M/S. A.B. ENGINEERING,,BARODA vs. THE ACIT, CENTRAL CIRCLE-1,, BARODA

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 1 of 12 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD

BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER

IT(SS)A No.77/Ahd/2014 Assessment Year: 2009-10

M/s. A.B. Engineering, The Assistant Commissioner of 783/3, GIDC Estate, Income Tax, Kakarpura, Central Circle – 1, Vs. Baroda – 390 014. Baroda. [PAN – AAOFA 6709 Q]

IT(SS)A No.121/Ahd/2014 Assessment Year: 2009-10

The Assistant Commissioner of M/s. A.B. Engineering, Income Tax, 783/3, GIDC Estate, Central Circle – 1, Kakarpura – 390 010 Vs. Baroda. Baroda – 390 014. [PAN – AAOFA 6709 Q]

IT(SS)A No.443/Ahd/2013 Assessment Year: 2009-10

Shri Bhavesh Praful Mistry, The Assistant Commissioner of C-36, Viral Park Society, Income Tax, B/h. Nandigram Appt., Central Circle – 1, GIDC, Vadsar Road, Baroda. Vs. Baroda – 390 010. [PAN – ADLPM 4950 B] (Appellants) (Respondents) Assessee by Shri Bandish Soparkar & Parin Shah, ARs. Revenue by Shri Sudhendu Das, CIT-DR Date of Hearing 08.05.2024 Date of Pronouncement 11.07.2024

O R D E R PER BENCH; IT(SS)A Nos.77 & 121/Ahd/2014 are cross appeals filed by the Assessee (M/s. A.B. Engineering) & Revenue against the order dated 6th December, 2013

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 2 of 12 passed by the CIT(A)-IV, Ahmedabad for the Assessment Year 2009-10 and IT(SS)A No.443/Ahd/2013 is an appeal filed by the Assessee (Shri Bhavesh Praful Mistry) against the order dated 30th September, 2013 passed by the passed by the CIT(A)-IV, Ahmedabad for the Assessment Year 2009-10.

IT(SS)A No.77/Ahd/2014 for Assessment Year 2009-10

“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has grossly erred in upholding validity of notice u/s.153C of the Act and coessential order passed by the Ld. Assessing Officer. 2. On the facts and in the circumstances of the case the learned CIT(A) has erred in confirming the addition of Rs.4,61,060/- out of alleged unaccounted income of Rs.1,15,00,000/- in current Assessment Year. 2.1 On the facts and in the circumstances of the case the learned CIT(A) has erred in rejecting the claim of appellant that addition of allege on money receipt of Rs.1,15,00,000/- cannot be made in the hands of appellant on sole basis of statement of partner of appellant firm when such statement was subsequently related by such partner, no evidence whatsoever was fond during course of search or bought on record by the Ld. Assessing Officer during assessment Proceeding which suggest receipt of alleged unaccounted income and confirmation of all buyers of plots were submitted during assessment proceeding wherein they have categorically denied unaccounted payment and such statements were not contravened by the Assessing Officer.”

IT(SS)A No.121/Ahd/2014 for Assessment Year 2009-10 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in restricting the addition of Rs.1,15,00,000/- made on account of on-money receipt to Rs.72,45,000/- for A.Y. 2009-10 and directing the balance of Rs.42,55,000/- to be considered for A.Y. 2010- 11. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.67,83,990/- out of the above addition of Rs.72,45,000/- and accordingly sustained the addition to Rs.4,61,010. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the addition of Rs.39,00,000/- made on account of sale of land.

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 3 of 12 4. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of CIT(Appeals) be set aside and that of the bnAssessing Officer be restored.”

IT(SS)A No.443/Ahd/2013 for Assessment Year 2009-10 “1. On the facts and in the circumstances of the case of the appellant, the order passed by the Learned CIT (Appeals) is bad in law and liable to be quashed. 2 On the facts and in the circumstances of the case of the appellant, the Learned CIT(Appeals) has grossly erred in sustaining the addition for Rs.1,26,20,891, holding the same to be 'on-money payment', when the Assessing Officer has taxed the same as unaccounted income, referable to statement under Section 132(4) of the Act. 3. Without prejudice to the above, on the facts and in the circumstances of the case of the appellant, Learned CIT(Appeals) has grossly erred in confirming the addition to the extent of Rs.1,26,80,891 (out of Rs.1,36,20,891) made by the Assessing Officer on account of unaccounted investment in property when she ought to have deleted the same, as no such addition has been warranted/justified. 4. On the facts and in the circumstances of the case of the appellant, the Leamed CIT(Appeals) has grossly erred in dismissing Ground No.4 of the Appellant's appeal challenging levy of interest under Section 234A, 2348 and 234C of the Act by observing that the said levy was consequential in nature. She ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the Appellant's case, the Appellant having not committed any default; there was no question of the Appellant to be visited with any levy of interest under aforesaid provisions.” 3. Firstly, we are taking the appeals filed in case of M/s. A.B. Engineering being IT(SS)A Nos.77 & 121/Ahd/2014 by the assessee and Revenue. Search action under Section 132 of the Income Tax Act, 1961 was carried out in the Baroda Bushing and Insulators Group of cases on 10.09.2009. In response to notice under Section 153C of the Act, the assessee filed return of income on 01.09.2011 showing Nil income. Thereafter, notices under Sections 143(2) & 142(1) of the Act were issued and served to the assessee. The Ld. AR of the assessee attended the proceedings and submitted the details and explanation alongwith submitting the

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books of account as well. The Assessing Officer observed that during the course of survey at the office of M/s. AB Engineering (Office of Shri Prafulbhai K. Mistry) at 748/3, GIDC Industrial Estate, Makarapur, Baroda, a large number of incriminating papers were found based on which Shri Prafulbhai K. Mistry admitted that AB Engineering/firm has received Rs.1.15 Crores on-money made a voluntary disclosure of Rs.1,36,20,891/- in his statement recorded under Section 132(4) of the Act. The Assessing Officer further observed that the return of income filed by the assessee that the assessee has not included the disclosure amount in its return of income. Accordingly, vide Order Sheet Entry dated 29.11.2011, the assessee was asked that during the survey at the office of M/s A.B Engineering, Annexure A-1 to Annexure A-3 were impounded which evidences sale of 17 sheds at GIDC Makarpura on plot no.922 and 923. On the sale of the above sheds evidenced by A1 to A3 Shri Prafulbhai K. Mistry in his statement admitted that receipt of Rs.1.15 crores of current year were unaccounted. In his statement, Shri Prafulbhai K. Mistry admitted that AB Engineering/firm had received Rs.1.15 crores on-money over and above the disclosed/accounted receipt on account of said land sale proceeds. The Assessing Officer observed that the assessee did not disclose this part which was made during the survey in his return of income. The show cause notice was issued to the assessee and the assessee submitted the reply. After considering the same, the Assessing Officer held that the 17 sheds were sold during the Assessment Year 2009-10 by AB Engineering and hence the addition of Rs.1.15 crores was made by the Assessing Officer. The Assessing Officer also made addition of Rs.39 lakhs in respect of the statement of Ashokbhai Patel who accepted that the amount on account of land sale which was actually belonged to AB Engineering.

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assessee. Notice under Section 153C of the Act was issued on 14.07.2011 in case of the assessee. The return of income at nil was filed by the assessee on 01.08.2011. The order under Section 153C read with Section 143(3) of the Act was passed on 28.12.2011 at Rs.1.54 crores thereby making addition of Rs.1.15 Crores on account of statement and disclosure of Shri Prafulbhai K. Mistry in survey conducted at assessee’s premises. The Ld. AR further submitted that the addition of Rs.39 lakhs on account of information received by the DCIT, Circle 2(2) was made in respect of the statement of Ashokbhai Patel. The CIT(A) dismissed the appeal of the assessee thereby upholding the proceedings under Section 153C of the Act as well as confirming the addition of Rs.1.15 Crores and holding that on-money pertaining to Assessment Year 2009-10 is Rs.72.45 lakhs. Further the Ld. AR submitted that the CIT(A) further held that Rs.67.83 lakhs are taxed in the hands of Bhaveshbhai and to that extent addition is protected and deleted the addition of Rs.39 lakhs. The Ld. AR submitted that the satisfaction note stated that the documents belonged to the assessee but the same is factually incorrect and erroneous. The Ld. AR submitted that the documents can at best related to the assessee but it cannot be stated that the same belonged to the assessee. Prior to amendment of Finance Act 2015, the Revenue could not assess the income under Section 153 of the Act for documents relating to the assessee. The satisfaction note also does not show that the documents belonged to the assessee. The Ld. AR further submitted that the satisfaction note dated 14.07.2011 does not mention about the survey conducted at the assessee’s premises and, therefore, satisfaction note recorded at the time of search in the case of that assessee are the same in the assessee’s case for that matter for search party as well. Thus, the satisfaction note does not record any document belonged to or relating to the assessee. The Ld. AR further relied upon the Circular No.24/2015 dated 31.12.2015 issued by the CBDT thereby stating that the clause especially the stages mentioned in paragraph no.2 (b) & (c) envisage in that Circular will be applicable in assessee‘s case only when the satisfaction note is a pre-requisite and that the Assessing Officer has to prepare satisfaction note which is mandatory in the situation envisaged in para 2(b) & (c). The Circular read as under :- “CIRCULAR NO.24/2015 [F.NO.279/MISC./140/2015/ITJ]

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 6 of 12 SECTION 153C, READ WITH SECTION 158BD, OF THE INCOME TAX ACT, 1961 SEARCH AND SEIZURE - ASSESSMENT OF INCOME IN CASE OF OTHER PERSON - RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD/153C OF SAID ACT CIRCULAR NO.24/2015 [F.NO.279/MISC./140/2015/ITJ), DATED 31-12-2015

The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12-3-2014 [2014] 43 taxmann.com 446 (SC) (available 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'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 AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be deckled in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.”

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 7 of 12

5.1 The Ld. AR relied upon the following decisions:-

a) Pepsi Foods(P) Ltd. [2014] 52 taxmann.com 220 (Delhi) b) Sunway Realtech (P) Ltd. [2022] 142 taxmann.com 477 (Delhi) c) Vikas Telecom Limited [2022] 135 taxmann.com 362 (Delhi) d) ACIT vs. Atul Kumar Gupta [2023] 152 taxmann.com 99 (Delhi Trib)

5.2 The Ld. AR further submitted that if the Assessing Officer of the searched person and the Assessing Officer of the assessee are same, as stated by the Ld. DR, then such a satisfaction note ought to have been recorded at the time of search or alongwith the initiation of proceedings against the searched person. It is in fact recorded only after almost two years from the date of search and thus it is time barred as held in case of Jitendra Modi, 403 ITR 110 (Guj. HC). The Ld. AR further summitted that the entire addition of Rs.1.15 Crores is bad and illegal in as much as other than statement of assessee, there is no other evidence about on-money receipt of Rs.1.15 Crores. The statement given by the assessee on 10.09.2009 was retracted as early as 02.03.2010, hence the same cannot be relied. As regards to calculation of proportionate on-money received before August 2008 by the CIT(A) in para 7.2 is erroneous. The Ld. AR submitted that in the absence of any party-wise information being available, when it is seen that the assessee did receive on-money and Bhavesh paid on-money, there being no other source of payment of cash, the same should be fully set off.

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 8 of 12

jurisdiction of Circle-1(1)(1) was formed by merger of erstwhile 5 Circles i.e. Circle- 1(1)(1), Circle-1(1)(2), Circle-1(2), Circle-1(3) & Circle-4(1), thus the case record as well as seized material are scattered to the multiple floors of Aaykar Bhavan as well as Old GEB Building. The Ld. DR submitted that the assessment proceedings in this case was completed under Section 153C of the Act in accordance with Section 153A of the Act wherein the satisfaction note is not required and, therefore, assessment is justifiable. Ld. DR relied upon the Assessment Order and subsequently mentioned that the additions which were deleted by the CIT(A) which was challenged by the Revenue in ITA No.121/Ahd/2014 clearly set out that the restricted addition on account of on-money receipt for A.Y. 2009-10 and directing the balance of Rs.42,55,000/- to be considered for A.Y. 2010-11 is not justifiable. Thus, the addition of Rs.67,83,990/- in fact has been deleted from the remaining addition of Rs.72,45,000 without any cogent reason by the CIT(A). The Ld. DR further submitted that deleting addition of Rs.39 Lakhs made on account of sale of land is also not justified.

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 9 of 12

the documents for invoking Section 153C of the Act was disclosed and referred in the satisfaction note as well as in the Assessment Order by the Revenue which is a crucial aspect while dealing with searched cases and in fact in this particular case there was a survey action in assessee’s case at assessee’s premises as well. Thus, the contention of the Ld. AR, therefore, appears to be not correct in the light of the Circular No.24/2015 dated 31.12.2015 issued by CBDT wherein it is stated that as per the Hon’ble Supreme Court observed in the case of M/s. Calcutta Knitwears [2014] 43 taxmann.com 446 for the purpose of Section 158BD of the Act, recording of a satisfaction note is a pre-requisite and the satisfaction note must be prepared by the Assessing Officer before he transmits the record to the other Assessing Officer who has jurisdiction over such other person under Section 158BD/153C and the satisfaction note could be prepared at the stage of course of the assessment proceedings under Section 158BD of the Act or immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person. In this particular case of the assessee, the fact remains that the search action under Section 132 of the Act in the case of Baroda Bushing & Insulators Group took place on 10.09.2009 and the Assessing Officer recorded the satisfaction note on 14.07.2011. The contention of the Ld. AR that the same is time barred appears to be not justifiable as there is no details given by the assessee as well as whether the assessment in searched party was completed or not. Thus, the notice issued under Section 153C is valid as it is in accordance with Section 153A as envisaged in the wordings of the provisions of Section 153C of the Income Tax Act, 1961. In fact the proceedings initiated by the Assessing Officer u/s 153C of the Act were valid as books of accounts belonging to the assessee were found and seized during the course of search and initiating proceedings u/s 153C of the Act. The decisions relied by the Ld. AR will not be applicable as the factual aspect and circumstances are different in the present assessee’s case and the contentions on the legal issue will be applicable in those cases for the set of facts explained in those cases and not int the present assessee’s case. Hence, the contentions taken by the assessee do not sustain legally and hence ground no.1 of the assessee’s appeal is dismissed.

IT(SS)A Nos.77 & 121/Ahd/2014 & 443/Ahd/2013 Assessment Years: 2009-10 for all Page 10 of 12

additions are not based on the searched material but that of the statement of Shri Praful K. Mistry and Shri Ashokbhai Patel which was not verified by the Assessing Officer and has not been tested by the Revenue Authorities by confronting to the assessee. In fact, in the assessee’s submissions before the Assessing Officer it was mentioned that the purchase of assets were duly recorded in the books of accounts of the firm which was purchased for Rs. 2.80 crores and the entire payment was made through banking channel which was not at all disputed by the Assessing Officer. In respect of on money receipt the assessee demonstrated that there was no evidence to justify the disclosure and the Assessing Officer made addition purely on conjectures and surmises which is not permissible. Therefore, on merit this addition does not sustain, hence Ground No. 2 and 2.1 of assessee’s appeal is allowed.

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Officer. In fact, no cash was found and it was the papers which has neither been established by the Revenue that of assessee’s papers which belonged to the assessee nor they found any corroborative evidence to establish that the same belonged to the assessee.

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Order pronounced in the open Court on this 11th July, 2024.

Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 11th July, 2024 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

By order UE COPY

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad