TaxTMI 
TaxTMI 
2025 (2) TMI 167
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....ee Company under Section 132 of the Income Tax Act 1961, in short "the Act". (ii) Pursuant to the search conducted, notice under Section 153C of the Act was issued against the assessee for the block years, i.e., from 1999- 2000 to 2004-2005 and also the search year 2005-2006. (iii) Pursuant to Section 153C notice, the assessee filed return of income, based on which, the Assessing Officer had completed the assessment by making certain additions. (iv) The assessment orders were passed on 29.12.2006 for all these seven years. Therefore aggrieved over the same, the assessee preferred Appeals before the CIT(Appeals) in all the seven cases. (v) On various dates between 18.12.2007 and 30.01.2008, orders were passed by the CIT (Appeals). As against the order passed by the CIT (Appeals), appeals were preferred by the Revenue, where regarding one addition in all seven cases, the Revenue lost the cases, in respect of all other issues, matters were remitted back to the Assessing Authority. Not satisfied with the said orders passed by the ITAT, the Revenue filed seven Tax Case (Appeals) against the one issue which they lost before the ITAT, in T.C.A.Nos.1005,....
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....TAT and on 18.11.2014, those Rectification applications were dismissed by the ITAT. Against that order also Tax Case (Appeals) were filed. (xiii) Some of the Tax Case (Appeals) since were subsequently withdrawn during the pendency of these Tax Case (Appeals), the remaining Tax Case (Appeals) are 25 in number which were grouped together and are disposed by this common order. 3. The following Substantial Questions of Law have been framed commonly in all these Appeals : "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in quashing the assessment orders made under Section 153C of the Income Tax Act without verifying the Satisfaction Note recorded by the Assessing Officer ? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in quashing the assessment orders holding that the assessing officer has not recorded the reasons before initiating proceedings under Section 153BC of the Income Tax Act ? 3. Whether on the facts and circumstances of the case, the Tribunal was right holding that recording of reasons / satisfaction which is neither mentioned in Section 153BC....
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....f litigation w.r.t. issues remanded by ITAT to AO in ITA Nos.910-915/2008 4 1073 1000 2003-04 Against order u/s 153(C) rws 143(3) rws 263 5 1074 1001 2003-04 2nd round of litigation w.r.t. issues remanded by ITAT to AO in ITA Nos.910-915/2008 6 1075 1002 2004-05 Against order u/s 153(C) rws 153A rws 263 7 1076 1003 2004-05 Against order u/s 153(C) rws 143(3) rws 263 8 1077 1004 2004-05 2nd round of litigation w.r.t. issues remanded by ITAT to AO in ITA Nos.910-915/2008 9 1078 1005 2005-06 2nd round of litigation w.r.t. issues remanded by ITAT to AO in ITA Nos.910-915/2008 Batch - III - Against common order of ITAT dated 18.11.2014 TCS 1046, 1047, 1048, 1049/2015 relating to A.Ys : 1999-00 & 2000- 01 already withdrawn Sl.No TCA No. of 2015 Against MP No. of 2014 A.Y Issues 1 1050 44 2001-02 Whether the ITAT is right in not recalling the earlier orders holding that there is no "satisfaction note" placed before the Tribunal 2 1051 45 2002-03 3 1052 46 2002-03 4 1053 47 2003-04 5 1054 48 2003-04 6 ....
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....e had produced the relevant papers arising out of the original file pertaining to the assessee. However, insofar as the searched person is concerned, whether such a satisfaction note has been recorded by the Assessing Officer was asked by the Court and the learned Senior Standing counsel appearing for the Revenue on instructions had stated that, no such reason has been recorded in respect of the searched person. However, the learned Senior Standing counsel appearing for the Revenue would further add that, such a requirement of recording satisfaction note in respect of the searched person was not required during the relevant point of time in view of the fluid situation with regard to the legal position as the new provision came in to effect only on 01.06.2003 and the law has been settled only in the year 2014. 10. Therefore after hearing the learned Senior Standing counsel appearing for the Revenue, on 23.10.2024, we have given a further direction to the Revenue that, a responsible officer on behalf of the Revenue in these cases shall file an affidavit stating that, there has been no satisfaction report recorded insofar as the searched person is concerned. 11. Pursuant to the ....
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....thority for both the searched person and other person, in order to proceed against the other person under Section 153C of the Act, the Assessing Authority of the searched person, the moment he has satisfaction with regard to the searched person, must also record his satisfaction about the incriminating materials or documents which are made available pursuant to the search conducted in the searched person premises and accordingly, his satisfaction to transmit the file to himself as the Assessing Authority, for the other person, must have been recorded in the note and it should be made available in the files of the searched person. 17. The learned Senior counsel would make further submissions that, even in this context, one search note is enough where there must be a clear satisfactory note recorded as to the incriminating documents pertaining to the other person, then only the cause of action to transmit the file to the Assessing Authority of the other person in case the Assessing Authority is different person or transfer it to himself or herself if the Assessing Authority for the searched person and other person is one and the same, would arise. 18. He would also submit that,....
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....inating documents and materials are seized from the premises of the searched person and some of such materials and documents pertaining not to the searched person and to the other persons, in respect of those other persons also, if the jurisdiction Assessing Officer is one and the same, once such satisfactory note is made by the Assessing Authority of the searched person under Section 153A proceedings that is sufficient to have such a satisfaction to proceed or initiate action against the other person within the meaning of Section 153C of the Act. 22. Whether this proposition stated by the learned counsel appearing for the Revenue has been accepted or endorsed in any of the decisions of the Court of Law is yet another question also to be answered. 23. The learned Senior Standing counsel appearing for the Revenue also has heavily relied upon the decision in Manish Maheshwari v. Assistant Commissioner of Income-tax reported in (2007) 159 Taxman 258 (SC). He also relied upon the decision of the Hon'ble Supreme Court in Super Malls (P) Ltd., v. Principal Commissioner of Income Tax reported in (2020) 115 taxmann.com 105 (SC). Even some more decisions he has relied upon, those ....
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....in assessee's group cases has held that, the Assessing Officer has not assumed valid jurisdiction under Section 153C because he has not recorded the requisite satisfaction and the entire proceedings initiated under Section 153C was void ab initio. 29. By making these observation, the relevant portion of the order of the ITAT has been recorded. The ITAT also has recorded the decision of the Tribunal in the case of M/s. SRM Easwari Travels and Tours (P) Ltd., dated 08.01.2010 and after recording these reasons, the Tribunal was of the view that, in view of the decision of the Hon'ble Supreme Court in the case of Manish Maheshwari (cited supra), the Tribunal did not find any reason to interfere with the order passed by the CIT (Appeals) and accordingly, the ITAT has dismissed all those appeals including the cross-objections filed by the assessee, as the cross-objections had been filed only to strengthen and support the view taken by the CIT (Appeals) in favour of the assessee. 30. Therefore the one and only issue which is revolving in this batch of cases right from the beginning from the CIT (Appeals) till this Court is as to whether there has been a separate satisfactory not....
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....aid 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. 9. A taxing statute, as is well-known, must be construed strictly. In Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], it was held : "While dealing with a taxing provision, the principle of 'Strict Interpretation' should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue." Yet again in J. Srinivasa Rao v. Govt. of A.P. & Another [2006 (13) SCALE 27], it was held : "In a case of doubt or dispute, it is well-settled, construction has to be made in favour of the taxpayer and against the Revenue." In M/s. Ispat Industries Ltd. v. Commissioner of Customs, Mumbai [JT 2006 (12) SC....
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....ed over to the Assessing Officer having jurisdiction in this matter. 33. Therefore what has been held in the said case in Manish Maheshwari (cited supra) is not supporting the case of the Revenue instead it supports the case of the assessee only. 34. The next decision is Commissioner of Income-tax-III v. Calcutta Knitwears, reported in (2014) 43 taxmann.com 446 (SC). In this case, almost with similar facts, where the proceedings initiated under Section 158BD when was questioned on the ground that, satisfactory report should have been recorded by the Assessing Officer under Section 158BD was on a date subsequent to the framing of assessment under Section 158BC in case of the searched person, i.e., beyond the period prescribed under Section 158BE(2)(b) and thereby notice issued under Section 158BD was belated and consequently the assumption of jurisdiction by the Assessing Authority in the impugned block assessment would be invalid. 35. In the said case, the Hon'ble Supreme Court has held in unequivocal term to the following effect : "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 prepa....
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....vailable in NJRS at 2014-LL-0312-51) has laid down that for the purpose of section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction 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 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'....
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....istant Commissioner of Income-tax reported in (2014) 52 taxmann.com 220 (Delhi). This has been confirmed by the Hon'ble Supreme Court in the matter of Assistant Commissioner of Income-tax v. Pepsin Foods (P) Ltd., reported in (2018) 89 taxmann.com 10 (SC). 44. All these decisions have been taken into account by a Division Bench of the High Court of Karnataka in Principal Commissioner of Income-tax v. Gali Janardhana Reddy reported in (2023) 152 taxmann.com 332 (Karnataka), where the question framed by the Court is as follows : "Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside assessment order passed for assessment year 2011- 12 by holding that there is no satisfaction recorded by the assessing officer of the searched person (153A) in the file of the said person ignoring the intention of legislature and even when the assessing authority has passed assessment order after recording satisfaction as required under Section 153C of the Act?" 45. In the said case, the Division Bench of the Karnataka High Court has taken this issue elaborately and has held as follows : "56. It is further contended that it is settle....
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....essing Officer of the searched person and thus, the Income Tax Appellate Tribunal passed an order quashing the assessment on account of lack of jurisdiction to proceed against the respondent / assessee under Section 153-C of the Act. The said order does not suffer from any infirmities but the Tribunal has rightly quashed the assessment on account of lack of jurisdiction. These are the contentions that have been made by the learned counsel for the respondent / assessee. Therefore, the learned counsel for the respondent / assessee prays for dismissal of this appeal preferred by the appellant / Revenue. ... ... ... 64.Section 153-C of the IT Act, 1961 relates to assessment of income of any other person. 153-C (1): Notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153 where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any Books of Account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in Section 153A, then, the ....
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....ling in detail to refer to each one of the substantial questions of law. The judgment rendered by the Tribunal does not suffer from any infirmity or absurdity to call for interference the said judgment and further no warranting circumstances arise. Consequently, these appeals deserve to be rejected." 46. However none of the Judgments cited by the Revenue has dealt with the issue in favour of the Revenue and even the Manish Maheshwari (cited supra) also has decided the issue in favour of the assessee and not in favour of the Revenue. Though it was cited by the learned Senior Standing counsel appearing for the Revenue, the case law in Super Malls (P) Ltd., v. Principal Commissioner of Income Tax, New Delhi reported in (2020) 115 taxmann.com 105 (SC), the issue that was decided by the Apex Court in the said Super Malls case was whether, when Assessing Officer of searched person and other person is same, it is sufficient for Assessing Officer to record in satisfaction note, the documents seized from searched person belong to other person and there is no requirement of transmitting documents seized from searched person. The question was answered in the affirmative and in the said cas....
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....e Revenue in Super Malls (P) Ltd., case also would not apply to the present case, because in the said case, since the Assessing Officer for both searched person and other person is one and the same, he was satisfied that the documents seized from searched person belong to assessee which was specifically mentioned in satisfaction note as well, therefore the Court accepted that the requirement of Section 153C was duly fulfilled. 50. No such satisfaction has been recorded herein as if the documents seized from the searched person belong to the assessee i.e., other person. In the absence of any such note, even the import of the said decision in Super Malls (P) Ltd., case, would no way help the case of the Revenue. 51. Therefore on the basis of the law that has been settled in various decisions of the Hon'ble Apex Court followed by the decisions of the various High Courts, the recording of satisfaction report is a sine qua non before initiating action under Section 153C of the Act. Based on the law settled by the Hon'ble Apex Court, the CBDT itself issued a Circular, where they have made very clear by way of clarification that even if the Assessing Officer of the searched ....