TaxTMI 
TaxTMI 
2015 (8) TMI 172
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.... individual and proprietor of a concern were seized. On the basis of documents so found belonging to the assessee, proceedings were initiated in the case of the assessee u/s 153C read with section 153A of the Act. The case of the assessee was initially centralized with ACIT, Central Circle 17 u/s 127 of the Act by CIT, Delhi-IX, New Delhi vide order F.No.CIT-IX/ITO (Hqrs.)/127/2009- 10/2591 dated 28.10.2009. Notice u/s 153C dated 01.10.2010 was issued to the assessee by the ACIT, CC 17, New Delhi requiring the assessee to file return of income within 15 days of service of the notice. Mean while the case was transferred to Central Circle 21 by an order u/s 127 of the Act issued vide F.No.CIT (C)-II/CENT/2010-11/1029 dated 19/10/2010. In response to the notice u/s 153C, the assessee filed a return for assessment year 2003-04 on 11.11.2010 declaring income of Rs. 82,100/-. A copy of the panchnama, reasons for issuing notice u/s 153C and jurisdiction order dated 19.10.2010 u/s 127 of the Act were dispatched to the assessee on 16.11.2010 as sought by the assessee. In response to the notice, the assessee took part in the proceedings. The AO noted that assessee has not produced any books ....
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....ame to the conclusion that the same modus operandi had been used by the group by running identical set up at other locations also. Thus, the AO was of the opinion that since the activities are indicative of bogus companies/proprietary concerns/HUFs run for the purposes of generating capital only, the assessee was directed to produce the bills of purchase and sale party-wise and to produce the persons with whom it had entered into such transactions. The AO noted that assessee had failed to produce the necessary bills/vouchers or identify the persons with whom it had business transactions. Therefore, he held that since no support evidences like delivery challan, vouchers and stock registers, the sales made by the assessee of Rs. 33,33,077/- could not be verified and treated as assessee's income from undisclosed sources and total income of the assessee was assessed at Rs. 35,53,734/-. Aggrieved by the same, the assessee preferred an appeal before the ld. CIT (A) who was pleased to partly allow the appeal of the assessee. 3. The assessee, being aggrieved by the order of the ld. CIT (A), is in appeal before us. 4. The grounds of appeal taken by the assessee in assessment year 2003-04 ....
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....e rejected, since the narrations are artificial, sham and not reflective of the actual business/ commercial transactions. However, the Ld. CIT (Appeals), still relying on these books/book results for the purpose of calculating the peak from the entries in the cash book and / or bank book of the appellant, amounting of 20,39,117/- for the relevant year under consideration. 7.A) That on the facts and on the circumstances of the case and the provisions of law, the Ld. CIT (Appeals)-II, has erred in sustaining the addition of Rs. 20,39,117/- as unexplained Investment/Expenditure, ignoring the fact that the same are duly reflected/ entered in the books of the accounts of the appellant for the year under consideration; B) That the Ld. CIT (Appeals)-II, has wrongly calculated the amount of Rs. 20,39,117/- for the purpose of sustaining addition as unexplained Investment/Expenditure; C) That the Ld. CIT (Appeals)-II, has ignored the concept of 'Real Income' and wrongly confirmed/ calculated the addition of Rs. 20,39,117/- without granting the credit of the peak of financial transactions as per the cash book/bank book for the preceding years. D) That the Ld. CIT (Appeals)-II, did....
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.... also in ITAT Mumbai, Bench 'D' in the case of Deven Mehta (order dated 24.04.2015). 7. On the other hand, ld. DR relied on the orders of the AO and CIT (A) and was of the opinion that satisfaction has been recorded by the AO before proceedings against the assessee u/s 153C of the Act, and took our attention to page 8 of the PB where satisfaction of the AO to proceed against the assessee dated 03.09.2010 is there, so there is no illegality as pointed out by the ld. AR. Therefore, according to Ld DR, the ground raised in this behalf is not valid and needs to be rejected. 8. We have heard the rival submission and carefully gone through the records and the case laws cited before us. The main issue that was raised by the assessee is that assumption of jurisdiction by the AO before issuing notice u/s 153C of the Act is not in accordance to law and so the impugned assessment U/s 153C read with 153A/143(3) of the Act is void-ab-initio and should be quashed being quarum-non-judice. A perusal of the assessment order of the assessee reveals that a search was carried out u/s 132 of the Act on Shri B.K. Dhingra, Smt. Poonam Dhingra, M/s Mayank Traders Pvt. Ltd. and M/s. Horizon Pvt. Ltd., an....
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....ver money, bullion, jewellery, etc. to him. So, what emerges is that the recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person' to acquire jurisdiction. Unless such jurisdictional fact is satisfied, there can be no question of making assessment or reassessment of the 'other person.' 10. In the case of Anil Kumar & Ors. vs. UOI & Ors. Reported in 155 Taxman 659 (SC), the Hon'ble Apex Court observed that "A jurisdictional fact is a fact which must exist before a court, a tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. . It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a Court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not ....
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....s 153C." Sd/- ACIT, Central Circle - 17, New Delhi" It can be seen from the assessment order that notice u/s 153C was issued to the assessee by the ACIT, Central Circle-17 on 01.10.2010,and satisfaction was recorded on 03.09.2010. It is apparent that it was: 'Satisfaction Note for issuing Notice u/s 153C of the I.T. Act, 1961 in the case of Mrs. Nutan Khurana, Prop. Ishika Creations', It is further noticeable from the above that : 'This satisfaction note is recorded and is placed in the file before issuing notice u/s 153C.' The contents of the above satisfaction note leave nothing to doubt that it was recorded by the AO of the assessee before taking up the assessment u/s 153C of the Act pursuant to the search conducted on Shri B.K. Dhingra, Smt. Poonam Dhingra, M/s Mayank Traders Pvt. Ltd. and M/s. Horizon Pvt. Ltd.. Pages 9-12 of the paper book are the copies of the reply dated 10.06.2013 and 28.06.2013/02.07.2013 furnished by the Dy. Commissioner of Income-tax, Central Circle-17, New Delhi to Shri B.K. Dhingra, Smt. Poonam Dhingra, M/s Mayank Traders Pvt. Ltd. and M/s. Horizon Pvt. Ltd., under the provisions of RTI Act, 2005. The relevant part of the reply dated ....
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....can find out that which of such documents etc. do not belong to the person searched and are relevant for the assessment of the other person. It is not as if all the books of account and documents etc. found during the course of a search are evaluated by a separate authority to figure out that which of these documents belong to the person searched and to the others and thus handed over to the concerned AOs of the person searched and others for making assessment. As it is only the AO of the person searched who can reach a conclusion that some of the documents etc. do not belong to the person searched but to some other person, the legislature has provided for recording of such satisfaction by the AO of the person searched. It is not permissible under the law to require the AO of the other person to record such satisfaction by the AO. 17. As regards the other argument of the ld. DR that since the AO of both the persons searched and the assessee is the same person, hence the requirement of recording satisfaction by the AO of the persons searched should be deemed to have been fulfilled with the recording of satisfaction by the AO of the assessee. We are again unable to appreciate this c....
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....nt. Therefore, now under the law, w.e.f. 1.10.2014 it has become obligatory not only for the AO of the person searched to record satisfaction before handing over books of account or documents, etc., to the AO of the 'other person', but, such AO of the 'other person' is also required to record satisfaction that the books of account or documents, etc. have a bearing on the determination of the total income of such other person. In the pre-substitution era of the relevant part of sub-section (1) of section 153C covering the period under consideration, the jurisdictional condition remains that the satisfaction is required to be recorded by and in the case of the person searched so as to enable the AO of the 'other person' to start with the proceedings for making assessment or reassessment. 20. The ld. DR contended that recording of satisfaction by the AO of the assessee at the most can be treated as a technical mistake and hence should not eclipse the assessment. Relying on certain judgments, the ld. DR submitted that the technicalities cannot be allowed to prevail in the course of indulgence of justice. 21. We agree in principle that technicalities cannot come in the way of dispensa....
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....ed to record the satisfaction. The relevant observations of the Hon'ble High Court contained in para 15 merit reproduction as under: - 'It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in Section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income.' 24. It is pretty clear from the above extraction that the satisfaction as referred to it in this case is that of the Assessing Officer having jurisdiction over the searched person. As such, we are of the considered opinion that this judgment does not support the Revenue's case. Resultantly, the characterization of the above Tribunal orders as per incurium by the ld. DR, is absolutely without any legally sustainable basis. 25. Even otherwise, the judicial discipline requires a subsequent bench to the....
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..../207 Taxman 260/20 taxmann.com 214. This Court had indicated in its judgement in Pepsi Foods (P.) Ltd. (supra) that the case of Kamleshbhai Dharamshibhai Patel (supra) was distinguishable on facts. Those observations would apply to the present writ petitions also. As regards the decision of the Allahabad High Court in Classic Enterprises (supra), this Court had indicated that it could not agree with the conclusions and observations of the Allahabad High Court inasmuch as the decision of the Allahabad High Court was premised on a consideration of the provisions of Section 158BD of the said Act which are entirely different from the provisions of Section 153C of the said Act. Furthermore, with regard to the decision in SSP Aviation Ltd. (supra), this court had noted that the said decision does not militate against the view taken in Pepsi Foods (P.) Ltd. (supra). 6. The learned counsel for the Revenue has cited an additional decision before us today and that is the case of Sarvesh Kumar Agarwal v. Union of India [2013] 353 ITR 26/216 Taxman 109 (Mag.)/35 taxmann.com 85 (All). This decision also, in our view, does not advance the case of the Revenue. This would be evident from the obse....
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....from whom the bullion was seized was able to establish that it did not belong to him but to Sarvesh Jewellers. It is in that context that the provisions of Section 153C of the Act were invoked inasmuch as the Assessing Officer would then be considered as having been satisfied that the bullion which was seized from the searched person did not belong to the searched person but to some other person (in that case M/s. Sarvesh Jewellers, Bareilly). 8. From the foregoing discussion it is evident that in order that the Assessing Officer of the searched person comes to the satisfaction that documents or materials found during the search belong to a person other than the searched person, it is necessary that he arrives at the satisfaction that the said documents or materials do not belong to the searched person. We may point out that in the course of the arguments we had asked the learned counsel for the Revenue as to whether the documents in question had been disclaimed by the Jaipuria Group. The learned counsel for the Revenue, on instructions, states that this was not the case. In other words, it follows that the Jaipuria Group did not say that the documents did not belong to them." 17....
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....g officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". A registered sale deed, for example, "belongs to" the purchaser of the property although it obviously "relates to" or "refers to" the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy "belongs to" the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner. 17. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant there....
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....tisfaction does not satisfy the requirement of Section 153C. On the same date i.e. 23.7.2010, similar satisfaction note, only with the change in the name of the assessee's has been issued arbitrarily which does not in any manner satisfy the requirement of section 153C of the I.T. Act. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. 19. Since we have quashed the notice u/s 153C of the Act itself, the other grounds are not adjudicated being academic. 20. As the facts and circumstances in the case of the assessee in other five assessment years i.e. 2004-05 to 2008-09 are similar to assessment year 2003-04, we order that the impugned assessment orders passed u/s 153C in assessment years 2004-05 to 2008-09 are also a nullity. 21. Before we part with this order, we were wondering whether during search, revenue ....