TaxTMI 
TaxTMI 
2016 (4) TMI 749
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.... u/s 133A of the Act was carried out at the assessee's premises. 2.2 In the course of survey proceedings, a diary was found which contained evidence of 'on money' collected that was not recorded in the regular books of account. As per nothing in the said diary, such unaccounted money received by the assessee firm worked out to Rs. 2,09,00,000/-. On being queried in this regard, the partner of the assessee firm admitted to the cash receipts but claimed that there are cash expenditures also and admitted an amount of Rs. 150 lakhs as additional income for the financial year relevant to Asst. year 2007-08. Further, in the survey proceedings, another diary was found which contained evidence of cash transaction in the sale of shop no. 3 in the residential building complex, wherein the cash component was Rs. 21,12,500/-. 2.3 The case was taken up for scrutiny and the assessee was issued notices u/s 153C of the Act for the relevant Asst. years. The assessment for Asst. years 2006- 07 and 2007-08 was completed u/s 143(3) r.w.s.153C of the Act vide orders dt. 30/12/2008. The additions made to the returned income of the assessee was on the following grounds:- (i) Income admitted on accoun....
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....e evidence brought on record for addition on account of unaccounted sales of shops for A.Y. 2007-08 can also be used it for arriving at unaccounted sale of shops for A.Y. 2006-07, applying the ration of the decision of the Hon'ble Supreme Court in the case of CST vs. H.M.Esufali H.M. Abdualili (1973) 90 ITR 271. III. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in not accepting the fact that there were unaccounted sales pertaining to shop nos. S-15 and S-16 for A.Y. 2006-07. IV. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in not accepting the fact that assessee has formally entered into agreement for all shops sold has received advances and has assigned names against the shops and this was established during the assessment proceedings. V. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A), Central VII, Mumbai may be set aside and that of the Assessing Officer restored. VI. The appellant craves leave to add, amend, alter or delete any or all the grounds of appeal, if need be." 5.2. Even though the assessee has got the relief it sought entirely pur....
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....ellant as search on partner. 2. Your appellant prays that (a) The said addition of Rs. 1,90,12,500/- made on estimated basis be deleted. (b) The income as returned by the appellant be accepted. (c) Such other relief as may be deemed fit in the matter be granted. 3. The appellant craves leave to add, amend, alter or delete any or all grounds of appeal." 6.2.2 The assessee has also raised the following additional grounds of appeal:- 1. "The learned Assessing Officer erred in making assessment u/s 143(3) and the same is without jurisdiction and bad in law. 2. The learned Assessing Officer failed to appreciate that notice u/s. 143(2) was not issued within time permitted and that the assessment order u/s 143(3) is without jurisdiction and bad in law. 3. The assessee prays that the assessment order may be cancelled as being without jurisdiction." 7.1 The ld. AR for the assessee was heard on the additional grounds for both Asst. year's 2006-07 and 2007-08 (supra). The issue raised therein are as under:- (i) The notice issued u/s 153C of the Act and the assessment made pursuant thereto is without jurisdiction. (ii) No incriminating evidence relating to the as....
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.... of the partner of the assessee firm. It was submitted that the two diaries which were used as evidences for the 'on money' receipts for flats and shops were found and impounded during the survey action u/s 133A of the Act in the business premises of the assessee firm. As the incriminating materials against the assessee firm was not found in the course of search action, the initiation of proceedings u/s 153C of the Act was not tenable. It was also submitted that any declaration or admission of income in statements u/s 132(4) of the Act cannot be considered as "material" found in the course of search action. 8.2.1 We have heard both the Ld. AR for the assessee and the Ld. DR for revenue in the matter and perused and carefully considered the material on record. Section 153C of the Act reads as under:- "153C. [(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 ....
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....erein. The same reads thus:- "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 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 as....
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....sessing 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 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 material 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 ass....
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.... 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 requirement................." Further, the Hon'ble High Court in its order has observed that:- " 8. The respondent, on the other hand, has supported the opinion of the Tribunal. That, the principle underlying the mandate of Section 158BD would apply on all fours to the....
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....edit Society Ltd. Vs. Amal Garg, Deputy Commissioner of Income-Tax dated 26.2.2014, Asstt. Commissioner of Income Tax Vs. J.B. Enterprises and others dated 26.6.2014. Since there is no direct judgment of the Supreme Court on Section 153C, reliance has been placed on the decisions of different High Courts on Section 153C, namely- of SSP Aviation Ltd. Vs. Deputy Commissioner of Income-tax dated 29.3.2012, Commissioner of Income Tax Vs. Classic Enterprises Cantt Road Lucknow dated 17.4.2013, Commissioner of Income Tax (Central) Vs. Gopi Apartment, dated 1.5.2014, Pepsi Foods Pvt. Ltd. Vs. Assistant Commissioner of Income Tax dated 7.8.2014, Pepsico India Holdings Pvt. Ltd. Vs. Assistant Commissioner of Income Tax and another dated 14.8.2014 and lastly Commissioner of Income Tax Vs. Madhi Keshwani dated 11.3.2015. 10.............................................................................................. 11. The moot question is: whether there is any distinction or dissimilarity between Section 158BD and Section 153C of the I.T. Act? If we accept the argument of the Department, that the purpose underlying the two provisions is completely different, further investigation into....
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....132 or 132 A of the Act, after recording such satisfaction, may transmit the records/documents/chits/papers etc to the assessing officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of the said other documents relating to such other person, the jurisdictional assessing officer may proceed to issue a notice for the purpose of completion of the assessments under Section 158BD of the Act, the other provisions of XIV-B shall apply. 39. The opening words of Section 158BD of the Act are that the assessing officer must be satisfied that "undisclosed income" belongs to any other person other than the person with respect to whom a search was made under Section 132 of the Act or a requisition of books were made under Section 132A of the Act and thereafter, transmit the records for assessment of such other person. Therefore, the short question that falls for our consideration and decision is at what stage of the proceedings should the satisfaction note be prepared by the assessing officer: whether at the time of initiating proceedings under Section 158BC for the completion of the assessments of the searched person under Sectio....
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....o the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person." 14. Thus, as envisaged by Section 158BD, "satisfaction" of the Assessing Officer before he transmits the material/records to other Assessing Officer having jurisdiction over such other person is sine qua non. Sans such satisfaction, the Assessing Officer cannot validly take recourse to the machinery provision. 15. We may now turn to Section 153C. No doubt, the form of Section 153C is dissimilar to that of Section 158BD. It is also true that the two provisions are embedded under different chapters. For, Section 153C is in Chapter XIV providing for procedure for assessment, whereas Section 158BD is found in Chapter XIV-B providing for special procedure for assessment of search cases. Further, Section 153C opens with ....
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............................................... 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 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.....
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....r held as under:- " 41. We would certainly say that before initiating proceedings under section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Section 148 of the Act where recording of reasons in writing are a sine qua non. Under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers' satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer c....
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....s New Delhi, 31st December, 2015 Subject: Recording of satisfaction note under section 158BD/153C of the Act - reg.- The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014(available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person." 3. Several High Courts have held that the provisions of section....