TaxTMI 
TaxTMI 
2018 (1) TMI 322
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....ircumstances of the case and in law, the ld. CIT(A) was justified in quashing the notice issued u/s. 153C of the Act as well as the assessment order u/s. 143(3) r.w.s. 153C of the Act without appreciating the fact that section 153C does not require A.O. in searched person to prepare two satisfaction notes when the A.O. is same for both. 2. In this case, the assessment was framed u/s. 143(3) r.w.s. 153C of the I. T. Act. In its appeal before the ld. Commissioner of Income Tax (Appeals), the assessee raised issues relating to validity of notice as well as merits of the case. The ld. Commissioner of Income Tax (Appeals) quashed the assessment order for lacking jurisdiction as there was absence of satisfaction recorded by the Assessing Officer in the case of searched person in this case, i.e., Shri Suresh Deshmukh that any valuable or books of account seized in his case belongs to other person, i.e., the assessee. Hence, the ld. Commissioner of Income Tax (Appeals) held that the Assessing Officer of the assessee could not assume jurisdiction to issue notice u/s. 153C for the concerned assessment years despite the fact that satisfaction was recorded in the case of the assessee. I may....
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....assessment records in the case of Subhash Peshmukh, the searched person, for A.Y, 2005-06 to 2011-12 and the same were perused. The common order sheet has been n;aintained for A.Yrs. 2005-06 to 2010-11 in the assessment folder for A.Y. 2010-11. Notice u/s.153A in the case of Shri.Subhash Deshmukh has been issued on 8.11.2011 and assessment order u/s.143(3) r.w.s. 153A was passed for A.Y. 2005-06 to A.Y. 2010-11 on 21.3.2013. However, no satisfaction note u/s.153C was found to have been recorded in the files of Subhash Deshmukh, as per the assessment records for A.Y.s, 2005-06 to 2011-12, submitted by the A.O. 5.3.3 The appellant has contended that section 153C of the Act requires that if the Assessing Officer of the searched person, from whom money, bullion, jewellery or other valuable article or thing or books of account or documents have been seized, is satisfied that any of such seized material belong to a person other than the searched person, then he shall handover the same to the A.O. having jurisdiction over the other person. It has been submitted that no such satisfaction has been recorded by the assessing officer in his capacity as the assessing officer of Subhash....
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....ions 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 the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts." 5.3.5 In view of the above facts of the case and the decision/circular discussed in para 5.3.4 above, I am of the considered opinion that in the absence of any satisfaction recorded by the A.O., as per the provisions of section 153C, in the case of the searched person i.e. Mr.Subhash Deshmukh that any valuable or books of account seized during search in his case belong to other person i.e. the appellant, the A.O. of the appellant firm could not assume jurisdiction to issue notice u/s.153C for the A.Yrs. 2005-06 to 2010-1-1. Therefore, issue ....
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....py of the satisfaction note of the A.O. having jurisdiction over the searched person vide letter dated 9.2.2015 addressed to the A.O. In this regard, it is observed from the letter of the A.O. (DCIT, CC-7(2), Mumbai) dated 10.2.2015, addressed to the appellant firm that the above said satisfaction note was recorded by the A.O. in the case of M/s. L, S. Developers for issue of notice u/s,153C of the Act. During the appeal proceedings, the assessment records in the case of Shri. Subhash Deshmukh for A.Y. 2005-06 to 2011-12 were perused. The common order sheet has been maintained for A.Yrs. 2005-06 to 2010-11 in the assessment folder for A.Y, 2010-11. Notice u/s.153A in the case of Shri.Subhash Deshmukh has been issued on 8.11.2011 and assessment order u/s. 143(3) r.w.s. 153A was passed for A.Y. 2005-06 to A.Y. 2010-11 on 21.3.2013. However, no satisfaction note U/S.153C was found to have been recorded in the files of Shri. Subhash Deshmukh, as per the assessment records for A.Yrs. 2005-06 to 2011-12, submitted by the A.O. 5.3.2 The appellant has contended that section 153C of the Act requires that if the Assessing Officer of the searched person, from whom money, bullion, jew....
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....erson other than the person referred to in section 153A)." Similar decision has been given by the Hon'ble High Court of Allahabad in the case of CIT (Central) vs Gopi Apartment 365 ITR 0411(All). Further, in the CBDT circular No.24/2015, it has been observed as under :- " 3. Several High Courts have held that the provisions of section 153C of the Act are substantially 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.1530 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 the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts." 5.3.4 In view of the above facts of the case and the decision/circular discussed in para 5.3.3 above, I am of the considere....
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....risdiction. Hence, the ld. Counsel of the assessee pleaded that accordingly there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). 7. Upon carefully consideration, I note that in the present case, it is undisputed that there is not satisfaction recorded in the case of the searched person, i.e., Shri Subhash Deshmukh that the incriminating materials seized belong to the assessee. The ld. Departmental Representative has also not disputed this proposition. Hence, though the satisfaction is there in the case of assessee, i.e., there is no such satisfaction in the case of searched person that the incriminating material belongs to the assessee. In this situation, the assessment order has been held to be invalid, in the aforesaid tribunal decision. We may gainfully refer to the said decision as under: 9. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that the satisfaction of the AO of the searched persons as envisaged u/s 1530 of the I.T. Act has not been recorded before initiating the proceedings against the assessee u/s 1530 of the Act which vitiates the entire impugned assessments. For this prop....
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....o the assesses in whose case action has been taken u/s 1530. The search records of the searched person, namely, M/s Artefact Projects Ltd. were called for and examined. No satisfaction note whatsoever was found recorded in the case of the searched person. Neither any satisfaction was mentioned in the order sheets nor any satisfaction note was found in the file which was not numbered. The fact that no satisfaction note is there in the case of the searched person is also evident from the finding of the learned CIT(Appeals) in his appellate order reproduced herein above wherein he also has referred to the satisfaction note which is recorded in the case of the assessee and not in the case of the searched person. 12. In this regard we can gainfully refer to the provisions of section 153(1) as under: " 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 t....
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....rson1, that the later AO acquires jurisdiction to make assessment or reassessment of the 'other person/ It is, therefore, clear that the AO of the 'other person1 can acquire jurisdiction to assess or reassess income of the 'other person' only when the AO of the persons searched records satisfaction in his case (searched person) before handing over money, bullion, jewellery, etc. to him. So, what emerges is that the recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person1 to acquire jurisdiction. Unless such jurisdictional fact is satisfied, there can be no question of making assessment or reassessment of the 'other person.' In the case of Anil Kumar & Ors. vs. UOI & Ors. Reported in 155 Taxman 659 (5C),the Hon'ble Apex Court observed that "A jurisdictional fact is a fact which must exist before a court, a tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority .. It is the fact upon which an administrative agency's power to act depends. If the ju....
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....smits the record to the other AO who has jurisdiction over such other person u/s 158BC. 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 158BD of the Act; or (b) in the course of the assessment proceedings under section 158BD 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 substantially 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 the AO of the searched person and the "other....
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....rinciple. We do not find any element of law to be decided. Conclusion: Recording of satisfaction of AO(s) is pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind dconsciously as documents seized must be belonging to any other person other than person referred to in S. 153-A. ii) Hon'ble High Court of Madhya Pradesh High Court decision in the case of CIT vs. Mechmen in ITA No. 44/2011, ITA No. 45/2011 & others vide order dated 10-07-2015. In this case the relevant exposition from the Hon'ble High Court is as under : Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be "satisfied" that the items belongs or belong to the person other that the person referred to in Section 153A. That satisfaction of the concerned Assessing Officer is a sine qua non. The consequences flowing from the action to be taken on the basis of such information handed over to the Assessing Officer having jurisdiction, for the assessee, who is a person other than the person referred to in Sec....
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.... Board of Direct Taxes on the subject "Recording of satisfaction note under Section 158BD/153C of the Act", these appeals are not pressed These appeals are, accordingly, dismissed as not pressed. 16. From the above case laws and CBDT Circular, it is evident that recording of requisite satisfaction in the case of a searched party is a sine qua non for assuming jurisdiction for the issue of notice u/s 153C even if the AO of the searched person and the assessee are same. It is abundantly clear from the records in the case of the searched person that there is no requisite satisfaction granting the AO jurisdiction for issuing notice to the assessee u/s 153C of the I.T. Act. No satisfaction note whatsoever is found in the case of the searched person, namely, M/s Artefact Projects Ltd. In absence of any satisfaction note in the case of M/s Artefact Projects Ltd. that any seized material belonging to the assessee has been found which is incriminating in nature which is to be handed over to the AO of the assessee, the jurisdiction assumed in this case is illegal and the same deserves to be quashed. Accordingly in the background of the aforesaid discussion and precedent, in our cons....