TaxTMI 
TaxTMI 
2022 (4) TMI 546
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....zed documents did not contain any receipts or payment or expenditure or transaction, the additions are estimated on the basis of enquiries conducted u/s.133A(5). But fact is that the material seize during the course of search was the basis for conducting enquiry u/s.133A(5), which was also mentioned in the assessment order. 3. The Ld.CIT(A) has failed to appreciate the fact that the assessee raised contention regarding the validity of the proceedings before the CIT(A) which is not permissible as the same had not been raised before the AO as per the decision in the case of M/s. Safety International Ltd., rendered by the Hon'ble Delhi High Court in 332 ITR 622." 2. The facts of the issue are that there was search action caried out at the residence of assessee on 3.11.2010 on the basis of warrant issued in the case of B. Nagendra. Consequently, notice u/s. 153C was issued on 14.11.2011 calling for return of income for AY 2010-11. The assessee filed return of income within specified due date u/s. 139(1) of the Act on 14.1.2010 declaring total income of Rs. 1,73,260 which included salary income of Rs. 1,26,000 and interest on savings bank of Rs. 1,42,264. The AO complete....
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....n that seized material belonging to assessee and proceedings u/s. 153C have been validly initiated. In case where the AO of a searched person and other person is the same, there could be one satisfaction note prepared by the AO, as he himself is the AO of searched person and AO of the other person, to whom the provisions o section 153C is applicable to frame assessment. The AO must be conscious and satisfied that the documents seized or recovered from the searched person belong to other person and in such a situation, the satisfaction note would be qua the other person and the requirement of handing over of seized documents from the searched persons would not be there; as he himself will be the AO of the searched person and the other person. He relied on the Supreme Court judgment in the case of Super Malls Pvt. Ltd. v. Pr. CIT,, (2020) 423 ITR 281 (SC) wherein on similar set of facts and circumstances, the Supreme Court exhaustively examined the provisions of CBDT Circular No.21/2015, the Supreme Court's decision in the case of CIT v. Calcutta Knitwears (2014) 6 SCC 444; decision of Delhi High Court in the case of Pepsi Food Pvt. Ltd. v. ACIT, (2014) 367 ITR 112 (Del). He drew our....
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....unt, materials or articles in the course of search of an assessee other than searched assessee, still it is open to such assessee to establish before his Assessing Officer that the opinion of the Assessing Officer transferring the materials or evidence or books of account or goods seized is wrong and that those do not belong to him. *In other words, the transfer of recovered books of account, evidence or materials is only a procedural formality to be complied with by the Assessing Officer who searched an assessee and recovered materials pertaining to another assessee, and the Assessing Officer who takes up assessment under section 153C against the latter will have full jurisdiction to appreciate evidentiary value of the books of account or materials or goods received from the other officer and proceed to make assessment in his own way. There is, therefore, no merit in the contention of the appellant that satisfaction is required to be recorded by the Assessing Officer, who conducted the search before transferring materials or articles or things found belonging to another assessee." [Para 5] 9. Reliance was placed on the decision in the case of CIT, Thrissur v. St. Franc....
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....y recorded satisfaction regarding undisclosed income of searched person and issued notice u/s. 153C of the Act and the judgment of the Supreme Court in Super Malls Pvt. Ltd. (supra) is directly applicable to assessee's case and prayed to vacate the order of the CIT(Appeals) on the legal issue and restore the appeal to the CIT(Appeals) to decide the issue on merits with regard to additions made by the AO. 13. The ld. DR also relied on the order of the Tribunal in the case of ACIT v. Everglades, ITA No.347/Bang/2012 dated 23.7.2021 wherein it was held as under:- "14. We have examined the satisfaction note filed by the Department. From a perusal of the same, we find that the AO has recorded that the seized document referred to in the satisfaction note belongs to the assessee. The assessee has not denied this fact at any point of time. We may also point out that in the proceedings before the AO, CIT(A) and the Tribunal, the assessee never raised the issue with regard to non-existence of the required satisfaction for initiating proceedings under section 153C of the Act. As we have already seen the decision of the Hon'ble Supreme Court rendered in the case of Supermall Pvt. L....
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....decision and we find that in the aforesaid decision, additions were deleted on the ground that the same were not based on incriminating seized material found in the course of search. In paragraph-32 of the said order, the tribunal has made it very clear that the issue of validity of initiation of proceedings 153C of the Act is not being adjudicated. Moreover, the said case pertained to assessment years where the assessments stood concluded prior to the date of search, whereas in the present case, the assessment for the relevant AY was open assessment not having been concluded pursuant to the original return of income filed by the Assessee either by an order u/s.143(3) or by non issue of notice u/s.143(2) of the Act, within the time period prescribed for issue of such notice before the date of search. In this regard, we also notice that in the present case, the assessee filed return of income on 15.10.2007 and no order under section 143(3) of the Act was passed. The search in the case of Shri. N. Krishna based on which proceedings under section 153C of the Act were initiated against the assessee took place on 26.08.2008. The time limit for issue of notice under section 143(2) of the....
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....e CIT(A) that the assessment had not abated and the addition, not based on any incremating seized material, was not sustainable. He submitted that the seized document would show that the same does not reveal any hidden or undisclosed income. 16. It is submitted that the search u/s. 132 was conducted in the case of B. Nagendra on 03-11-2010. The Notice u/s. 153C came to be issued on 09-04-2012 in the name of the assessee, and therefore the said date requires to be construed as the date of search in view of the Proviso u/s. 153C(1), read with the second Proviso to section 153A(1) of the Act. The return of income for the subject assessment year was filed on 14-10-2010 and accordingly, the last date to issue the Notice u/s. 143(2) expired on 30- 09-2011, prior to the said date of 09-04-2012. Hence it is submitted that the assessment had NOT ABATTED as on the date of search as per the said Proviso to section 153C(1) of the Act. 17. In the light of the fact that the assessment had not abated, it is submitted that the addition is unjustified and unsustainable as it is not based on any incriminating material found during the search. Reference is made to the decision of the Hon'bl....
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....son. 20. He submitted that the Hon'ble Supreme Court in the case of M/s Calcutta Knitwears :2014] 43 taxmann.com 446 (SC) held that existence of cogent and demonstrating material is germane to the assessing officers' satisfaction in concluding that the seized documents "belong to" a person other than the searched person is necessary for initiation of action u/s 158BD. The ratio decidendi of this decision applies to the proceedings u/s 153C also, since sections 158BD & 153C are substantially pari materia`. The jurisdictional High Court in IBC Knowledge Park (P.) Ltd. [2016] 69 taxmann.com 108 (Karnataka), held holding that prima-facie satisfaction that seized assets/documents belong to the other person is a prerequisite for invoking section 153C of the Act. 21. The Hon'ble High Court of Delhi in the case of Pepsi Foods (P) Ltd.,(2014) 52 taxman.com 220 (Delhi) held that mere use or mention of word, 'satisfaction' or 'I am satisfied' in order or note would not meet requirement of concept of satisfaction as used in section 153C of the Act. The Hon'ble Supreme Court dismissed SLP of the department in its order in SLP 4659 of 2015, order dated; 04-1....
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....eferred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (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 is 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: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this 72[sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall....
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....cted by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this 79 [sub-section] available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. (2) The authorisation referred to in clause (a) and clause (b) of sub-section (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets b....
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....al income of such other person of such assessment year in the manner provided in section 153A." 26. Now the controversy in this appeal is limited to applicability of section 153C of the Act. On a plain reading of the above provisions, it is clear that the provisions of section 153A, 153B & 153C of the Act lay down the scheme of assessment in the case of search and requisition u/s. 132 & 132A of the Act. The provisions of section 153A is with regard to searched person u/s. 132 of the Act where books of account or other documents or assets are requisition u/s. 132A of the Act after 31st May, 2003. The provisions of section 153B lay down the time limit for completion of assessment u/s. 153A. The provisions of section 153C provide that where AO is satisfied that any money, bullion, jewellery or other valuable or article or thing or books of account or documents seized are requisition belong to or belonged to person other than the person searched, the AO shall proceed against such other person by issuing notice and assess or reassess the income of such other person. 27. From a bare reading of the provisions of sec.153C, it is crystal clear that the condition precedent for issue of....
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....ial 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". . . 'It is evident 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 requ....
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....eld that unless it is established that the documents in question do not belong to the searched person, the question of invoking the provisions of sec.153C of the Act does not arise. It was also held that unless searched person disclaims the documents as belonging to him, provisions of sec.153C do not get attracted. It is also further laid down that in the satisfaction note there should be something to indicate that the seized document do not belong to the searched person. The Hon'ble Delhi High Court held as follows:- 'Having set out the position in law in the decision of this Court in the case of Pepsi Foods Pvt. Ltd. (supra), it must be seen as to whether the Assessing Officer of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners. First of all we may point out, once again, that it is nobody's case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression us....
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....t, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed.' 31. Similarly, the Hon'ble Gujarat High Court in the case of Vijaybhai N.Chandrani v. Asstt. CIT [2011] 333 ITR 436 held that even if there is a reference to the assessee in the seized documents, it does not mean that the assessee is the owner of those documents unless the revenue proves conclusively that the assessee is the owner of those documents. The Hon'ble Gujarat High Court held as follows:- "Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should ....
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....for initiation of action u/s 158BD. The ratio decidendi of this decision applies to the proceedings u/s 153C also, since sections 158BD & 153C are substantially pari materia`. 34. The Hon'ble High Court of Delhi in Canyon Financial Services Ltd (2017) 84 taxman.com 71 (Delhi) held that the AO of the searched person had not proved that the seized document belonged to the assessee and not to the searched person. 35. The ITAT, Bangalore, Bench 'B' in Senate [2016] 68 taxmann.com 223 (Bangalore-Trib.) held that there should be something in the satisfaction recorded by the AO of the searched person to indicate that the searched person had disclaimed the seized documents before reaching a conclusion/satisfaction that the documents do not belong to the searched person but to the other third person. 36. In CIT V. Sinhgad Technical Education Society, 397 ITR 344 (SC), where loose papers found and seized from residence of President of assessee, an educational institution, indicating capitation fees received by various institutions run by assessee did not establish co-relation document-wise with assessment years in question notice issued under section 153C had rightly bee....