TaxTMI 
TaxTMI 
2024 (3) TMI 1126
X X X X Extracts X X X X
X X X X Extracts X X X X
.....(C) 4264/2024], lay challenge to the initiation of proceedings under Section 153C of the Income Tax Act, 1961 [the Act] and thus impugn the notice dated 07 March 2023 referable to that provision. The petitioner, in addition, also impugns the orders dated 22 September 2023 as well as 01 March 2024 and 06 March 2024 passed by the respondents disposing of various objections which came to be submitted by the petitioner. For the sake of convenience, reference to facts and the position of material before us would be as appearing on W.P.(C) 4268/2024 being Item 93 on our board when we reserved orders. 2. The Section 153C action is based on searches which were conducted upon four individuals in April, 2019. According to the writ petitioner, on the basis of the material which was gathered in the course of those searches, the Assessing Officer [AO] of the searched persons also drew corresponding Satisfaction Notes for initiation of proceedings against the petitioner in terms of Section 153C of the Act on various dates the details whereof are set out in a tabular form as under:- Sr. No. Date of supply of satisfaction notes Date of satisfaction note Particulars Recorded by w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5. It was also the submission of Dr. Singhvi that Section 153C obliges the AO to make specific reference to the incriminating material that may have been found in respect of each of the AYs' in respect of which proceedings under Section 153C are proposed to be initiated. According to learned senior counsel, in the absence of an explicit reference to the incriminating material or asset that may have been discovered year wise and a failure to establish a connection between such material and the total income of each of the six AYs', invalidates the initiation of action under Section 153C of the Act. 6. It was then submitted by Dr. Singhvi that a combined Satisfaction Note as drawn by the AO in the present case would not satisfy the statutory requirements of Section 153C of the Act. According to learned senior counsel, for the purposes of undertaking an assessment in respect of the relevant AY or AYs' based on material gathered in the course of the search, the AO is obliged to draw a Satisfaction Note independently in respect of each of the AYs'. According to Dr. Singhvi, this would be the position which would flow from the judgment rendered by the Supreme Court in Commissioner of I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act: or (b) in the course of the assessment proceedings under section 158BC of the Act: or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d after delay of 19 months is belated. (Para 6 & 29) That assessment of searched person was completed on 27.03.2006, then the handing over of seized documents by Assessing Officer of searched person to the jurisdictional Assessing Officer of assessee on 15.06.2017 is belated. 10. Having heard, Dr. Singhvi, who appeared for the petitioners as well as Mr. Hossain, learned counsel representing the respondents, we note that undisputedly insofar as AYs 2014-15, 2015-16 and 2016-17 are concerned, final assessment orders had come to be framed in respect of the petitioner in December 2018. These petitions are, therefore, undisputedly not concerned with abated assessments. 11. Section 153C firstly contemplates the abatement of all inconclusive assessments and which may have been pending finalization on the date of commencement of action under the aforesaid provision. Insofar as "concluded assessments" are concerned [and that expression being meant to describe those cases where regular assessment may have either been concluded or where the time for initiating action under Sections 143 or 153 would have passed], the AO must be satisfied that any money, bullion, jewellery, valuable ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... referred to in sub-section (1) of section 153A". For the purposes of understanding the meaning to be assigned to the expression relevant assessment year, we would have to necessarily travel back to Explanation 1 as placed in Section 153A. The submission, therefore, that Section 153C would only extend to six assessment years immediately preceding the AY relevant to the financial year in which the search took place is wholly untenable. 14. These aspects are in any case no longer res integra having been duly considered by this Court as well as the Supreme Court right from the time judgment came to be rendered in SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax (2012) SCC OnLine Del 1898 and ending with the authoritative pronouncement of the Supreme Court in Commissioner Income Tax vs. Jasjit Singh 2023 SCC Online SC 1265. More importantly, the precedents rendered in the context of the First Proviso to Section 153C have unequivocally held the same not merely intended to deal with the subject of abatement but also determinative of the relevant date for the purposes of computation of the six or the ten assessment years as the case may be. The Supreme Court in Jasjit Singh has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement. 10. This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to copious material gathered in the course of the searches including inter alia, documents, loose sheets, evidence existing on electronic devices, WhatsApp chats, record of accounts maintained in Excel format as well as the statement of various individuals recorded in the course of the multiple searches. Although we have gone through the Satisfaction Note in its entirety, we desist from reproducing its contents here bearing in mind the nature of the evidence that has been alluded to therein coupled with the detailed reference that it makes to identified individuals and personages. Our hesitation to do so also flows from the fact that assessment proceedings are yet to be concluded and we would not like to cause any accidental prejudice to any party. 18. However, and on a prima facie examination, it is evident that the respondents appear to have collated substantial and concrete evidence warranting further scrutiny and examination under the Act. For the limited purposes of indicating the material on the basis of which we find, prima facie, that the Satisfaction Note refers to material pertaining to the three AYs' in question we set out a tabular statement with appropriate cross ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s from September, October and November 2015 • Document 10 - consisting entries dated 11.06.2015 and 15.06.2015 • Document 19 - consisting entries from the period of 16.06.2014 to 15.01.2015 • Document 20 - showing balance as on 10.08.2015 PDF 520 PDF 525 PDF 526 PDF 527 PDF 532 PDF 533 13. Documents found during the search on Himanshu Sharma that corroborated the details found in Excel file "LS.xlsx" PDF 537 PDF 549 B. Evidences related to MP Assembly Election 2018 PDF 545 14. Files "PK AC. xlsx" and "Final 12.12.18.xlsx" found in the laptop of Lalit Chhallani seized from his residential premises • Excel sheet found which mentions AICC has given 33 crores • Sheet named "BREF" which shows updated position of receipts, expenses and cash in hand PDF 545 PDF 549 PDF 564 15. File "Expense.doc" containing date wise payments and receipts found at the premises of Ashwin Sharma during the search in case of Prateek Joshi PDF 550 16. Corroborative evidences PDF 565 C. Evidences related to MP Assembly Election 2013 PDF 568 17. Note named 'Recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eets containing details of unaccounted cash (seized from WUPPTCL Office-subsidiary of MEIL) PDF 621 22. Relevant statements of - PV Sunil, Shivendra, Rajendra, Kameshwar Yadav, Baswapoorna Reddy, Ramanjneyulu. SM Moin, Rajesh Sharma, Mukesh Kr. Pandey, Chander Prakash Malhotra, TM Varghese PDF 625 19. The material which is taken note of in the Satisfaction Note makes detailed references to unaccounted transactions with respect to the Lok Sabha Elections 2019, MP Assembly Elections 2018 and MP Assembly Elections 2013. Apart from the above there is specific reference to unaccounted for transactions pertaining to the three AYs' in question as would be evident from some of the details that we have chosen to extract hereinabove. The search documents recovered from the MEIL Group appear to indicate unaccounted transfers to the political party during AYs' 2017-18 to 2020-21. The material which forms part of the Satisfaction Note also captures details of disbursements made to candidates vying in upcoming elections together with signed receipts. There is a detailed reference to payments allegedly made to MPs'/MLAs' and candidates. The said note also carries material see....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d chart is itself based on the evidence taken note of in the Satisfaction Note and thus constituting material in the possession of the jurisdictional AO and forming the basis for formation of opinion. A reading of the Satisfaction Note also leads us to the irresistible conclusion that the escaped income as estimated would qualify the pre-conditions that stand constructed by virtue of the Fourth Proviso when viewed from the point of quantum as well as non-disclosure. Once the aforesaid position is accepted, it becomes apparent that the argument of limitation would disintegrate. 22. Another submission which was addressed by Dr. Singhvi was with respect to a combined Satisfaction Note having been prepared for all AYs in question without explicit reference to year wise incriminating material and taking into consideration material that was gathered and collected in the course of four different searches. We find ourselves unable to sustain that submission bearing in mind the indubitable fact that Section 153C of the Act represents the power conferred upon the AO to commence a process of assessment or reassessment for a block period of ten assessment years in the maximum. The procedure....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being issued calling upon the person to furnish a return of income for each of the six AYs' or the relevant AY or AYs'. This too appears to suggest that while the notice could be composite and based on a common satisfaction note which encapsulates the incriminating material pertaining to the AYs' in question, it is only returns which must and mandatorily be filed separately. 25. Regard must be had to the indubitable fact that the Satisfaction Note merely forms the foundation for initiation of action and which would enable us to evaluate whether an opinion has been validly formed. As long as it rests on incriminating material which pertains to the AYs' in question, the same would qualify the requirement of Section 153C. We deem it apposite to observe that while it would be imperative for the Satisfaction Note to refer to the material pertaining to the AYs' which are sought to be reopened, a consolidated Satisfaction Note clearly does not appear to be an anathema provided it rests on material which pertains to the AYs' which are sought to be reopened. 26. We in this respect also bear in mind the lucid explanation of the procedure liable to be adopted under Sections 153A and 15....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 27. That leaves us only to evaluate the argument of inordinate delay. The submission of Dr. Singhvi essentially proceeded on the basis of Calcutta Knitwears and the expression 'immediately after' appearing in paragraph 41 of the report. We deem it apposite to extract paragraphs 35, 37, 38 and 41 of the said judgment hereinbelow:- "35. Having said that, let us revert to the discussion of Section 158-BD of the Act. The said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 158-BC 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 was made under Section 132-A 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. xxxx xxxx xxxx 41. In the result, we hold that for the purpose of Section 158-BD 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 over such other person. The satisfaction note could be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that an identical question fell for consideration of a Division Bench of our Court in Commissioner of Income Tax vs Sudhir Dhingra 2015 SCC Online Del 7108. The Court in Sudhir Dhingra observed as under:- "17. The application of Calcutta Knitwears was the subject matter of a recently decided case, i.e., CIT v. V. K. Narang HUF (I. T. A. No. 1064 of 2009, decided on January 8, 2015) (2015) 372 ITR 333 (Delhi) where it was observed that (page 336): "Having regard to the decision in Manish Maheshwari v. Asst. CIT (2007) 289 ITR 341 (SC) this court is of the opinion that the satisfaction note in the present case meets with the requirements of law. So far as the question of delay is concerned, the court is of the opinion that in the facts and circumstances of the present case, it cannot be held that there was any delay in recording the satisfaction note. The assessment of the searched person was completed on December 31, 2001. The satisfaction note was recorded on May 30, 2002, i.e., just about five months after the date of completion of the searched person. Notice was issued on June 3, 2002, immediately after the satisfaction note was recorded to the present assessee.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onstrued or understood as being an expression of inflexible hues. What appears to have been frowned upon is inordinate delay. The question of whether delay is inordinate and consequently warranting quashing of the assessment proceedings itself, would inevitably be a question of fact which would have to be answered in the facts and circumstances of each case. We would also and necessarily have to bear in consideration the scope, extent and complexity of the investigation and enquiry which may have preceded the initiation of proceedings under Section 153C. However, we find ourselves unconvinced to hold in favour of the petitioner on this score for reasons which follow. 32. It would be pertinent to recall Dr. Singhvi's submission in this respect who had referred to the date when the AO of the searched person had recorded its satisfaction [19 and 20 February 2023] even though the assessment of the searched persons had been completed a year and a half earlier. The Section 153C notices came to be issued thereafter on 07 March 2023. 33. The respondent in its order under Section 142(1) dated 01 March 2024 has referred to the flow of proceedings in the form of a chart which is extract....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Miglani & others group (comprising of 147 sheets) ii) Copy of satisfaction note dated 19.2.2023 recorded by the learned Deputy Commissioner of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Migalni & others group (comprising of 147 sheets) iii) Copy of satisfaction note dated 19.2.2023 recorded by the learned Deputy Commission of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Miglani & others group (comprising of 44 sheets) iv) Copy of satisfaction note dated 20.2.2023 recorded by the learned Deputy Commission of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely Praveen Kakkar, R.K. Miglani & others group (comprising of 81 sheets) v) Copy of satisfaction note dated 20.2.2023 recorded by the learned Deputy Commission of Income Tax, Central Circle-19, New Delhi i.e. AO of the searched assessee namely M/s Megha Engineering & Infrastructure Ltd. (MEIL group (comprising of 81 sheets) 4.10.2023 i) It was submitted that contain satisfaction notes recorded by the Assessing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interpreted by the judgment of Hon'ble High Court of Bombay in the case of Ashok Commercial Enterprises vs. ACIT reported in 334 CTR 757 and decision of Hon'ble Pune Bench of Income Tax Appellate Tribunal in the case of BVG India Ltd. v. DCIT in IT (SS) A.No. 11/Pun/20323 dated 19.10.2023. A copy of the judgment of Hon'ble High Court of Bombay in the case of Ashok Commercial Enterprises (Supra) is placed at pages 14 to 39 of this Reply and decision of Pune Bench of Hon'ble Income Tax Appellate Tribunal in the case of BVG India Ltd. (Supra) is placed at pages 40 to 78 of this Reply. ii) It was further submitted that in light of the aforesaid decision, non-mention of DIN on the satisfaction notes but mentioning DIN on the covering letters of the communication to the assessee is not in compliance of the mandatory CBDT Circular No. 19/2019 dated 14.8.2019 and therefore having regard to the said, the present satisfaction notes are illegal and therefore shall be treated as invalid and shall be deemed to have never been issued. iii) Having regard to the aforesaid the present proceedings being non-est, invalid and therefore may kindly be dropped, more particularly in view of binding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y to judgment of Apex Court in the case of CIT v. Singhad Technical Education Society reported in 397 ITR 344. It is thus reiterated to satisfy the burden imposed by establishing not only that the documents alleged to be relating/pertaining to the assessee are 'incriminating' but must also be shown that such documents seized establish co-relation documents seized establish co-relation document wise with assessment years under consideration iii) It was again requested that the following material be supplied to enable the assessee to furnish its objections; i) Copy of panchnamas prepared on the search persons; ii) Copy of documents seized from the searched person and, relied upon in the satisfaction note allegedly pertaining to assessee or containing any information allegedly relating to the assessee; and iii) Copies of statements recorded of the searched person, if any, in respect of above alleged documents seized from the search persons ix) 16.1.2024 Additional Satisfaction notes for Assessment year 2017-18 recorded on 12.1.2024 by the learned Deputy Commissioner of Income Tax, Central Circle-1(4), Bangalore i.e. AO of the searched assessee na....