Income Tax Appellate Tribunal - Hyderabad
A Ramesh, Hyd, Hyderabad vs Dcit, Central Circle-7, Hyd, Hyderabad on 14 February, 2017
1
ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh
Babu (HUF) & Shri A. Ramesh, Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" (SMC) : HYDERABAD
BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
ITA.No.613/Hyd/2016
Assessment Years 2007-2008
Sri D. Ramesh Babu (HUF) The DCIT, Central Circle-7
Hyderabad. vs. Hyderabad.
PAN AAJHR9310P
(Appellant) (Respondent)
ITA.No.614/Hyd/2016
Assessment Years 2008-2009
Sri A. Ramesh The DCIT, Central Circle-7
Hyderabad. vs. Hyderabad.
PAN AFIPA0221L
(Appellant) (Respondent)
For Assessee : Shri K.A. Sai Prasad
For Revenue : Shri A. Sitarama Rao
Date of Hearing : 14.02.2017
Date of Pronouncement : 14.02.2017
ORDER
The above appeals are filed by two assessee's and are directed against the separate but identical orders of the CIT(A)-12, Hyderabad dated 10.12.2015 for the A.Ys. 2007-08 and 2008-09 wherein the Ld. CIT(A) confirmed the order passed by the A.O. dated 13.13.2013 under section 143(3) read with section 153C of the I.T. Act, 1961 (hereinafter called as "Act"). The grounds of appeal raised by the assessee Sri D. Ramesh Babu (HUF) for the A.Y. 2007-08 are as under:
1. "The Ld. CIT(A), in the facts and circumstances of the case, is not justified in dismissing the appellant's ground/objection on the validity of initiating the proceedings u/s.153C of the I.T. Act.2
ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh Babu (HUF) & Shri A. Ramesh, Hyderabad.
2. The Ld. CIT(A) is not justified in rejecting the appellant's explanation and confirming the addition of Rs.10 lakhs.
3. The appellant reserves its right to add, alter or substitute any of the ground or grounds during the course of hearing."
1.1. The grounds of appeal raised by the assessee Sri A. Ramesh Babu for the A.Y. 2008-09 are as under :
1. "The Ld. CIT(A) in the facts and circumstances of the case, is not justified in dismissing the appellant's ground/objection on the validity of initiating the proceedings u/s.153C of the I.T. Act.
2. The Ld. CIT(A) is not justified in rejecting the appellant's explanation and confirming the addition of Rs.4,67,500.
3. The Ld. CIT(A) is not justified in confirming the addition of Rs.3,01,000 rejecting the fact that the transaction is not mateiralised during the relevant previous year.
4. The appellant reserves its right to add, alter or substitute any of the ground or grounds during the course of hearing."
2. We have heard Shri K.A. Saiprasad, Ld. Counsel for the assessee and Shri A. Sitarama Rao, Learned Senior D.R. appearing on behalf of the Revenue.
3. On careful consideration of the contentions of both the parties and on a perusal of the papers on record, the orders of the authorities below as well as the case law cited, I hold as follows.
3.1. The assessee contended that the notice issued under section 153C of the Act is bad in law for the reason that, the A.O. of the assessee who was searched under section 132 of the Act, has not recorded satisfaction that incriminating material etc., belonging to the appellants have been found during the course of search and thereafter referred the matter to the A.O. of the appellants along with such material. It was 3 ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh Babu (HUF) & Shri A. Ramesh, Hyderabad.
pleaded that in the absence of the satisfaction note recorded by the A.O. of the searched party, the proceedings initiated under section 153C would be illegal and consequently, the assessments are bad in law. Reliance is placed on the following decisions :
(i) Pepsico India Holdings (P) Ltd., vs. ACIT (2014) 50 taxmann.com 299 (Del.) (HC)
(ii) CIT vs. Meghmani Organics Ltd., (2013) 40 taxmann.com 31 (Gujarat) (HC)
(iii) CIT vs. Shettys Pharmaceuticals & Biologicals Ltd., (2015) 57 taxmann.com 282 (A.P.)
4. The Ld. D.R. submitted that the Ld. CIT(A) had considered this point and as the assessee has not raised this issue at any point of time during the assessment proceedings, this ground cannot be taken before the CIT(A). On a query from the Bench, the Ld. D.R. could not produce any satisfaction note recorded by the A.O. of the searched party i.e., M/s. Sri Sai Kamal Constructions and Developers, Hyderabad. He produced a file of the appellants but the noting shown to the Bench is not a satisfaction note.
5. I find that the issue in question is a jurisdictional issue. The assessee has taken this ground before the Ld. CIT(A) and the Ld. CIT(A) should have disposed off this jurisdictional issue.
6. As admittedly, no satisfaction has been recorded by the A.O. of M/s. Sri Sai Kamal Constructions and Developers i.e., the searched party that any money, bullion, jeweller; 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 referred to in Section 153A of the Act was found the entire proceedings under section 153C of the Act is bad in law.
4ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh Babu (HUF) & Shri A. Ramesh, Hyderabad.
7. The jurisdictional High Court in the case of CIT vs. Shettys Pharmaceuticals & Biologicals Ltd., 57 taxmann.com 282 (A.P.) has held as follows :
"5. The argument apparently is very attractive, but the law is otherwise and the learned Tribunal has correctly applied. We therefore appropriately set out Section 153C of the Act.
"153C. Assessment of income of any other person.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, 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 referred to in section 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 notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets. seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub- section (1) of section 153A." (Emphasis Supplied)
6. It is therefore clear that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jeweller; 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 referred to in Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the Seizing Officer. In other words it is not an automatic action. We find satisfaction of two officers is missing. In this connection we set out the text of the order of the Assessing Officer which is as follows:
"A search and seizure operation u/s. 132 was carried out in the group case of Dr.T.Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been 5 ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh Babu (HUF) & Shri A. Ramesh, Hyderabad.
seized. Hence it is considered to initiate proceeding u/s. 153C of the LT. Act."
7. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a precondition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the Act. It is contended that the same Assessing Officer is involved in the matter. This fact does not dispense with above requirement. It is settled position of law that when a thing is to be done in one particular manner under law this has to be done in that manner alone and not other way (See Nazir Ahmed v. King Emperor). We think the learned Tribunal has correctly followed the. principle. We do not find any element of law to be decided.
8. We accordingly dismiss the appeal. There will be no order as to costs."
8. The facts of the case on hand are similar to the facts of the above case. Hence, respectfully following the above judgment of the jurisdictional High Court, I quash both the assessment orders passed under section 143(3) read with section 153C as bad in law.
9. In the result, appeals of the assessee in both the assessment years are allowed.
Order pronounced in the open Court on 14.02.2017.
Sd/-
(J. SUDHAKAR REDDY) ACCOUNTANT MEMBER Hyderabad, Dated 14th February, 2017 VBP/-
6ITA.Nos.613 & 614/Hyd/2016 Shri D. Ramesh Babu (HUF) & Shri A. Ramesh, Hyderabad.
Copy to
1. Shri D. Ramesh Babu (HUF), Hyderabad.
C/o. Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1st Floor, Sowbhagya Avenue, Street No.1, Ashoknagar, Hyderabad-020.
2. Shri A. Ramesh, Hyderabad.
C/o. Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1st Floor, Sowbhagya Avenue, Street No.1, Ashoknagar, Hyderabad-020.
3. The Dy. Commissioner of Income Tax, Central Circle-7, Posnett Bhavan, Tilak Road, Ram Koti, Hyderabad - 95.
4. CIT(A)-12, Hyderabad.
5. Pr. CIT (Central), Hyderabad.
6. D.R. ITAT "A" (SMC) Bench, Hyderabad.
7. Guard File.