TaxTMI 
TaxTMI 
2019 (6) TMI 1429
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....order of the Ld. CIT(A) appeal for the Assessment Year (A.Y.) 2009-10. Since the facts are identical, these appeals are clubbed, heard together and disposed in a common order for the sake of convenience as under: I.T.A.No.17/Viz/2019 3. This appeal of the assessee is related to the validity of issue of notice u/s 153C as well as the merits of the case on additions confirmed by the Ld.CIT(A). Since the validity of notice issued u/s 153C is a legal issue and goes to the root of the assessment made u/s 143(3) r.w.s. 153C, hence, we, first, take up the issue relating to the validity of issue of notice u/s 153C of the Income Tax Act, 1961 (in short 'Act'). 4. Brief facts of the case are that the assessee is engaged in the business of civil contract works filed it's return of income originally on 30.09.2009 declaring total income of Rs. 70,67,040/-. Search and seizure operations u/s 132 of the Act was conducted in the residence of Sri Ravulapalli Venkataramaiah and during the course of search incriminating material was found indicating the unaccounted income/unaccounted payments. The AO had issued the notice u/s 153C dated 07.06.2013 which was duly served on the assessee calling....
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.... search, certain incriminating material was found which is stated to be belonging to the assessee. The AO had issued notice u/s 153C after recording the reasons in the assessee's case, but no reasons were recorded in the case of searched person i.e. R.Venkatramaiah while transferring the seized material to the AO of the assessee. The Ld.AR further contended that even if the AO is one and the same for both the assessee as well as the searched person, satisfaction note in the case of searched person is mandatory requirement as held by the Hon'ble Supreme Court in the case of CIT Vs. Calcutta Knitwears and Circular issued by the CBDT supra. The Circular issued by the CBDT is binding on the department. Therefore, argued that the AO had issued notice u/s 153C without recording satisfaction in the case of searched person, hence notice issued u/s 153C is invalid and required to be quashed. The Ld.AR also relied on the decision of Hon'ble High Court of Andhra Pradesh in the case of CIT Vs. Shettys Pharmaceuticals & Biologicals Ltd., 57 taxmann.com 282(AP). The decision of Hon'ble Allahabad High Court in the case of CIT Vs. Gopi Apartment [2014] 365 ITR 411 (All). 8. On the other hand, t....
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....ction note under section 158BD/153C should be withdrawn / not pressed if it does not meet the guidelines laid down by the Apex Court." 9.1. Hon'ble High Court of Andhra Pradesh in the case of CIT Vs. Shettys Pharmaceuticals & Biologicals Ltd. supra held that recording of satisfaction by both the AOs is a pre condition for invoking jurisdiction u/s 153C of the Act. For the sake of clarity and convenience we extract para No. 5 to 7 of the Hon'ble Jurisdictional High Court which reads as under. 5. The argument apparently is very attractive, but the law is otherwise and the learned Tribunal has correctly applied. We therefore appropriately set out Section 153C of the Act. "153C. Assessment of income of any other person.- (1) Notwithstanding anything contained ix section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, Jeweller)' 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 153k then the books of account or documents or assets seized or requisitioned sha....
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....nd not other way (See Nazir Ahmed & King Emperor). We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided." 9.2. Similar issue has come up before this Tribunal in the case of Sri Seshasai Township P.Ltd. Vs. ACIT in I.T.A. No.301 & 302/Viz/2015 dated 11.01.2019, wherein the coordinate bench of ITAT, Visakhapatnam has taken the similar view. For the sake of clarity and convenience we extract relevant part of the order of this Tribunal which reads as under: "10. We have heard both the parties and perused the material placed on record. As per the information placed in the paper book, the assessee has requested for supply of reasons and satisfaction of the AO of the searched person and the AO has replied vide letter dated 23.11.2017, stating that the AO of the Sai Teja Housing & Estates has recorded the satisfaction that there were documents found / impounded during the course of search belonged to the assessee. In response to question No. 2 and 3 relating to providing the copies of the satisfaction recorded by the AO of SaiTeja Housing & Estates for initiating the proceedings u/s 153C of the Act, in the case of t....
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.... of the assessing officer of the searched person is mandatory requirement to transfer the records and to hold that the incriminating material found in the premises of the searched person in fact belonged to such other person. 12. Similar view is expressed by the Coordinate Bench of ITAT, Hyderabad in the case of Shri Srinivas Babu, Hyderabad Vs. ACIT supra relied upon by the assessee. For ready reference, we extract para No.6 of the order of the Coordinate Bench of ITAT in the case of Shri Srinivas Babu cited supra. "6. Having regard to the rival submissions and in the light of the decision of the jurisdictional High Court in line with the view taken by the Apex Court and the binding Circular issued by the CBDT(binding upon the Revenue), we are of the view that the proceedings initiated under S.153C of the Act for these two years deserve to be quashed in as much as the concerned Assessing Officer has admittedly not recorded any satisfaction before forwarding the files to the Assessing Officer in whose charge, the assessee herein is assessed. In other words, the assessments made under S.153C of the Act are hereby quashed. In this view of the matter, the other groun....
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....he Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive 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 t....
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....onclusive satisfaction that documents belongs to a person other than searched person in[2018] 89 taxmann.com 10 (SC). Therefore, the courts held that the satisfaction not only should be recorded but also should be written in detail with valid reasons and it should not be vague. In the instant case, there is no dispute that the department could not establish that the AO of the searched person has recorded satisfaction before issue of notice u/s 153C of the Act. Therefore, respectfully following the view taken by the decisions Hon'ble courts cited supra and as per the discussion in preceding paragraphs, we hold that the notice issued u/s 153C is unsustainable." 9.3. Since the facts are identical, respectfully following the decision of Hon'ble High Court of Andhra Pradesh and the view taken by this Tribunal in the case cited supra, we hold that the issue of notice u/s 153C without recording the reasons in the case of searched person renders the notice issued u/s 153C as invalid. Accordingly, we quash the notice issued u/s 153C and the cancel the consequent assessment made u/s 143(3) r.w.s. 153C. Since we have quashed the notice issued u/s 153C and cancelled the consequent assessmen....