TaxTMI 
TaxTMI 
2024 (12) TMI 1785
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....ake of brevity, the grounds of appeal filed by the Revenue in ITA No.465/Hyd/2024 are reproduced as under : "1. The Ld CIT(A) erred on the facts and in the circumstances of the case and in law. 2. The Ld CIT(A) erred in quashing the notice issued u/s 153C of the Act for the A.Y. 2017-18, through the mandatory conditions as prescribed in section 153C, that the seized material has a bearing on the determination of the total income of the assessee, have been met and the satisfaction also accordingly recorded by the Assessing Officer. 3. The Ld CIT(A) erred in quashing the notice u/s 153C only on technical grounds by placing reliance on the decision of Apex Court in the case of M/s Singhad Technical Education Society 84 taxmann.com 290, the ratio of which is distinguishable from the facts of the present case, without adjudicating on the merits of the additions made based on seized annexures adnumbered UPF/RP/EL-30, 31, 34, 47, 50, and 637. 4. The Ld CIT(A) erred in quashing the assessment proceedings u/s 153C without appreciating the fact that seized material for the relevant period was there and was also mentioned in the satisfaction note for the A.....
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....dingly, completed assessment u/s 153C of the Act dt.30.03.2023 assessing the total income of the assessee at Rs. 9,54,94,651/-. 4. Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A), who granted relief to the assessee. 5. Feeling aggrieved with the order of ld. CIT(A), Revenue filed appeals before us and on the other hand, assessee filed Cross- Objections before us. 6. Before us, ld. DR submitted that the Ld. CIT(A) while passing the order has merely allowed the appeal of assessee for the reasons mentioned in para at pages 154 to 165 of his order. In this regard, it was submitted by the ld. DR that the order passed by the Ld. CIT(A) is contrary to record and law. It was submitted that the Ld. CIT(A) has merely relied upon one satisfaction note reproduced at page 156 of the order which is to the following effect : 6.1. Further, it was submitted that the Assessing Officer of the searched person had recorded a separate satisfaction on 14.03.2022 in the case of the A.K. Entertainments (India) Pvt. Limited, and Adventures International Limited. Further, ld. DR has submitted a letter dt.01.12.2022 wherein it was mention....
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.... M/s Adventures International Pvt Ltd, Hyderabad and M/s A.K. Entertainments India Pvt Ltd, Hyderabad separately by the ACIT, CC- 1(3), Hyderabad, and accordingly, notices u/s 153C were issued in both the cases. 5. The copies of satisfaction note recorded by the ACIT, Central Circle 2, Rajahmundry, and ACIT, Central Circle 1(3), Hyderabad are enclosed herewith for ready reference in the case of M/s Adventures International Pvt Ltd, Hyderabad and M/s A.K. Entertainments India Pvt Ltd, Hyderabad. 6. After issuing notices u/s 153C in the name of M/s. A. K .- Entertainments (India) Put. Ltd, the assessee company i.e. M/s. Adventures International Put. Ltd, has filed a letter dated 01.12.2022 wherein it was stated that, the company M/s. A. K. Entertainments (India) Put. Ltd, has got merged with the assessee company M/s. Adventures International Put. Ltd, vide order of Hon'ble NCLT in C.P.No.239 of 2016 (CP(TCAA)No. 18/HDB/2017) dated 03.04.2017 and filed a copy of the said order. The copy of the assessee letter is submitted herewith. 7. Further, the assessee has not produced any evidence before the ACIT, CC-1(3), Hyderabad that such merger was ever brought to ....
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....s issued u/s 153C of the IT Act. The Ld. CIT(A), has allowed the appeal of the assessee by taking into consideration only the satisfaction note u/s 153C recorded in the case of M/s. Adventures International Put. Ltd., wherein the seized material mentioned are: Annx/ UPF/RP/ EL-47 pg. no.36,42,43 and Annx/ UPF/RP/EL-34 pg. no.66. 11. However, the Ld. CIT(A), has not taken into cognizance of the fact that there exists another satisfaction note recorded for the seized material in the case of M/s. A K Entertainments (India) Put. Ltd,(merged with M/s. Adventures International Put. Ltd.,) which formed the basis for making the additions in the hands of the assessee company M/s. Adventures International Put. Ltd., which were discussed in detail in the assessment orders along with the extracts of the seized material. Therefore, the observation of the Ld. CIT(A) that there is no satisfaction recorded for the assessment year under consideration was completely incorrect and hence, the same was not accepted. 12. Accordingly, further appeal has been filed before the Hon'ble ITAT, on the ground that the Ld. CIT(A) has not taken into cognizance of the fact that there exists a....
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....er of the Assessing Officer clearly shows that these documents were not referred by the Assessing Officer while making the addition in the hands of the assessee. It was submitted that the proforma of the satisfaction note recorded u/s 153C in the case of the assessee clearly shows that the satisfaction was recorded for the A.Y. 2015-16 to A.Y. 2021-22. It is not clear from the recording of the satisfaction as to which document i.e., Annex/UPF/RP/EL-47 or Annex/UPF/RP/EL-34 pertains to the assessment year under consideration. It was submitted that the satisfaction was recorded by the Assessing Officer / searched person on 14.03.2022 and the satisfaction in the case of the A.K. Entertainments (India) Pvt. Limited and assessee u/s 153C were recorded on 27.06.2022. It was submitted that as per the record, the said A.K. Entertainments (India) Pvt. Limited was merged with assessee company w.e.f. 30.04.2017 and at the time of recording of satisfaction i.e., 27.06.2022, the said A.K. Entertainments (India) Pvt. Limited was not in existence. It was further submitted that A.K. Entertainments (India) Pvt. Limited ceases to be the legal entity after 30.04.2017 and no satisfaction can be record....
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....nt] Documents (b) Description of the seized material Documents (c) Address of premise/place from where such material was seized Residential Premises of Sri VV Balakrishna Rao, Prop. M/s. Usha Pictures and Finance Raja Ram Mohan Rai Street, Power Pet, ELURU, West Godavari District. (d) Date of seizure of such material 31/01/2021 (e) Particulars of the relevant Panchanama Panchanama Dated 31/01/2021 (f) Annexure/s. No./page Number etc (particulars to be specified) Annx/UPF/RP/EL-47 pg.no.36,42,43 and Annx/UPF/RP/EL-34, pg.no 66 6 Relationship of the person referred to in S.No.2 with the person referred to in S. No. 4 Usha Pictures & Financiers has lent loans to M/s. AdVentures International Pvt. Ltd., 7 Satisfaction of the Assessing Officer of the person referred to in section 153A that the seized material referred to in S. No. 5 belong to the person referred to in S.No. 4 A Search and Seizure operation u/s.132 of the IT Act in the case of Sri VV Balakrishna Rao, Prop. Usha Pictures and Fin....
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....rights have referred to the following Annexures in Column 1. Hyper Annex/UPF/RP/EL-50 (Pg.no.12) dated 19.08.2016 'KITTU UNNADU JAGRATHA' Annx/UPF/RP/EL47(Pg.no.26 dated 03.03.2017) EEDU GOLD EHE' Annx/UPF/RP/EL47(Pg.no.11 & 12 dated 06.10.2016 and Page No.10 handwritten letter dated 08.08.2016) 'EDORAKAM AADORAKAM' Annx/UPF/RP/EL47(Pg.no.5 dated 13.04.2016 13. Similarly, at page 7 of the order of Assessing Officer, Assessing Officer referred to the Annexure /UPF/RP/EL-50(page 12) addressed to Usha Pictures and the Assessing Officer reproduced the said Annexure which is as under : 14. The Assessing Officer at page 9 of his order, has referred the Annexure /UPF/RP/EL-47 (pages 11 and 12) and also referred to page 10. On the basis of the above said Annexures / seized documents, the Assessing Officer made addition of Rs. 1,46,76,000/- in the hands of the assessee (Page 16 of Assessing Officer's order). 15. Similarly, in para 5, the Assessing Officer in his order in table 3 refers to the following Annexures for making the addition for Rs. 176,55,800/- in the hands of the assessee (Para 6.3 of Assessing Officer's order). Table 3 as mentio....
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.... Annx/UPF/RP/EL- 93 (page no.68) 17.03.2017 35,00,000 Annx/UPF/RP/EL- 93 (page no.66) 18.03.2017 25,00,000 Total 7,66,19,800 5,00,32,0 16. From the reading of the table 1 and 3 (supra), it is clear that there is no reference of the Annexures mentioned in satisfaction note for making the additions in the hands of the assessee for an amount of Rs.1,46,76,000/- and Rs. 1,76,55,800/-. In other words, the addition made by the Assessing Officer not on the basis of the incriminating material found and referred in the satisfaction note at the time of making the addition. In our considered opinion, the law is fairly settled that the Assessing Officer or the ld. CIT(A) cannot made addition in the hands of the assessee unless the same is made on the basis of incriminating material which was sized or pertains to the assessment year for the year under consideration. For that purposes, we may fruitfully rely on the decision of hon'ble Supreme Court in the case of Sinhghad Educational Society reported in 84 Tax....
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....4 Usha Pictures & Financiers has lent loans to M/s. AK Entertainments India Pvt. Ltd. 7 Satisfaction of the Assessing Officer of the person referred to in section 153A that the seized material referred to in S.No. 5 belong to the person referred to in S.No. 4 A Search and Seizure operation u/s.132 of the IT Act in the case of Sri VV Balakrishna Rao, Prop. Usha Pictures and Financiers was conducted on 28/01/2021. During the course of search proceedings, certain incriminating material relating to the assessee were found and seized vide Annx/UPF/RP/EL-30 pg 118 to 137 and Annx/UPF/RP/EL-31 - pg 43 to 46, Annx/UPF/RP/EL-34-pg. 46 to 66, 1 to 31 Annx/UPF/RP/EL-47, pg. 10 to 60, Annx/UPF/RP/EL-Pg.No. 12,50, pg.130 to 131, Annx/UPF/RP/EL-63 Pg. 147 to 202 In view of the above, I am satisfied that the seized materials referred to in S.no.5 relate to the person referred in S. no 4 and have a bearing on determining the total income of the assessee 8 Assessment Years involved A.Y. 2015-16 to A.Y. 2021-22 Note: 1. Copy of relevant Panchanama may be sent at the time of handling over of the relevant seize....
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....o in S.No.2 with the person referred to in S.No. 4 Usha Pictures & Financiers has given cash loans & also made cash payments for acquisition of movie distribution rights to M/s. AK Entertainments India Pvt. Ltd. 7 Satisfaction of the Assessing Officer of the person referred to in section 153C that the seized material referred to in S.No. 5 belong to the person referred to in S.No. 4 As per Annexure 8 Assessment Years involved A.Y. 2015-16 to A.Y. 2021-22. Sd/- (K. SHIVALINGAM) Assistant Commissioner of income Tax, Central Circle-1(3), Hyderabad Date: 27.06.2022 Place: HYDERABAD 19. It was submitted by the ld.DR that the proceedings against M/s. A.K. Entertainments India Pvt. Ltd. were dropped as the said company had merged with the assessee on 30.04.2017. The ld.DR has drawn our attention to the approval of dropping of proceeding u/s 153D of the Act against A.K. Entertainments (India) Pvt. Limited, of the letter dt.27.03.2023. The letter of Addl. Commissioner of Income Tax at page 105 reads as under : 20. The ld.DR had submitted that after dropping of the assessment proceedings in the hands of A.K. Entert....
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.... by the Tribunal." 22. We have heard the rival contentions and perused the material on record. Admittedly, as per the communication at page 105 dt.27.03.2023, the Revenue has dropped the proceedings against A.K. Entertainments (India) Pvt. Limited, for the A.Y. 2017-18 to 2020-21. The question which requires to be answered is whether the dropping of proceedings based on merger of the company on 30.04.2017 whether the satisfaction note recorded in the hands of A.K. Entertainments (India) Pvt. Limited, can form basis of making the addition in the hands of the assessee or not. In our understanding, no addition can be made unless the Assessing Officer record the satisfaction u/s 153C of the Act disclosing the reasons for initiating the proceedings against the assessee. In the present case, after dropping of the proceedings against A.K. Entertainments (India) Pvt. Limited, no fresh satisfaction was recorded by the Assessing Officer within the four corners of 153C recording the satisfaction that the material seized belongs to the assessee. In our view, in the absence of satisfaction as required to be recorded u/s 153C based on seized documents referred to in the satisfaction note in t....
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.... considered by us and reasons given in preceding paragraph Nos.8 to 25 shall apply mutatis and mutandis to this appeal as well. Therefore, for similar reasons, we dismiss this appeal too. 27. In the result, the appeal of the Revenue in ITA No.489/Hyd/2024 is dismissed. C.O.Nos.5 and 6/Hyd/2024 28. Coming to Cross - Objections filed by the assessee, in view of our finding in both the appeals of Revenue, the cross objections filed by the assessee are dismissed. 29. In the result, the C.Os. filed by the assessee are dismissed. 30. To sum up, the appeals of the Revenue and also the Cross - Objections of assessee are dismissed. Order pronounced in the Open Court on 19th December, 2024. ============= Document 1 Proforma for Recording Satisfaction under section 153C (to be filled by the Assessing Officer of the person referred to in section 15]C) 1 2 Name of the Group Searched Name USHA BALA GROUP VV BAÅA KRISHNA RAO (HUF) Prop. Usha Pictures and financiers, Raja Rammohan Rai Street, Power Pet. ELURU, West Godavari District. PAN : AAAHV6609Q and PAN of the person referred to in section 153A 3 Date of initiation of search in the case of the person referred....
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.... of seized material on the basis of which action under section 153C Is proposed (a) Nature of the seized material [money/bullion/jewellery/other valuable article or thing/books of account/document] Documents (b) Description of the seized material Loose sheets (c) Address of premise/place from where such material was seized · Residential Premises of Sri Và Balakrishna . Rao, Prop. M/s. Usha Pictures and Finance Raja Ram Mohan Ral Street, Power Pet, ELURU, West Godavari District. (d) Date of seizure of such material 31/01/2021 [c] Particulars of the relevant Panchanama Panchanama Dated 31/01/2021 (0) Annexure/s. No./page Number etc (particulars to be specified) Anna/UPF/RP/EL-47 * pg.no.36,42,43 and Annx/UPF/RP/EL-34, pc.no 66 6 Relationship of the person referred to in S.No.2 with the person referred to in S.No. 4 Usha Pictures & Financiers has made cash payments for acquisition of movie distribution rights to M/s. Adventures International Pvt. Ltd. 7 Satisfaction of the Assessing Officer of the person referred to in section 153C that the seized material referred to in S.No. 5 belong to the person referred to In S.No. 4 As per Annexure 8 Assessment Years Invol....
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....ala Krishna Rao (HUF) perlauns to Adventures International Pvt. Ltd. and the same has bearing on the determination of total income of the assessce for the Asst. years 2015-16 to 2021-22 and hence, this is a fit case for initiation of proceedings u/s. 153C of the I. T. Act, 1961. Therefore, the" proceedings are initiated in the case of the assessee u/s. 153C of L.T. Act. Genel. (K. SHIVALINGAM) Assistant Commissioner of Income-tax, Central Circle-1(3), Hyderabad. Document 3 A.K. Entertainments (India) Pvt. Ltd. Dr. No. 8-2-293/82/F/C/30, Film Nagar, Jubilee Hills Hyderabad-500 096. INDIA ) 19-08-2016 Received amount Rs 50,00,000/ rupees fishy lathy. through RIGS 1000,000/ cash 4000000/- - from who picture Eluru Towards week Godavari distribution amount from 14reals. (or the picture "Hyper" Starring Ram, Rashitherine Directed by Santosh Srinivas music by Ghibrey, produced by Ramachet Gropi achanta, Ani Confera. For A.K. Entertainments Und) Pvt Ltd Authorised Signatory 19/08/2016 Document 4 100 अपर आयकर आयà¥à¤•à¥à¤¤, सेंटà¥à¤°à¤² रेंज....