DAKSHAYANI HORTICULTURE PRIVATE LIMITED,HYDERABAD vs. ACIT., CENTRAL CIRCLE-2(4), HYDERABAD

On the facts and circumstances of the case, the Ld. Principal CIT erred in law in subjecting the assessment order u/s 153C of the Act to revision u/s 263 with regard to the issue of unexplained investment in the purchase of lands at Kodangal, though such 4 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assessment order cannot be regarded as erroneous when the Assessing Officer has taken one of the plausible views by assessing the same income in the assessment order passed u/s 153C for Α.Υ 2018-19.

Facts of the case, in brief, are that the assessee is a Company involved in the business of Growing of Crops, Market gardening, Horticulture was filed it’s returns of income for the assessment year 2019-20 on 31.10.2019 admitting the loss income at Rs.13,384/-. A search and seizure operation u/sec.132 of the Income Tax Act, 1961 [in short “the Act”] was conducted in the case of M/s MSN Laboratories Pvt. Ltd. and its associated entities on 5 ITA.Nos.1333, 1331 & 1328/Hyd./2024 24.02.2021. The assessee was also covered in the search and seizure operation. Therefore, the Assessing Officer issued notice u/sec.153C of the Act on 12.01.2023 for the impugned assessment year 2019-2020. In response, the assessee has filed it’s return of income on 10.02.2003 admitting the loss income of Rs.13,384/-. Subsequently, the Assessing Officer issued statutory notices u/sec.143(2) and 142(1) of the Act to the assessee. After considering the submissions of the assessee, the Assessing Officer accepted the return of income of the assessee at loss figure at (-) Rs.13,384/- vide order dated 28.03.2023 passed u/sec.153C of the Income Tax Act, 1961.

During the course of assessment proceedings, the Assessing Officer observed that the material seized during the course of search at the residence of Shri D. Venugopal Reddy contained information regarding payment of on- money for purchase of lands at Kodangal by the appellant and other companies. The Assessing Officer stated that on perusal of the seized material vide page nos.5 to 22 of A/DVR/RES/01 which contains signed agreement of sale

Subsequently, the learned PCIT by exercising his revision powers u/sec.263 of the Act issued show cause notice dated 30.09.2024 u/sec.263 of the Act to the assessee on the ground that the assessee has made on- money payment of Rs.74,16,750/- towards purchase of agricultural lands which has neither been offered for taxation in assessment year 2019-2020 by the assessee nor the same was assessed to tax by the Assessing Officer u/sec.69 of the Act in the assessment year 2019-2020. In response to the said notice, the assessee filed his reply dated 18.11.2024. The learned PCIT after considering the submissions of the assessee and assessment order, noted that the assessment order passed by the Assessing Officer u/sec.143(3), r.w.s.153C on 28.03.2023 for assessment 10 ITA.Nos.1333, 1331 & 1328/Hyd./2024 year 2019-2020 and the Order of approval u/sec.153D of the Act issued by the Joint Commissioner of Income-Tax, Central Range-2, Hyderabad are erroneous and prejudicial to the interest of revenue. Accordingly, the same are set- aside to the file of the Assessing Officer and the Joint/Addl. CIT respectively for the limited purpose of assessing the unexplained investment of Rs.74,16,750/- towards purchase of land under the provisions of section 69 of the Act r.w.s.115BBE of the Act and for invoking of relevant penal provisions of the Act. On identical grounds, similar directions were given by the PCIT in respect of remaining two assessee’s viz., Adrija Farms Private Limited and Prayaga Green Meadows Private Limited to assess the unexplained investment of Rs.1,53,33,750/- and Rs.67,28,000/- respectively u/sec.69 r.w.s.115BBE of the Act to the Assessing Officer.

Aggrieved by the orders of the learned PCIT, these assessee’s are in appeal before the Tribunal.

The Learned Counsel for the Assessee further submitted that, as regards assessment orders passed by the Assessing Officer u/sec.153C for the assessment year 2019- 2020, is void ab initio in absence of valid assumption of 13 ITA.Nos.1333, 1331 & 1328/Hyd./2024 jurisdiction u/sec.153C by the Assessing Officer and that the assessment orders which are ab initio void cannot be subjected to revision u/sec.263, Learned Counsel for the Assessee CA MV Prasad submitted that the Assessing Officer failed to identify and co-relate the seized material which is relevant for determination of total income for the impugned assessment year 2019-2020 in the case of all the three assessee’s under appeals while recording the “satisfaction note” and in absence of such valid satisfaction note, assumption of jurisdiction by the Assessing Officer u/sec.153C of the Act is bad in law and unsustainable. He submitted that the satisfaction notes in the cases of three appellants viz., Adrija Farms Pvt Ltd, Dakshayani Horticulture Pvt. Ltd., and Prayaga Green Meadows Pvt. Ltd., are identically worded. In the satisfaction notes of the said three cases, the AO made discussion regarding the issues of stated sale consideration in the registered sale deeds being less than the stamp duty value within the meaning of section 56(2)(x) and on-money payments made in cash in respect of lands purchased at Kodangal during 14 ITA.Nos.1333, 1331 & 1328/Hyd./2024 previous relevant to assessment year 2017-2018 by the said assessee’s. The AO made the said discussion with reference to the seized material and sworn statements u/sec.132(4) relevant to the said issues and he arrived at the conclusion that income u/sec.56(2)(x) and on-money payments that were made during the assessment year 2017-2018 for purchase of lands at Kodangal need to be brought to tax in the hands of the said assessee’s for the assessment year 2017-2018. Based on the said discussion, the AO recorded his satisfaction that the seized material has a bearing on the determination of total income of the said assessee’s for the assessment year 2017-2018. However, in the last paragraph of the satisfaction notes, the Assessing Officer stated that he is satisfied that the seized material relates to the assessee’s and has a bearing on the determination of the total income of the assessees for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted i.e., for A.Ys 2015-2016 to 2021-2022. But, as could be seen from the satisfaction notes that the Assessing Officer did not make any 15 ITA.Nos.1333, 1331 & 1328/Hyd./2024 discussion therein which enabled him to arrive at the said satisfaction for A.Ys 2015-2016 to 2021-2022 based on the identification and co-relation of the seized material that is relevant to each of the said assessment years, except assessment year 2017-2018.

The Learned Counsel for the Assessee Shri MV Prasad accordingly submitted that, from the perusal of the contents of the satisfaction notes recorded by the Assessing Officer in the case of all the three appellants, it is evident that, the Assessing Officer has not identified and co-related the seized material that has a bearing on the determination of the total income of the appellants for all the assessment years for which such satisfaction is purported to have been arrived at, barring one assessment year. The satisfaction recorded by the Assessing Officer in a sweeping manner for the impugned assessment year 2019-2020 in respect of three assessee’s without co-relating the seized material does not constitute a legally valid satisfaction for the impugned assessment year for which such co-relation has not been brought out in the satisfaction note and consequently, the 16 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assumption of jurisdiction u/sec.153C for the impugned assessment year 2019-2020 is bad in law and unsustainable. He submitted that without such co-relation, it cannot be regarded that the seized material has a bearing on the determination of total income for the said assessment years, which is a jurisdictional fact and sine qua non for issue of notice u/s 153C for the said assessment years. In the absence of bringing out co-relation of the seized material with the total income of impugned assessment year 2019-2020, the satisfaction recorded by the Assessing Officer for the impugned assessment year cannot be considered to be a bonafide and legally valid satisfaction. He, therefore, submitted that the assessment proceedings initiated for the impugned assessment year 2019-2020 u/sec.153C of the Act are bad in law being without jurisdiction. The consequential assessment orders passed u/sec.153C for the impugned assessment year is ab initio void in the absence of valid jurisdiction to pass the said orders. In support of his contentions, the Learned Counsel for the Assessee, relied on the decision of Hon'ble 17 ITA.Nos.1333, 1331 & 1328/Hyd./2024 Supreme Court in the case of CIT v. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC), wherein it was held that notices issued u/sec.153C are not legally sustainable for the assessment years for which the seized documents mentioned in the satisfaction note do not establish any co-relation with the relevant assessment years. It was held that the notices issued u/sec.153C are legally valid only for such assessment years for which the seized material adverted to in the satisfaction note pertains to.

The Learned Counsel for the Assessee further submitted that, the issue of whether the Assessing Officer is bound to issue notice u/sec.153C for all the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted regardless of the existence of seized incriminating material for the concerned assessment years is no longer res integra? In support of this contention, the Learned Counsel for the Assessee relied on the Judgment of Hon'ble Delhi High Court in the case of Saksham Commodities Ltd v. ITO 18 ITA.Nos.1333, 1331 & 1328/Hyd./2024 [2024] 461 ITR 1 (Delhi) wherein the Hon’ble Delhi High Court held that there is a well settled distinction which the law recognizes between the existence of power and the exercise thereof and merely because section 153C confers jurisdiction upon the Assessing Officer to commence an exercise of assessment or reassessment for a block of years which are mentioned in that provision, same alone would not be sufficient to justify steps in that direction being taken, unless incriminating material so found is likely to have an impact on total income of a particular assessment year forming part of six assessment years immediately preceding assessment year pertaining to search year or for "relevant assessment years". The Learned Counsel for the Assessee placed on record the Judgment Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society and Hon'ble Delhi High Court in the case of Saksham Commodities Ltd v. ITO (supra). He accordingly submitted that in absence of satisfaction note recorded by the Assessing Officer regarding identification and co-relation of the seized material to the concerned assessment years in 19 ITA.Nos.1333, 1331 & 1328/Hyd./2024 order to establish the fact that the seized material has a bearing on the determination of the total income for the said assessment years, assumption of jurisdiction u/sec.153C of the Act is not legally valid. He accordingly stressed on the point that since the satisfaction notes recorded by the AO in the cases of the three appellants have not brought out the co-relation of the seized material with the determination of total income for the impugned assessment year 2019-2020, it follows from the application of the aforementioned settled law to the said fact that the assumption of jurisdiction u/sec.153C by the Assessing Officer for the impugned assessment year 2019-2020 is bad in law and that, the consequential assessment orders passed u/sec.153C for the impugned assessment year 2019-2020 is ab initio void in the absence of valid jurisdiction to pass the said orders. The Learned Counsel for the Assessee accordingly submitted that the assumption of jurisdiction and issue of notice u/sec.153C in the case of the appellants for impugned assessment year 2019-2020 may kindly be considered as bad in law and the consequent assessment orders passed 20 ITA.Nos.1333, 1331 & 1328/Hyd./2024 u/sec.153C for the impugned assessment year 2019-2020 as void ab initio. The Learned Counsel for the Assessee, therefore, submitted that the assessment orders which are ab initio void cannot be subjected to revision u/sec.263 of the Act, the appellant submits that the revision powers can be exercised only in respect of such assessment orders which are legally valid. If an assessment order has been rendered non-est in the eyes of law or bad in law, such an order has no legal existence and consequently, no further action under the statute can be taken with regard to such a non-existing order including revision u/sec.263. The legal maxim "Sublato Fundamento Cadit Opus”, which means that once the foundation is removed, the entire structure falls, is squarely applicable to the factual situation prevalent in the case of the three appellants. The said legal maxim has been a cornerstone in legal proceedings, signifying that actions based on an unlawful foundation are inherently invalid. In support of this contention, the Learned Counsel for the Assessee relied on the judgment of the Hon'ble Goa Bench of Bombay High Court in the case of Gigabyte Technology 21 ITA.Nos.1333, 1331 & 1328/Hyd./2024 (India) Pvt Ltd v. CIT in Tax Appeal Nos.77 and 78 of 2015. A copy of the said judgment of is furnished at Page Nos.293 to 305 of PB-1. Further, the Learned Counsel for the Assessee placed reliance on the decision of the Hon'ble ITAT, Mumbai in the case of Westlife Development Ltd v. Pr.CIT [2017] 88 taxmann.com 439 (Mumbai) wherein it has been held that since the original assessment order was null and void in the eyes of law as the same was passed upon a non-existing entity, the CIT could not have assumed jurisdiction under the law to make revision of a non-est order. The Hon'ble Tribunal, therefore, held that the impugned order passed u/sec.263 by the CIT is also a nullity in the eyes of law and the same is accordingly quashed. In support of this contention, the Learned Counsel for the Assessee also relied on the decision of ITAT, Delhi Bench in the case of Krishan Kumar Saraf vs. CIT in ITA.No.4562/Del./2011 and ITAT, Jaipur Bench in the case of Dinesh Kumar Chaurasia vs. ACIT in ITA.No.420/JPR/ 2024 wherein the Delhi Tribunal held that while exercising powers u/sec.263, the Commissioner cannot revise an 22 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assessment order which is non-est in the eye of law. Copies of orders of the Tribunal are placed on record at pages 312 to 323 of PB-1. The Learned Counsel for the Assessee accordingly submitted that the revision orders passed u/sec.263 of the Act by the PCIT for A.Ys 2019-20, which sought to revise the assessment orders passed u/sec.153C for the said assessment years which are void ab initio, may kindly be considered as bad in law and legally unsustainable.

The Learned Counsel for the Assessee CA MV Prasad further submitted that the PCIT was erred in law and on facts in placing reliance on seized material which is non-incriminating in nature for revising an order passed u/sec.153C of the Act. He submitted that in the absence of any incriminating information in the said seized document, the same does not constitute seized material that has a bearing on the determination of total income of the appellants for the impugned assessment year 2019-2020. Hence, the reliance placed by the PCIT on the said seized document for the purpose of revision of assessment order 23 ITA.Nos.1333, 1331 & 1328/Hyd./2024 u/sec.153C for assessment year 2019-2020 is misplaced and the same is untenable. The Learned Counsel for the Assessee further submitted that unlike assessments u/sec.153A in the case of searched persons where the issue of notices u/sec.153A for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted is automatic, the issue of notices u/sec.153C in the cases of a person’s other than the searched person is contingent on the availability of seized material pertaining to or containing information relating to such other person and on such seized material being incriminating in nature in as much as it has a bearing on the determination of total income for the relevant assessment years. These conditions for issue of notices u/sec.153C are the jurisdictional conditions and notices u/sec.153C cannot be issued unless the Assessing Officer is satisfied regarding the fulfilment of these conditions and satisfaction note is recorded by him regarding the same. The said jurisdictional requirements for issue of notices u/s 153C are required to be strictly construed. The satisfaction 24 ITA.Nos.1333, 1331 & 1328/Hyd./2024 of the Assessing Officer regarding the fulfilment of the jurisdictional conditions is sine qua non for the issue of notices u/sec.153C and the notices issued and assessments made u/sec.153C without such satisfaction of the AO are bad in law. The Learned Counsel for the Assessee further drew the attention of the Bench with regard to the provisions of the Act prescribes that the satisfaction for assuming jurisdiction u/sec.153C should be that of the AO and no other authority including the higher authorities such as JCIT, PCIT etc. has been vested with the said power. The provisions of section 263 of the Act do not provide for revising the "satisfaction note" recorded by the Assessing Officer, which is completely different and distinct in its nature from the order passed by the Assessing Officer. Hence, the appellant submits that the satisfaction note recorded by the Assessing Officer for enabling him to assume jurisdiction to issue notices u/sec.153C is final and the same cannot be re-written by any other authority including the PCIT in the absence of enabling provision in the Act. In the light of the said legal position, the appellant 25 ITA.Nos.1333, 1331 & 1328/Hyd./2024 submits that the powers of the PCIT for revision of an assessment order u/sec.153C for any assessment year are limited to the issues covered by the "satisfaction note" recorded by the Assessing Officer for the concerned assessment year based on the seized material having a bearing on the determination of total income for the concerned assessment year. If the assessment order u/sec.153C for an assessment year omits to bring to tax the income that is emerging from the seized material relied upon in the "satisfaction note" for the concerned assessment year, the PCIT would be justified in law in invoking the powers of revision u/sec.263 for the said assessment year, since the jurisdiction u/sec.153C has been lawfully assumed by the AO for making the said assessment. On the other hand, if the jurisdiction u/sec.153C has not been lawfully assumed by the Assessing Officer for a particular assessment year in the absence of drawing necessary satisfaction by him for the said year in the satisfaction note with reference to the seized material which has a bearing on the determination of total 26 ITA.Nos.1333, 1331 & 1328/Hyd./2024 income for the said year, the PCIT has no legal powers to re- write or modify the satisfaction note in order to render the assumption of jurisdiction by the AO as lawful which was otherwise unlawful. The Learned Counsel for the Assessee submitted that in the case of the appellants for assessment year 2019-2020, the satisfaction note recorded by the AO does not contain any discussion regarding the seized material that has a bearing on the determination of the total income of the appellant for the said assessment years. Since the fulfilment of the jurisdictional condition to the said effect is not brought out in the satisfaction note of the Assessing Officer, the assumption of jurisdiction u/sec.153C by the Assessing Officer for the impugned assessment year 2019-2020 is not lawful and the consequential notices issued and assessment orders passed for the assessment year 2019-2020 do not have validity in law. In the said facts and circumstances of the case, the PCIT is not empowered to revise such assessment orders by relying on seized documents in respect of which the Assessing Officer did not record any satisfaction in the 27 ITA.Nos.1333, 1331 & 1328/Hyd./2024 satisfaction note, since the same would amount to re- writing the satisfaction note by the PCIT which is not legally permissible as submitted earlier.

The Learned CIT-DR Shri B Bala Krishna, on the other hand, relied on the orders of the PCIT and submitted that the statute did not explicitly made it clear that if an assessment order passed by the Assessing Officer with the approval of JCIT u/sec.153D of the Act, cannot be revised by the PCIT in exercise of his revisionary powers u/sec.263 of the Act. He, therefore, submitted that the order of PCIT passed u/sec.263 of the Act is in accordance with law and should be upheld. Further, since the income chargeable to tax has escaped assessment and as per the seized material the income pertains to the previous assessment years, the learned PCIT has rightly exercised his revisional powers u/sec.263 of the Act and the orders of the PCIT should be upheld as the assessment orders passed by the Assessing Officer are not only erroneous but also prejudicial to the interest of the revenue. He accordingly submitted that the order of the PCIT is in accordance with law and, therefore, 28 ITA.Nos.1333, 1331 & 1328/Hyd./2024 he submitted that the order of the PCIT should be upheld in the interest of substantial justice. Learned CIT-DR further submitted that, as per sec.263 of the Act, the PCIT can revise any order passed under this Act which means order passed by the Assessing Officer includes the order passed by the ACIT/Addl. CIT and, therefore, the arguments of the Counsel for the Assessee that assessment order passed by the Assessing Officer with the approval of Addl. CIT u/sec.153D cannot be revised is devoid of merit and cannot be accepted. Learned CIT-DR further submitted that during the course of search incriminating material was found in the form of agreement to sale for purchase of land has been found and as per the said incriminating material, the assessee has agreed to purchase the land at a particular price, whereas, the final sale deed has been executed for a different amount. Further, another statement was found during the course of search which contains details of total payment made for purchase of land and payment in cash and cheque and when these incriminating documents were confronted to the assessee employees of the appellant 29 ITA.Nos.1333, 1331 & 1328/Hyd./2024 company, they have agreed that there is on-money payment for purchase of land through Shri D. Venugopal Reddy Anirudh Reddy. The Department has recorded the statement from Shri D. Venugopal Reddy where he has clearly admitted to have received consideration in cash for sale of land at Kodangal. The said statement has been confronted to Shri MSN Reddy, Managing Director of the appellant-company where he has admitted on-money payment for purchase of land and also declared additional income towards on-money for the assessment year 2020- 2021. The Assessing Officer based on statement of Shri MSN Reddy has assessed on-money payment for purchase of land at Kodangal for the assessment year 2018-2019, even though, the seized material clearly shows payment of on-money for the assessment years 2019-2020. The learned PCIT after considering the relevant seized material clearly came to the conclusion that, the material found during the course of search suggests on-money payment for the assessment years 2019-20, whereas, the Assessing Officer assessed the on-money only on the basis of statement of 30 ITA.Nos.1333, 1331 & 1328/Hyd./2024 Shri D. Sreenivas Reddy and MSN Reddy for some other assessment years and because of this, the learned CIT(A) has deleted the additions made by the Assessing Officer. Since the Assessing Officer has passed assessment order without considering relevant seized material in light of the statement of Shri D. Sreenivas Reddy and Shri Anirudh Reddy, the on-money for payment of purchase of land has been assessed for some other assessment years which renders the assessment order passed by the Assessing Officer erroneous and prejudicial to the interest of revenue. Therefore, he submitted that, there is no merit in the arguments advanced by the Learned Counsel for the Assessee that, in absence of valid satisfaction note for the assessment year in question, the assessment order becomes void abinitio and liable to be quashed and consequently, the PCIT cannot revise assessment order which is illegal by exercising his revisional powers u/sec.263 of the Act is contrary to law and cannot be accepted. Therefore, he submitted that grounds taken by the assessee on this regard should be rejected.

The provisions of sec.263 of the Income Tax Act, 1961 deals with revision powers of the Principal CIT and as per the said provisions if the PCIT satisfies that the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue, then the assessment order passed by the Assessing Officer can be revised. But, in order to invoke the provisions of sec.263 of the Act, the PCIT should satisfy that the twin conditions provided under the Act are satisfied i.e., (1) order of the Assessing Officer is erroneous and further (2) It is prejudicial to the interest of revenue. Unless the PCIT 34 ITA.Nos.1333, 1331 & 1328/Hyd./2024 makes-out a case that twin conditions mentioned therein are satisfied, the PCIT cannot assume his revisionary jurisdiction and revise the assessment order passed by the Assessing Officer in terms of sec.263 of the Act.

In light of the above factual and legal background, if we examine the order passed by the PCIT u/sec.263 of the Act, we have to understand whether the PCIT has arrived at a correct conclusion on the basis of material available on record which warrants revisional jurisdiction and set-aside the assessment order passed by the Assessing Officer. Admittedly, there is no dispute with regard to the fact that the appellant and it’s group companies have purchased land on various dates and also paid on-money for purchase of land and this fact has been confirmed by none other than Shri MSN Reddy, Group Managing Director. This fact is further strengthened by the statement recorded from Shri D. Venugopal Reddy, employee of MSN Group of companies and Shri J. Anirudh Reddy and Shri Uday Kumar Reddy who have involved in the procurement of land for appellant group companies from 35 ITA.Nos.1333, 1331 & 1328/Hyd./2024 various sellers and both of them admitted to have received cash for payment of consideration to sellers. However, fact remains that it is important to ascertain, whether the material found during the course of search and relied upon by the PCIT which is pertains to on-money payment for purchase of land pertains to assessment year 2019-2020 as considered by the PCIT or 2017-2018 as considered by the Assessing Officer. The PCIT has relied upon Annexure-A/ DVR/RES/01 seized during the course of search operation in the case of Shri D. Venugopal Reddy and it’s associated entities which contains details of payments through RTGS on various dates. The said documents does not contain any details of cash payment to any party. The Assessing Officer recorded satisfaction as required u/sec.153C of the Act before issuing notice u/sec.153C and observed that the material found during the course of search as a bearing on the total income of the appellant and other group companies for assessment year 2017-2018. However, in the satisfaction note recorded by the Assessing Officer u/sec.153C of the Act, there is no direct reference to any incriminating 36 ITA.Nos.1333, 1331 & 1328/Hyd./2024 material which pertains to the assessment year 2019-2020. However, as per the satisfaction note, the Assessing Officer has recorded clear factual finding that based on the sale deeds and sale agreement, the on-money payment for purchase of land at Kodangal is assessable for the assessment year 2017-2018 and this fact has been strengthened by the subsequent affidavit filed by Shri MSN Reddy where he has admitted on-money payment for purchase of land in assessment year 2018-2019. Therefore, it is necessary for us to understand the reasons given by the PCIT to set aside the assessment order passed by the Assessing Officer u/sec.153C of the Act for the assessment year 2019-2020 in light of satisfaction note recorded by the Assessing Officer for initiation of proceedings u/sec.153C of the Act and also the assessment order passed by the Assessing Officer for the assessment year 2019-2020.

It is well settled principles of law that any assessment orders passed by the Assessing Officer u/sec.153C for any assessment years are void ab initio in absence of valid assumption of jurisdiction u/sec.153C by 37 ITA.Nos.1333, 1331 & 1328/Hyd./2024 the Assessing Officer and that the assessment orders which are ab initio void cannot be subjected to revision u/sec.263 of the Act, because if any order is illegal, then same cannot legalised by the higher authority. In the present case, the Assessing Officer failed to identify and co-relate the seized material which is relevant for determination of total income for the impugned assessment years 2019-2020 in the case of all the three assessee’s under appeals while recording the “satisfaction note” and in absence of such valid satisfaction note, assumption of jurisdiction by the Assessing Officer u/sec.153C of the Act is bad in law and unsustainable. We have gone through the satisfaction notes in the cases of three appellants i.e., Adrija Farms Private Limited, Hyderabad; Dakshyani Horticulture Pvt. Ltd., Hyderabad and Prayaga Green Meadows Private Limited, Hyderabad, which are identically worded. In the satisfaction notes of the said three cases, the AO made discussion regarding the issues of stated sale consideration in the registered sale deeds being less than the stamp duty value within the meaning of section 56(2)(x) and on-money payments made 38 ITA.Nos.1333, 1331 & 1328/Hyd./2024 in cash in respect of lands purchased at Kodangal during the previous year relevant to A.Y 2017-2018 by the said assessee’s. The AO made the said discussion with reference to the seized material and sworn statements u/sec.132(4) relevant to the said issues and he arrived at the conclusion that income u/sec.56(2)(x) and on-money payments that were made during the assessment year 2017-2018 for purchase of lands at Kodangal need to be brought to tax in the hands of the said assessees for the A.Y 2017-2018. Based on the said discussion, the AO recorded his satisfaction that the seized material has a bearing on the determination of total income of the said assessees for the A.Y 2017-2018. However, in the last paragraph of the satisfaction notes, the Assessing Officer stated that he is satisfied that the seized material relates to the assessees and has a bearing on the determination of the total income of the assessees for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted i.e., for assessment years 2015-2016 to 2021-2022. But, as could be seen from the 39 ITA.Nos.1333, 1331 & 1328/Hyd./2024 satisfaction notes that the Assessing Officer did not make any discussion therein which enabled him to arrive at the said satisfaction for assessment years 2015-2016 to 2021- 2022 based on the identification and co-relation of the seized material that is relevant to each of the said assessment years, except assessment year 2017-2018.

Further, it may also be seen that there was no discussion at all by the Assessing Officer in the satisfaction note regarding the issue of on-money payments made for purchase of lands at Kodangal. Therefore, from the perusal of the contents of the satisfaction notes recorded by the Assessing Officer in the case of all the three appellants, it is evident that, the Assessing Officer has not identified and co- related the seized material that has a bearing on the determination of the total income of the appellants for all the assessment years for which such satisfaction is purported to have been arrived at, barring one assessment year. The satisfaction recorded by the Assessing Officer in a sweeping manner for the impugned assessment year 2019- 2020 without co-relating the seized material to each of the 40 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assessment years involved in the said period does not constitute a legally valid satisfaction for the assessment years for which such co-relation has not been brought out in the satisfaction note and consequently, the assumption of jurisdiction u/sec.153C for the impugned assessment years is bad in law and unsustainable. Further, without such co- relation, it cannot be regarded that the seized material has a bearing on the determination of total income for the said assessment years, which is a jurisdictional fact and sine qua non for issue of notice u/s 153C for the said assessment years. In the absence of bringing out co-relation of the seized material with the total income of assessment year 2019-2020, the satisfaction recorded by the AO for the said assessment years cannot be considered to be a bonafide and legally valid satisfaction. Therefore, in our considered view the assessment proceedings initiated for assessment year 2019-2020 u/sec.153C of the Act are bad in law being without jurisdiction. The consequential assessment orders passed u/sec.153C for the said assessment years are ab initio void in the absence of valid 41 ITA.Nos.1333, 1331 & 1328/Hyd./2024 jurisdiction to pass the said orders. This principle is supported by the decision of Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC), wherein it was held that notices issued u/s 153C are not legally sustainable for the assessment years for which the seized documents mentioned in the satisfaction note do not establish any co-relation with the relevant assessment years. It was held that the notices issued u/s 153C are legally valid only for such assessment years for which the seized material adverted to in the satisfaction note pertains to.

Further, the issue of whether the Assessing Officer is bound to issue notice u/sec.153C for all the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted regardless of the existence of seized incriminating material for the concerned assessment years is no longer res integra ? In support of this contention, the Learned Counsel for the Assessee relied on the Judgment of Hon'ble Delhi High Court in the case of Saksham 42 ITA.Nos.1333, 1331 & 1328/Hyd./2024 Commodities Ltd v. ITO [2024] 461 ITR 1 (Delhi) wherein the Hon’ble Delhi High Court held that there is a well settled distinction which the law recognizes between the existence of power and the exercise thereof and merely because section 153C confers jurisdiction upon the Assessing Officer to commence an exercise of assessment or reassessment for a block of years which are mentioned in that provision, same alone would not be sufficient to justify steps in that direction being taken, unless incriminating material so found is likely to have an impact on total income of a particular assessment year forming part of six assessment years immediately preceding assessment year pertaining to search year or for "relevant assessment years". Therefore, in absence of satisfaction note recorded by the Assessing Officer regarding identification and co-relation of the seized material to the concerned assessment years in order to establish the fact that the seized material has a bearing on the determination of the total income for the said assessment years, assumption of jurisdiction u/sec.153C of the Act is not legally valid. In the present cases, the 43 ITA.Nos.1333, 1331 & 1328/Hyd./2024 satisfaction notes recorded by the AO in the cases of the three appellants have not brought out the co-relation of the seized material with the determination of total income of assessment year 2019-2020 and, therefore, it follows from the application of the aforementioned settled law to the said fact that the assumption of jurisdiction u/sec.153C by the Assessing Officer for the said assessment years is bad in law and that, the consequential assessment orders passed u/sec.153C for the said assessment years are ab initio void in the absence of valid jurisdiction to pass the said orders. In our considered view, validity of the satisfaction note is required to be evaluated on the basis of the contents of such satisfaction note alone and it is not permissible to virtually expand the scope of the contents of the satisfaction note at a later stage by improving or supplementing the same. This is analogous to the settled legal position governing the evaluation of the validity of the reasons recorded for re- opening of assessment u/sec.147 of the Act. In support of these submissions, the Learned Counsel for the Assessee, relied on the decision of Hon'ble Bombay High Court in the 44 ITA.Nos.1333, 1331 & 1328/Hyd./2024 cases of Hindustan Lever vs., RB Wadkar [2004] 268 ITR 332 (Bombay); Aroni Chemicals Ltd vs., DCIT [2014] 362 ITR 403 (Bombay) and Prashant S. Joshi Vs. ITO (2010) 324 ITR 154 (Bombay), where it has been held that the reasons recorded by the Assessing Officer for re-opening cannot be improved or substituted or supplemented at a later stage when subjected to judicial challenge and the issue of whether the AO had reasons to believe that the income has escaped assessment has to be adjudicated only with reference to the reasons actually recorded by the Assessing Officer before the issue of notice u/sec.148 without taking assistance from any external material. Therefore, in our considered view, the assumption of jurisdiction and issue of notice u/sec.153C in the case of the appellants for A.Y. 2019-2020 is bad in law and the consequent assessment orders passed u/sec.153C for the said assessment years as void ab initio. Further, once the assessment orders which are ab initio void, then said invalid orders cannot be subjected to revision u/sec.263 of the Act, because the revision powers can be exercised only in respect of such 45 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assessment orders which are legally valid. If an assessment order has been rendered non-est in the eyes of law or bad in law, such an order has no legal existence and consequently, no further action under the statute can be taken with regard to such a non-existing order including revision u/sec.263. The legal maxim "Sublato Fundamento Cadit Opus”, which means that once the foundation is removed, the entire structure falls, is squarely applicable to the factual situation prevalent in the case of the three appellants. The said legal maxim has been a cornerstone in legal proceedings, signifying that actions based on an unlawful foundation are inherently invalid. Although, the assessee has not challenged the validity of assessment orders when they are passed, but in our considered view, there was no occasion for the assessee to challenge said orders, because the orders are not averse to the assessee at that point of time. Further, in our considered view, the assessee can challenge the validity of orders at the very first available opportunity and in our considered view, since the assessee has got an opportunity to question the validity of 46 ITA.Nos.1333, 1331 & 1328/Hyd./2024 orders, it has rightly challenged the validity of orders in the present proceedings. Since the original assessment orders itself is invalid in absence of valid satisfaction and non-est in eyes of law, the PCIT cannot revise the non-est orders u/s 263 of the Act. In this regard, it is relevant to refer the judgment of the Hon'ble Goa Bench of Bombay High Court in the case of Gigabyte Technology (India) Pvt Ltd v. CIT in Tax Appeal Nos.77 and 78 of 2015 and the decision of the Hon'ble ITAT, Mumbai in the case of Westlife Development Ltd v. Pr.CIT [2017] 88 taxmann.com 439 (Mumbai) wherein it has been held that since the original assessment order was null and void in the eyes of law as the same was passed upon a non-existing entity, the CIT could not have assumed jurisdiction under the law to make revision of a non-est order. The Hon'ble Tribunal therefore held that the impugned order passed u/sec.263 by the CIT is also a nullity in the eyes of law and the same is accordingly quashed. In support of this contention, the Learned Counsel for the Assessee also relied on the decision of ITAT, Delhi Bench in the case of Krishan Kumar Saraf vs. CIT in 47 ITA.Nos.1333, 1331 & 1328/Hyd./2024 ITA.No.4562/Del./2011 and ITAT, Jaipur Bench in the case of Dinesh Kumar Chaurasia vs. ACIT in ITA.No.420/JPR/ 2024 wherein the Delhi Tribunal held that while exercising powers u/sec.263, the Commissioner cannot revise an assessment order which is non-est in the eyes of law. Therefore, in our considered view, the revision orders passed u/sec.263 of the Act by the PCIT for A.Y. 2019-2020, which sought to revise the assessment orders passed u/sec.153C for the said assessment years which are void ab initio, is bad in law and legally unsustainable.

Coming back to another aspect of the issue. The PCIT placed reliance on seized material recovered from Sri D. Venugopal Reddy, employee of MSN Group vide Annexure-A/DVR/RES at page nos.5 to 22 seized during the course of search operation, for revising an order passed u/sec.153C of the Act. We have considered relevant seized material which is available in paper book filed by the assessee and we find that said document contains details of land purchased at Kodangal Mandal including name of the vendor, khata no., survey no., extent of land, document no., 48 ITA.Nos.1333, 1331 & 1328/Hyd./2024 and date of document, consideration paid as per document. Further, it also contains details of cash paid which was written by hand with signature for total extent of land purchased by the appellant companies. If we go by the said document and date of sale deed registered for purchase of lands at Kodangal, said purchases relates to or pertains to assessment year 2018-2019 only, but, not as considered by the learned PCIT for the assessment year 2019-2020. The learned Pr. CIT only on the basis of the date of the document printed on right hand side of the paper i.e., on 20.09.2018 came to the conclusion that whatever transactions recorded in the said document pertains to assessment year 2019-2020, even though, the sale deed document no. and date clearly shows purchase of lands for the assessment year 2018-2019. Further, the Pr. CIT has jumped to the erroneous conclusion that the on-money payments were made by the appellants during the previous year relevant to assessment year 2019-2020 merely and solely on the basis of the date of sheet which is mentioned as 23.09.2018 in the page nos.18, 19 and 20 of the seized 49 ITA.Nos.1333, 1331 & 1328/Hyd./2024 material A/DVR/RES/01. The said date which is found at the top right hand corner of each of the said three loose sheets in the seized material represents the date on which the data/information has been prepared. The PCIT himself has stated that the said date i.e., 23.09.2018 is the date of sheet. It is not correct to infer that the on-money payment have been made during the previous year relevant to assessment year 2019-2020 merely based on the date of sheet without pointing of any evidence regarding the date of payment of on-money which establish that the said payments were made for the assessment year 2019-2020. In this connection, it is relevant to point-out that, the A.O. had clearly stated in the satisfaction note in each of the three appellant’s case that, the seized material vide page nos.5 to 22 of A/DVR/RES/01 contained a signed agreement of sale dated 11.06.2016 and other loose sheets and it is noted therefrom that the lands to the extent of ac.182.00 guntas was agreed to be purchased at a total consideration of Rs.5,55,71,000/- and an amount of Rs.1,60,00,000/- was paid towards the same consisting of payment of Rs.80 lakhs 50 ITA.Nos.1333, 1331 & 1328/Hyd./2024 in cash on 25.05.2016 and payment of Rs.80 lakhs through RTGS on 10.06.2016. The said payment of Rs.80 lakhs by cash on 25.05.2016 is reflected at page nos.5 and 6 of the seized material and from the said seized material, it is evident that on-money payment was made during the previous year relevant to the assessment year 2017-2018. Therefore, in our considered view, in absence of any incriminating information in the said seized document which pertains to assessment year 2019-2020, the same does not constitute seized material that has a bearing on the determination of total income of the appellants for the assessment year 2019-2020. Therefore, the reliance placed by the PCIT on the said seized document for the purpose of revision of assessment orders u/sec.153C for assessment year 2019-2020 is misplaced and the same is untenable. Further, unlike assessments u/sec.153A in the case of searched persons where the issue of notices u/sec.153A for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted is automatic, the issue of notices u/sec.153C in 51 ITA.Nos.1333, 1331 & 1328/Hyd./2024 the cases of a persons other than the searched person is contingent on the availability of seized material pertaining to or containing information relating to such other person and on such seized material being incriminating in nature in as much as it has a bearing on the determination of total income for the relevant assessment years. These conditions for issue of notices u/sec.153C are the jurisdictional conditions and notices u/sec.153C cannot be issued unless the Assessing Officer is satisfied regarding the fulfilment of these conditions and satisfaction note is recorded by him regarding the same. The said jurisdictional requirements for issue of notices u/s 153C are required to be strictly construed. The satisfaction of the Assessing Officer regarding the fulfilment of the jurisdictional conditions is sine qua non for the issue of notices u/sec.153C and the notices issued and assessments made u/sec.153C without such satisfaction of the AO are bad in law. Further, the provisions of the Act prescribes that the satisfaction for assuming jurisdiction u/sec.153C should be that of the AO and no other authority including the higher authorities 52 ITA.Nos.1333, 1331 & 1328/Hyd./2024 such as JCIT, PCIT etc. has been vested with the said power. The provisions of section 263 of the Act do not provide for revising the "satisfaction note" recorded by the Assessing Officer, which is completely different and distinct in its nature from the order passed by the Assessing Officer. Therefore, the satisfaction note recorded by the Assessing Officer for enabling him to assume jurisdiction to issue notices u/sec.153C is final and the same cannot be re- written by any other authority including the PCIT in the absence of enabling provision in the Act. Therefore, in our considered view, the powers of the PCIT for revision of an assessment order u/sec.153C for any assessment year are limited to the issues covered by the "satisfaction note" recorded by the Assessing Officer for the concerned assessment year based on the seized material having a bearing on the determination of total income for the concerned assessment year. If the assessment order u/sec.153C for an assessment year omits to bring to tax the income that is emerging from the seized material relied upon in the "satisfaction note" for the concerned 53 ITA.Nos.1333, 1331 & 1328/Hyd./2024 assessment year, the PCIT would be justified in law in invoking the powers of revision u/sec.263 for the said assessment year, since the jurisdiction u/sec.153C has been lawfully assumed by the AO for making the said assessment. On the other hand, if the jurisdiction u/sec.153C has not been lawfully assumed by the Assessing Officer for a particular assessment year in the absence of drawing necessary satisfaction by him for the said year in the satisfaction note with reference to the seized material which has a bearing on the determination of total income for the said year, the PCIT has no legal powers to re- write or modify the satisfaction note in order to render the assumption of jurisdiction by the AO as lawful which was otherwise unlawful. In the case of the appellants for assessment year 2019-2020, the satisfaction note recorded by the AO does not contain any discussion regarding the seized material that has a bearing on the determination of the total income of the appellant for the said assessment years. Since the fulfilment of the jurisdictional condition to the said effect is not brought out in the satisfaction note of 54 ITA.Nos.1333, 1331 & 1328/Hyd./2024 the Assessing Officer, the assumption of jurisdiction u/sec.153C by the Assessing Officer for the said assessment years is not lawful and the consequential notices issued and assessment orders passed for the said assessment years do not have validity in law. In the said facts and circumstances of the case, the PCIT is not empowered to revise such assessment orders by relying on seized documents in respect of which the Assessing Officer did not record any satisfaction in the satisfaction note, since the same would amount to re-writing the satisfaction note by the PCIT which is not legally permissible.

In the present case, going by the facts available on record, we find that there is no direct co-relation between the incriminating material found during the course of search qua the assessment years 2019-2020 to allege that the documents found during the course of search belongs to or relates to the assessee’s and has a bearing on the total income of the assessee’s for the assessment year 2019- 2020. Therefore, we are of the considered view that the satisfaction note recorded by the Assessing Officer 55 ITA.Nos.1333, 1331 & 1328/Hyd./2024 u/sec.153C of the Act is not in accordance with law as provided u/sec.153C of the Act and this fact is further strengthened by the decision of Hon’ble Supreme Court in the case of CIT vs., Sinhgad Technical Education Society [2017] 397 ITR 344 (SC) wherein it has been clearly held that unless the Assessing Officer records satisfaction with reference to the incriminating material qua each assessment year, the initiation of proceedings u/sec.153C and consequent assessment proceedings is null and void abinitio. Since the satisfaction note recorded by the Assessing Officer is not a valid satisfaction, in our considered view, any assessment order passed by the Assessing Officer pursuant to the said “invalid satisfaction note” also void abinitio and liable to be quashed. Therefore, once the assessment order considered to be illegal assessment order, in our considered view, the assumption of jurisdiction by the PCIT to revise the assessment order in terms of sec.263 of the Income Tax Act, 1961 is also illegal and void abinitio and liable to be quashed because an illegal order cannot be legalised by exercising revisionary power u/sec.263 of the Act.

The assessee has challenged the order passed by the PCIT u/sec.263 of the Act on many facets including the validity of jurisdiction of PCIT in light of approval granted by the JCIT/Addl. CIT u/sec.153D of the Act. Since, we have quashed the order passed by the PCIT u/sec.263 of the Act on the issue of invalid satisfaction note, in our considered view, the other grounds taken by the assessee are become academic in nature and does not require any specific adjudication. Therefore, all other grounds taken by the assessee are dismissed as infructuous.

In the result, ITA.No.1333/Hyd./2024 in the case of Dakshyani Horticulture Pvt. Ltd., Hyderabad for the assessment year 2019-2020 is allowed.

To sum-up, all the above 03 appeals i.e., ITA.No.1333/Hyd./2024, ITA.No.1331/Hyd.2024 and ITA.No.1328/Hyd./2024 in the case of the above respective Assessee’s are allowed. A copy of this common order be placed in the respective case files.