TaxTMI 
TaxTMI 
2017 (11) TMI 909
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....d circumstances of case and in law, the addition of Rs. 26,91,041/- on account of unexplained cash salary is beyond the jurisdiction of provisions of section 153C of Income Tax Act, 1961 and Commissioner of Income Tax (Appeal) erred in not holding so. 3. On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs. 26,91,041/- on account of unexplained cash salary. The appellant craves leave to add one or more ground of appeal or to alter / modify the existing ground before or at the time of hearing of appeal. The aforesaid grounds are without prejudice to each other." 2. The brief facts of the case are that the assessee is an individual who during the year under consideration derived income from "salary", "house property" and "other sources". A search and seizure operation u/s. 132 of the Income Tax Act, 1961 was conducted by the Investigation Wing of the Department on 22.3.2012 in M/s Focus Group of cases. On the basis of this search, proceedings u/s 153C of the Income Tax Act, 1961 were initiated against the assessee by issuing notice dated 26.11.2013 on the basis of "satisfact....
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.... 3. That there has been no "handing over" of the seized documents as required u/s 153C before initiation of proceedings under that section. The brief arguments in respect of each of the above broad heads is being given hereunder :- 1. That the notice issued u/s 153C is bad-in-law and without jurisdiction as no satisfaction as required u/s 153C of the Act has been recorded by the assessing officer of the searched person. In terms of provisions of section 153C of the Act, the satisfaction u/s 153C has to be recorded by the A.O. of the searched person. Even when the assessing officer of "searched person" and the "person other than the searched person" (against whom proceedings u/s 153C are supposed to be initiated) are the same, the requirement of recording satisfaction by the assessing officer of the searched person cannot be avoided and such satisfaction has to be recorded by the 'assessing officer' in his capacity as assessing officer of 'searched person'. In the absence of such satisfaction, the proceedings initiated u/s 153C are without jurisdiction. In the appellant's case, the so called satisfaction note has been recorded by the assessing officer in his capac....
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....[2014] 52 taxmann.com 220 (Delhi) - Pepsico India Holdings (P.) Ltd. v ACIT [2014] 50 taxmann.com 299 (Delhi) - CIT v Mechmen (2015 (7) TMI 538 Madhya Pradesh High Court order dated10.07.2015). 1.2 It will be worthwhile to point out that in DCIT v Aakash Arogya Mandir (P) Ltd. (2015) 58 taxmann.com 293 (Delhi-Trib).also the notice issued u/s 153C was held to be illegal and assessment proceedings were quashed as no satisfaction was recorded by the assessing officer of the searched person. Thereafter, the revenue went in appeal before the Hon'ble High Court of Delhi ( P. R. Commissioner of Income Tax, Central-II) vs. Aakash Arogya Mandir Pvt. Ltd.) wherein the Hon'ble High Court, while dismissing the appeal of the Revenue, held as under :- "8. The Revenue has not placed any material to dispute the factual finding of the ITAT that the requirement of the law explained by this Court in Pepsi Foods regarding the recording of satisfaction by the AO even in respect of the searched person was not fulfilled. Consequently, the fact that it was the same AO both for the searched person and the Assessee makes no difference to the consequence of non-compliance ....
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....t pre-requisite of invocation of provisions of section 153C is that there must be satisfaction by the assessing officer of searched person that documents found and seized during the course of search 'belongs to' 'other person' against whom notice u/s 153C is proposed to be issued. As per provisions of section 132(4A)(i), presumption is that document belongs to such person from whose possession, the document is seized. Therefore the A.O. of the searched person is first required to record satisfaction that documents do not belong to searched person.Infact, the first requirement under law is that A.O. of the searched person is required to rebut the presumption u/s 132(4A)(i) and u/s 292C(1)(i) that seized documents do(es) not belong to the searched person. Provisions of section 132(4A)(i) 132. (1)** ** ** (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) That such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person....
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....rive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized docu....
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....d, yes [Paras 14 and 15] [In favour of assessee] In the present case of the appellant, in the "satisfaction note" recorded u/s 153C there is no rebuttal that seized documents do not belong to the searched person. As a matter of fact the A.O. has not even mentioned that any document seized during search belong or belongs to the appellant. 2.3 The Hon'ble Bombay High Court in the case of CIT v Arpit Land (P) Ltd. [2017) 78 taxmann.com (Bom) has held as under:- 7. The grievance of the Revenue as submitted by Mr.Kotangale is a submission made on the basis of suspicion and not on the basis of any evidence on record which would indicate that the respondent - assessee and persons searched were all part of the same group. Be that as it may, the requirement of Section 153C of the Act cannot be ignored at the alter of suspicion. The Revenue has to strictly comply with Section 153C of the Act. We are of the view that non satisfaction of the condition precedent viz. the seized document must belong to the respondent - assessee is a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken thereunder null and void. The issue of Section 69C of the....
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....ort of her contention, the Ld. CIT(DR) has also filed the written submissions, by relied upon the following case laws. The contents of the written submissions are reproduced as under:- "- Pr. CIT v. Sheetal International Pvt. Ltd - Pr. CIT v Instronics Ltd. - Ganpati Fincap Services (P) Ltd. v CIT, - CIT v Super Malls (P) Ltd. - PCIT v Nau Nidhi Overseas Pvt. Ltd. - KamleshbhaiDharamshibhai Patel v CIT - Rajesh Sunderdas Vaswani v ACIT - SSP Aviation Ltd v DCIT - CIT v Classic Enterprises - Savesh Kumar Agarwal v Union of India The assessee in Ground of Appeal 1 has alleged that the notice under section 153 C issued in this case is illegal, without jurisdiction and CIT(A) erred in not holding so. The Revenue submits that the notice under section 153 C and the consequent assessment was well within the ambit of law and as per provisions of section 153 C. The CIT(A), therefore rightly upheld the order of the AO in this regard. A search & seizure operation under section 132 of the Income Tax act, 1961 was conducted on 22.03.2012 in M/s Focus Energy Group of cases, M/s Gr....
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....h is conducted or requisition made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The Revenue reiterates that the provisions of section 153A unambiguously state that 153(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003, the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income ..... (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. From a bare reading of the provisions of 153 A & 15....
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....ched person who also happened to be Assessing Officer of assessee (other person) to effect that seized documents belonged to assessee, issuance of notice under section 153C against assessee on basis of said note was justified. 3. Ganpati Fincap Services (P.) Ltd. Vs CIT 2017] 82taxman.com408 (Delhi (Copy Enclosed) where Hon'ble Delhi High Court held that where Assessing Officer of searched person recorded that documents seized during search belonged to assessee, merely because he had not categorically stated that documents mentioned therein did not belong to searched person would not invalidate assumption of jurisdiction under section 153C in respect of assessee. Where proceeding under section 153C was initiated against assessee on basis of seized documents which could not be said to be non- incriminating on bare perusal and despite of being given several opportunities no submission on. merits of case was made by assessee, assessment order passed under said section to make additions was justified. 4. PCIT Vs Super Malls Pvt Ltd [2016] 76 taxmann.com 267 / {Delhi/[2017] 393 ITR 557 {Delhil/[2017] 291 CTR 142 (Delhi) (Copy Enclosed) where Hon&#....
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....Hon'ble Allahabad High Court held that where after search at business premises of assessee-firm and its partner, books of account were handed over to concerned Assessing Officer, who after recording satisfaction issued notice under section 153C and completed assessment under section 153C/143(3), assessment was in accordance with law 10. Savesh Kumar Agarwal Vs Union of India (35 taxmann.com 85, 216 Taxman 109, 353 ITR 26) (Copy Enclosed) where Hon'ble Allahabad High Court held that even if assessing authority receiving satisfaction note had not found any thing adverse against assessee on examination of account books, and further seized goods had already been released, notice under section 153C could still be issued to assessee to file return of income. Where bullion seized was released to assessee for having been validly entered in stock books, Assessing Officer on receiving satisfaction note could still proceed under section 153A against assessee to find out source of income. No Evidence filed to rebut the truth of receipt of salary in cash Despite repeated opportunities given by the AD and also the CIT(A), the assesse did not produce an....
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....rding to Its literal and grammatical meaning, whatever the result may be. While interpreting tax statute, the function of the court of law is not to give words in the statute a strained and unnatural meaning to cover and extent its applicability to the areas not intended to be covered 'under the said statute. Vidarbha Irrigation Dev. Corpn. v/s ACIT [(2005) 278 ITR 521 (Born)]. It is not permissible to construe any provision of a statute, much less a taxing provision, by reading into it more words than its contains. CIT vs: Vadilal Lallubhai [(1972) 86 ITR 2 (SC)] Literal construction means that there is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. ICAI vs. Price Waterhouse, (1997) 90 Compo Case 113, 140, 141 (SC) State of West Bengal vs. Scene Seven P. Ltd. AIR 2000 SC 3089, 3094 Harbajan Singh vs. Press Council of India (2002) 3 SCC 722, 727. District Registrar and Collector V. Canara Bank, (2005) 1 SCC 496. Strict construction: A tax is imposed for public purpose for raising general revenue of the state. A....
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....ecorded by incorrect AO raised in the submission of the Ld. counsel, it is worthwhile to refer the section 153C(1) of the Act at the material time as under: "153C. Assessment of income of any other person.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or 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 against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :" 4.1 After careful perusal of the above provisions, it is evident that where the Assessing Officer of the searched person is satisfied that any money, bullion, jewellery, books of accounts or other documents etc. belong to a per....
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....ficer of the searched person, the Assessing Officer of the other person can proceed for determining undisclosed income of such other person. 4.4 Thus, we find that as far as recording of satisfaction by the Assessing Officer of the searched person is concerned, the requirement of the section 158BD and section 153C of the Act are identical. The difference is in respect of what belongs to the other person. In section 158BD, it is the undisclosed income which should belongs to the other person, whereas in section 153C, it is the material which should belongs to other person. 4.5 We further find that the issue of recording satisfaction and framing assessment under section 158BD of the Act came up for consideration before the Hon'ble Supreme Court of India in the case of CIT Vs. Calcutta Knitwear (Supra) wherein, the Hon'ble Supreme Court has held that for the purpose of section 158BD of the Act the satisfaction note is sine qua non and must be prepared by the Assessing Officer before transfer of the records to the other AO who has jurisdiction over such other person. 4.6 However, on comparison of the section 158BD and 153C of the Act, it is clear that so far as the question of....
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....on 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." 4.8 We note that in the other decisions of the Hon'ble High Court and Tribunal, cited in the written submission of the assessee as well as by the learned CIT(DR), as far as the issue of recording satisfaction by the Assessing Officer of the searched person, prior to handing over of such material to the AO of the other person, similar findings are given and now by the judgement of the Hon'ble Supreme Court in the case of Calcutta Knitwears (supra) the issue is settled. Even when the Assessing Officer of the searched person and Assessing Officer of the other person is same, even then the satisfaction has to be recorded by the AO in his capacity as AO of searched person. 4.9 We also note that when the Assessing Officer of the searched person and Assessing Officer of the other person are different, then it can easily be discern, that satisfaction has been recorded by which Assessing Offi....
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....on by the Assessing Officer of the searched person provided in the statute could be treated as a small irregularity. In our opinion it is the prime requirement for initiating proceedings under section 153C of the Act. The Assessing Officer in the capacity of the searched person only examines the records seized and come to the conclusion as to which of the such money, bullion jewellery or documents belongs to the searched person and to the others. The legislature has provided for recording of such satisfaction by the Assessing Officer of the person searched and thus the Assessing Officer cannot be allowed to record satisfaction in the capacity of Assessing Officer of other person. In our opinion no assessment or other proceeding can be lawfully taken up and completed unless the concerned authority has jurisdiction to do so and the lack of jurisdiction goes to the foundation of the matter and if the foundation is missing, the entire building collapse. Thus, the contentions advanced by the Revenue are rejected. We further find that the Central Board of Direct Taxes (CBDT), who is the Apex Body controlling the Administration of the Income Tax Department, in the aforesaid Circular has c....