TaxTMI 
TaxTMI 
2016 (7) TMI 851
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....n deleting the disallowance made by the AO u/s 37 amounting to Rs. 38,83,148/-. 2. The Commissioner of Income Tax (Appeals) erred in holding the issuance of notice u/s 153C is bad in law. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 4. From the aforesaid grounds it would be clear that the main grievance of the department in this appeal relates to action of the ld. CIT(A) in holding the notice issued u/s 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act) as bad in law. 5. The facts of the case in brief are that the assessee during the year under consideration was engaged in the business of providing Business Auxiliary services and also earned income by way of commission and brokerage. The assessee filed its return of income on 30.09.2008 declaring an income of Rs. 1,85,52,489/-. Subsequently, a search operation was undertaken by the CBI at the residential premises of the director of the assessee, namely, Sh. Jatinder Pal Singh on 22.04.2010 and a cash of Rs. 2 crores was seize....
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....ertaken on 22.4.2010 pursuant to authorization u/s. 132 in the case of Sri Jatinder Pal Singh, R/o D-6/13, Vasant Vihar, New Delhi, cash of Rs. 15,75,000/- was found out of which cash of Rs. 15,00,000/- was seized from the above premises. 2. Statement of Sh. Jatinder Pal Singh was recorded u/s. 132(4) of the income tax Act, 1961. In reply to question No. 7, it is stated as under: About Rs. 15 lacs is at my residence and Rs. 2 crores in my office which is located in the same plot on ground floor. Out of Rs. 15 lacs, a sum of Rs. 10 lacs belongs to company namely Navnidh Overseas Pvt. Ltd. and Rs. 5 lacs is my personal Rs. 2 crores I have received as advance with regard to my agricultural land at Faridabad where I intended to sell the land in small plots" 2.1 In answer to question No. 27, Sh. Jatinder Pal Singh states as under: "The cash belongs to both the companies and my personal cash but the computer on which books of accounts are maintained have been seized by the CBI and physical print out have not been taken hence I am not in a position to explain the same" 3. The case of M/s. Nav Nidh Overseas Pvt. Ltd. and M/s. Nav Nidh Motels Pvt. Ltd. have been, centralized to this....
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....ate to understand the provisions of section 153C and its applicability to the issue on hand. For applicability of the provisions of section 153C, the following conditions are required to be fulfilled: (i) The Assessing Officer is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account or document seized or requisitioned belong to a person other than the person with respect to whom search was initiated. (ii) The books of account, document or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such person. (iii) The Assessing Officer shall proceed against each such other person in the same manner as the person searched, to make assessment or re assessment in accordance with the provisions of section 153A. It is implied that such other person shall also be assessed or reassessed for that year of search and the preceding six years. 7.1.2 The reference to the "Assessing Officer" in this section 153C is the "Assessing Officer" who is making the assessment of the person searched under section 153A. The satisfaction regarding the books of account, documents or assets seized belonging to s....
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....ppellant The satisfaction note which is recorded by the AO in the case of the appellant company ignoring the same in the case of the searched person i.e. Sh. Jatinder Pal Singh, which is a pre-requisite condition for initiation of proceedings under section 153C does not hold any legal sanctity even otherwise when the ownership of the seized money by the department seemed doubtful. 7.1.3 The second part of the section deals with the handing over of the seized material and assuming the jurisdiction of the Assessing Officer on such other person, other than the person searched. From the material on record it is seen that no document or books of account were seized from the director's residence "belonging" to the appellant company. It was stated in the assessment order that during the course of search proceedings the appellant company was asked to produce the copies of the ITRs and books of account which he failed. Subsequently, during post search enquiries again the appellant was asked to furnish the copies of ITRs and final accounts which the AR of the appellant submitted. From these facts it is evident that no document was seized from the other person searched, pertaining to th....
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....f authorization was issued in the name of the appellant company to initiate search operation u/s 132 against the appellant company with its address. (c) The ownership of cash of Rs. 10,00,000/- belonging to the appellant is doubtful as it is based on the contradictory statements of the director of the appellant company and such statement is not corroborated with any finding on record. Moreover this cash was seized from the bedroom of Sh. Jatinder Pal Singh from the first floor. (d) Even, if the Assessing Officer is common in the case of the person searched and that of the other person, the Assessing Officer should have drawn a satisfaction note while assessing the case of Sh. Jatinder Pal Singh u/s 153A and then transferred such note to the file of the appellant company. This is not the case here as no satisfaction was drawn by the AO while assessing Sh. Jatinder Pal Singh u/s 153A regarding the appellant's case as no such satisfaction note was found on record of Sh. Jatinder Pal Singh. However, satisfaction note was drawn in the case of the appellant in its assessment record. Although the AO is common in both the cases, yet there is no transfer of such note from the file o....
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....re the authorities below and strongly supported the impugned order passed by the ld. CIT(A). It was further submitted that no satisfaction was recorded in the case of the searched person. Therefore, the issuance of notice u/s 153C of the Act was rightly held by the ld. CIT(A) as illegal and without jurisdiction. The reliance was placed on the judgment of the Hon'ble Jurisdictional High Court in the case of Pr. CIT & Ors. Vs Nikki Drugs & Chemicals Pvt. Ltd. & Ors. (2016) 236 Taxman 305. 11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that a search took place at the residential premises of one of the director of the assessee, namely, Sh. Jatinder Pal Singh on 22.04.2010 and on the basis of the said search, the AO initiated the proceedings in the hands of the assessee u/s 153C of the Act. In the instant case, the requisite condition for taking first step for initiation of the proceedings u/s 153C of the Act was not fulfilled since the AO of the searched person did not record the satisfaction that the assets or documents seized did not belong to the searched person ....
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....fficer 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. It is settled that recording of such satisfaction is sine qua non for commencing any proceedings under Section 153C of the Act. Thus, the decision of the ITAT in this regard cannot be faulted. It was sought to be contended that the assessing officer of the searched persons had, in fact, recorded the necessary satisfaction note. However, the learned counsel for the Revenue could not confirm whether such note was prepared prior to the initiation of the proceedings under section 153C of the Act. The Assessee's contention that despite its request such note had not been disclosed during the assessment proceedings has also not been controverted. In the circumstances, the categorical finding of the ITAT that it was an admitted fact that the assessing officer of the searched persons had not recorded a satisfaction note, cannot be interfered with." 13. A similar view has been taken by the Hon'ble Jurisdictional High Court in the case of Pepsi Foods Pvt. Ltd. Vs ACIT (2014) 367 ITR 112 wherein it has been held as under: "that i....