TaxTMI 
TaxTMI 
2017 (11) TMI 909
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..... 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 "satisfaction note" dated 26.11.2013. The AO thereafter completed the assessment u/....
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....ation 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 capacity as assessing officer of the assessee (i.e. a person other than a searched person) and not in his capacity as....
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....igh 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 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 q....
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....st 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; ** &n....
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....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 document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Offi....
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....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 Act can only arise for consideration if the proceedings under Section 153C of the Act are upheld. Therefore, in the present facts, the issue of Section 69C of the Act is academic. 2.4 The jurisdictional Delhi High Court in the case of Canyon Financial Services Ltd. v ITO (2017) 84 taxmann.com 74 has held that i....
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....IT 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 Granada Services (P) Ltd, Ms iEn.ergizer IT Services (P) Ltd & iServices India (P) Ltd. Incriminating Documents found During Search A perusal of Page 2 & 3 of the Assessment Order details the nature of incriminating documents. Seized material catalogued as FO-101 A-16 & FO- 10/AA-2 seized from premises of Mis Granada Services (P) Ltd, Ms iEnergizer IT Services (P) Ltd & iServices India (P) Ltd reflected as payments of ....
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....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 & 153C it is clear that the basic pre-requisite to issue notice under section 153C is that 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. If the A.O is so satisfied he shall assess and reassess such income according to the provisions of section 153A. In such a case the A.O. shall assess or reassess the total in....
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....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'ble Delhi High Court held that where Assessing Officer had issued satisfaction note under section 153C after satisfying himself with contents of documents seized, Tribunal could not declare it as invalid on hyper technical ground of incorrect terminology used in said note. Satisfaction note recorded u/s 153C in respect of the assessee, being the third party, could not be said to be invalid on a hyper technical ground by interpreting the expression "belonging to" too literally. 5. PCIT Vs MIs Nau Nidh Overseas Pvt Ltd. (ITA No.58/2017) (Copy Enclosed) where H....
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....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 any evidence to disprove the case of the AO. The Supreme Court has held that the parties must lead evidence during the course of assessment proceedings ( Keshav Mills & Co Ltd 56 ITR 365 (SC). In the instant case no evidence produced before AO or CIT (A) to disprove: - incriminating evidence against the assesse in the form of seized documents Although, the rigors of Indian Evidence Act do not apply to Income Tax proceedings, section 114{g) of Indian Evidence Act clearly says that if evidence is not produced, it is presumed to go against the party not producing it. Interpretation of Statute With regard to interpretat....
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....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 taxing statute is to be strictly construed. Lord Hasbury and Lord Simonds stated: "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words." It is settled law that a taxation statute in particular has to be strictly construed and there is no equity in a taxing provision. H.H. Lakshmi Bai v/s. CIT [(1994) 206 ITR 688, 691 (SC)]. "The subject is not to be taxed without clear words for that purpose ..... " CIT vs. Provident Inv. Co. Ltd. (1954) 32 ITR 190 (SC) J.K. Steel Ltd. vs, UOI AIR 1970 SC 1173 CIT vs. Indo Oceanic Shipping Co. Ltd. (2001) 247 ITR 247 (Bom) Hansraj & Sons vs. State of J & K (2002) 6 SCC 227, 237....
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....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 person other than the person searched, then such assets or documents etc. shall be handed over to the AO of the 'other person' and the AO should proceed against such other person to assess or reassess the income of the 'other person'. Thus, according to the provision, before handing over of such assets/ documents to the Assessing Officer of the "other person", the satisfaction has to be recorded by the Assessing Officer of the person searched that money bullion, jewellery or document etc. found from the person searched belong to other person. Thus, the AO 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 tha....
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.... 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 acquiring jurisdiction by the Assessing Officer of the person other than the person searched, is concerned, the provisions of section 153C are pari material with section 158BD and the ratio of the judgement of the Hon'ble Supreme Court will apply to the provision of section 153C as well. 4.7 We further find that the CBDT has also issued its Circular No. 24/2015, dated 31st December, 2015, in view of the aforesaid judgment of the Hon'ble Supreme Court in the case of Calcutta Knitwears (supra), which reads as under: "The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation. 2. 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 f....
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....n 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 Officer. But the difficulty arises when the Assessing Officer of the searched person and Assessing Officer of other person is same and he has not recorded under which capacity, the satisfaction note was recorded by him. In such circumstances, it is required to go through the circumstantial evidence to decide whether the satisfaction note was recorded by the Assessing Officer in the capacity of the Assessing Officer of searched person. 4.10 We further note that Ld. counsel of the assessee in the written submission has submitted that head note for the satisfaction itself states that "Satisfaction note for taking action u/s 153C in case of Adarsh Aggarwal" at the end of the satisfaction note it has been mentioned that "Therefore, to assessee undisclosed income of Shri Adarsh Agarwal, proceedings u/s 153C of the Act needs to be initiated." 4.11 However, the settled....
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....dation 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 clearly directed the officers of the Department either not to file appeals or to withdraw the appeals where satisfaction note is not recorded by the Assessing Officer in the capacity of searched person. In such circumstances, advancing of above arguments are futile and wastage of resources of the Income Tax Department. 4.14 With regard to second alternate contention of the assessee that no documents belong to the assessee was found and there is no satisfaction recorded that any document belonging to the assessee was found during the search, it is seen that in the satisfaction note, the assessing officer has not recorded any satisfaction that documents "belonging to" the assessee was found during search. There is amendment in the Income Tax Act with effect from 1st June 2015 whereby the seized documents even if they pertains to or relates to "other person" and does no....