisfaction by the Assessing Officer for issuing a notice u/s 153C of the Act.
80. On the other hand, in reply to the learned CIT DR's contentions, it was argued by the learned counsel for the assessee that even under the new scheme of assessment u/s 153C of the Act, satisfaction is to be necessarily recorded by the Assessing Officer of the searched person indicating the documents seized or requisitioned, which belong to a person other than the person referred to in section 153A of the Act. He invited our attention to the precise language used in section 153C of the Act which categorically requires the Assessing Officer's satisfaction to the effect that valuables, seized documents found during the course of search, which belong to a person other than a person searched and the procedure of handing over of these documents/valuables, 30 etc. to the Assessing Officer having jurisdiction over such other person and thereafter obligation of the Assessing Officer of such other person to proceed against each such other person and issue such other person notice and thereafter to assess or reassess the income of such other person in accordance with the provisions of section 153A of the Act. As per the learned counsel for the assessee, copy of such satisfaction note should be given to the assessee whereas the appraisal note, as referred by the learned CIT DR, is a confidential document prepared by the department for their internal use and copy of which is not handed over to the assessee. Such appraisal report is a secret document prepared by the department and which is not open to the assessee, therefore, cannot be treated at par with the satisfaction note as contemplated u/s 153C of the Act with regard to the documents seized during the proceedings u/s 132, which is alleged to be belonging to a person other than the person referred to in section 153A of the Act. Reliance was also placed on the proposition laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari; 289 ITR 341(supra) and G.K. Drive Shaft; 259 ITR 19 and the decision of the jurisdictional Tribunal in the case of Rishi Construction; 10 ITJ 346 and Asnani Builders; 10 ITJ 618.
81. We have deliberated upon the contentions of the learned CIT DR, Shri K.K. Singh and learned counsel for the assessee, Shri H.P. Verma, with regard to interpretation of recording of satisfaction while assuming jurisdiction u/s 153C of the Act. Even in the new scheme of framing of assessment in case of search cases, the legislature has clearly stipulated the 31 requirement for recording of satisfaction while assuming jurisdiction to issue notice and frame assessment u/s 153C of the Act which requires that satisfaction to be recorded with reference to the documents and other materials found during the course of search belonging to a person other than the searched person. Prima facie, Assessing Officer of searched person should form an opinion with regard to any document, valuable, etc. as found during the course of search that such document, which is declined by the searched person, actually belongs to some other person against whom proceedings u/s 153C are required to put into operation. After such recording, of satisfaction, the documents so seized should be handed over to the Assessing Officer of such other person. The legal requirement of recording of such satisfaction cannot be substituted by appraisal note which is prepared by the search party after completion of search insofar as such appraisal note is a secret document prepared by the department for their internal use, contents of which are not conveyed to the assessee nor its copy is supplied to the assessee even on making a written request. The appraisal note so prepared by the department is meant to monitor after the search proceedings are over so as to ensure exhaustive assessment of all searched person with respect to their correct income and to plan a strategy for further deep inquiry and investigation of documents found during the course of search. Since copy of such appraisal note is not supplied to the assessee, it cannot be taken at par with the requirement of recording of satisfaction note as stipulated u/s 153C of the Act, which is a mandatory 32 requirement. What is the legislative intent of such satisfaction and in what manner it should be recorded has been dealt with in the judicial pronouncements in the cases of Manish Mahehwari and G.K. Drive Shaft by the Hon'ble Supreme Court. Accordingly, we are not inclined to agree with the proposition that the appraisal note prepared by the department should be treated as a satisfaction note as required to be recorded in terms of section 153C of the Act so as to empower the Assessing Officer to assume jurisdiction to issue notice and thereafter frame assessment u/s 153A read with section 143(3) of the Act.
82. In view of the above discussion, we do not find any infirmity in the order of the learned Commissioner of Incometax (Appeals) who has quashed the assessment framed u/s 153C of the Act. Further, the detailed finding recorded by the learned Commissioner of Incometax (Appeals) with respect to recording of satisfaction has not been controverted by the department by bringing any positive material on record. We, therefore, do not find any infirmity in the order of the learned Commissioner of Income tax (Appeals) quashing the assessments framed u/s 153C of the Act in the cases of all these assesses."
13. Recently, the Hon'ble Delhi High Court in the case of CIT vs. Radhey Shyam Bansal held as under :-
"(ii) The word "satisfaction" has not been defined in the act. By its very nature "satisfaction"
must precede the sending of papers/documents by the searched person's A.O. to the third person's A.O. Mere use or mention of the word 'satisfaction' in the order/note will not meet the 33 requirement of concept of satisfaction as used in s. 158BD. The satisfaction has to be in writing and can be gathered from the assessment order, if it is so mentioned/recorded, or from any other order, note or record maintained by the A.O. of the person searched. The A.O. must reach a clear conclusion that good ground exists for the A.O. of the third person to initiate proceedings as material before him shows or would establish "undisclosed income" of a third person. There must be rational and tangible nexus between the material found in search and the satisfaction :
(iii) On facts (without going into the issue of whether the A.O. was "functus officio"), the assessment order passed in the case of Manoj Aggarwal does not show any "satisfaction" that any undisclosed income belongs to the assessee.
Though Manoj Aggarwal's A.O. wrote a letter to the assessee's A.O. informing him that the assessee was providing bogus accommodation book entries and the quantum of transactions was given as per Annexures, the Annexures were missing from the file. No evidence and material was brought on record to show that the assessee had received cash for the entries. So, the onus on the A.O. that there was valid satisfaction was not discharged."
14. As already observed hereinabove, the provisions of section 153C are analogous to section 158BD and, therefore, decisions rendered with reference to the provisions of section 158BD would apply with reference to the cases falling u/s 153C unless the context requires otherwise. The 34 Apex Court in the case of Manish Maheshwari (supra) after considering the provisions of section 158BD held that :
(i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act
(ii) The books of accounts or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person;
and
(iii) The Assessing Officer has proceeded u/s 158BC against such other person.
35
15. Since the provisions of section 153A are analogous of section 158BD in this regard, the above observation of the Apex Court would squarely apply with reference to the provisions of section 153A/153C of the Act.
16. In view of the above, we do not find any merit in the assumption of jurisdiction by the Assessing Officer u/s 153C of the Act. With regard to merit of the addition, it was submitted that during the course of assessment, Assessing Officer found that there was gift received by the assessee. Every assessee and every year is separate and distinct. But the authorities below have considered the family history of the gifts from and to different persons and being influenced on the same collective facts and assessed the gifts as income 36 which is void ab initio, incorrect and against the principle laid down in cases narrated.
17. As we have already decided the legal issue regarding assumption of jurisdiction, we are not going into the merits of the addition made by the Assessing Officer.
18. In the result, all the appeals of the assessee are allowed in the terms indicated hereinabove.
Order pronounced in open Court on 31st May, 2011.
(JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated - 31.5.2011 Copy to ssessee/Department/CIT/CIT(A)/DR Dn/-