TaxTMI 
TaxTMI 
2016 (5) TMI 1018
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.... assessment year 2007-08 comprises of Revenue's appeal IT(SS)A No.90/Ahd/2011 and assessee's C.O. No.57/Ahd/2011 therein. Last assessment year 2008-09 has got assessee's appeal IT(SS)A No.03/Ahd/2011 and C.O. No.58/Ahd/2011 and Revenue's cross appeal IT(SS)A No.91/Ahd/2011. The relevant proceedings in all these cases are under section 153A(1)(b) read with section 153C read with section 143(3) of the Income Tax Act, 1961 (in short 'the Act'). This completes the entire batch of 9 cases. 2. We come to the rival pleadings now. The assessee's appeal IT(SS)A No.01/Ahd/2011 in assessment year 2005-06 raises two substantive grounds inter alia challenging legality of section 153C proceedings followed by the one on merits against addition of Rs. 63,26,507/- in the nature of suppressed income earned through M/s. Kunvarji Commodities Private Limited. Next is assessment year 2006- 07. The assessee's Appeal IT(SS)A No.02/Ahd/2011 raises two similar grounds in preceding assessment year. The only difference is in the relevant figure of alleged suppressed income coming to Rs. 1,11,30,886/-. The revenue in its appeal IT(SS)A No.89/Ahd/2011 pleads solitary substantive grievance for reviving additi....
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....d other valuable articles. This included file documents Annexures A-55, 64 & 65 belonging to the assessee. The same culminated in issuance of section 153C notice dated 23.07.2009. The assessee filed return on 23.08.2009 stating income of Rs. 1,32,400/-. The Assessing Officer took up scrutiny. He inter alia noticed assessee's action of allegedly misusing client code facility and observed that the same resulted in suppression of income/profits of Rs. 63,26,507/- not offered in the books of account. This amount stood added as assessee's income in assessment order dated 29.12.2009. 6. The assessee preferred appeal. He inter alia raised two substantive grounds. First one assailed legality of the impugned section 153C proceedings. Latter ground on merits challenged correctness of the above stated addition. We reiterate that the instant adjudication is confined to legal aspect only. The assessee argued in the course of lower appellate proceedings that none of the seized material belonged to him as contemplated under section 153C of the Act. The CIT(A) concurs with the Assessing officer to hold that above stated incriminating material annexure-55, 64 to 65 belongs to assessee only there....
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....se. Accordingly notice u/s.153C r.w.s. 153A of the Act is issued for the A.Y 2002-03 to 2007-08. Sd/- (GAURAV BATHAM) Dy. Commissioner of Income Tax, Central Circle-1(1), Ahmedabad" 9. Learned authorised representative strongly argues that the above extracted satisfaction note has been made in assessee's case who happens to be other than the searched assessee and no such satisfaction has been recorded in the case file of M/s. Kunvarji (supra) that the incriminating material hereinabove belonged to the assessee. It is further stated that the assessee filed RTI application as well seeking to confirm as to whether the Assessing Officer had recorded any satisfaction in case of the above stated searched assessee under section 153C. We are informed that the department has furnished the above extracted satisfaction only to have been entered for the purpose of initiating the impugned proceedings. The assessee accordingly contends that this course of action adopted by the Assessing Officer is not sustainable as per the case law of hon'ble jurisdictional high court (2014) 222 Taxman 96 (Guj) DCIT vs. Lalitkumar M. Patel upholding tribunal's order in IT(SS)A No.61/Ahd/2007 prop....
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....a. Date : 23.02.2004" 8. The learned counsel for the assessee has challenged the validity of the initiation of the proceedings under Section 158BD mainly on two counts - (i) that the proceedings were initiated after completion of the assessment in the case of Jayaraj Group of cases and (ii) during the assessment proceedings of Jayraj Group no satisfaction was recorded by the AO of Jayaraj Group but reasons was recorded by the AO of the assessee for issuing of notice under Section 158BD. In support of his contention, he relied upon the decision of the Hon'ble Apex Court in the case of Manish Maheshwari Vs. ACIT, 289 ITR 341 and Special Bench of the ITAT in the case of Manoj Agarwal Vs. DCIT, 113 ITD 377. The learned DR, on the other hand, relied upon the orders of the authorities below and stated that the satisfaction recorded by the AO under Section 158BC is a valid satisfaction because the persons who recorded the satisfaction was the AO for Jayaraj Group of cases as well as the assessee. He also submitted that notice under Section 158BD was duly issued before the completion of the assessment under Section 158BC read with section 263, in the Jayraj Group of cases. 9....
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....oss material indicating the presence of undisclosed income in the hands of the person not searched, there has to be a provision for making a similar assessment in the case of the other person. As section 158BC relates to a person searched there has to be different provision for making a similar assessment in the case of the other person and hence section 158BD has been enacted. So, the said section states that if the Assessing Officer is satisfied that the undisclosed income belongs to the other person, then he shall hand over the seized material so as to enable the second Assessing Officer to make a block assessment in a similar manner and that is not possible if the satisfaction is not recorded. And this can be recorded only and only in the course of the section 158BC proceeding and nowhere else. It is the Assessing Officer assessing the person searched who goes, through the seized material and comes to a decision as to whether there is any undisclosed income unearthed as a result of search, if so its nature and to whom it belongs. If the said undisclosed income belongs to the person searched that is the end of the matter. If, on the other hand, the material examined shows that t....
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....notice under section 158BD, satisfaction must be recorded by the AO of the person searched, that the undisclosed income belongs to the person other than the person searched and then books of accounts or other documents seized has to be handed over to the AO of the person to whom the undisclosed income belongs. Thereafter on the basis of such satisfaction, the AO of the persons to whom the undisclosed income belongs will take proceedings under Section 158BD. Special Bench of the ITAT has further held that such satisfaction by the AO of the person searched has to be recorded in the course of proceedings under Section 158BC and not thereafter. Meaning thereby, the satisfaction must be recorded before the completion of the assessment of the person searched. Now in the case of the assessee we have reproduced the satisfaction note in para-7 above. 12. From the satisfaction note, it seems that it is recorded by the AO of the assessee and not the AO of Jayraj Group of cases. This inference of ours is on the following basis: i) Heading of the note is "Reasons for issue of Notice u/s.158BD of the Act". Thus, it is the reasons recorded by the AO before the issue of notice under Se....
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....nt of Jayraj Group was originally completed under Section 158BC on 30-1-2004. That thereafter under Section 263 such order was set aside and fresh assessment order was passed on 29-12-2006. However, it is not the case of the Revenue that the order under Section 263 was passed with regard to some finding pertaining to undisclosed income of the assessee viz. Shri Lalit M. Patel. In the fresh assessment order passed in pursuance of Section 263 also there is no mention with regard to undisclosed income, if any belonged to Shri Lalit M. Patel. 14. In view of the totality of the above facts, we are of the opinion that the reasons recorded for issue of notice under Section 158BD by the AO of the assessee cannot be said to be valid satisfaction for issue of notice under Section 158BD, we therefore respectfully following the decision of the Hon'ble Apex Court in the case of Manish Maheshwari (supra) and the decision of the Special Bench of the ITAT in the case of Manoj Aggarwal (supra), hold that the issue of notice under Section 158BD in the case of the assessee was not valid. We quash the same. Once the notice under Section 158BD itself is quashed, the assessment order passed under Sec....
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....assessee. The question is, where this paper was placed by him? Whether in the order sheet entries of Shri Bhaskar Ghosh's assessment proceedings; in a separate file or in cupboard available in his room. There is no dispute raised by the ld. representatives that this satisfaction was not recorded within the stages contemplated by the Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears (extracted supra). The attempt at the end of ld. counsel for the assessee is that there should be a straight jacket system, whereby the satisfaction recorded even by the same AO then, that should be placed in the file of searched person and if it is placed in some other cupboard in his room by the AO then, there cannot be any satisfaction, we fail to appreciate that technical approach at the end of assessee. The law does not require the manner and the procedure of keeping the files. The section only requires that a satisfaction be recorded and it should be during the period propounded by Hon'ble S.C. in Calcutta Knitwears, that has been recorded in the present case. It is available on page 74 of the Paper Book. The second scenario can also happen that seized material of KPC group might be k....
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....impugned proceedings are under section 153C of the Act conducted on 25.03.2008 in case of M/s. Kunvarji Commodities Brokers Pvt. Ltd. There is further no issue that the DCIT Central Circle 1(1) is the common assessing authority in case of both the assessees. The legal position envisaged under section 153C of the Act is very clear that the Assessing Officer of the searched assessee has to satisfy himself that any money, bullion, jewellery or other valuable articles etc. belongs to some other persons and not the searched assessee. This has to be followed by another exercise in case of such other assessee that the same is caused escapement of any income. It is at this stage that both parties have cropped up the instant issue. The assessee's case is that there is no satisfaction at first level in case of the searched entity opposed by the Revenue by saying that the Assessing Officer is the same who has expressed satisfaction in assessee's case. The law about entering of such a satisfaction is very well settled now. Hon'ble apex court in the case of Manish Maheshwari vs. ACIT (2007) 289 ITR 341 (SC) holds that such a satisfaction is indeed mandatory. We deem it appropriate to observe th....
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....to facts of the instant case. We reiterate that the assessee's case is that once the Assessing Officer does not specifically record satisfaction in searched entity's case that the money, bullion, jewellery etc. in question belongs to a third person, places the same in it's file followed by an opinion of the above stated material having caused escapement of any income. It is accordingly argued that the impugned satisfaction does not adhere to above stated settled law. The Revenue on the other hand makes out a case that the Assessing Officer's satisfaction has come only after careful examination of the above stated incriminating material being examined together in the cases of M/s. Kunvarji as well as the assessee. We find no reason to agree with this contention. As observed by the learned co-ordinate bench in Lalit Kumar M. Patel's case, the Assessing Officer in the impugned satisfaction mentions only assessee's name on top of the satisfaction note and not that of the searched entity. There is no material placed on record before us that the Assessing Officer had kept the case files of the searched party and that of the assessee together before drawing the impugned satisfaction note.....