Income Tax Appellate Tribunal - Chandigarh
Acit, Chandigarh vs M/S Orbit Commercial Pvt. Ltd., New ... on 19 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH,CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 393/CHD/2015
Assessment Year: 2008-09
M/s Orbit Commercial P.Ltd., Vs The DCIT,
28, Gulmohar Enclave, Central Circle-II,
New Delhi. Chandigarh.
PAN: AAAC0861E
&
ITA No. 520/CHD/2015
Assessment Year: 2008-09
The DCIT, Vs M/s Orbit Commercial P.Ltd.
Central Circle-II, 28, Gulmohar Enclave,
Chandigarh. New Delhi.
PAN: AAAC0861E
(Appellant) (Respondent)
Assessee by : Shri M.P.Rastogi
Respondent by : Shri Sushil Kumar,CIT-DR
Date of Hearing : 10.01.2017
Date of Pronouncement : 19.01.2017
ORDER
PER BHAVNESH SAINI,JM Both the cross appeals are directed against the order of ld. CIT(Appeals) Gurgaon dated 12.03.2015 for assessment year 2008-09.
2
2. We have heard ld. Representatives of both the parties and perused the material on record.
3. The assessee has filed appeal on the following grounds :
1. That in the absence of requisite satisfaction contemplated u/s 153C of the Income-tax Act, 1961 (hereinafter referred to as the Act), the assumption of jurisdiction by the Assessing Officer of the appellant to make assessment in terms of Section 153A/153C of the Act is bad in law and consequently the assessment so framed in furtherance of such invalid jurisdiction is also bad in law.
2. That the CIT (Appeals) has erred on facts and under the law in upholding the jurisdiction of the Assessing Officer to frame assessment u/s 153A/153C of the Act merely on the expression of the Assessing Officer in the assessment order, "The proceeding in terms of section 153C of the Income-tax Act, 1961 was initiated after duly recording reasons", without looking and analyzing the satisfaction actually recorded by the Assessing Officer.
3. That Dr. Naresh Mittal was not a Director in the company at the time of purchase of land and accordingly the evidentiary value of the papers/documents seized from the residence of Dr. Naresh Mittal in the course of search, cannot be deemed and treated as correct in the absence of any independent corroborative material and accordingly the addition of Rs.2,01,75,496/- as sustained by CIT (Appeals) on account of alleged excess investment in land is arbitrary, unjust and at any rate very excessive.
4. That the lower authorities have erred on facts and under the law in holding that the documents/papers seized from the residence of Dr. Naresh Mittal during the course of search, belonged to the appellant and accordingly the addition of Rs.2,01,75,496/- as sustained by CIT (Appeals) in the absence of any independent corroborative material, is arbitrary, unjust and at any rate very excessive.
5. That the papers/documents as found and seized during the course of search on the residence of Dr. Naresh Mittal are neither signed nor in the handwriting of the appellant, hence in the absence of any independent corroborative material brought on record, the addition of Rs.2,01,75,496/- as sustained by CIT (Appeals) based on such alleged papers/documents is arbitrary, unjust and at any rate very excessive.
6. That the assessee denies its liability to charge interest u/s 234B and 234C of the Act.3
4. The revenue has filed the appeal on the following grounds :
"1. Whether on the facts and in the circumstances of the case and as per provisions of law, the Ld. CIT(A)(Central) is correct in allowing the relief to the assessee with regard to one of the sellers namely Sh. Virender Kumar despite the fact that the assessee failed to substantiate its claim with regard to discrepancy regarding actual cost of land shown in the seized documents viz-a-viz shown by the A.O. in the show cause notice and cash payment of Rs. 46,00,000/- is mentioned in the seized document page 12 of A-2."
2. "Whether on the facts and circumstances of the case and as per provisions of law, the Ld. CIT(A)(Central) is correct in allowing the relief to the assessee with regard to one of the sellers namely Sh. Virender Kumar by taking the actual cost of the land as Rs. 57,00,000/- despite the fact that the cost of land as shown in the agreement deed stood at Rs. 95,24,754/-."
"3. Whether on the facts and circumstances of the case and as per provisions of law, the Ld. CIT(A)(Central) is correct in allowing the relief to the assessee by taking the total cost of the land as Rs. 7,58,00,000/- despite the fact that the cost of land as shown in the seized documents stood at Rs. 8,56,24,754/-."
5. The assessee has filed the following additional ground of appeal :
That in the absence of requisite satisfaction contemplated u/s 153C of the Income-tax Act, 1961 (hereinafter referred to as the Act), the assumption of jurisdiction by the Assessing Officer of the appellant to make assessment in terms of Section 153A/ 153C of the Act is bad in law and consequently the assessment so framed in furtherance of such invalid jurisdiction is also bad in law."
6. The ld. counsel for the assessee submitted that this additional ground is same as have been raised on ground No. 1 in appeal of the assessee. He has, however, submitted that since this issue was not raised before ld. CIT(Appeals), therefore, assessee filed an 4 application for admission of the additional ground of appeal. He has submitted that the above additional ground relates to valid assumption of jurisdiction by the Assessing Officer which is condition precedent for valid astt. and it goes to the root of the matter and does not require the elaboration of new facts other than the facts already on record. He has submitted that it is settled proposition of law that ground of jurisdiction can be raised by an assessee at any time even in the collateral proceedings because it goes to the root of the matter. He has relied upon decision of the Gujrat High Court in the case of P.V.Doshi Vs CIT 113 ITR 22 and of Bombay High Court in the case of Inventors Industrial Corporation Ltd. Vs CIT 194 ITR 548.
7. Briefly the facts of the case are that search & seizure operation under section 132(1) of the Act was conducted on 17.11.2010 in Dr. Nareh Mittal group of cases. Later on, the jurisdiction of this case was transferred to ACIT, CC-2, CHD. The documents belonging to the assessee company were found and seized from the residence of Shri Naresh Mittal at house No. 212 Sector 6, Panchkula. The proceedings in terms of Section 153C of the Act were initiated after duly recording reasons. The assessee had filed return of income under section 139 of the Act on 14.05.2008 showing total income of Rs. 1,06,750/-. Statutory notices were also issued under section 153C of the Act 5 calling for the return of income and assessee filed the return of income under section 153C of the Act declaring the same income as was declared in the return under section 139 of the Act. The Assessing Officer considered the issue with regard to purchase of land at village Chandi Mandir, Panchkula and held that total consideration money paid by the assessee was Rs. 8,56,24,754/- for the land at Chandi Mandir wheeas in his books of account, assessee had shown payment of consideration money only to the extent of Rs.
5,56,24,504/-. Hence the difference of Rs.
3,00,00,250/- ( Rs. 8,56,24,754/- - Rs. 5,56,24,504/-) was treated as unexplained investment of the assessee under section 69B of the Act and addition was accordingly made.
8. The assessee challenged this addition before ld. CIT(Appeals) and the ld. CIT(Appeals) restricted the addition to Rs. 2,01,75,496/- ( Rs. 7,58,00,000 - Rs. 5,56,24,504/- ) and same was treated as unexplained investment in purchase of land by the assessee company. The appeal of the assessee was partly allowed.
9. The ld. counsel for the assessee submitted that the satisfaction as required under section 153C of the Act have not been recorded in the case of the person searched i.e. Dr. Naresh Mittal. He has referred to PB-8 6 which is satisfaction note dated 17.08.2012 which was recorded under section 153C of the Act in the case of the assessee M/s Orbit Commercial Pvt. Ltd. he has submitted that addl. ground is purely legal ground and relied upon decision of ITAT Chandigarh Bench in the case of Shri Pawan Mangla Vs CIT in ITA 445/2015 dated 14.06.2016 in which on identical facts, additional ground was admitted and appeal was decided in favour of the assessee. The ld. DR, however, submitted that additional ground need not to be admitted because Assessing Officer was same in the case of the assessee and the person searched and satisfaction have been recorded by the Assessing Officer in the case of the assessee.
10. We have considered the rival submissions relating to admission of the additional ground. We find that additional ground is in relation to the jurisdiction issue in as much as it mentions that no satisfaction was recorded by the Assessing Officer of the searched person and therefore, the very issue of notice under section 153C of the Act was bad. Additional ground is purely legal ground and goes to the root of the matter and therefore, such legal issue raised in the additional ground is admitted. We rely upon decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT 229 ITR 383 in which it was held that "Purely legal question of law which does not require 7 fresh facts to be investigated, should be admitted as additional ground". Therefore, additional ground raised by the assessee is admitted.
11. The ld. counsel for the assessee on merits of the additional ground submitted that search was conducted in the premises of Dr. Naresh Mittal and during the course of search, certain documents were alleged to have been found. Based on that, the Assessing Officer of the assessee had initiated the proceedings under section 153C of the Act thereby recording the reasons on 17.08.2012 for issuance of the notice under section 153C of the Act, copy of the same is placed at page 8 of the Paper Book. He has submitted that on perusal of Section 153C of the Act, it is clear that where Assessing Officer is satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or other documents seized belong to a person other than the person searched, then the books of account etc. re to be handed over to the Assessing Officer having jurisdiction for such other person. In other words, the initiation of the proceedings against "such other person"
is depending upon satisfaction being recorded by the Assessing Officer of the person searched. In the following cases, it has been consistently held that if the 8 Assessing Officer of the person searched fails to record the satisfaction as contemplated under section 153C of the Act, then the Assessing Officer of "other person" has no jurisdiction to proceed against other person under section 153C of the Act i.e. i) CIT Vs Gopi Apartment 365 ITR 411 (ii) Pepsi Foods Pvt. Ltd. Vs ACIT 367 ITR 112 (Del) (iii) CIT Vs Smt. Nirmala Keshwani 380 ITR 566 (All) (iv) CIT Vs Mechmen 380 ITR 591 (MP). The ld.
counsel for the assessee submitted that in the above cases, it has been consistently held that "even if the Assessing Officer of the 'person searched' as well as 'other person' is same, the recording of satisfaction note in the case of the 'person searched' by his Assessing Officer is a mandatory condition to assumption of jurisdiction for framing assessment in the case of 'other person' under section 153C of Income Tax Act".
11(i) He has relied upon CBDT Circular No. 24/2015 dated 31.12.2015 in which after considering the judgements of various High Courts, this position has been accepted. The CBDT in its circular clarified that "even if Assessing Officer of the 'person searched' and the 'other person' is one and the same, then also Assessing Officer is required to record his satisfaction as has been held by the Courts". In the instant case, the Assessing Officer of Dr. Naresh Mittal - "person searched" has not recorded such satisfaction at all as contemplated under the provisions of Section 153C of 9 the Act. The satisfaction note dated 17.08.2012 was recorded by the Assessing Officer of the assessee at the time of issuance of notice under section 153C of the Act which is bad in law. He has relied upon order of ITAT Chandigarh Bench in the case of Shri Pawan Mangla Vs DCIT (supra) in which Tribunal has accepted such additional ground of appeal and found that no such satisfaction note has been recorded by the Assessing Officer of Dr. Naresh Mittal as contemplated under section 153C and quashed the assessment on account of lacking of valid jurisdiction. Copy of the order is placed on record with CBDT circular. He has submitted that since in this case, no satisfaction note was recorded by the Assessing Officer of the 'person searched' i.e. Dr. Naresh Mittal, therefore, Assessing Officer has not assumed the valid jurisdiction so, assessment may be quashed in the matter.
11(ii) On the other hand, ld. DR filed his written submission in which the crux of the submission of ld. DR has been that there is a factual mistake by stating that satisfaction has not been recorded by the Assessing Officer of the person searched i.e. Dr. Naresh Mittal as required under section 153C of the Act. It has already submitted that Assessing Officer of Dr. Naresh Mittal and the assessee is same and this Assessing Officer has recorded satisfaction in terms of Section 153C of the Act which has already been placed on record at page 8 of 10 the Paper Book of the assessee. The submissions of ld. DR are same as have been made before the Tribunal in case of Shri Pawan Mangla Vs DCIT. The ld. DR also placed on record letter dated 09.01.2017 sent to CIT-DR ITAT by ACIT, CC-2, Chandigarh in which it was informed to the ld. DR that from perusal of the astt. records of Dr. Naresh Mittal, the 'searched person', no satisfaction note under section 153C of the Act has been found to be placed in assessment record. However, the Assessing Officer recorded satisfaction note/reasons for issuance of notice under section 153C of the Act in the assessment record of M/s Orbit Commercial Pvt. Ltd.
New Delhi (assessee). Copy of the same is also placed on record which is the same as have been filed by assessee at page 8 of the Paper Book.
12. The ld. counsel for the assessee in rejoinder has also submitted that assessee also moved to the Assessing Officer for providing satisfaction note if recorded in the case of 'person searched' under RTI Act but no information have been supplied to the assessee.
13. We have considered rival submissions and perused the material on record. The letter of ACIT, CC-2, Chandigarh dated 09.01.2017 cl earl y reveal ed that no sati sfacti on note under secti on 153C of the Act have been found to be pl ac ed i n the assess ment record of t he 'person searched' i .e. Dr. Naresh Mittal. The assessee also 11 moved under RTI Act to the Revenue Department to provide information, if any satisfaction note have been recorded in the case of 'person searched' i.e. Dr. Naresh Mittl, however, no information have been supplied to the assessee as per submissions of ld. counsel for the assessee. The ACIT, CC-2, Chandigarh also provided copy of the satisfaction note under section 153C dated 17.08.2012 which is stated to have been recorded in the case of the assessee. Copy of the same is also filed by assessee at page 8 of the Paper Book. We, therefore, find that issue is identical as have been considered and decided by ITAT Chandigarh Bench in the case of Shri Pawan Mangla Vs DCIT in ITA 445/2015 for assessment year 2008-09 dated 14.06.2016 in which it was held as under :
"The present appeal has been preferred by the Assessee against the order of Principal CIT (OSD), Gurgaon, dated 12.03.2015.
2) The assessee has raised the following grounds of appeal:-
1. That the order of Learned Commissioner of Income Tax (Appeals) is bad and against the facts & Law.
2. That the Learned Commissioner of Income Tax (Appeals) has erred in allowing the impugned assessment orders u/s 153C against the appellant whereas the provisions of Section I53C are not applicable over the transaction on the basis of which proceedings were initiated against the appellant.
3. That, the Learned Commissioner of Income Tax (Appeals) has erred in confirming the additions in the hands of Sh. Pawan Mangla (Individual) when the whole transaction (excluding the alleged receipt of Rs.25,15,173/-) was carried out by Pawan Mangla & Sons (HUF).12
4. That the Learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition of Rs.25,15,173/- when the property in question was owned and sold by Pawan Mangla & Sons (HUF) and not by Sh.
Pawan Mangla (Individual).
5. That the Learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition without any documentary evidence against the assessee on record.
6. That the Learned Commissioner of Income Tax (Appeals) has erred in allowing the charging of interest u/s 234A, 2348 and 234C of the Income Tax Act.
7. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing.
3. During the course of hearing, Ld. Counsel for the assessee vide petition dated 04.01.2016 prayed for admission for Additional Ground, which reads as under:-
Your Honour is requested to accept the following additional ground of appeal in the above stated appeal:-
That the Learned Principal C/T (OSD) has wrongly upheld validity of notice issued u/s 153C of the Income Tax Act, /961 of the Appellant, without appreciating the fact that no satisfaction has been recorded by the Assessing Officer of searched person regarding any document belonging to the appellant than the person searched."
This issue was raised before the Learned Assessing Officer and the Learned Principal C/T (OSDJ and the same is discussed by both the officers in their orders.
The Hon'ble Bench is requested to accept the aforesaid Additional Grounds of Appeal, which is based on legal issue to be adjudicated by the Hon'ble Bench in this appeal for the sake of justice. Further no new facts are placed before the Hon'ble Bench through this Grounds of Appeal.
We may like to rely on the judgment of Hon'ble Supreme Court in the case of NTPC vs. C/T, 229 /TR 0383 and the order of Hon'ble Punjab & Haryana High Court in the case of Manoj Ahuja Vs. /AC 150 /TR 696.13
Your honour is humbly requested to admit this additional ground of appeal, based on law point, which could not be taken before the C/T {A} due to mistake of the counsel.
4. At the time of hearing Ld, Counsel of the assessee submitted that the additional ground is purely legal ground which goes to the root of the matter and does not require fresh facts to be investigated and therefore, it should be admitted. On the other hand, Ld CIT DR opposed the prayer so made and submitted that it is an afterthought and it should not be admitted.
5. Having heard the rival submissions relating to the admission of Addl. Ground, we find that the additional ground is in relation to the jurisdictional issue in as much as it mentions that no satisfaction was recorded by the A.O. of the searched person and therefore, the very issue of notice u/s 153C was bad. The additional ground is purely legal ground and goes to the root of the matter and therefore, such legal issue raised in the additional ground is admitted. It goes without saying that the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax (1998) 229 ITR 0383 have held that pure legal question of law which does not require fresh facts to be investigated should be admitted as additional ground. Therefore, Add). Ground is admitted. Adverting to the merit of the Additional Ground, Ld. Counsel for the assessee submitted that no satisfaction has been recorded by the A.O. of the searched person in the file of the searched person and all that has been recorded is in the file of the appellant vide the order sheet entry dated 17.08.2012 which reads as under:-
Reasons recorded for issuing notice u/s I53C A search was conducted on 17.11.2010 at the residential premises of Dr. Naresh Mittal at H. No. 212, Sector-6, Panchkula. During the course of search, documents marked asAl,A2 and A3 were found and seized.
Pages 21-25,127-136 of document Al, Pages 1-14,65-69,95-96, 150, 178-251,253 of document A2 and pages 31-32 of document A3 contain the details of transactions in immovable property made by Sh. Powan Mangla which need to be verified.14
In order to protect the interest of revenue I am satisfied that the case of Pawan Mangla needs to be assessed and therefore notice, u/s 153C of the fT Act, 1961 is being issued.
6. Ld. Counsel for the assessee assailed the assumption of jurisdiction u/s 153C on the above mentioned ground and supported his argument with the decision of Delhi High Court in the case RRJ Securities Ltd. ITA No. 164/2015, dated 30.10.2015 and another decision DCIT Central Circle--21, New Delhi vs. Satkar Road Lines P. Ltd. and CO. No. 341-346/Del./2015, dated 14.08.2015. According to Ld. Counsel for the assessee, even if the Assessing Officer of the searched person and third person is one and the same officer yet recording of mandatory satisfaction has to be made by the A.O. in the capacity of the A.O. of the searched person and that too in the assessment record of the searched person. According to Ld. Counsel for the assessee, since this jurisdictional requirement was not met, the assumption of jurisdiction u/s 153C was lacking.
7. On the other hand Ld. CIT DR submitted that according to the communication dated 27.04.2016 received from ACIT vs. Central Circle-ll, Chd., reason has been recorded vide order sheet dated 17.08.2012 and no other reason was found to have been recorded u/s 153C in the assessment records available with that office. According to Ld. CIT DR, satisfaction has been recorded vide order sheet entry dated 17.08.2012-and that is the sufficient compliance of requirement of section 153C. Ld. CIT DR filed note dated 25.3.2016 & 27.04.2016 in which it was submitted that A.O. of the searched person (Dr. Naresh Mittal) and in the case of the assessee is the same and therefore, satisfaction recorded by that very A.O. vide order sheet entry dated 17.08.2012 is in terms of the requirement of law. According to Ld. CIT DR, Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears (2014) 362 ITR 673, nowhere stated that the A.O. of the searched person must record satisfaction in the case records of the searched person only and nowhere else. Decision of Kolkatta Bench in the KPC Medical College & Hospital vs. DCIT 59 taxmann.com 393 was relied extensively. Ld. CIT DR in the end submitted that the Addl. Ground may be dismissed on merit also. 15
8. We have heard the rival submissions and perused the orders passed by the authorities below and have taken ourselves to the material placed before us. Undisputedly A.O. of the searched person and the A.O. of the appellant assessee is one and the same A.O. There is no dispute on this fact also that A.O. of the assessee recorded 'reason' u/s I53C on 17.08.2012 on the order sheet of the case records of the appellant assessee. It is also undisputed fact that no satisfaction for assuming jurisdiction u/s 153C was recorded in the case records of the person searched i.e. Dr. Naresh Mittal. In the setting of the above undisputed facts, we have to examine as to whether assumption of jurisdiction u/s 153C was in accordance with law. Section 153C provides that if books of accounts, documents etc. belonging to the third person are fpund during the course of search, the A.O. shall hand over such documents, books of accounts etc. to the A.O. of such third person and thereafter the A.O. of such third person shall proceed to assess or reassess the total of income of third person in terms the provision u/s 153A. The very fact that a third person who has not been searched is also sought to be proceeded under section 153A upon the books of account or documents etc. belonging to him, found during search .speaks the serious consequences of section 153C qua third person. Therefore the provision of section 153C have to be construed strictly and in case it is found that jurisdictional conditions are not satisfied, the very assumption of jurisdiction by the A.O. under that section is liable to be set aside. This proposition of law has found approval from the highest court of the land though in the back drop of section 158BD in the cases of Manish Maheshwari vs. ACIT 289 ITR 341 (SC), CIT vs. Calcutta Knitwears (2014) 362 ITR 673. It has also been held in the case of Rajhans Builders vs. CIT 226 Taxman 415(Gujarat) that provision of section 158BD and those of section 153C are in pari-materia.
8. In the present case A.O. of the searched person did not record any satisfaction that any of the documents found during the course of search belonged to the third person i.e. the appellant assessee as can be seen from the plain reading of the reason recorded. Moreover, such satisfaction has not 16 been recorded in the case records of the searched person by the A.O. of the searched person in that capacity. A.O. of the searched person and A.O. of the appellant assessee i.e. the third person even if is one and the same person but it has been held in various juridical decisions relied upon by the Ld. Counsel for the assessee that A.O. of the searched person is required in law to record satisfaction in the case records of the searched person as an A.O. of the searched person. It is not out of place to mention that the recording of satisfaction by the A.O. even if Assessing Officer is one and the same person is no longer res-integra in as much as Hon'ble Allahabad High Court in the case of CIT vs. Gopi Apartments 365 ITR 411 (All) and Hon'ble Madhya Pradesh High Court in the case of CIT vs. Mechmen 380 ITR 591 (MP) have similarly held. The Hon'ble Allahabad High Court in the case of CIT Vs. Gopi Apartments (supra) held as follows:
25. A bare perusal of the provision contained in Section 153C of the I.J. Act leaves no doubt that, as is provided under Section 158BD, where the Assessing Officer, while proceeding under Section 153A against a person who has been subjected to search and seizure under Section "13211) or has been proceeded under Section 132A, 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 such other person notice and assessor reassess income of such other person in accordance with theprovisions of section 153A.
26. Thus, there are two stages:
(/) The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing ^ Officer of such a 'searched person', may, if he is satisfied, that any money, document 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'.17
(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'.
27. 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.
28. 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' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory.
29. In this regard, the ratio of the judgment of the Supreme Court in the case of Commissioner of Income Tax-Ill Vs. M/s Calcutta Knitwears, Ludhiana (supra), as noted above, clearly applies to the proceedings under Section 153C also.
30. The 'satisfaction' has to be in writing and can be gathered from the assessment order passed in respect of the 'searched person', if it is so mentioned/ recorded or from any other order, note or record maintained by the Assessing Officer of the 'searched person'. The word 'satisfaction' refers to the state of mind of the Assessing Officer of the person searched, which gets reflected in a tangible shape/ form, when it is reduced into writing. It is the conclusion drawn or the finding recorded on the foundation of the material available. In this regard, reference may be made to the pronouncements in the case of C.I.T. Vs. Radhey Shy am Bonsai 12011) 337 ITR 217 (Delhi) and the Division Bench judgment of this Court in the case of C.I.T. Vs. Classic Enterprises reported in (2013) 358 ITR 465 (Allahabad/.
31. In the case of Manish Maheshwari Vs. Assistant Commissioner of lncome Tax and another, (2007) 289 ITR 341 (SC), their Lordships had the occasion to consider the provisions of Sections 158BC and T58BD and held that the conditions precedent for taking recourse to a block assessment in terms of Section 158BC and 158BD (i) were as under:
"(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 under Section 132 of the Act:
(ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person: and (Hi) The Assessing Officer has proceeded under Section 158BC against such other person.18
(ii) The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions, of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act."
32. 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. The Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Mechmen (supra) likewise held as follows:
"18. The concomitant of this conclusion, is that, the legal position as applicable to section 158BD regarding satisfaction in the first instance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction: and in the second instance of the Assessing Officer having jurisdiction whilst sending notice to such other person (other than the person referred to in section 153A), must apply proprio vigore. The fact that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in section 153C belongs or belong to a person (other than the person referred to in section 153A), being a sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in section 153A). The question as to whether that may influence the opinion of the Assessing Officer having jurisdiction over such other person, also cannot be the basis to take any other view. As a matter of fact, the other Assessing Officer to whom the items are handed over, before issuing notice must himself be satisfied after due verification of the items received and the disclosures made by the other person in the returns for the relevant period a/ready filed by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, the argument of the Department must be negatived.
19. After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts: before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in section 153AJ under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him.
20.As a result, we hold that there is no infirmity in the view taken by the Tribunal on the questions under consideration. The view taken 19 by us is reinforced from the decisions of other High Courts in the cases of CIT V. Gopi Apartment (supra), Pepsi Foods P.Ltd. fsupraj, Pepsico India Holdings. P. Ltd.{supra] and, lastly, CfT v. Smt. Madhu Keshwani (supra). The observations of the Delhi High Court in the case of SSP Aviation Ltd. (supra) have been explained in the subsequent case of Pepsico India Holdings P. Ltd. (supra).
21. We conclude that the condition precedent for resorting to action under section 758BD delineated by the Supreme Court in the case of Manish Maheshwari (supra) and In the recent case of CfT v.
Calcutta Knitwears (supra), would apply on all fours mandating satisfaction of the Assessing Officer(s) dealing with the case at the representative stages referred to in section 153C.
9. In view of the above we hold that in the absence of a valid recording of satisfaction by the AO of the searched person i.e; Dr. Naresh Mittal that certain documents found during the course of search beyond to the assessee, the assumption of jurisdiction u/s 153 C in the case of the assessee was invalid.
10. We are not persuaded by the argument of Ld. CIT DR for the simple reason that the position of law as explained in the above mentioned judicial decisions has interpreted section 153C in the manner as interpreted by the Ld. Counsel for the assessee. Reliance of the decision of Kolkata Bench by Ld. CIT DR in the case of KPC Medical College & Hospital, Supra, does not help the cause of revenue in as much as there are decisions of High Court of Delhi, Allahabad, and Madhya Pradesh as referred above. Moreover, even from the plain reading of the reason recorded on 17.8.2012, there is nothing to suggest that any document etc. found in search belonged to the appellant. All that is mentioned is that the page no. 21-25, 127-136 of document no. Al etc i.e. documents found in search contain details of transactions in immovable property made by the assessee. This is not the case of AO of the assessee in the reason recorded that documents found during search belonged to the assessee. 'Documents belonging to a person' and 'transactions contained in some documents made by a person' are two different things. Section 153C can be invoked only if the finding is there that documents etc. found during search belonged to the third person which is not the case made out by AO in the present case. Therefore, after considering the "totality of facts and circumstances and the position of law as explained above, we hold that the jurisdiction assumed u/s 153C was lacking in the instant case and therefore the notice issued u/s 153C is held not in accordance with law and the assessment made is quashed. Since we have held that assumption of jurisdiction u/s 153C itself is bad, we do not propose to dispose the other grounds of appeal. In the result, appeal is allowed in above terms.
12. In the result appeal of the assessee is allowed." 20
14. The CBDT also clarified in their circular No. 24/2015 dated 31.12.2015 that even if the Assessing Officer of the 'searched person' and the 'other person' is one and the same then also he is required to record his satisfaction as is held by the Courts.
15. In view of the above, we hold that in the absence of valid recording of satisfaction by the Assessing Officer of the 'searched person' i.e. Dr. Naresh Mittal that certain documents found during the course of search belonging to the assessee, the assumption of jurisdiction under section 153C of the Act in the case of the assessee was invalid. The issue is squarely covered in favour of the assessee by order of ITAT Chandigarh Bench in the case of Shri Pawan Mangla Vs DCIT (supra) and Board Circular.
16. Considering the totality of the facts and circumstances and the position of law as considered above, we hold that jurisdiction assumed under section 153C of the Act was lacking in the instant case and therefore, notice issued under section 153C of the Act is held not in accordance with law and astt. made is quashed. Since we have held that assumption of jurisdiction under section 153C itself is bad in law,we do not propose to decide the other grounds of appeal raised in the cross appeals by the assessee as well as by the revenue. Resultantly, all additions would stand deleted. In view of the above 21 discussion, the appeal of the assessee is allowed and departmental appeal is dismissed.
17. In the result appeal of the assessee is allowed and departmental appeal is dismissed.
Order pronounced in the Open Court.
Sd/- Sd/-
( ANNAPURNA GUPTA ) ( BHAVNESH SAINI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 19th January,2017.
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR
Assistant Registrar
ITAT/CHD