TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 546
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 completed assessment u/s. 153C r.w.s. 143(3) of the Act on 22.3.2013 by de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tiated. 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 attention to various findings of the Supreme Court in the case of Super Malls Pvt. Ltd. (su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee 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. Francis Clay Décor Tiles (2016) 385 ITR 624 (Kerala) it was observed that neither under section 132 or under section 153A, phraseol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uper 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. Ltd., (supra), settles the issue with regard to initiation of proceedings under section 153C of the Act. The aforesaid decision considers the earlier decision of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se 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 Act for Assessment Year 2007-08 was available to the AO till 30.09.2008. Since the search was conducted on 26.08.2008 in the case of Shri. N. Krishna, the proceedings a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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'ble Coordinate Bench in the case of Sree Lakshmi Venkateshwara Minerals (2021)123 taxmann.com 255(Bangalore- Trib), wherein, it is held that the addition, not based on any incriminating material found....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfaction 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; 04-12-2017 reported in (2018) 89 taxman.com 10 (SC). 22. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. Time-limit for completion of assessment under section 153A. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, 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 by the Authorised Officer. Assessment of income of any other person. 153C. (1) 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 othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arched 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 notice u/s 153C is that money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such person. If this requirement is not satisfied, recourse cannot be had to the provisions of sec.153C. The very same provisions had come for interpretation before the Hon'ble Delhi High Court in the case of Pepsi Foods (P.) Ltd. (367 ITR 112) wherein the Hon'ble Delhi High Court observed at pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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.' 28. Further, the term 'belonging to' has been interpreted by the Hon'ble Supreme Court in the case of CWT v. Bishwanath Chatterjee [1976] 103 ITR 536 and Nawab Sir Mir Osman Ali Khan v. CWT [1962] 162 ITR 888 wherein the Hon'ble Supreme Court in CWT v. Bishwanath Chatterjee has held as under :- "The expression "belong" has been defined as follows in the Oxford English Dictionary:- " To be the property or rightful possession ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 used in Section 153C of the said Act is that "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 ...." In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arly, 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 belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of s. 153C of the Act. Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading &....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 been quashed and set aside by the Hon'ble Supreme Court. 37. Coming to the facts of the present case, the AO recorded the satisfaction in the case of assessee as follows:- "14.11.2011 A search action u/s. 132 was initiated in the case of Sri B. Nagendra and in connection with the same, the premises of Sri T.H. Suresh Babu, Laxmi Narasimha Swamy Nilaya, Near Railway Quarters, Bamboo Bazar, Siraguppa Road, Bellary was also searched and documents / assets were seized as per inventory A-1/THS annexed to the panchanama dated 03.11.2010 for the search cond....