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2024 (12) TMI 391

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....ing officer for documents relied upon by the respondent along with satisfaction recorded under section 153C of the Act. The respondents supplied satisfaction recorded by the Assessing Officer of the searched person on 31.03.2018 as well as the satisfaction recorded by the respondent vide letter dated 25.11.2019. As per the satisfaction note, for initiation of the assessment proceedings under section 153C of the Act, it is revealed that during the course of search at the office premises of M/s. Venus Infrastructure and Developers Pvt Ltd and Shri Ashok S. Vasvani for Venus Group on 10.03.2015, various loose papers, documents and digital data were seized and 11 documents pertaining to the petitioner were identified. 5. The respondent who is Assessing Officer of the petitioner, recorded satisfaction note on 23.10.2019 for initiation of the assessment proceedings under section 153C of the Act for the Assessment Years 2009-10 to 2014-15 in respect of each of the Assessment Year falling within six Assessment Years immediately preceding the Assessment Year relevant to previous year in which the search was conducted. 6. The respondent in the satisfaction note dated 23.10.2019 has recorde....

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....ted on 10.03.2015 whereas, the satisfaction note of Assessing Officer of the searched person was recorded on 31.03.2018 i.e. almost after three years whereas, the satisfaction note dated 23.10.2019 recorded by the respondent- Assessing Officer of the petitioner was even later i.e. after more than four years from the date of the search and one and half years from the date of the satisfaction note recorded by the Assessing Officer of the searched person. 9. It was therefore submitted that as the satisfaction note ought to have been recorded at the time of search along with initiation of the proceedings against the searched person and in view of the facts of the case, as the same is recorded only after more than three years from the date of search, such satisfaction note is therefore, time barred. Reliance was placed on the decision of CIT vs. Jitendra H. Modi vs. reported in 403 ITR 110 (Guj.) and in case of Commissioner of Income Tax vs. Bharat Bhushan Jain reported in 370 ITR 695 (Delhi). 10. It was further contended that the impugned notices are also time barred for the reason that six years must be computed from the date when the materials were forwarded to the jurisdictional A....

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....4 (Delhi). 13. It was also submitted that no valid satisfaction is recorded by both the Assessing Officers to assume jurisdiction to issue notice as in view of the fact that incriminating material referred to in the satisfaction note does not disclose which document relates to the petitioner leading to the belief that there is unaccounted income. It was submitted that the satisfaction note only refers to the documents found during the course of the search from the Venus Group and it only says that in case of the petitioner Rs. 4.8 Crore on-money was paid without referring to any incriminating material against the petitioner. Reliance was placed on the following decisions: a.Principal Commissioner of Income Tax vs. Abhisar Buildwell (P.) Ltd reported in 454 ITR 212(SC) b.Sri Sai Cashews reported in [2021] 131 taxmann.com 177 (Orissa) c.Principal Commissioner of Income Tax vs. Vikas Telecom Ltd reported in [2022] 135 taxmann.com 362 (Delhi) d.Sunway Realtech (P.) Ltd reported in [2022] 142 taxmann.com 477 (Delhi) 14. Per contra, learned Senior Standing Counsel Mr. Varun Patel for the petitioner submitted that separate satisfaction notes are recorded by the Assessing Off....

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....ed on the decision of the Hon'ble Apex Court in case of ITO vs. Vikram Sujit Kumar Bhatia reported in 453 ITR 417 wherein it is held that the amended provisions are not substantive but clarificatory of the previous wordings of the provisions. It was further submitted that the provision of section 153C refers to the assessment or re-assessment of the income of the other person in accordance with the provision of section 153A and as per the second proviso to section 153A of the Act which has been inserted by the Finance Act 2017 w.e.f. 01.04.2017, 'relevant assessment year' has been explained as per the Explanation-1 to mean an assessment year preceding the Assessment Year relevant to the previous year in which, the search is conducted or requisition is made which falls beyond six years but not later than ten Assessment Years from the end of the Assessment Year relevant to the previous year in which the search is conducted or requisition is made if the escaped assessment amount amounts to or is likely to amount to Rs. 50 Lakh or more. It was therefore, submitted that in the facts of the case, the respondent-Assessing Officer has arrived at the satisfaction that there is likely escape....

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....ubjectmatter of assessment proceedings. 20. Reliance was also placed on the decision of the Delhi High Court in case of Principal Commissioner of Income Tax vs Karina Airlines International Ltd. reported in (2024) 165 taxman.com 421 wherein it is held that in case of search conducted in the Year 2016 and the satisfaction was recorded in 2019 after amendment to 153C by the Finance Act,2017 came into effect, block period of six assessment years would get extended to ten Assessment Years. 21. Reliance was placed on the decision of the Jitendra Mansukhlal Adesara vs. Assistant Commissioner of Income Tax reported in [2021] 126 Taxman.com 150 (Guj.) wherein it is held by this Court that when the Assessing Officer is satisfied, the documents containing the details in the seized material from the searched person and such material pertains to the petitioner, it cannot be said that the mandatory requirements of section 153C of the Act have not been complied with. 22. It was therefore, submitted that as per the mandate of section 153C of the Act, notice is required to be issued for 10 Assessment Years which would cover the Assessment Years 2011- 12 and 2012-13 even if after applying the de....

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....isfaction note must be prepared by the AO before he transmits the record 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 1S8BC 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 153BC of the Act of the searched persona." 3.Several High Courts have held that the provisions of section 153C of the Act are substantially similar/parimateria w 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....

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....other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other per- son, which in the present case is the petitioner herein, ....

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.... to 2017-18, in the second scenario from 2013- 14 to 2018-19 and in third scenario from 2014-15 to 2019-20. 30. However, as contended by the learned Senior Standing Counsel Mr. Patel for the Revenue that the period of 10 years is required to be reckoned as held by the Hon'ble Delhi High Court in case of Principal Commissioner of Income Tax vs Karina Airlines International Ltd.(supra), whether the incriminating material is received in either of the three scenarios, the Assessment Years 2011-12 and 2012-13 would be covered within the period of 10 years to be reopened under section 153C read with section 153A of the Act. The Hon'ble Delhi High Court has held in the said case as under : "7. It becomes pertinent to note that as those provisions stood prior to Finance Act, 2017, the relevant assessment years which could be thrown open pursuant to a search stood at six assessment years. By virtue of Finance Act, 2017 the block period for search assessment stood extended to ten assessments years on account of the introduction of the concept of "relevant assessment year or years". That expression came to be defined by Explanation 1 to Section 153A as extending to the period which falls b....

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.... statutory provisions being available to be invoked for the purposes of assessment covering a block of ten Ays'. 16. It however becomes relevant to note that Section 153C applies equally to all non-searched entities and neither carves out an exception nor does it create a separate regime pertaining to a contingency where the AO of the searched and the non-searched entity are one and the same. If the submission of Mr. Mann were to be accepted, it would amount to the Court carving out an exception in respect of those cases where the jurisdictional AO of the searched and non-searched entity were the same. This would also lead and constrain the Court to restrict the application of the First Proviso to Section 153C (1) of the Act only to those cases where the AO of the non-searched entity be one different from that of the searched person. This would clearly amount to a reconstruction of Section 153C and creating an exception which the Legislature chose not to introduce. 17. The First Proviso to Section 153C (1) has been consistently recognized as not being concerned merely with the aspect of abatement, which is spoken of in the Second Proviso to Section 153A (1) of the Act, bu....

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....physical act of transmission of documents is merely a step in aid of formation of opinion whether an assessment under Section 153C is liable to be initiated. It is in that sense merely a machinery provision put in place to enable the AO of the non-searched person to examine whether an assessment is liable to be commenced under Section 153C of the Act. Thus, even in a case where the AO of the searched and the nonsearched party be one and the same, it would be the formation of an opinion that the material is likely to "have a bearing on the determination of the total income.." which would constitute the core and the heart of Section 153C. 21. A harmonious interpretation of the main part of Section 153C and its Proviso lead us to hold that in cases where the jurisdictional AO is common, the commencement point would have to be construed as the date when the satisfaction is formed by the said AO with respect to such other person. In our considered view, even though there may not have been an actual exchange of material unearthed in the course of the search between two separate authorities, it would be the date when the AO records its satisfaction with respect to the non- searched ent....

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....the course of the search would have empowered and enabled the respondent to undertake an assessment for six assessment years immediately preceding the assessment year pertaining to the previous year in which the search was conducted and would also extend to the four additional AYs' which would stand included by virtue of Explanation 1 to Section 153A of the Act. The aforesaid position cannot possibly be doubted bearing in mind Section 153C incorporating the phrase ".....and for the relevant assessment year or years 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 ....

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.... therefore, that Section 153A was not invoked is untenable. xxxxx 20. The petitioner has woefully failed to establish that the material which forms the bedrock for recordal of satisfaction is not founded on any data, material evidence or documentation pertaining to AYs' 2014- 15, 2015-16 and 2016-17. In fact no submission in this respect was either addressed or iterated. We note that the cumulative impact of the material which had been gathered in the course of the search and which was also duly noticed in the Satisfaction Note has also been collated in the form of a chart which stands extracted in the Section 142(1) notice dated 01 March 2024. The said chart is extracted hereinbelow : - AY Amount in crores 2020-21 Rs. 12.70 2019-20 Rs. 348.78 2018-19 Rs.4.19 2017-18 Rs.6.27 2016-17 Rs.32.44 2015-16 Rs. 39.77 2014-15 Rs.79.72 As is manifest from the above, there is specific reference to unaccounted transactions pertaining to AYs 2014- 15, 2015-16 and 2016-17. The aforesaid chart correlates with the material which stands noticed and forms part of the Satisfaction Note. More importantly, the amounts identified as relevant to the AYs' i....

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....came to be introduced in the Act by virtue of Finance Act, 2003 and intended to act as a substitute to the procedure which was otherwise envisaged under Chapter XIV-B. 23. For the purposes of invoking Section 153C of the Act it is incumbent upon the AO to be satisfied that the material gathered in the course of the search and pertaining to the non-searched person would have a bearing on the determination of the total income of such other person either for six AYs' or for the relevant AY or AYs'. Since the provision itself requires and enables the AO to undertake an assessment for a block period of ten years, it would clearly not be incumbent upon it to draw separate or independent satisfaction notes for each AY. A composite Satisfaction Note would suffice the requirements of Section 153C of the Act provided it embody details of the material gathered in the course of the search and pertaining to the AYs forming part of the block as a whole. As long as the common Satisfaction Note includes sufficient particulars of the incriminating material relevant to the block of AYs', the same would, in our considered opinion, satisfy the statutory requirement as imposed by the Act....

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....Income Tax (Central) -III Vs. Kabul Chawla11 "37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years "in....

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....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. xxxxxx 34. As is manifest from the above, while the Section 153C notice was issued on 07 March 2023, the Satisfaction Note appears to have been provided to the petitioner on 28 and 30 June 2023. These writ petitions came to be preferred long thereafter on 19 March 2024. We take note of the statutory timeframes stipulated under Section 153B of the Act for completion of assessment proceedings and more particularly the Second and Third Proviso's which mandate assessment itself being completed within twelve months from the time when the books of account or material is handed over to the AO of the non-searched person. This would mean that in the present case and taking the date of handing over or recordal of satisfactio....