TaxTMI 
TaxTMI 
2017 (5) TMI 1050
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....f Rs. 2,74,00,000/- made by the AO on account of share appl ication money under section 68 of the Act. 3(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in conf irming the above addition rejecting the explanation and evidences brought on record by the assessee to prove the identity, creditworthiness of the shareholder and genuineness of the transaction. (ii) That the addition had been made without pointing out any defect or irregularity in the evidences f i led by the assessee. 4. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in conf irming the said addition despite the fact that the same has been made on the basis of material and evidences col lected at the back of the assessee without giving it an opportunity to rebut the same in clear violation of the principle of natural justice. 5. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in conf irming the addition despite the same being made on the basis of statements of some person without giving assessee an opportunity to cross examine in clear violation of principle of natural ju....
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....so conducted on the business premises of the assessee on 14.09.2010. The AO issued the notice u/s 153A of the Act on 04.11.2011 for the assessment year under consideration. The assessee informed the AO that no action u/s 132 of the Act was initiated against the assessee. The AO verified the same and found the said version of the assessee as correct. Accordingly, the aforesaid notices issued u/s 153A of the Act were withdrawn and the assessee was informed accordingly. Thereafter, a satisfaction note u/s 153C of the Act was drawn on 27.02.2013 and the notices u/s 153C of the Act were issued for the assessment year. In response, the assessee vide letter dated 05.03.2013 stated that return of income already filed u/s 139(1) of the Act on 25.09.2009 may be treated in response to the notice u/s 153C of the Act. The AO in the body of the assessment order dated 28.03.2013 observed that during the course of assessment proceedings u/s 153C of the Act in the case of Sh. Pramod Goel, it was noticed that the search and seizure operation u/s 132 of the Act was undertaken on 14.09.2010 in the cases of Sh. Pramod Goel, Smt. Savita Goel and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi and th....
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....C of the Act was issued. 4. The assessment, thereafter, was completed on 28.03.2013, assessing the income of the assessee at Rs. 2.74 crores for AY. 2009- 10 and at Rs. 75 lacs for A.Y. 2010-11, making addition u/s 68 of the Act on account of share capital /premium received by the assessee during the year under consideration. 5. The assessee went into appeal before the Ld. CIT(A), challenging the legality of the notice u/s 153C of the Act, as well as the order passed in consequence thereto. Addition made by the AO on account of share capital/premium was challenged by the assessee on merits as well. The Ld. CIT(A) allowed all the grounds relating to legal issues in favor of the assessee, while on merits, she preferred to confirm the addition. Therefore, in these cross appeals, the assessee is against the confirmation of addition on merits, and the department is against the action of the Ld. CIT(A) in allowing the legal grounds in favor of the assessee. 6. The main issue dealt with the Ld. CIT(A) was the validity of satisfaction note on the basis if which proceedings have been initiated. This has been dealt with by her in her order at Page 11 from Para 8.1.4 onwards. The cop....
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....the assessee's paper book and read as under: "During the course of assessment proceedings uls 153A in the case of Sh. Pramod Goel, it is noticed that search and seizure operation uls 132 was undertaken on 14.09.2010 in the case of Sh. Pramod Goel, Smt. Savita Goel, and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Dwellings Pvt. Ltd. were found and seized from the above premises. Page No. 96 to 98 of Annexure A-1 of Party V-2 is a copy of the Balance sheet, Profile loss account, Schedule-A (Advance against suppliers) pertaining to M/s Victory Dwellings Pvt. Ltd, for the financial year ending 31.3.2010. The case of M/s Victory Dwellings Pvt. Ltd. was centralized with this office vide F. No. CIT-Delhi- VII Centralization 2011-12/648 dated 22.6.2011 issued by the CIT, Delhi-VI, New Delhi. I am therefore satisfied that the documents seized" as referred to above, belong to M/s Victory Dwellings Pvt. Ltd. warranting action u/s 153C in this case. " On perusal of the aforesaid satisfaction note, it is crystal clear that the said satisfaction was recorded by the AO in the proceedings relating to the ass....
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....nsequence of non-compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO were the same, satisfaction would have to be recorded separately qua the searched person and the Assessee. - Decided against revenue" * ITAT Delhi in the case of Moon Buildtech Pvt. Ltd.v. DCIT in ITA No. 202/Del/2014 dated 31.03.2016 "Validity of assessment uls 153C - Held that:- Assessing Officer of the searched person has failed to record his satisfaction that the seized documents belonged to the assessee i.e. other than the searched person. The recording of such a satisfaction is sine qua non for commencing any proceedings uls 153C of the Act. Hence, no action could have been initiated against the assessee in absence of recording of satisfaction by the Assessing Officer of the searched person. Sans such satisfaction, the Assessing Officer has invalidly taken recourse to the initiation of proceedings uls 153C of the Act. Hence, the action u/s 153C is not justified. The lack of jurisdiction by the Assessing Officer cannot be brushed aside under the guise of a technical defect. No assessment can be lawfully taken up and completed u....
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....tion was reached by the AO of the searched person that the documents belonged to a person other than the person referred to in section 153A.This satisfaction was explicitly reached by the AO of searched person DCIT Central Circle 09 since he was the Assessing officer of both the searched person and the appellant under Centralization order 127 dated 22.06.2011. The language of the satisfaction note (placed at Annexure-1) was not properly examined by the Ld CIT(A) who misinterpreted the note as coming from AO of the 'other person'. The language is explicit and shows that satisfaction is in fact of the AO of the searched person ie DCIT Central Circle 09, holding jurisdiction over both searched person and other persons including appellant (jurisdiction conferred vide centralization order dt 22.06.2011). This makes it amply clear that this is the satisfaction of the AO of the searched person before transferring the file of the appellant to himself for passing the assessment order in the capacity of AO of the 'other person'. This satisfaction note is the satisfaction of the AO of the searched person ie DCIT Central Circle 09, post centralization of cases vide order dt 22.....
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....e of Panchuram Oeshmukh(supra) held that a "Hypertechnical approach cannot be allowed to suffer the revenue which is collected for the welfare of the State and spent for the same" and since the AO was the same in these cases, so there was no need of communication of satisfaction. "7. As per amended provisions of s. 153C, satisfaction has to be arrived at with regard to belongingness of a document found during the search and not regarding the undisclosed income. The AO has issued notice, after considering all the related particulars. The seized material was received on 21st Oct., 2005. Prior to this, the AO was having enough evidence to record satisfaction and the same is contained in the order sheet. The satisfaction gives specific particulars of Annexures to the seized material and the contents of the seized material, which shows that the AO applied his mind before issuing the notice. In this background, it is not correct to suggest that the notice was issued without proper satisfaction. Regarding issue of subsequent notice, AO has stated that it was issued as a matter of abundant precaution and all earlier proceedings were superseded by the fresh notice which takes care ....
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....nt between two Departmental Officers" and in this case since the same officer held jurisdiction in dual capacity, his satisfaction is clearly made out and "Therefore there is, no merit in the contention of the assessee's counsel that satisfaction is required to be recorded by the AO, who conducted the search before transferring materials or articles or things found belonging; to another assesse". The Kerala High Court in the case of CIT v Panchjanyam Management 333 ITR 281 (Kerala) Hon'ble Kerala High Court), while distinguishing the facts of the case decided by the Apex Court in the case of Manish Maheshwari reported at 289 ITR 341 (SC) held at para 7 "In our view, in the first place, there is no mention in section 15880 that the Assessing Officer before transferring the file to another officer having jurisdiction to assess the person other than the assessee proceeded under section 132 or 132A has to record his satisfaction in writing. It is pertinent to note that wherever Assessing Officers are required to record their satisfaction before issuance of notice, the statute prescribes the same. A situation of that nature is covered by section 148(2) which requires the officer....
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....ered search assessment is made of the on the partnership firm wherein the searched assessee is the managing partner. So much so, issuance of notice under section 158BD read with section 158BC is sufficient for initiation at assessment which in this case is admitted done and the assessee has filed return in Form 2B in terms a notice issued. Therefore what remains is only the assessee's contest against the assessment on the merits which the Tribunal has not done Subham Javedvs ACIT (2010) 122 ITO 307 (Bangalore) ITAT Bangalore Bench 'B' reiterate this position. 5. The case of Supreme Court decision of Calcutta Knitwears Ludhiana dated 12th March 2014, 362 ITR 673(SC) the court has held that for the purpose of section 158 BO of the Act a satisfaction note must be prepared by the AO before he transmits the records to the other assessing officer who has jurisdiction over such other person. The view was followed by the Hon'ble Delhi High Court in the case of Manju Finance Corporation 231 Taxman 44(Del). In the above cases the AOs of the searched person and the other person were different and involved transfer of records from one AO to another AO. In the instant case....
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....is crucial nexus between the seized material and additions made on the one hand and the materials impounded in survey from the appellant's premises. The ITAT has also ignored the Kerala High Court decision in the case of Panchjanyam Management (supra) wherein the issue of same AO for the searched person and other person has been decided by the Court. 8. The Honb'le ITAT has also not considered the Apex court decision in the case of Mukundray K Shah reported in 290 ITR 433(SC) where the Apex court upheld the additions u/s 158BC(c) r.w. 143(3) made u/s 2(22)(e) on the basis of seized material which assessee had claimed was print out of the ledger account that was part of the audited books of account of the assessee reflecting investment made in RBI Relief Bonds. The hon'ble Delhi High Court in the case of Kabul Chawla(supra) has also not considered the case of Mukundray K Shah (supra) on the issue of 'incriminating' material while deciding. 9. The recent judicial thinking has also been ignored which is apparent from the Apex Court decision in the case of MAK Data P Ltd 358 ITR 593(SC) which has held in the context of 271(1)(c) at para 10 that" the AO has to ....
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....on of the Ld. AR that satisfaction of the AO was not recorded before initiating proceedings u/s 153C read with Section 153A of the Act against the assessee." As discussed satisfaction has been duly recorded by the AO, existence of undisclosed income is not a pre-requisite under the provision of section 153C which is distinguishable from the provisions of section 158BD. Hon'ble Delhi High Court in the case of SSP Aviation (mentioned supra) as well as by the Hon'ble ITAT in the case of Apporva Extrusion Pvt. Ltd. ITA No. 3308/Del/2010 vide order dated 09.10.2014 and ITAT in the case of M/s. Piyush Infrastructure India Pvt. Ltd. ITA No.1 072/Del/2011 vide order dated 25.10.2012 endorse this. Decisions relied upon by the learned Counsel are distinguishable on both fact and law and in clear violation of the principle of Cassus omissus that a matter which should have been, but has not been provided for in a Statute cannot be supplied by Courts, as to do so will be legislation and not construction. 11. It is settled law that technicalities and irregularities which do not occasion failure of justice should not be allowed to defeat the ends of justice, therefore, on the bas....
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....o whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the. Court to try to get the real intention of the legislature by carefully analysing the whole scope of the statute or section or a phrase under consideration. In the case of P.T. Rajan v. T.P.M. Sahuj, 8 SCC 498 the apex Court has said that whether a statute would be directory or mandatory will depend upon the scheme thereof. Ordinarily, a procedural provision would not be mandatory even if the word "shall" is employed therein unless a prejudice is caused. In Section 153 C the words used are "... the assessing officer is satisfied... " It is important to note that in Crawford on Statutory Construction at p. 539, it is stated: * Miscellaneous implied exceptions from the requirements of mandatory statutes, in general even where statute is clearly mandatory or prohibitory, yet, in many instances, the Courts will regard certain conduct beyond the prohibition of the statute through the use of various devices or principles. Most, if not all of these devices find their jurisdiction in consideration of justice. It is a well-known fact that often to enforce the law to it....
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....53C by the AO holding jurisdiction over the searched person. * The appellant has failed to bring out that he was prejudiced particularly as reiterated supra the ownership of documents found during the search have never been challenged by the appellant in violation of apex court decisions. * Decisions relied upon by the learned Counsel are distinguishable on both fact and law and in clear violation of the principle of Cassus omissus that a matter which should have been, but has not been provided for in a Statute cannot be supplied by Courts, as to do so will be legislation and not construction. * It is trite law that even orders passed in violation of such provisions can be set aside only where such violation has occasioned prejudice to the subject. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enquiries since all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself. This is scarcely the argument in this case. It is thus humbly prayed that the Departmental appeals 6239 and 6240/Del/2014 be upheld and the case be heard on merits. Wi....
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..... The Tribunal vide its order dated 24.3.2017 has held as under:- "14. 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 the search did not take place at the business premises of the assessee rather it took place at the premises of Sh. Pramod Goel, Smt. Savit Goel and Sh. Ashish Goel u/s 132 of the Act on 14.09.2010 and the notices were issued to those parties u/s 153A of the Act. The AO also issued notice u/s 153A of the Act to the assessee but later on being satisfied that no search and seizure operation u/s 132 of the Act was initiated against the assessee, he withdrew the notice issued u/s 153A of the Act. Thereafter, the AO issued the notice u/s 153C of the Act on the basis that the documents pertaining to the assessee were fund from the premises of the searched person. The said documents were the copies of balance sheet, profit and loss account and schedule A (advances against supplier). In the present case, the AO assumed the jurisdiction u/s 153C(1) of the Act, the provisions contained in the said Section read as under: "Notwithstanding anything....
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....person i.e. Sh. Pramod Goel. On the contrary, the AO recorded the satisfaction note in the file of the other person i.e. the assessee company. We have also perused the copy of satisfaction note recorded by the AO which is placed at page no. 21 of the assessee's paper book and read as under: "During the course of assessment proceedings u/s 153A in the case of Sh. Pramod Goel, it is noticed that search and seizure operation u/s 132 was undertaken on 14.09.2010 in the case of Sh. Pramod Goel, Smt. Savita Goel, and Sh. Ashish Goel at BN- 33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Dwellings Pvt. Ltd. were found and seized from the above premises. Page No. 96 to 98 of Annexure A-1 of Party V-2 is a copy of the Balance sheet, Profile loss account, Schedule-A (Advance against suppliers) pertaining to M/s Victory Dwellings Pvt. Ltd, for the financial year ending 31.3.2010. The case of M/s Victory Dwellings Pvt. Ltd. was centralized with this office vide F. No. CIT-Delhi-VI/Centralization/2011-12/648 dated 22.6.2011 issued by the CIT, Delhi-VI, New Delhi. I am therefore satisfied that the documents seized,, as referred to above, belong to M/....
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....nd the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court." 17. From the plain reading of the aforesaid Circular No. 24/2015 dated 31.12.2015 issued by the Central Board of Direct Taxes, it is crystal clear that even if the AO of the searched person and of the other person is one and the same then he is required to record his satisfaction in the case of searched person. In the present case, it is an admitted fact that the AO of the searched person has not recorded any satisfaction rather the satisfaction is recorded by the AO of the other person i.e. the assessee which is evident from the satisfaction note, copy of which is placed at page no. 21 of the assessee's paper book. Therefore, the assessment framed in the hands of the assessee was not valid. Moreover, from th....
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.... section only on the basis of the seized material (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess " to completed assessment proceedings, (vi) In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Off icer, (vii) Completed assessments can be interfered with by the Assessing Off icer whi le making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." It has further been held that: "On the date of the searc....