TaxTMI 
TaxTMI 
2018 (10) TMI 238
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....absence of any incriminating material found during the course of search under section 132 of the Act. Further, according to the learned Counsel there is no satisfaction recorded by the AO of the searched person as required under section 153C of the Act. For this assessee has raised the following two grounds in its Cross Objection: - "1. The Ld. CIT(A) has erred in law and in facts in upholding the validity of assessment under section 153C of the Act in absence of any incriminating material found during the course of search. 2. The Ld. CIT(A) has erred in law and in facts in upholding the validity of the assessment tin absence of recording of a valid satisfaction as required under section 153C of the Act." 3. Briefly stated facts are that a search was conducted by the Income Tax department under section 132 of the Act on Shri Gangadhar Shetty Group on 20.08.2009. The assessee company i.e. Salasar Dwellers Pvt. Ltd. was floated by one Shri Dinesh Punia along with Shri Madhusuden Budhia as its director and on 29.03.2007, Shri Dinesh Punia invested a sum of Rs. 25 lacs as share capital. The assessee company entered into development agreement dated 26.04.2007 with M/s Sagar develop....
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....davali Village, Andheri (E), Mumbai. While perusing the assessment records and the seized material it is found that the development agreement entered into by the appellant company and M/s Sagar Developers Pvt. Ltd. was apparently for the consideration of Rs. 8.5 Crs. Shri Gangadhar Shetty in his statement on oath dated 15.10.2009 stated as follows in answer to Q.No. 21: Q.21 From the seized material, which were found and seized from this premises on 20.08.2009, it is seen that you received cash of Rs. 1.75 Crs. in relation to the SRA project undertaken by the partnership firm M/s Sagar Developers. Please explain why this should not be treated as firm's undisclosed income? Ans. I would like to refer the statement recorded u/s 132(4) on 20.8.2009, wherein I have declared a sum of Rs. 1.40 Crs. as unexplained cash expenses pertaining to this SRA project and I have received Rs. 1.75 Crs. as reimbursement of my spending from M/s Salasar Dwellers P. Ltd. So against Rs. 1.75 Crs., I have already offered Rs. 140 Crs. as undisclosed income. Therefore, I is incorrect to treat and consider Rs. 1.75 Crs. a my undisclosed income. The above statement of Shri Gangadhar Shetty is corrobo....
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....nbsp; sd/- (MKA (JS) AM) (JM) 27.06.2018 Hearing is adjourned to 31.07.2018 at the request of Ld. DR. The case records related this case are not available. Both parties informed (a/w Co 257/M/17) Sd/- &nbs....
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....M) (JM) 6.08.18 Hearing is adjourned to 11.09.18 at the request of ld. (CIT Departmental Representative). Last opportunity to the Ld. Departmental Representative to produce satisfactory note otherwise adverse view will be taken. Both parties informed. (alw Co 257/M/17) Sd/- ....
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.... (JM)" 6. When this matter was called up for hearing on 17.09.2918, the Bench again inquired about the satisfaction note recorded by the AO of the search person. But the learned Sr. DR made statement that no satisfaction note is available on record and the records have not come for production before the Bench. We find from the records that the assessee before CIT(A) also on number of occasions requested for satisfaction note and for this Ld Counsel submitted as under:- "We submit that in the course of hearing on 08.05.2018, the appellant had pointed out that request for providing copy of satisfaction note to the Assessing Officer was made on number of occasions during the course of proceedings before Ld. CIT(A) vide letters dated 20.04.2012, 19.11.2012 and 11.03.2014. Later, request was once again made to the Assessing Officer during the proceedings before the Hon'ble Tribunal vide letter dated 22.02.2018. Accordingly, at the time of hearing on 08.05.2018, the Hon'ble Bench had directed the Ld. CIT-DR to provide the copy of the satisfaction note within one month to the assessee. The same was not provided to the assessee. At....
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....er AO shall proceed against such 'other person' to assess or reassess his income. A bare perusal of the provision indicates that before handing over such documents etc. to the AO of the 'other person', a 'satisfaction' has to be recorded by the AO of the person searched that money, bullion or jewellery, etc., found from the person searched belong to the 'other person'. Only when such 'satisfaction' is recorded by the AO of the person searched and such documents or assets seized, etc., are handed over to the AO of the 'other person', that the later AO acquires jurisdiction to make assessment or reassessment of the 'other person.' It is, therefore, amply vivid that the AO of the 'other person' can acquire jurisdiction to assess or reassess income of the 'other person' only when the AO of the person searched records satisfaction in his case before handing over money, bullion, jewellery, etc. to him. 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 person' to acquire jurisdiction. Unless such jurisdictional condition is sat....
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.... has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also he 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." 10. The argument of the learned CIT(A) in his order that the searched person and the assessee are being assessed by the same AO, the learned Counsel for the assessee contended that even in cases where the AO of the person searched and the assessee who is sought to be assessed u/s 153C of the Act is the same, the AO is required to record his satisfaction that the assets / documents seized belonged to a person i.e. the assessee, other than the searched person. This view is finally settled by Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Mechmen (2016) 380 ITR 591 (MP) wherein the view is expressed in the following manner :- "18. The concomitant of this conclusion, is that, the legal position as applicable to Section 158BD regarding satisfaction in the first insta....