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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: Appeal by the assessee is directed against order of the
CIT(A)-7, Mumbai (Concurrent jurisdiction over the charge
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
of CIT(A)-I Indore) dated 21.3.2013 pertaining to the
assessment year 2008-09. The assessee has raised
following grounds of appeal:
“That on the facts and in the circumstances of the case, the assessment order as passed by the assessing officer u/s 143(3) r.w.s. 153C of the Income Tax Act is bad in law, illegal and barred by limitation of time. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the A.O’s action in issuing notice u/s 153C of the Income Tax Act and thereby passing order u/s 153C r.w.s. 143(3) of the Income Tax Act without properly appreciating the facts of the case and submissions made before him. WITHOUT PREJUDICIE TO THE ABOVE 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) also erred in maintaining addition of Rs.68926888/- as made by the Assessing Officer on account of Project at Satellite Hills without properly appreciating the facts of the case and submission made before him. 4. The assessee reserves its right to add, alter, modify or amend the grounds of appeal as and when required.” 2. The facts giving rise to the present appeal are that
a search and seizure operation u/s 132 of the Income Tax
Act, 1961 (hereinafter called as ‘the Act’) were conducted at
the various premises, persons and concerns commonly
known as “Satellite Hills” on 19.11.2009. The search
operation was initiated in the case of M/s. M/s. Phoenix
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
Devcons Pvt. Ltd. and others on 19.11.2009. It is alleged
by the A.O. that during the search operation, various
documents/loose papers were seized from the premises of
M/s. Phoenix Devcons Pvt. Ltd., 434-Orbit Mall, Indore
belonging to M/s. Avalanche Reality Pvt. Ltd. It is also
recorded that copies of documents related to the assessee
and on the basis of which satisfaction was recorded for
issuing notice u/s 153C of the Act were supplied. The
A.O. therefore made two additions of Rs.6,89,26,888/-
treating as own money and disallowance of Rs.15,16,961/-
by invoking the provisions of section 40A(3) of the Act.
Aggrieved by this, the assessee preferred an appeal
before Ld. CIT(A), who after considering the submissions,
partly allowed the appeal. Thereby the Ld. CIT(A)
sustained the addition of Rs.6,89,26,888/- and deleted the
addition of Rs.16,25,964/-. The Ld. CIT(A) also rejected
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
the objection of the assessee that no satisfaction was
recorded by the assessee of the searched person.
Aggrieved by this, the assessee is in present appeal.
Ground No.1 & 2 of the assessee’s appeal are against
initiation of provisions u/s 153C of the Act in the absence
of the satisfaction recorded by the A.O. of the searched
person. Ld. Counsel for the assessee submitted that the
Tribunal has directed the revenue to furnish copy of the
satisfaction recorded by the A.O. of the searched person. It
is stated that there is no ambiguity under the provisions of
law. It is mandated by the law that satisfaction of the A.O.
of the searched person is a sine qua non for issuance of
notice u/s 153C of the Act. It is submitted that ex facie
action of the A.O. is contrary to the mandate of law and
assessment so framed deserves to be quashed. Ld.
Counsel for the assessee has relied upon various case laws.
Ld. Senior Counsel placed reliance on the judgement of 4
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
Hon'ble jurisdictional High Court rendered in the case of
CIT Vs. Mechmen 11-C (2015) 60 taxmann.com 484 (M.P.).
Ld. Senior Counsel submitted that admittedly no
satisfaction was recorded by the A.O. in the case of
searched person. He submitted that the revenue has
miserably failed to produce and place on record the
requisite satisfaction note recorded in the case of the
searched person. He submitted that law is well settled that
jurisdiction in the case of the other person the assessee
herein u/s 153C of the Act could be exercised only in the
event when the Assessing Officer of the searched person
makes a satisfaction note that during the search, some
material belonging to the assessee is found. The A.O. of
the searched person, thereafter, transmits such material
along with satisfaction note to the A.O. of the Assessing
Officer of such other person. If this exercise is found to be
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
wanting, any action taken would be illegal and not in
confirmity with the law.
Ld. D.R. supported the order of the authority below
and submitted that law does not require the assessing
officer of the searched person to make a written note. He
has to just satisfy himself and transfer the material to the
concerned A.O., who thereafter in accordance with law
would issue a notice calling upon the assessee to file return
of income and accordingly assess the income. He
submitted that throughout, the assessee has not raised
any objection with regard to the satisfaction note in the
entire proceedings. The assessee had attended the
assessment proceedings, filed details, thereafter he filed an
appeal before Ld. CIT(A). Before both the authorities, the
assessee has not taken any ground that no satisfaction has
been recorded. He submitted that no such ground was
taken even before the Ld. CIT(A). Under these facts, the 6
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
assessee cannot be allowed to take an objection that no
satisfaction has been recorded and the assessment
proceedings are vitiated on this account.
We have heard the rival submissions, perused the
materials available on record and gone through the orders
of the authorities below. We find merit into the contention
of the Ld. D.R. that no specific ground was raised before
Ld. CIT(A) challenging the assessment on the ground that
no satisfaction was recorded by the assessing officer of the
searched person. Hence, the assessment is vitiated. Ld.
Senior Counsel Shri Sumit Nema in response to the query
submitted that law is well settled that a ground on legal
issue can be raised at the appellate stage. In support of
this contention, Ld. Counsel relied upon the judgement of
the Hon'ble apex court rendered in the case of NTPC
Limited Vs. CIT (1998) 229 ITR 353 (SC). Therefore,
respectfully following the judgement of the Hon'ble 7
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
Supreme Court rendered in the case of NTPC Limited Vs.
CIT (supra), the ground raised was admitted for
adjudication.
Before embarking upon rival contentions, for the sake
of clarity, relevant to the provisions of the Act is
reproduced hereunder:-
“153C [Notwithstanding anything contained in section 139, section 147, section 148, section 149, 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 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 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 in accordance with the provisions 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 six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] 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 section132 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:]
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
[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 nto 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 [and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.]
A bare reading of the above provision of law suggests
that the satisfaction of the A.O. of the searched person is a
sine-qua-non to the effect that “(a) any money, bullion,
jewellery or other valuable article or thing, seized or
requisitioned belongs to; or (b) any books of accounts or
documents, seized or requisitioned pertains or pertain to,
for any information contained thereto, relates to a person
other than person referred to in sub section 153A of the
Act.
Admittedly, in the present case, no satisfaction note by
the A.O. of the searched person is furnished by revenue,
despite categorical directions dated 21.6.2017 & 17.5.2018
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
given by this Tribunal. However, a satisfaction note in the
case of assessee has been furnished by the revenue vide
letter dated 24.4.2017. Ld. CIT(DR) fairly conceded the fact
that despite various reminders, the satisfaction note by
A.O. of searched person i.e. M/s. Phoenix Devcons Pvt.
Ltd., 434, Orbit Mall, Indore is not made available.
The Hon'ble jurisdictional High Court in the case of
CIT Vs. Mechmen 11-C (supra) has held as under:
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
The revenue has not brought to our notice any other
binding precedent by the Hon'ble Supreme Court or the
Hon'ble jurisdictional High Court. We therefore,
respectfully following the Hon'ble High Court of Madhya
Pradesh in the case of CIT Vs. Mechmen 11-C (supra) hold
that the proceedings u/s 153C of the Act is not validly
initiated and is contrary to settled position of law and the
same is therefore hereby quashed.
The other grounds are not being adjudicated as we
have quashed the initiation of proceedings itself. Appeal of
the assessee is allowed in the terms indicated above.
[ITA No.535/Ind/2013] [M/s. Avalanche Reality, Indore]
In the result, the appeal filed by the assessee is
allowed.
Order was pronounced in the open court on 04 .12.2018.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER
Indore; �दनांक Dated : 04/12/2018 VG/SPS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order
Sr. Private Secretary, Indore