TaxTMI 
TaxTMI 
2017 (6) TMI 174
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....and filed an adjournment application signed by Advocate Ms. Ananya Kapoor, Ld. counsel of the assessee, on the ground that arguing counsel, Advocate Mr Salil Kapoor was travelling out of country, due to some personal reasons. Earlier, the cases were fixed for hearing on 07/11/2016 and on the request of the Revenue these were adjourned to 25/01/ 2017 as last opportunity. On 25/01/2017, the Ld. counsel of the assessee requested that he would be busy before the Hon'ble High Court of Delhi for arguing other matters and therefore the cases were adjourned to 16/05/2017 again as a last opportunity to both parties. These cases were fixed for hearing for the first time on 10/09/2012 and thereafter, adjourned several times on the request of the Ld. counsel as well as request of the learned CIT(DR). On 21/10/2014, the Ld. CIT(DR) submitted that the Revenue had requested to Hon'ble Vice President, ITAT, New Delhi for constitution of special bench in the case of "Konnar Enterprises Private Limited" having ITA No. 4141 - 4146/Del/2012 and Cross Objection No. 345-350/Del/2012 for assessment year 2003-04 to 2008-09 and the issue involved in the present appeals and cross objections being identical ....
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....ed on behalf of the assessee, thus, these cross objections deserve to be dismissed in limine. A chart of the calculation of delay in filing submitted by the Ld. CIT(DR) is reproduced as under: A.Y. CO No. and ITA No. Date of Filing of Appeal by the Department Date of issue of First Notice of the registry of ITAT Date of receipt of notice of appeal claimed by the assessee in Form No. 36A Date of CO filed by the Assessee 2003-04 133/Del/2012 in ITA No. 1074/Del/2012 01.03.2012 02.03.2012 29.03.2012 20.04.2012 2004-05 134/Del/2012 in ITA No. 1075/Del/2012 01.03.2012 02.03.2012 30.03.2014 20.04.2012 2005-06 135/Del/20 2 in ITA No. 1076/Del/2012 01.03.2012 02.03.2012 30.03.2014 20.04.2012 2006-07 136/Del/2012 in ITA No. 1077/Del/2012 01.03.2012 02.03.2012 29.03.2012 20.04.2012 2007-08 137/Del/2012 in ITA No. 1078/Del/2012 01.03.2012 02.03.2012 30.03.2014 20.04.2012 2008-09 138/Del/20 2 in ITA No. 1079/Del/2012 01.03.2012 02.03.2012 30.03.2014 20.04.2012 8. On the issue of delay in filing cross objection, the Ld. CIT(DR) further submitted as under: "In this ....
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.... the Act. In the circumstances, we do not find any merit in the objections of the Revenue on the issue of no letter of condonation of the delay by the assessee and accordingly request for dismissal of cross objections is rejected. ITA No. 1074/Del/2012 for AY: 2003-04 10. Now we take up the appeal of the Revenue in ITA No. 1074/Del/2012 and cross objection of the assessee in CO No. 133/Del/2012 for assessment year 2003-04. The grounds raised in the appeal of the Revenue and the cross objection of the assessee are as under: "1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 35,21,200/- made by the Assessing Officer u/s 69C of the Income Tax Officer, 1961 on account of unexplained purchases. 2. That the Commissioner of Income Tax (Appeals) erred in law and on facts in accepting the transactions of sale and purchase made in cash as genuine. 3. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 1,40,829/- made by the Assessing Officer by way of 50% disallowance of expenditure and depreciation claimed by the assessee. 4. (a) The order of....
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....of the Act and accordingly the same did not abate for the purpose of initiation of proceedings u/s 153C and as such the assessment being bad in law deserves to be quashed. 8. That the respondent reserves the right to add/amend/alter the grounds of cross objection." 11. Facts in brief of the case are that a search and seizure action under section 132 of the Act was carried out on 20/10/2008 at the premises of Sh. B.K Dhingra, Smt. Poonam Dhingra and M/s. Madhusudhan Buildcon Private Limited and during the course of search certain documents belonging to the assessee were seized. Accordingly, proceedings under section 153C r.w.s. 153A of the Act were initiated in the case of the assessee for six assessment years i.e. assessment year 2003-04 to assessment year 2008-09. The DCIT, Central Circle 17, New Delhi, issued notices under section 153C r.w.s. 153A on 08/07/2010 requiring the assessee to file the returns of income. In response to notice for the year under consideration, the assessee filed return on 18/09/2010 declaring nil income. 11.1 The case was subsequently transferred to another officer i.e. DCIT, Central Circle 21 on 10/11/2010 due to transfer of jurisdiction conseq....
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....e assessee is not dealing in branded items. There is no name of any company in these products. Shawls are purchased and sold in pieces and rest other items are sold in meters. It is further seen that the purchases & sales are within M/s Thapar Homes Group of cases. In inventories of Fabric & Textile Goods shown in the balance sheet the closing stock of last year stands at Rs. 4,99,86,780/-. This year the figure is Rs. 5.00.08.350/- which us almost the same. Therefore, purchases & sales are only out of current year "transactions" which are held unverifiable and bogus. It is highly improbable that with a huge stock inventory of goods which change in fashion and taste the assessee has to make sales from fresh purchases only. The preponderance of probability suggests that the stocks are not genuine but since these are declared prior to 1.4.02, no action is being taken for now." 11.5 No separate addition was made for the sales which were otherwise held as bogus by the Assessing Officer. 11.6 The Assessing Officer also disallowed 50% of the expenses claimed in the profit and loss account, which was worked out to Rs. 1,40,829/-. 11.7 Aggrieved with the assessment made, the assess....
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....t. 14. In the written submissions filed the assessee has challenged the validity of the jurisdiction assumed under section 153C of the Act on the grounds that satisfaction was recorded by the incorrect AO, there is no application of mind while recording the satisfaction note, there was no incriminating material, no finding that documents do not belong to the search party and proceedings for assessment year 2003-04 and assessment year 2004-05 are barred by limitation. 15. As regard the claim that satisfaction was recorded by the incorrect AO, in the written submission, it is submitted as under: "It is respectfully submitted that for the purpose of assumption of jurisdiction u/s 153C, it is trite law, that Assessing Officer of the searched person has to record a finding that the seized documents belong to another person. In the instant case, the language of satisfaction note makes it clear that Assessing Officer of the other person (assessee) has recorded the satisfaction and not the Assessing Officer of the searched person (as mentioned in Section 153C). The satisfaction note states "notices u/s 153C are hereby issued" The heading also stated that "satisfaction note for iss....
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....ecifically stated that the documents found are not incriminating qua the assessee. Transactions referable to the seized material stood entered in the regular books of accounts maintained in the normal course of business and this has also been accepted by the Assessing Officer in the assessment order. It is trite law that addition under Section 153C can be made only if the documents received have a bearing on the determination of the total income of the assessee. In the instant case, these transactions already stand recorded in the books of accounts of the assessee." 17. In support of the above contention, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of PCIT Vs. Nikki Drugs and Chemicals Private Limited (2016) 386 ITR 680 (Delhi). 1 8. In the written submission, the assessee submitted list of documents relying on which 153C proceedings have been initiated as under and claimed that those documents were not incriminating: "(i) Copy of account and confirmation of 'Miracle Fashion' in the books of A (not an incriminating document - it is already part of books also) (ii) Resolution letter authorizing staff of CA to file petitions in Court ....
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....e satisfaction notes were placed on the file is transferred, including the file of the assessee (at serial No. 59), which is evident from order of transfer of records, reproduced as under: "Please refer to CIT(A)-II/Central/2010-11/1029 dated 19/12/10/2010 on the above said subject. In pursuance of the order u/s 127 of the I.T. Act, 1961 dated 19/21/10/2010, I am transferring herewith 61 (sixty one) cases of block assessments for the AYs 2003-04 to 2009-10 of M/s. Thapar Homes Ltd. group of cases. The Satisfaction notes have been placed on each file and notices u/s 153-C/142(1) have also been issued in all 61 cases. The Annexure-I showing details of 61 cases is attached herewith. All the 61 (sixty one) cases are getting barred by limitation on 31.12.2010." Please acknowledge the receipt Yours faithfully, ACIT, Central Circle-17" 4. The language of the satisfaction note is explicit and shows that the satisfaction is in fact of the AO of the searched person i.e ACIT, Central circle - 17. 5. The information furnished under RTI pertains to satisfaction note available on the file of the searched person and letter No. 785 dated 26/10/2010 explains why this was not av....
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....der 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 of all background, which is justified. 8.............. Hypertechnical approach cannot be allowed to suffer the revenue which is collected for the welfare of the State and spent for the same. Under these circumstances all the preliminary issues raised by the assessee were rightly rejected by the AO and by the CIT(A), which needs no interference from our side. It is pertinent to mention that the AO is same in these cases, so there is no need of communication of satisfaction. We are aware of the ratio of the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [20071208 CTR (SC) 97:120071289 ITR 341 (SC) wherein it has been held that the AO has to record his satisfaction that any....
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....lhi 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 the AO holding jurisdiction over both searched person and over person to whom notice under section 153C was issued is the same person. This is evident from satisfaction note which the AO has recorded. This is a distinction recognized by the Kerala High Court in the case of CIT v Panchjanyam Management (supra). 9. Further as explained in CIT (A) order relying upon jurisdictional High Court in Anil Kumar Bhatia 24 Taxman 98 (Delhi)- there is no condition of satisfaction on the existence of incriminating documents for assumption of jurisdiction u/s 153 C- The AO is obliged to initiate u/s 153 C where valuable article, books of account, document etc relating to a person other than the searched person is seized. Similar view is taken in CIT v. Chetan Dass 25 Taxman.com 227 (Delhi). The decisions of Honb'le ITAT in various cases relied upon on the issue of "seized material of incriminating material" have not considered the Apex court decision in t....
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....o 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 satisfy whether penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing". The word of "satisfied" used in 271 (1 )(c) is similarly placed as the word 'satisfied' occurring in section 153A/C. Similarly the Hon'ble Delhi High Court in the context of section 271(1)(c) has held in the case of ECS Ltd 336 ITR 162(Del) that if satisfaction is discernible from the assessment order then penalty is justified. In a recent decision, the Hon'ble Delhi High Court has held in the context of section 14A, in the case of Indiabull Financial Services Ltd 76 taxmann.com 268(Del), that AO need not expressly record his dissatisfaction about assesse's calculation in cases where he has carried out elaborate analysis for determining expenditure incurred for earning exempt income. 23. In his submission, the learned CIT(DR) has distinguished the cases relied upon by the assessee in the writt....
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....he apex Court with various other High Courts on the issue of prejudice caused to the affected parties. As delineated by the hon'ble Bombay High Court in the case of Shirish Madhukar Dalvi reported in 287 ITR 242(Bom): a) In the case of State of Kemla v. Muniyalla,1985 SC 470,it is held that merely because an order is purported to be made under a wrong provision of law, it does not become invalid so long as there is some other provision of law. b) In the case of Hukumchand Mills Ltd. v. State of Madhya Pradesh,1964 SC 1329the apex Court has ruled that mere mistake in the opening part of the notification in reciting the wrong source of power does not affect the validity of the amendments made. c) In the case of State Bank of Patiala v. S.K. Shaima, 3 SCC 364the apex Court ruled that in case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. The order passed in violation of such provision can be set aside only where such violation has occasioned prejudice to the subject. It further went on to observe that even mandatory requirement can be waived by the person concerned, ....
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....trate prejudice suffered by it. The same principle is reiterated in the case of State Bank of Patiala (supra). Precisely the issue in Pepsi foods and Pepsico ie initiation of proceeding on the basis of photocopies without reaching a finding that these belonged to other than the searched person. (vi) The ITAT orders relied upon not only violate cassus omissus but are in contravention of trite law as they fail to bring out how the appellant was prejudiced particularly as reiterated supra when the ownership of documents found during the search have never been challenged by the appellant and the issue of satisfaction was never taken up before lower authorities and appellant acquiesced in proceedings and sought telescoping before CIT(A). Letter no 785 dt 26-10-2014 read with satisfaction note clearly lays down the that AO of searched person ACIT, CC - 17 had recorded his satisfaction before transferring the files to ACIT, CC- 21 after change of jurisdiction. (vii) It is thus humbly prayed that the cross objections be dismissed and the case heard on merits. 24. We have perused the written submissions of the parties and the relevant material available on record. The first issue c....
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....O acquires jurisdiction under section 153C of the Act only when the AO of the searched person record the satisfaction and handover the assets or documents belonging to the other person, to the Assessing Officer of the other person. It transpires from the provision that recording of satisfaction by the Assessing Officer of the "person searched" is a condition precedent for the Assessing Officer of the "other person" to acquire jurisdiction and unless jurisdictional condition is satisfied, there can be no question of making assessment or reassessment in the case of such other person. 26. Prior to the introduction of section 153C, under the scheme of block assessment for such cases, there is a corresponding section 158BD of the Act which reads as under: "Undisclosed income of any other person. 158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing....
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.... 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 153C of the Act are substantial similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of oth....
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....sed with the written submission. Such reply in the case of Sh. BK Dhingra reads as under: "2. From the assessment records of Sh. Bhupesh Kumar Dhingra, which is covered under Section 153A, for the Assessment years from 2003-04 to 2008-09 (Block period) it is notices that there is not 'satisfaction note'available/recorded in respect of other entities." 35. According to this RTI reply, no satisfaction note is available on the assessment record either of Sri BK Dhingra or Smt. Poonam Dhingra. However, we find that RTI reply has been submitted by the assessee from the Assessing Officer of M/s Madhusudhan Buildcon Private Limited. 36. On the contrary, the Ld. CIT(DR) in his written submission has submitted that the Assessing Officer of the searched person recorded the satisfaction note and copy of the same was placed on the record of such other person and on transfer of the jurisdiction of those other person to the DCIT, Central circle 21, copy of all the satisfaction note were also transferred with the record, and which are available on such records. The Ld. CIT(DR) claimed to filed such transfer note, and part of the appraisal report, however, same were not found to be enclos....
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.... Ltd The case was centralized In the Central Circle - 17, New.Delhi vide orders dated 05/Jan/10 of CIT-I, New Delhi." 39. On perusal of the above satisfaction note we find that the Assessing Officer has recorded that in terms of provision of section 153C of the Act, notices are hereby issued u/s 153C for AY 2003-04 to 2008- 09 in the case of M/s. ANG Corporate Consultant Private Limited (old name of the assessee). Since notice under section 153C of the Act is always issued by the Assessing Officer of the other person and not by the Assessing Officer of the searched person, the sentence that "notices are hereby issued" indicate that the above satisfaction note has been recorded by the DCIT Central circle 17, New Delhi in the capacity of the Assessing Officer of other person. The heading of this satisfaction note also supports this view. 40. The above fact coupled with the fact of non-availability of satisfaction note on the record of the searched persons, Sh. BK Dhingra and Smt. Poonam Dhingra led us towards the conclusion that the satisfaction note was not recorded by the DCIT, Central circle 17, New Delhi, in the capacity of a Assessing Officer of searched person, which is o....