TaxTMI 
TaxTMI 
2015 (8) TMI 710
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....nd during the course of search at their residential premises at F-6/5, Vasant Vihar, New Delhi, certain documents belonging to the assessee, which is a private limited company 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-III, New Delhi vide order F.No. CIT-III/Centralisation/2009-10/2515 dated 29.10.2009. Notice u/s 153C dated 08.07.2010 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 06.09.2010 declaring income of Rs.Nil. 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 12.11.2010 as sought by the a....
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....umber might be much higher also. During the course of inquiries, the AO found that the director/shareholder was not a man of means and the premises were not commercial premises. It was also reported by the investigation wing that no evidence of stock was found from any other premises of the Thapar Homes Group. During the course of assessment proceedings, the assessee claimed that the assessee had a godown at Khasra No. 34/7, Village Dera Mandi, Tehsil Mehrauli, New Delhi. But, the AO observed that the claim was non-verifiable due to lapse of so many years. The AO also found that most of the concerns of Thapar group had sought to declare this premises as their godown but no such claim was made during search proceedings. The AO observed that in the case of present assessee, all the purchases & sales were in cash. The items purchased & sold were textile & fabrics. The name and style of the textiles & fabrics were Denim, Fabrics K-III Super Fine (N), Fabric (PS), Fabric (PS) Embroidery, Fabric (PS) Excel, Fabrics, Kashmiri Fabrics-I, Kashmiri Fabrics-I (D), etc. From these items, the AO observed that the assessee was not dealing in branded items and there was no name of any company in ....
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....) is illegal, bad in law, time barred, without jurisdiction and wrong on facts. The additions made are unjust, unlawful and arbitrary and are made against the principles of natural justice. 2. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT (A) has failed to appreciate that the Ld. AO was not justified to ignore the submissions of the appellant that the assessment proceedings for the year under appeal was not pending on the date of the recording of satisfaction u/s. 153C and since the same didn't abate, the proceedings u/s. 153C of the LT. Act in this case are bad in law and deserves to be quashed. 3. That on the facts and circumstances of the case and the provisions of law, the Ld CIT (A) has failed to appreciate that the assessment framed by Ld. AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s. 153C of the LT. Act and as such the assessment being bad in law deserves to be quashed. 4. That on the facts and circumstances of the case and the provisions of law, the Ld CIT (A) has failed to appreciate that the Ld AO was not justified to ignore the submissions of the appellant that ....
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....nd findings of the Ld CIT (A) and Ld AO in the impugned appellate order and assessment order, respectively, is irrelevant and vitiated in the law. 10. That the CIT (A) has erred in ignoring the explanation given, evidences and material placed and available on record. The same has not been properly considered and judicially interpreted and the same do not justify the additions/disallowances made. The additions have been sustained with preset mind of the CIT (A) and her order is based on surmises, conjectures and suspicion. 11. That on the facts and circumstances of the case the interest charged u/s 234A and 234 B has been wrongly and illegally charged and in any case is highly excessive. 12. That the respondent craves the right to amend, append, delete any or all grounds of appeal." 5. At the outset of the hearing, the ld. AR for the assessee assailed before us from the grounds of cross objection that satisfaction of the AO of the searched person as envisaged under section 153C of the Act has not been recorded, before initiating the proceedings against the assessee u/s 153C of the Act, which vitiated the entire impugned assessments, so we deem it fit to deal with the sai....
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....ment 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 and M/s. Madhusudan Buildcon Pvt. Ltd., and in such search proceedings, certain documents belonging to the assessee was found which led to the making of assessment u/s 153C read with section 153A of the Act. In order to appreciate the contention made by the ld. AR on the question of recording of proper satisfaction, it would be apposite to note down the prescription of the relevant parts of section 153(1) at the material time, as under:- "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 requisitione....
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....icer 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 possess. The existence of 'jurisdictional fact' is sine qua non for the exercise of power by a court of limited jurisdiction". 11. As noted earlier section 153C provides for taking recourse to assessment in respect of any other person, the conditions precedent wherefore are : (i) satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and (iii) the AO has proceeded under s. 153C against such other person. The conditions precedent for invoking the provisions of s. 153C, thus, are required to be satisfied before the provisions of said section are applied in relation to any person other than the person whose pre....
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....ingra and M/s Madhusudan Buildcon (P) Ltd, under the provisions of RTI Act, 2005. The relevant part of the reply dated 10.6.2013 given to Sh. B. K. Dhingra, is as under:- "2. From the assessment records of Sh. Bhupesh Kumar Dhingra, which is covered under section 153A, for the Asst. years from 2003-04 to 2008-09 (Block period) it is noticed that there is no 'satisfaction note' available/recorded in respect of other entities." Similar replies have been given to Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. On a consideration of the above replies given by the Department to the persons searched, it is manifest that there is 'no satisfaction note available/recorded in respect of other entities'. On a conjoint reading of the Satisfaction note and replies given by the Department to the persons searched under the RTI Act, it clearly emerges that no satisfaction was recorded by the AO in the cases of the persons searched u/s 132(1) of the Act (i. E. Shri B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd.) that some books of account or documents etc. belonging to the assessee were found which were handed over to the AO of the 'other person' (i. E. the....
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....he recording of satisfaction by the AO of the assessee. We are again unable to appreciate this contention that the commonness of the AO would make no difference in so far as the recording of satisfaction in the case of the persons searched is concerned. What is relevant for this purpose is not the identity of the person assessing but his position and the capacity. When the law requires the AO of the person searched to record the necessary satisfaction, it is the AO having jurisdiction over the person searched who is obliged to record such satisfaction in the capacity of that AO and that too in the case of the person searched. The mere fact that the AO of the person searched and the assessee is the same person, does not, in any manner, obliterate the requirement of law necessitating the recording of satisfaction in the case of the person searched that money, bullion, jewellery, etc., found from the person searched belongs to the 'other person.' What is crucial to note is capacity of the AO and not his identity. In view of the fact that when the statutory stipulation is for recording the satisfaction by the AO of the person searched, then, it cannot be substituted with the satisfacti....
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....course of indulgence of justice. 21. We agree in principle that technicalities cannot come in the way of dispensation of justice. However, it is important to note that the lack of jurisdiction by the AO cannot be put under the carpet in the guise of a technical defect. It goes without saying that no assessment or other proceedings can be lawfully taken up and completed unless the concerned authority has jurisdiction to do so. Lack of jurisdiction goes to the very root of the matter and cuts the tree of assessment if the foundation of jurisdiction is missing. 22. The ld. AR has brought to our notice two orders passed by the Delhi Benches of the Tribunal, namely, ACIT vs. Inlay Marketing Pvt. Ltd. (ITA No.4200/Del/2012), etc. and DCIT vs. Aakash Arogya Mandir Pvt. Ltd. (ITA No.5437/Del/2013), etc., in which the notices and the consequential assessments u/s 153C, under identical circumstances, have been quashed. The ld. DR contended that the above referred two Tribunal orders are per incurium and should not be followed. The main reason for declaring the tribunal orders as per incurium was the nonconsideration of the judgment of the Hon'ble jurisdictional High Court in judgment i....
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.... absolutely without any legally sustainable basis. 25. Even otherwise, the judicial discipline requires a subsequent bench to the follow an earlier order of a coordinate bench on the point. It is only if the subsequent bench feels itself unable to concur with the view taken earlier that it is required to refer the case for consideration by a special bench. In our considered opinion, these two orders of the co-ordinate benches are perfectly in accordance with law. 26. Coming back to facts of the instant case, it is palpable that the AO of Shri B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd., did not record any satisfaction that some money, bullion, jewellery or books of accounts or other documents found from these persons belonged to the assessee. The absence of such satisfaction, in our considered opinion, failed to confer any valid and lawful jurisdiction on the AO of the assessee to proceed with the matter of the assessment u/s 153C of the Act. We, ergo, set aside the initiation and the ensuing assessment on the assessee as void ab initio. 27. The reliance of the ld. DR on some decisions on other legal issues or merits is of no consequence in vie....
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....man 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 observations of the Allahabad High Court in paragraphs 19 to 21 of the said decision, which read as under: "19. In Manish Maheshwari's case (Supra) the Supreme Court observed that taxing statute must be constructed strictly. The Court, however, shall not interpret statutory provisions in such a manner, which would create an additional physical burden on a person. In case of any doubt or dispute, construction is to be made in favour of the tax payer and against the revenue. 20. In the present case we do not find anything wrong in the satisfaction note and the forwarding of the entire matter by the Income Tax Officer, Ward-Ill (2), Ahmedabad to the Assessing Officer of the petitioner at Bareilly. All the requirements of Section 153(c) were complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jewellers,....
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....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. The Hon'ble Delhi High Court further held as under:- "13. Having set out the position in law in the decision of this Court in the case of Pepsi Foods Pvt. Ltd. (supra), it must be seen as to whether the Assessing Officer of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners. 14. First of all we may point out, once again, that it is nobody's case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that "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....
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....3C 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 thereto stand quashed. 18. The writ petitions are allowed as above. There shall be no orders as to costs." 18. The Ld AR took our attention to the order of the co-ordinate Bench in DCIT vs. Aakash Arogya Mindir P. Ltd. (ITA Nos. 5437 to 5442/Del/ 2013) (PB Pages 49 to 64) wherein on similar facts of the searched person i. E. B. K Dhingra, Smt. Poonam Dhingra, M/s Madhusudan Buildcon Pvt. Ltd., M/s. Mayank Traders (P) Ltd. and M/s Horizon Pvt. Ltd. were searched but no satisfaction was recorded like in this case, where it was held as under: "11. ......The assessee falls into the jurisdiction of Hon'ble Delhi High Court in view of the case law of Pepsi Foods (P) Ltd, therefore, we held that recording of satisfaction by AO of searched persons is a necessary pre condition for initiation of proceedings u/s 153C which has not been done in the present appeals. Therefore, we quash the assessment proceedings being illegal." Thereafter, we find that the department went in appeal before the Hon'bl....
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....e person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a 'sine-qua-non' to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. 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 assess....