TaxTMI 
TaxTMI 
2017 (6) TMI 174
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.... 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 to the issue involved in the cases of "Konn....
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....ons 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 connection, against the order of the CIT (A), Revenue filed appeal on 01.03.2012 and on 02.03.2012 itself notice of hearing was generated and i....
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....y 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 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 befo....
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....e 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 consequent to the order of the Commissioner of income tax(Central)-II, New Delhi vide order under section 127 dated 19/10/2010. 11.2 Subsequently, notice under section 143....
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....rs. 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 assessee filed appeal before the Ld. Commissioner of Income-tax (Appeals) and challenged the validity of the proceedings under section 153C of the Act as well as the additions made by....
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....ed 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 issuing notice u/s 153C, in the case of M/s. ANG Corporate consultants P. Ltd." The satisfaction is recorded on 05.07.2010 and 153C notice is issued on very next day 06.07.2010. Hence, the c....
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.... 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 (not an incriminating document - it is already part of books also) (iii) Copy of legal notices (not an incriminating document - it is already part of books also) (iv) Application for early hearing filed in Court (....
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....-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 available on the file of the searched person. 6. Perusal of the satisfaction note, letter of transfer of record an extract from appraisal report, which is available at Annexure A3 shows that satisfaction is in recorded by the AO having j....
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....uggest 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 undisclosed income belongs to third party and handover the books of accounts and other documents and assets seized to AO having jurisdiction against the said third person. This ratio is not applicable when jurisdiction of both assessees vests....
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....O 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 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.s. 143(3) made u/s 2(22)(e) on the basis of seized material which the assessee had claimed was print out of the ledger account that ....
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....urse 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 written submission made earlier. It is further submitted by the Ld. CIT(DR) in his written submission that existence of undisclosed income is not a prerequisite under the provision of section 153C of the Act, and which is distinguishable from the provisions o....
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....iyalla,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, if such mandatory provision of law is conceived in his interest and not in the public interest. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enguiries. As a rule, all such proce....
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....r 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 challenging the jurisdiction under section 153C of the Act raised is whether the satisfaction note required in terms of section 153C of the Act has been recorded by the AO of the searched person or of the other person (i.e. the assessee). It is apparent from the assessmen....
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....ding 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 Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly." 27. From perusal of the above provision, it is clear that when the Assessing O....
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....te 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 other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if....
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....te'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 enclosed with his written submission. 37. We also note that the Ld. counsel of the assessee has not certified the paper book pages filed along with the written submission, whether same were available before the lower authorities or those are additional evidences. Irrespective of the fact whether the RTI replies....
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....3-04 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 one of the essential requirement for invoking jurisdiction under section 153C of the Act and in absence of which proceedings initiated under section 153C of the Act are not validly initiated. Accordingly, we quash those proceedings. 41. The Ld. CIT(DR) in written submission has submitted that technicalities and irre....