TaxTMI 
TaxTMI 
2017 (4) TMI 286
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....in disallowing Rs. 21,55,722/-/-, Rs. 36,87,787/- and Rs. 44,19,031/- for A.Ys. 2007-08, 2008-09 and 2009-10 respectively from out of financial expenses and the learned CIT(A) was unjustified in only partly allowing the expenditure. On the facts and circumstances of the case, the expenditure is incurred for the purpose of business and therefore allowable. (3) That the learned CIT(A) erred in law and on facts in holding that the trading transaction, in which delivery is not enforced, constitutes speculative transaction. On the facts and circumstances of the case the trading transactions entered by the assessee are outside the purview the definition of speculative transaction as envisaged as per Section 43(5) of the Income Tax Act. (4) That the learned CIT(A) erred in law and on facts in holding that the financial expenses (partly) have been incurred for speculative transaction. On the facts and circumstances of the case, the funds available through LC transaction have been utilised for the working capital of the regular business of the assessee. (5) That the Assessing Officer erred in law and on facts in charging interest under section 234A, 234B and 234C ....
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.... during the assessment proceedings or in his order to support the claim made in the order by him. Thus, that the order of AO is unjustified and liable to be set aside. 2.3 In addition to the fact that as noted in the assessment order, the appellant raised no substantial reason for its objection to notice u/s 153C, and the fact that the AO has noted that during the course of search several item of books of accounts and incriminating documents were found and seized and that the seized material vide Page No. 8 to 16 of A2(25) belong to the assessee which is incriminating in nature, and further that the authorized representative of the assessee inspected the seized material and took photocopies of relevant documents etc., the appellant's ground is held to be without substance and is dismissed." 5. On merits learned CIT(Appeals) partly sustained the addition made by the AO . 6. Against the above order of learned CIT(Appeals), assessee is in appeals before us. As emanating from the grounds of appeal referred above, the assessee at the threshold has raised the issue that learned CIT(Appeals) has erred in holding that the notice issued u/s 153C is valid. 7. We have heard ....
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....ide order dated 24/02/2016 8. Further more learned counsel submitted that the addition has not been made on the basis of seized material. In this regard learned counsel submitted that the assessments in all these cases have been completed earlier. Hence in the absence of incriminating material found during the search, no addition is sustainable u/s 153C. Learned counsel further submitted that no incriminating document was found during search. The documents in Page No. 8 to 16 of item 25 of Annexure A2 are sale invoices issued by the appellant company to Gupta Domestic Fuels (N) Ltd. and Gupta International Industries Ltd. on account of sale of Coal by the appellant to these companies. Once the invoices are issued by the appellant and have been received by the buyers viz. Gupta Domestics Fuels (N) Ltd. and Gupta International Industries Ltd. the same belongs to the buyers. If the seized document which forms the basis does not belong to the petitioner, there is no jurisdiction to issue notice u/s 153C and, therefore, the entire proceedings are null and void as held by Hon'ble Jurisdictional Bombay High Court in the case of CIT vs. Arpit Land Pvt. Ltd. in I.T. Appeal No. 83/2014 or....
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....aterial found may relate to the assessees in whose case action has been taken u/s 153C. At the outset in this case we may gainfully refer to the satisfaction recorded in the case of persons in whose cases search and seizure activities were conducted. The satisfaction note found in the case of the searched persons, namely, Shri Mukesh Gupta Indl. and Gupta Coal India Ltd. were examined from the concerned assessment records brought by the learned D.R. Common satisfaction note in the case of Mukesh Gupta, Indl. Reads as under : "All the books and documents seized / impounded during the course of search / survey as also material gathered on enquiries and post search investigations and the various observations made in the appraisal report have been carefully examined and considered with reference to the regular books of accounts while framing the assessments for all the assessment years." Common satisfaction note in the case Gupta Coal India Ltd. reads as under: " All the books and documents seized/impounded during the course of search/survey as also material gathered on enquiries and post search investigations and the various observations made in the appraisal repo....
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....r documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :] 6[Provided further that the Central Government may by rules7 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.] 13. From the above provisions, it is clear that where the AO of the persons searched is satisfied that any money, bullion, jewellery, books of accounts or other documents etc. belong to a person other than a searched person, then such document or assets etc. shall be handed over to the AO of the other person and the later AO shall proceed against such other person to assess or reassess his income. Thus it is manifest before handing over such documents to the AO of the other person a satisfaction has to be recorded by the AO of the searched persons, that....
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.... 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 premises had been searched or whose documents and other assets had been requisitioned under s. 132A.s That the recording of satisfaction by the AO having jurisdiction over the person searched is an essential and prerequisite condition for bestowing jurisdiction to the AO of the other persons. 14. Now in this regard the CBDT has also issued notification as under : "CIRCULAR NO. 24/2015 F.No.279/Misc.l140 /2015/IT J Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 31 st 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 Mls Calcutta Kni....
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.... is no such satisfaction that any bullion, jewellery, books of accounts, other documents etc. belonging to the assessee has been found and the same is being handed over to the AO of the assessee. Thus the absence of requisite satisfaction denudes the legality of jurisdiction in this case. Hence it has to be held that since proper satisfaction as envisaged u/s 153C has not been recorded, the assessments are liable to be quashed on account of lack of validity of jurisdiction. In this regard the case laws referred above by the learned counsel of the assessee support this proposition. We may gainfully refer to some of them as under : i) CIT vs. Shetty Pharmaceuticals & Biological Ltd. 232 Taxman 0268. (Andhra Pradesh H.C.) In this case it was held that section 153C and 153A mandates recording of satisfaction of the Assessing Officer(s) is a pre- condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the Act. It is contended that the same Assessing Officer is invo....
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....t must be negative. We conclude that the condition precedent for resorting to action under Section 158BD delineated by the Supreme Court in the case of Manish Maheshwari (supra) and in the recent case of Commissioner of Income-tax-III vs. Calcutta Knitwears (suspra), would apply on all fours mandating satisfaction of the Assessing Officer(s) dealing with the case at the respective stages referred to in Section 153C. iii) Hon'ble Bombay High Court decision in the case of Director of Income Tax vs. M/s Ingram Micro (India) Exports Pte Ltd. in ITA No. 1337 of 2013 & Others vide order dated 29-04-2015. In this case it was expounded that as per provisions of section 153A and section 153C of the I.T. Act, proceedings can only be initiated after the AO arise at the satisfaction that the seized material pertains to other persons, namely, persons other than searched persons. It is only then the persons other than the searched party can be proceeded against. If there is a satisfaction required and to be recorded as a pre- condition and which is mandatory then in the absence thereof all further steps stand vitiated. iv) In a batch of appeals in ITA....