TaxTMI 
TaxTMI 
2019 (11) TMI 33
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....d to by the Assessing Officer does not belong to the appellant, the initiation of proceedings under section 153C is bad in law. (ii). The learned Commissioner of Income Tax (Appeals)-1, Hyderabad [Ld.CIT(A)] failed to appreciate that there was no incriminating material found belonging to the Appellant as envisaged in Section 153C of the Act during the course of 132 operations in the case of Sudhir Shah (Individual). Therefore, the notice issued under section 153C of the Act is invalid, bad in law and without jurisdiction. (iii). The Ld.CIT(A) failed to appreciate that entire assessment was framed based on the revenue records obtained from MRO, Rajendranagar Mandal during the course of assessment proceedings which was never put to the Appellant for rebuttal and therefore to assess the income already disclosed by the Appellant in the return filed under section 139 of the Act before the date of search without any incriminating material is invalid, bad in law and without jurisdiction. (iv). Without prejudice to the above grounds, the assessment framed is without complying with the procedures prescribed under section 153C of the Act vis - a - vis recording of ....
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....rutiny and notices u/s.143(2) and 142(1) of the Act were issued to the assessee and completed the assessment u/s.143(3) r.w.s.153C of the Act on total income of Rs. 2,22,100/- by order dated 31-12- 2009 for the AY.2002-03. The details of the assessed income for the various assessment years under consideration: S.No A.Y. Assessed Income (Rs) Date of order u/s.143(3) of the Act 1 2002-03 2,22,100 31-12-2009 2 2003-04 48,12,960 3 2004-05 4,12,130 4 2005-06 4,20,530 5 2006-07 2,64,26,335 6 2007-08 13,99,26,290 7 2008-09 3,32,580 3.1. During the assessment proceedings, the AO made the additions representing the sale of landed properties situated at Vattinagulapally village. The AO assed the sale consideration for capital gains purposes and also treated the agricultural income as 'income from other sources'. Against the order of AO, the assessee went on appeal before the CIT(A) and challenged the validity assessment order on merits. During the appeal hearing before the First Appellate Authority (FAA), the Ld.AR also argued that initiation of proceedings u/s.153C of the Act, without having the incriminating m....
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....chanama, ample material and evidences are available in the seized material marked as A/SDS/2 and the contents of the material is supported by the statement recorded from Shri Apoorva Shah, the nephew of the assessee, who is handling all the accounts of the Group. Thus, submitted that there is incriminating material found and seized from the searched person, hence argued that the additional grounds raised by the assessee does not qualify for admission, hence requested to reject the same. 6. We have heard both the parties and gone through the material placed on record. Prima-facie, from the Panchanama and the annexures, we find that there was no seized material found and seized during the course of search from the premises of the searched persons, i.e., Shri Sunil D.Shah and Shri Sudhir D.Shah belonging to the assessee. The material found and seized from the searched person requires further verification for identifying the relevant assessment years. The Department also did not place any evidence to show that the satisfaction was recorded in the case of searched person as required u/s.153A/153C of the Act. Therefore, we are of the considered opinion that the additional grounds need....
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....ciety (2017) 397 ITR 344 / (2017) [84 taxmann.com 290] (SC) held that - without having incriminating material, the assessment framed u/s.153C of the Act required to be set aside. The Hon'ble Delhi High Court in the case of Pepsico India Holdings (P) Ltd., Vs. ACIT (2014) [50 taxmann.com 299) (Delhi)held that - unless and until it is established that the documents seized do not belong to searched person, the provisions of Section 153C do not get attracted. The Ld.AR also relied on the following decisions to support his arguments with regard to validity of initiation of proceedings, without having seized material and without recording the reasons in the hands of the searched person. i. CIT Vs. Sinhgad Technical Education Society [397 ITR 344] (SC); ii. Pepsico India Holdings (P) Ltd., Vs. ACIT [370 ITR 295) (Delhi); iii. VijaybhaiN.Chandrani Vs. ACIT [333 ITR 436] (Gujarat); iv. CIT Vs. Late J.Chandrasekar (HUF) [338 ITR 61] (Madras); v. Pr.CIT Vs. Smt.Sunita Bai [78 taxmann.com 274] (Karnataka); vi. CIT Vs. IBC Knowledge Park (P) Ltd., [385 ITR 346] (Karnataka); vii. CIT Vs. Shettys Pharmaceuticals & Biologicals Ltd.....
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....nt that there was incriminating material, which is available in the searched premises, belonging to assessee. Hence, there is no merit in the argument advanced by the Ld.Counsel for the assessee that there assessment u/s.153C of the Act was initiated without having the incriminating material. 6.4. Ld.DR referring to Pg.1 of the Paper Book, submitted that the AO had recorded the satisfaction in the case of Shri Sudhir D.Shah (HUF) and merely because of the reason that the details of incriminating material was not specifically mentioned it is unjustified to hold that the initiation of proceeding are invalid and hence argued that the AO has rightly initiated the proceedings, and reasons were recorded, therefore, argued that the validity of assessments required to be upheld. In this connection, Ld.DR relied on the following decisions: i. CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd.,(2015) [64 taxmann.com 34] (SC); ii. V.H.Yahiya Vs. DCIT (2015) [56 taxmann.com 169] (Kerala); iii. CIT Vs. RRJ Securities Ltd., (2017) [79 taxmann.com 115] (SC); iv. Co-ordinate Bench decision of the ITAT in the case of Bharat Ginning & Pressing Facto....
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....sdictional High Court in the case of CIT Vs. Shettys Pharmaceuticals & Biologicals Ltd., (2015) 57 taxmann.com 282) (Andhra Pradesh) and the Hon'ble Jurisdictional High Court held that recording satisfaction of the AO of the searched person is the pre-condition for assuming jurisdiction u/s.153C of the Act. Referring to Pg.116 of the Paper Book, Ld.AR argued that the Hon'ble AP High Court in the case of CIT-III Vs. Sri Rao Subba Rao (HUF) in ITTA No.254 of 2014, dt.15-04-2014 upheld the order of the ITAT and decided the issue in favour of assessee for not recording the satisfaction in the case of searched person. 6.7. Therefore, argued that in the instant case, there is no dispute that there was no satisfaction recorded in the case of searched persons, hence AO had incorrectly assumed the jurisdiction, therefore requested to quash the notice issued u/s.153C of the Act and cancel the orders of the lower authorities. 7. We have heard both the parties and gone through the material placed on record. In the instant case, there is no dispute that no satisfaction was recorded by the AO of the searched person. The department did not place any evidence to controvert the submis....
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.... has called for the remand report, in the remand report also, the AO mentioned regarding recording of satisfaction in the case of the assessee, but no mention was made in respect of the satisfaction recorded in the case of searched person i.e. R.Venkatramaiah. The department also did not place any evidence to show that satisfaction was recorded in the case of searched person, R.Venktramaiah, while transferring the incriminating material. As observed from the CBDT Circular No.24/2015 dated 31.12.2015 which is placed in page No.9B of the paper book , the CBDT has given guidelines to all the AOs to record satisfaction even if the AO of the searched person and the other person is one and the same. For the sake of clarity and convenience, we extract para No.4 and 5 of the Circular which reads as under : "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."....
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....the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the Seizing Officer. In other words it is not an automatic action. We find satisfaction of two officers is missing. In this connection we set out the text of the order of the Assessing Officer which is as follows: "A search and seizure operation u/s. 132 was carried out in the group ease of Dr. T. Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceedings u/s. 153C of the I.T. Act.' 7. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the....
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....on is required to be recoded and relied on the decision Hon'ble Delhi High court in case of Instronics Ltd and Ganapati Fincap Services Pvt. Ltd. In the case of Instronics Ltd the Hon'ble High Court of Delhi restored the matter back to the file of the ITAT since there is no discussion on whether the documents referred to in the ITAT's order in fact incriminating and the AO of the searched person has recorded the satisfaction that the seized documents belonged to the assessee. The decision of Hon'ble High Court of Delhi in the case of Ganapati Fincap Services Pvt. Ltd. Vs. CIT (supra) is against the writ petition and the facts of the assessee's case are distinguishable, therefore, the case laws relied upon by the Ld.DR are not applicable in the assessee's case. 11. In this connection, it is pertinent to mention section 292C of the Act places presumption that the material found during the course of search belongs to the searched person and the contents of such books of account and other documents are true. So it is the obligation of the AO as well as the searched person to prove that the incriminating material found during the course of search in fact does not belong to the ....
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....3C. The so-called satisfaction recorded in the notice u/s 153C is totally vague. It has not specified which valuable articles/things/books of accounts/documents were found from Shri Rameshbhai B. Shah which belongs to the assessee. In the assessment order the Assessing Officer has mentioned that in the laptop of Shri Rameshbhai B. Shah the data pertaining to the assessee were found and on that basis notices u/s 153C have been issued. However, in the notice u/s 153C, wherein the Assessing Officer is claimed to have been recorded the satisfaction for issue of the notice, there is no mention about such laptop or the alleged data in such laptop which is claimed to be belonged to the assessee. In view of above, we have no hesitation to hold that the basic condition for issue of notice u/s153C has not been satisfied." 14. The departmental circular dated 31.12.2015 also directed the AO to record the satisfaction, even if the AO of the searched person and the other person is one and the same and the Circular is binding on the assessing officers. Non recording of satisfaction of the assessing officer of the searched person renders the assessment proceedings u/s 153C as invalid. Thi....
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....nt from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act. 12. This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the noti....
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....he case of searched person is invalid. Accordingly, we quash the notices issued u/s.153C of the Act and cancel the assessments framed u/s.143(3) r.w.s. 153C of the act. The assessee's appeals on this ground is allowed. 8. Since, we have allowed the appeal of the assessee on the ground of non-recording of reasons, we consider it is not necessary to adjudicate the other grounds raised by the assessee in these appeals. 9. In the result, the appeals in ITA Nos.1871/Hyd/13, 1872/Hyd/13, 1873/Hyd/13, 1874/Hyd/13, 1875/Hyd/13 & 1876/Hyd/13 are allowed. ITA No.1877/Hyd/2013 (AY.2008-09): 10. In this case, the AO made regular assessment u/s.143(3) of the Act. In the assessment proceedings, the AO made an addition of Rs. 1,60,000/- relating to agricultural income as 'income from other sources'. The AO found during the course of assessment proceedings that the assessee along with other brothers are having lands situated at Vattinagulapally village and the lands were vacant lands. The land revenue records also shows that such lands were vacant lands and no agricultural activities were carried out. The AO further observed that majority of the lands were transferred by the assessee t....