TaxTMI 
TaxTMI 
2016 (10) TMI 1378
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....ct to initiation of proceedings u/s 153C of the I. T. Act by contending that no satisfaction was recorded by the A.O. in the case of searched person that the incriminating material found during the course of search belongs to the assessee and therefore, the assessment completed u/s 153C of the Act is illegal. The bench directed the learned DR of the revenue to place the copy of satisfaction recorded in the case of the searched person that the incriminating material seized during the course of search pertains to the assessee and the hearing was adjourned to 03.08.2016. The hearing was again adjourned ton 10.08.2016 and then to 23.08.2016 and again to 26.08.2016 to enable the DR to file the required satisfaction. On 26.08.2016, hearing was concluded with the liberty to the DR to file written submissions on or before 02.09.2016. On 07.09.2016, learned DR of the revenue filed written submissions and submitted that in view of "All India Bandh" on 02.09.2016, the said written submissions be accepted on 07.09.2016. We accept the same and consider it for deciding this technical aspect first i.e. validity of assessments u/s 153C read with section 144. 4. In course of hearing on 26.08.201....
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....tuations. For example, if the the transfer of records occurs in a Financial Year 2 years after the search date, the A.O of 153C cases losses jurisdiction over the earliest 2 A.Y s. on which he may possess seized records. On the other hand, he assumes jurisdiction over 2 new A.Ys. on which there are no seized records. There can be no assessments for the latest 2 years based on seized documents transferred. Therefore, the argument of the assessee that the 1st 2 years assessments are void are not logical vis-a-vis the provisions of the Act. b) Note on opportunity of being heard (Refer pg. 4 of report of DCIT) The report of DCIT elaborates that the assessee had not filed return of in response to notice u/s 153C even under protest and that all orders for the batch of 6 Assessment Years were best judgement assessments u/s 144 r.w.s. 153C based on material available on record due to total non-cooperation of assessee during assessment proceedings. c) Note on Transportation Expenses ( Refer pg. 4 to 6 of report of DCIT) The report of DCIT elaborates that AO had sent two showcause notices dated 01/03/2013. The assessee replied on the same issue....
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....) that the assessing officer should also be satisfied that the incriminating documents should conclusively establish that the documents seized should conclusively reflect or disclose any undisclosed income. In this regard the following case laws are relied upon: 1. SSP Aviation Ltd. Vs DCIT [2012] 20 taxmann.com 214 (Delhi) (HC) 2. All Cargo Global Logistics Ltd. [20 12] 23 taxmann.com 103 (Mum) (SB) 3. CIT Vs Chetan Das Lachman Das [2012] 25 taxmann.com 227 (Delhi) (HC) (B) In the following case laws courts have held that that satisfaction is to be made with respect to the ownership of the documents and not regarding the undisclosed income: 1. ACIT Vs Panchuram Deshmukh & Ors (ITAT Bilaspur) 33 TTD 53 V. NON - COMPLIANCE BY THE ASSESSEE TO THE NOTICE ISSUED u/s 153C FOR FILING RETURN OF INCOME AND TO THE NOTICES ISSUED DURING THE SCRUTINY PROCEEDINGS u/s 153 C A very crucial aspect in this case is the complete noncooperation and non-compliance by the assesse to the statutory notices issued. (1) The assessee did not file any Return of Income in response to the notices issued u/s 153C. (2) The ass....
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....mission of records". Copies of assessment orders in the cases of Shri K. Raghavacharyalu and Smt. G.Renuka are enclosed to establish that the assessments are completed by the same assessing officer i.e Shri Shivanand H. Kalakeri, who had done the assessments in the case of the assessee. (iii) The assessing officer has recorded satisfaction In the case of the assessee. (iv) The eventuality of an assessing officer of the person covered under provisions of Section 153BC being the same as the officer of the person covered under provisions of Section 153 BD is not examined by the Hon'ble Supreme Court in the case of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC). (v) It is humbly submitted that judgments must be read as a whole and observations in judgments should be considered in the context in which they are made and in the light of questions that were before the court. In CIT v. Sun Engineering Works Pvt. Ltd.(198 ITR 297) the Supreme Court observed: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the comple....
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....rstly, the decision of Hon'ble Supreme Court in the case of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC) , which is rendered in connection with search assessments under Chapter XIV-B (sections 158B to 158BI), which are different provisions compared to assessments of the assessee which relate to the new search assessment procedure as contained under sections 153A to 153A which are brought into statute w.e.f 1-6-2003. 2. Secondly, the facts in the case of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC) are different from that of the assessee as the officer of the person covered under provisions of Section 158BC was different from the officer of the person covered under provisions of Section 158BD and therefore the issue of "transmission of records" (refer Para 39) came up before the Hon'ble Court and consequently the issue of the "who should recording of satisfaction" and "at what point of time the satisfaction should be recorded was also considered". In this context the Hon'ble court stated that the satisfaction can be recorded at any of the 3 stages - (1) At the time of initiation of proceedings u/s 158BC, (2) along with the proceedings U/S 158BC and (3)....
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....ourt in its decision of CIT Vs Calcutta Knitwears 43 taxmann.com 446 (SC). 4. Therefore, in view of the fact that assessing officer of the person covered under provisions of Section 153 A being the same as the officer of the person covered under provisions of Section 153 C and the assessing officer having recorded the satisfaction before issuing notice u/s 153C, sufficient compliance has been made by the A.O as required under the provisions of the statute. Submitted for kind consideration." 2. We also reproduce the satisfaction note dated 14.12.2012 which has been submitted by the ld. DR of revenue along with her written submissions. The same is as under:- "Recording of satisfaction note before issuance of notice under section 153C: Name of the assessee: Sri Gali Janardhana Reddy (Ay: 2005-06 to 2010-11) A search u/s. 132 was conducted on 25/10/2010 in the case of Mr K. Raghvacharyulu at flat No.402, Kakateeya Residency, Kappagal Road, Bellary. During the course of the search, following documents/books of account belonging to Sri Gali Janardhana Reddy were seized and the contents are explained in brief as below- ....
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.... the same person and satisfaction note has been recorded by him on 14.12.2012 before issue of notice u/s. 153C of the I.T. Act. In the same satisfaction note, he has noted in the last that "Issue notice u/s. 153C of the Income Tax Act, 1961." This last line of the satisfaction note proves beyond doubt that such satisfaction note has been recorded by the same Officer who is the AO of assessee as well as of the searched persons in his capacity as AO of assessee and not in his capacity as AO of searched persons, because if satisfaction note is recorded by the AO of the searched person, it cannot be said in the said satisfaction note that "Issue notice u/s. 153C of the Income-tax Act", because such notice u/s. 153C of the Act is not required to be issued in the case of searched person, but in the case of the other person i.e., the present assessee. In our considered opinion, even if the AO of assessee and the searched person is one and the same, then also, the satisfaction note has to be recorded by the AO in his capacity as AO of the searched person and not in his capacity as AO of the other person in whose case notice u/s. 153C is required to be issued. 4. In the light of th....
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....son searched is mandatory and it has to precede the initiation of proceedings against the other person (not searched). The relevant observations of the jurisdictional High Court are extracted hereunder:- "We have heard Sri Bharat Ji Agrawal, learned senior counsel assisted by Sri Ashok Kumar, learned counsel for appellant and Sri Ashish Bansal, learned counsel for respondent assessee and have perused the records. The contention of Sri Agrawal is two fold. Firstly, he contends that in the instant case, the Assessing Officer of the 'searched person' and the 'other person' being the same, there was no requirement of handing over of the books of account or documents or assets seized or requisitioned, as is mentioned in Section 153C nor there was any necessity of recording a prior satisfaction before proceeding to assess the 'other person'. The satisfaction subsequently recorded in the assessment order in respect of the 'other person' was sufficient compliance of provisions of Section 153C, which, in any case, was procedural in nature. The A.O. of both the proceedings, being the same, he was neither required to handover the documents to ....
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....noted above, no other argument was raised by the learned counsel for either of the parties nor any other judgment was cited before us in support of their respective contentions. The relevant provision in the instant case, i.e. Section 153C is as under: "153C. Assessment of income of any other person. (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 other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A." The aforesaid provision is contained in Chapter- XIV of the Income Tax Act, which contains the procedure for assessment. ....
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....action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts were made under Section 132A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person. 44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction ov....
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....rson notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Thus, there are two stages: (1) The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. (2) The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Offi....
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.... and held that the conditions precedent for taking recourse to a block assessment in terms of Section 158BC and 158BD (i) were as under: "(i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person. 11. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act." The ratio of the judgment in Manish Maheshwari's case also applies to the provisions of Section 153C and to the facts of this case. In the instant case, a categorical finding has been recorded by the C.I.T. ....
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....provision under which action could be initiated against him. The reliance placed by Sri Agrawal upon the Division Bench judgment of this Court in the case of C.I.T. Vs. Classic Enterprises (supra) far from helping his cause goes against him. We have already relied upon the said judgment to explain the concept of 'satisfaction' under Section 153C, which is required to be recorded in writing. However, on the other issues, the said judgment is distinguishable for the reason that in the said case, the Assessing Officer had recorded his 'satisfaction' and after recording the satisfaction on the subject matter on 02.08.2006 handed over the books of account and seized material, thus, the issue, which falls for consideration in this appeal, in fact, did not arise for consideration in the said appeal. In any case, the case at hand being squarely covered by the pronouncements of the Supreme Court, as already referred, the reliance placed by Sri Agrawal on the aforesaid judgment does not cut much ice." 6. Now it is clear from the record that satisfaction by the Assessing Officer of the searched person was not recorded before initiating proceedings under secti....