2024 (2) TMI 1623

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....ted per a common order. The impugned assessments follow a search u/s. 132(1) of the Act on a firm 'K.K. Builders', Kannur, conducted at the assessee's - running two bar hotels, Hotel Broad Bean, Chakkarackal, besides a survey u/s.133A at Hotel Broad Bean, Kakkayangad, on 26.09.2012. This explains the assessments being u/s. 153A r/w s. 153C of the Act. 3.1 Before us, Shri Ved, the learned counsel for the assessee, would assail the assessments, each of which stands completed by making an addition for unexplained expenditure on construction of the assessee's two hotel buildings, i.e., at Chakkarackal and Kakkayangad, u/s. 69C of the Act, to it's returned income at nil, on the basis of the validity of the satisfaction note prepared u/s. 153C of the Act. Towards this, he would take us through the satisfaction notes (PB pgs. 167-169), which, again, identically worded, read as under, each bearing reference to the relevant year: 'ORDER SHEET PAN: AADCK3339E           A.Y. 2008-09/2009-10/2010-11 (*) M/s. K.K. Leisures and Tourism International Pvt. Ltd. Room No. PP-V528 C K.K. Plaza, Peravoor, ....

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....TRAVELLING 20417   9649     BANK INTEREST             2341557 7060408 4795241 1964654 16161860 TOTAL TO BE BILLED IN K.K. BUILDERS           16161860 Expenditure shown in K.K. Leisures & Tourism International Pvt. Ltd. Upto 31.03.2011 Kakayangad Chakkarakl   Interest Share 9942220 13690485     1764480 2417311   TOTAL 11706680 16107796 27814476         TOTAL BUILDING COST     43976336         Broad Bean, Kakkayangad - 101,50,000/- (written by hand)   Broad Bean, Chakkarakkal - 73,00,000/- (written by hand)   What, then, he would question, is the incriminating material on the basis of which the satisfaction note stands recorded, and jurisdiction for assessment/s u/s. 153A r/ws. 153C of the Act assumed? Upon being questioned in this respect, he would explain that the assessee, a part of the K.K. Builder's group, had, for the purpose of it's hotel b....

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....ch other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of accoun....

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....nd, further, of the other person, sec. 153C merely requires the seized material to have a bearing on the determination of his total income for the relevant year/s. This is understandable inasmuch as the issue of notice u/s. 153A r/w s. 153C is only a first step in the enquiry which is to follow on the other person, even as explained in, inter alia, SSP Aviation Ltd. v. Pr. CIT [2012] 346 ITR 177 (Del). The provision, it may be noted, does not contemplate any enquiry with the 'other person' prior to the issue of notice to him. Again, understandably, while the asset/s seized, as specified in the SN, would be that belonging to the 'other person', the document/s seized must pertain to, or information therein, relate to him. Though this aspect gets clarified; the law prior to the amendment to s. 153C by Finance Act, 2015, w.e.f. 01.06.2015, using the words 'belongs to' in relation to both, the valuables and the documents, this is how the law has always been understood as. Reference in this context may be made to the decisions in Calcutta Knitwears (supra)(para 38); Singhad TES (supra) (para 20); and Super Malls (supra) (para/pgs. 288,290). In the latter two cases, notice u/s. 153A(a) on....

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....nor any explanation by the assessee in its respect, much less any adjustment to income with regard thereto, in the assessment order/s. We are alive to the aspect that the 'satisfaction note' is not to be elevated to the status of a 'reason recorded' u/s. 148, and where the document/s seized reflects any information which has a bearing on the assessee's total income, the requirement of law is satisfied, i.e., for the purpose of assumption of jurisdiction. But, then, this is precisely what the satisfaction note, a mandatory requirement of law, is to state, w.r.t. the material seized, exhibiting thus the nature of the document and the resultant satisfaction. Is it then, that the AO deliberately did not refer to the seized material in the SN? We may not go thus far, and suffice to state that the satisfaction/s under reference neither stands the test of scrutiny nor otherwise meets the requirement of law. When we speak of scrutiny, we may again clarify that we are not in any manner suggesting the satisfaction to be justiciable, which even the reason recorded u/s. 148(2) is not, but only that it must bear information signifying a relevance, with reference to the material on which it i....

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....me set of arguments and facts. There is accordingly no deficiency in procedure. It is, after all, the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC); Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)). The Tribunal, as explained in CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 (SC), is to deal with and determine all questions which arise out of the subject-matter of an appeal in the light of evidence, and consistently with the justice of the case. We are, in this context, conscious that it could be argued that an invalid approval may not fail an assessment per se, but render it liable to be set aside for curing the defect; the satisfaction being, as afore-noted, immanent from the material seized. Whatever be the merits of the argument, the same shall not apply in the instant case inasmuch as our finding qua non-application of mind only endorses our finding of want of jurisdiction in the absence of a valid SN/s. 4.5 Coming to the impugned order, the first plea, i.e., on the basis of a clear dichotomy between the satisfaction recorded, and the....