TaxTMI 
TaxTMI 
2016 (6) TMI 1220
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.... Mangla & Sons (HUF). 4. That the Learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition of Rs. 25,15,173/- when the property in question was owned and sold by Pawan Mangla & Sons (HUF) and not by Sh. Pawan Mangla (Individual). 5. That the Learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition without any documentary evidence against the assessee on record. 6. That the Learned Commissioner of Income Tax (Appeals) has erred in allowing the charging of interest u/s 234A, 234B and 234C of the Income Tax Act. 7. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing. 3. During the course of hearing, Ld. Counsel for the assessee vide petition dated 04.01.2016 prayed for admission for Additional Ground, which reads as under:- Your Honour is requested to accept the following additional ground of appeal in the above stated appeal:- "That the Learned Principal CIT (OSD) has wrongly upheld validity of notice issued u/s 153C of the Income Tax Act, 1961 to the Appellant, without appreciating the fact that no satisfaction has been recorded by the Assessing Officer of searched ....
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....which reads as under:- Reasons recorded for issuing notice u/s 153C A search was conducted on 17.11.2010 at the residential premises of Dr. Naresh Mittal at H. No. 212, Sector-6, Panchkula. During the course of search, documents marked as A1, A2 and A3 were found and seized. Pages 21-25,127-136 of document A1, Pages 1-14,65-69, 95-96, 150, 178-251,253 of document A2 and pages 31-32 of document A3 contain the details of transactions in immovable property made by Sh. Pawan Mangla which need to be verified. In order to protect the interest of revenue I am satisfied that the case of Pawan Mangla needs to be assessed and therefore notice u/s 153C of the IT Act, 1961 is being issued. 6. Ld. Counsel for the assessee assailed the assumption of jurisdiction u/s 153C on the above mentioned ground and supported his argument with the decision of Delhi High Court in the case RRJ Securities Ltd. ITA No. 164/2015, dated 30.10.2015 and another decision DCIT Central Circle-21, New Delhi vs. Satkar Road Lines P. Ltd. and CO. No. 341-346/Del./2015, dated 14.08.2015. According to Ld. Counsel for the assessee, even if the Assessing Officer of the searched person and third person is one and the....
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....o the third person are found during the course of search, the A.O. shall hand over such documents, books of accounts etc. to the A.O. of such third person and thereafter the A.O. of such third person shall proceed to assess or reassess the total of income of third person in terms the provision u/s 153A. The very fact that a third person who has not been searched is also sought to be proceeded u/s 153A upon the books of account or documents etc. belonging to him, found during search speaks the serious consequences of section 153C qua third person. Therefore the provision of section 153C have to be construed strictly and in case it is found that jurisdictional conditions are not satisfied, the very assumption of jurisdiction by the A.O. under that section is liable to be set aside. This proposition of law has found approval from the highest court of the land though in the back drop of section 158BD in the cases of Manish Maheshwari vs. ACIT 289 ITR 341(SC), CIT vs. Calcutta Knitwears (2014) 362 ITR 673. It has also been held in the case of Rajhans Builders vs. CIT 226 Taxman 415(Gujarat) that provision of section 158BD and those of section 153C are in pari--materia. 8. In the presen....
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....ssessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Officer of such 'other person', thereafter followed by issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. 27. The initiation of proceedings against 'such other person' aredependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceeding....
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.... handed over to the Assessing Officer havingjurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person. 11. The conditions precedent for invoking the provisions ofSection 158BD, thus, are required to be satisfied before the provisions, of the said chapter are applied in relation to any person other than theperson whose premises had been searched or whose documents andother assets had been requisitioned under Section 132A of the Act." 32. The ratio of the judgment in Manish Maheshwari's case also applies to the provisions of Section 153C and to the facts of this case. The Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Mechmen (supra) likewise held as follows: "18. The concomitant of this conclusion, is that, the legal position as applicable to section 158BD regarding satisfaction in the first instance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction; and in the second instance of the Assessing Officer having jurisdiction whilst sending notice to such other person (other than the person referred to in section 153A), must apply proprio vigore. The fact....
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....in the cases of CIT V. Gopi Apartment (supra), Pepsi Foods P.Ltd. (supra), Pepsico India Holdings P. Ltd.(supra) and, lastly, CIT v. Smt. Madhu Keshwani (supra). The observations of the Delhi High Court in the case of SSP Aviation Ltd. (supra) have been explained in the subsequent case of Pepsico India Holdings P. Ltd. (supra). 21. 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 CIT v. Calcutta Knitwears (supra), would apply on all fours mandating satisfaction of the Assessing Officer(s) dealing with the case at the representative stages referred to in section 153C. 9. In view of the above we hold that in the absence of a valid recording of satisfaction by the AO of the searched person i.e; Dr. Naresh Mittal that certain documents found during the course of search beyond to the assessee, the assumption of jurisdiction u/s 153 C in the case of the assessee was invalid. 10. We are not persuaded by the argument of Ld. CIT DR for the simple reason that the position of law as explained in the above mentioned judicial decisions has interpreted secti....