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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आयकर अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A No.89/Ind/2016 Assessment Year: 2006-07 ACIT 1(1) M/s. L.N. Gupta Mathur Vaishya बनाम/ Charitable Trust Bhopal Vs. E-1/55, Arera Colony, Bhopal (Revenue) (Respondent) PAN: AAATL4820E
CO No.31/Ind/2016 ( Arising out of IT(SS)A No.89/Ind/2016) Assessment Year: 2006-07 M/s. L.N. Gupta Mathur ACIT 1(1) बनाम/ Vaishya Charitable Trust Bhopal Vs. E-1/55, Arera Colony, Bhopal (Appellant) (Revenue) PAN: AAATL4820E
IT(SS)A Nos.195 &196/Ind/2016 Assessment Years: 2008-09 & 2009-10
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016
M/s. Kasturi Devi Ramkumar ACIT 1(2) बनाम/ Vaishya Charitable Trust vs. Bhopal Vs. ACIT 1(2) Bhopal (Appellant) (Revenue) PAN: AAATK6258L
Revenue by Smt. Ashima Gupta CIT-DR Respondent by Shri Anil Kumar Khabya, CA Date of Hearing: 09.07.2019 Date of Pronouncement: 18.07.2019 आदेश / O R D E R PER MANISH BORAD, A.M: Above captioned appeals filed at the instance of revenue, assessee and Cross objection by the assessee pertaining to A.Ys. 2006-07 2008-09 & 2009-10 are directed against the order of Ld. Commissioner of Income Tax(Appeals), Bhopal, (in short ‘CIT(A)’), dated 28.03.2016 & 29.07.2016 which are arising out of the order u/s 153C r.w.s 143(3) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 26.03.2013 by ACIT-1(2), Bhopal. 2. In the case of L. N. Gupta Mathur Vaishya Charitable Trust the Revenue has raised following grounds of appeal in ITANo.89/Ind/2017: “Whether on the facts and circumstances of the case, the Ld. CIT(A), was justified in deleting the addition of Rs.68,00,000/- as the assessee was not eligible for exemption u/s 12 of Income Tax Act, 1961 since the assessee was engaged in the business of renting the property owned by it for earning money for the purposes of
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 the marriages, birthdays party etc.”
The Assessee has raised following grounds of appeal in CONo.31/Ind/2016: “That the entire proceeding of assessment by invoking provisions of section 153C is without jurisdiction and the same is bad in law.”
In the case of another Assessee namely Kasturi Devi Ramkumar Vaishya Charitable Trust has raised following grounds of appeal in IT(SS)ANos.195 & 196/Ind/2017 for A.Y. 2008-09 & 2009-10: “That the entire proceeding of assessment by invoking provisions of section 153C is without jurisdiction and the same is bad in law. That the Ld. CIT(A)/AO erred in denying benefit of deduction u/s 11(2) of the Act. That the Learned erred in not quashing charging of interest of Rs.1379/- u/s 234B of the Act when there is no liability of advance tax.”
From perusal of the above grounds we find that the assessee’s Cross Objection in CO No.31/Ind/2016 and in assessee’s appeal in IT(SS)A Nos.195 & 196/Ind/2016 common issue has been raised contending that the assessment proceedings carried out u/s 153C of the Act are bad in law and are without jurisdiction since no proper satisfaction was recorded by the Ld. Assessing Officer ( in short ‘Ld. AO’) of the searched person. 6. We will first take this common legal issue and for the purpose of adjudication we will take up the facts of the assessee namely L.N. Gupta Mathur Vaishya Charitable Trust.
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 7. Brief facts as culled out from the records are that the assessee is a charitable trust showing income from interest and donation. Search and seizure operation were conducted u/s 132 of the Act at the residential premises of Mr. Rakesh Gupta on 28.10.2010 and the same was concluded on 30.10.2010. During the course of search, various documents related to the assessee were found and seized as per Annexure BS-1/3 page no.1 to 4 and 13 to 34 of the Panchnama dated 28.10.2010. Ld. AO after recording the reason, issued notice u/s 153C of the Act dated 06.03.2012 directing the assessee to file return for A.Y. 2005-06 to 2010-11. Notices were duly served and necessary compliance was made. During the course of assessment proceedings Ld. AO was not satisfied with the benefit claimed by the assessee u/s 12A of the Act as in his view the assessee was merely earning income from renting the building for the purpose of marriage and birthday parties and not for any charitable activity. He accordingly treated the excess of income/expenditure as income for the year under assessment. 8. Aggrieved with the order of Ld. AO assessee preferred an appeal before the Ld. CIT(A) challenging validity of the proceedings u/s 153C of the Act, on the ground that no satisfaction was recorded by the ld. AO of the searched person namely Mr. Rakesh Gupta with reference to the seized documents pertaining to the assessee found during the course of search. However assessee got part relief from Ld. CIT(A). Assessee could not succeed on legal ground.
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 9. Now the assessee has filed cross objection challenging the validity of the assessment proceedings carried out u/s 153C r.w.s. 143(3) of the Act. 10. At the outset, Ld. counsel for the assessee submitted that the issue is squarely covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court in the case of CIT v. Mechmen 380 ITR 591 (MP) wherein the Hon'ble Court has held that satisfaction is required to be made by the assessing officer of the searched person as well as the assessing officer of the person other than the searched person even when the assessing officer is common for both. Ld. counsel for the assessee further submitted that no satisfaction note of the assessing officer of the searched person is available in record with reference to the documents seized during the course of search pertaining to the assessee. 11. Per contra Learned Departmental Representative (Ld. DR) vehemently argued supporting the orders of both the lower authorities. She also placed reliance on the judgment of Hon'ble Delhi High Court in the case of Pr. CIT vs. M/s. Nau Nidh Overseas P. Ltd. order dated 03.02.2017 and Pr. CIT vs. Instronics Ltd. [2017] 82 taxmann.com 357 (Delhi) wherein it has been held that where the assessing officer of searched person other than the searched person are same, the failure of the assessing officer in such case to record a separate satisfaction in the case of searched person will not vitiate the proceedings under section 153C of the Act initiated against the person other than the searched person.
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 12. We have heard rival contentions and perused the record placed before us. The short issue for adjudication is that in case the assessing officer of the searched person and of a person other than the searched person is same, whether it is mandatory for the Ld. AO to prepare separate satisfaction note with reference to the documents seized during the course of search relating to the “person other than the searched person” in order to initiate the assessment proceedings u/s 153C of the Act. 13. In the instant case, the search was conducted in the case of Mr. Rakesh Gupta (Searched person) on 28.10.2010 and concluded on 30.10.2010. During the course of search various documents relating to the assessee (person other than the searched person) were found and seized as per Panchnama dated 28.10.2010. Coincidently, the assessing officer of the searched person happens to be the assessing officer of the ‘person other than the searched person. In the office file only one satisfaction note is prepared by the assessing officer in his capacity as the Assessing Officer of the assessee i.e. the ‘‘person other than the searched person’. There is no other satisfaction note prepared by the Assessing officer of the searched person mentioning therein that certain documents or other items as provided in section 153C of the Act relating to other person are required to be examined by the Assessing Officer of the ‘person other than the searched person’. Before adverting to the adjudication of the facts we would like to produce below the provisions of u/s 153C(1) of the Act which reads as under:
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 “Notwithstanding anything contained in section 139, 147, section 148, section 149, undisclosed income belongs to any section 151 and section 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 document seized or requisitioned pertains or pertain to, or any information contained therein, related to, A person other than the person referred to in section 153A, then the books of account or documents or assets, seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against each such other person and issue notice and assess or reassesss the income of the other person in accordance with the provision of section 153A, if that assessing officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153C]. 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.
From perusal of the provisions of sub-section (1) of section 153C of the Act, it contemplates that first condition for initiating the assessment proceedings u/s 153C of the Act is that the assessing officer of the searched person after being satisfied should hand over the books of account or documents or seized requisitioned to be handed over to the assessing officer having jurisdiction over such other person. It clearly provides that
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 the satisfaction note has to be prepared by the Ld. AO of the searched person before handing over the seized material to the Ld. AO of the ‘person other than the searched person’. Second condition is that the Assessing officer of the “person other than the searched person” shall before preceding for issuing notice and assess or reassess the income of the ‘person other than the searched person’ in accordance with the provision of u/s 153A of the Act needs to be ‘satisfied’ that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. 15. So the satisfaction note is to be prepared two occasion i.e. firstly by the assessing officer of the searched person at the time handing over seized material and secondly by the Assessing Officer having jurisdiction over the “person other than the searched person” before issuing notice u/s 153C of the Act. However, u/s 153C(1) of the Act there is no clear provision to deal with a situation where the assessing officer of the searched person and the person other than the searched person is same. In the instant case same is the situation. 16. We find that in the given facts circumstances of the case, Hon'ble Jurisdictional High Court in the case of CIT vs. Mechmen has discussed the provisions of u/s 158BD of the Act viz-a-viz provision of u/s 153C of the Act and laid down the ratio that even if the assessing officer of both the searched person and ‘person other than the searched person’ is same, two separate satisfaction note are to be prepared for lending credence to the Assessing Officer for
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 his/her satisfaction and also to provide opportunity to assessee for giving meaningful explanation if needed. The relevant abstract of the judgment of Hon'ble jurisdictional High Court including the facts dealt therein are mentioned below:
Facts
“A search was conducted against the partners of respondent firm under Section 132(1) of the IT Act on 16.9.2005. A survey under Section 133A was conducted at the business premises of the respondent firm and no papers were impounded during the course of that survey. However, the Assessing Officer [ACIT-1(2)] issued notice under section 153C on 22.3.2006, calling upon the respondent to file returns for the AYs 2000-01 to 2005-06. The assessee filed returns within the prescribed time for the respective assessment years. The assessee also filed the return for the assessment year 2006-907 under section 139(1). Besides a response was also filedto the notice under section 142(1). The assessing Officer passed order under section 153C/143(3) making identical additions towards disallwoances of purchase amounts and fabrication charges for all the assessment years and addition towards excess stock in the assessment year 2006-07. The commissioner (appeals) found as a matter of fact that no incriminating material attributable to the assessee was seized during the course of search at the premises of the person in respect of whom search was conducted and there was no satisfaction or even the basis for satisfaction to issue a notice under section 153C. No satisfaction had been recorded by the Assessing Officer even before issuance of notice under section 153C. On thse findings, the commissioner (appeals) concluded that the action of the assessing officer was illegal and invalid and quashed the proceedings for the concerned assessment years. This was confirmed by the Tribunal. On appeals.
Relevant finding
We are not inclined to accept the argument of the Department that the purpose underlying the two provisions is different. We also find that even the procedure is not different. The subject matter of the action would differ in the context of the machinery provision invoked, in the given case. That, however, cannot be the basis to extricate the Assessing Officer, who resorts to power under Section 153C of handing over the items referred to in Section 153C to the Assessing Officer having jurisdiction, of his duty to be satisfied about the jurisdictional fact that the items belongs or belong to a person other than the person referred to in Section 153A.
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 18. The concomitant of this conclusion, is that, the legal position as applicable to Section 158BDregarding satisfaction in the first instance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction; and in the second instance of the Assessing Officer having jurisdiction whilst sending notice to such other person (other than the person referred to in Section 153A), must apply proprio vigore. The fact that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in Section 153A). The question as to whether that may influence the opinion of the Assessing Officer having jurisdiction over such other person, also cannot be the basis to take any other view. As a matter of fact, the other Assessing Officer to whom the items are handed over, before issuing notice must himself be satisfied after due verification of the items received and the disclosures made by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, the argument of the Department must be negatived.
After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him.
As a result, we hold that there is no infirmity in the view taken by the Tribunal on the questions under consideration. The view taken by us is reinforced from the decisions of other High Courts in the cases of Commissioner of Income Tax (Central) Vs. Gopi Apartment (supra), Pepsi Foods P. Ltd. (supra), Pepsico India Holdings P. Ltd. (supra) and lastly CIT Vs. Madhi Keshwani (supra). The observations of the Delhi High Court in the case of SSP Aviation Ltd. (supra) have been explained in the subsequent case of Pepsico India Holdings P. Ltd. (supra).
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 21. We conclude that the condition precedent for resorting to action under Section 158BD delineated by the Supreme Court in the case of Manish Maheshwari (supra) and in the recent case of Commissioner of Income Tax-III Vs. Calcutta Knitwears (supra), would apply on all fours mandating satisfaction of the Assessing Officer(s) dealing with the case at the respective stages referred to in Section 153C.
Reverting to the substantial questions of law articulated while admitting these appeals, we hold that the same will be of no avail to the Department considering the fact situation of the present case and for the reasons mentioned hitherto. In that, we have rejected the argument that even in cases, under Section 153C the Assessing Officer(s) need not record satisfaction and in particular at both the stages - be it Assessing Officer of searched person or Assessing Officer having jurisdiction over such other person. Notably, the requirement of recording satisfaction is not for the benefit of the Assessing Officer(s), but lending credence to his satisfaction and on which matters the assessee can give meaningful explanation and reason it out as and when opportunity is given to the concerned assessee.
In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail.
Accordingly, these appeals are dismissed with no order as to costs.
From going through above judgment the ratio laid down for the purpose of u/s 153C of the Act is that the Assessing Officer of the searched person before handing over the seized documents to the Assessing Officer having jurisdiction must be "satisfied" that the items belongs or belong to the person other than the person referred to in Section 153A. That satisfaction of the concerned
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 Assessing Officer is a sine qua non. On examining the facts of the instant appeals we observe that during the course of hearing revenue was directed to place on record the satisfaction note prepared by the Ld. AO before initiating the proceedings u/s 153C of the Act vide order dated 30.11.2018. Ld. DR placed on record letter issued by DCIT, Bhopal on 28.07.2012 prepared by the assessing officer in the case of assessee i.e L.N. Gupta Mathur Vaishya Charitable Trust. No satisfaction note of the Assessing Officer of the searched person i.e. Mr. Rakesh Gupta was found to be made before handing over the seized documents relating to the assessee. Ld. DR was fair enough to accept that only one satisfaction note was prepared and that was of the assessing officer of the “person other than the searched person”. Undisputedly no satisfaction note was prepared by the Ld. AO of the searched person mentioning about the seized records pertaining to the assessee being the person other than the searched person. 18. Though the ld. DR has placed reliance on the judgment of Hon'ble Delhi High Court in the case of Pr. CIT vs. M/s. Nau Nidh Overseas P. Ltd (supra) and Pr. CIT vs. Instronics Ltd.(supra) favouring for the revenue, however, as per the Judicial precedence we are bound to follow the judgment of Hon'ble Jurisdictional High Court since there is no judgment of Hon'ble Apex Court favouring the revenue about the issue raised before us. 19. We, therefore, respectfully following the judgment of Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax v. Mechmen(supra) and in the given facts of the case wherein
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 the Assessing Officer of the searched person( Rakesh Gupta) has not prepared any satisfaction note in order to satisfy that the alleged seized documents relate to the assessee (person other than the searched person) which is the first step which should have been taken up by the Ld. AO no matter that Assessing Officer is common for both the searched person and the person other than the searched person, therefore, in our considered view all the proceedings carried thereafter u/s 153C r.w.s 153A of the Act are without jurisdiction, bad in law and void ab initio and the same are liable to be quashed. We, accordingly, allow sole ground raised in the cross objection filed by the assessee in case of L.N. Gupta Mathur Vaishya Charitable Trust. 20. Since we have allowed the ground raised by the assessee in the Cross Objection, dealing with the grounds raised by the revenue challenging the finding of the Ld. CIT(A) giving relief to the assessee deleting the addition of Rs.68,00,000/-, merely becomes academic in nature and therefore, needs no adjudication and the same is dismissed being infractuous. 21. Apropos to the appeals of another assessee raised in the case of M/s Kasturi Devi Ramkumar Vaishya Charitable Trust in IT(SS)ANo.195 & 196/Ind/2016 the issues and facts remains the same wherein the assessee has challenged the validity of assessment u/s 153C of the Act. In this case also no satisfaction note was prepared by the Ld. AO of the searched person before handing over the seized documents to Assessing Officer of the assessee i.e. “person other than the searched person”.
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016 22. We find that in this case also Ld. AO of the searched person failed to prepare a satisfaction note evidencing a satisfaction that some of the seized material found during the course of search were related to the assessee which is a person other than the searched person. 23. We have adjudicated similar issue in the case of L.N. Gupta Mathur Vaishya Trust in IT(SS)ANo.89/Ind/2016 and CO. No.31/Ind/2016 in the preceding paras and applying the same ratio as held by Hon'ble Madhya Pradesh High Court in the case of CIT vs. Mechmen(supra), hold the proceedings u/s 153C of the Act initiated in the case of assessee being without jurisdiction bad in law and void ab initio. Accordingly, common grounds raised by the assessee in IT(SS)ANo.195 & 196/Ind/2017 for A.Ys. 2008-09 & 2009-10 are allowed. 24. In the result, Cross Objection by the assessee in CO No.31/Ind/2016 is allowed, Revenue’s appeal in IT(SS)ANo.89/Ind/2016 is dismissed being infractuous & common grounds raised by the assessee in IT(SS)A Nos. 195 & 196/Ind/2016 are allowed. Order was pronounced in the open court on 18 .07.2019.
Sd/- Sd/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore; �दनांक Dated : 18/07/2019 ctàxÄ? P.S/.�न.स. 14
L.N. Gupta Mathur Vaishya Trust & Kasturi Devi Ramkumar IT(SS)ANo.89/Ind/2016 & CONo.31/Ind/2016 & IT(SS) No.195 & 195/Ind/2016
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar