M/S. AVALANCHE REALITY PVT. LTD.,INDORE vs. THE ACIT3(1), INDORE

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 of CIT(A)-I Indore) dated 21.3.2013 pertaining to the

assessment year 2008-09. The assessee has raised

following grounds of appeal:

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 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.

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 the objection of the assessee that no satisfaction was

recorded by the assessee of the searched person.

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 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 wanting, any action taken would be illegal and not in

confirmity with the law.

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 assessee cannot be allowed to take an objection that no

satisfaction has been recorded and the assessment

proceedings are vitiated on this account.

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 Supreme Court rendered in the case of NTPC Limited Vs.

CIT (supra), the ground raised was admitted for

adjudication.

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:]

[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.]

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.

the A.O. of the searched person is furnished by revenue,

despite categorical directions dated 21.6.2017 & 17.5.2018 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.

CIT Vs. Mechmen 11-C (supra) has held as under:

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.

have quashed the initiation of proceedings itself. Appeal of

the assessee is allowed in the terms indicated above.

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