THE MODERN CONSTRUCTION CO. PVT. LTD.,AHMEDABAD vs. ITO, WARD-2(1)(4), AHMEDABAD

ORDER \nPER:ANNAPURNA GUPTA, ACCOUNTANT MEMBER\nThese are appeals relating to two different assessees, filed\nagainst separate orders passed by Ld. Commissioner of Income Tax\n(Appeals) [in short “CIT(A)) u/s 250(6) of the Income Tax\nAct, 1961(hereinafter referred to as 'Act”). The appeals in ITA\nNo.3464 and 3465/Ahd/2016 arise against orders passed in\nquantum proceedings and the appeal in against order passed in penalty proceedings conducted under\nsection 271(1)(c) of the Act.\n2. At the outset itself it was stated that the issue for\nadjudication in the appeals filed by the two assessees was common\nand identical arising from assessment framed on them u/s 153C\nr.w.s 153A of the Act on account of additions made to their incomes\nfrom documents found during search action undertaken u/s 132 of\nthe Act on an alleged accommodation entry provider entity. The\ndocuments allegedly revealing both the assessees to have taken\naccommodation entry of capital gains earned from sale of immovable\nproperty,adopting identical modus operandi in both the cases. The\nassessees being found to have not disclosed capital gains to the\nextent of accommodation entry availed, addition of the same was\nmade in the hands of both the assessees. The nature/ character of\naddition and its basis therefore, it was common ground, was\nidentical and so also the arguments to be made by both the sides.\nTherefore, both the appeals were taken up together for hearing, and\nare being disposed of by way of this commonconsolidated order.\n3.\nThe penalty appeal, it was stated was filed only in the case of\none assesse i.e. The Modern Construction Co. P. Ltd. and was levied\non account of addition made to the income of the said assessee in\nthe quantum proceedings. Being related to the appeal filed by the\nassessee in quantum proceedings, the same was also heard along\nwith other two appeals.\n4. The ld. counsel for the assessee stated that he shall be making\narguments dealing with the facts in the case of the assessee, M/s.\nModern Construction Co. P. Ltd. in ITA No.3464/Ahd/2016.\nTherefore, we shall be adjudicating the appeal of the assessee in ITA\nNo.3464/Ahd/2016 and our decision rendered therein shall apply\npari passu to other appeal in ITA No.3465/Ahd/2016.\nΙΤΑ NO.3464/AHD/2016 – Asst.Year 2013-14\n5. Brief background of the case is that search action\nunder\nsection 132 of the Act was undertaken in the case of Sarang\nChemical Ltd. (“SCL” for short) alongwith cases of Amrapali Group\non 26.10.2012. During the course of search certain documents\nbelonging/pertaining to the assessee were found. Based on these\ndocuments the\nAssessing Officer(AO)of the assessee recorded\nsatisfaction to assume jurisdiction in terms of the provisions of\nsection 153C of the Act for framing assessment in the case of the\nassessee. Due notices were issued to the assessee who was\nconfronted with all the material available with the AO. The\nassessment order reveals that the case of the Revenue was that the\ndocuments found during search on “SCL”, along with the\nstatements recorded of the Director of the said company and others,\nrevealed that the assessee had colluded with SCL, who had admitted\nto be an accommodation entry provider,for routing through “SCL” a\nportion of the sale consideration received by it, in cash, on transfer\nof immovable property owned by it. Thus, in this manner, the\nassessee allegedly had managed to show the transfer of\nimmoveable property to have been effected at a consideration less\nthan the actual consideration. The assessee, as per the AO, therefore\nhad disclosed less capital gain to tax. The AO, after considering\nthe submissions made by the assessee, proceeded to add the sale\nconsideration routed by the assessee through “SCL”, to the capital\ngains returned by the assessee from the sale of the said immovable\nproperty. Therefore, in the assessment framed under section 153C\nread with section 153A of the Act, the addition made to the income\nof the assessee was on account of capital gains short disclosed on\nsale of immovable property. The quantum being Rs.3,42,41,628/-.\nThis addition was challenged before the ld.CIT(A) who confirmed the\norder of the AO, and thus, the present appeal before us.\n6.\nThe assessee has raised the following grounds in its appeal\nbefore us:\n\"1. The learned CIT(A) has erred both in law and on the facts of the case\nin confirming the action of AO in making an addition of\nRs.3,42,41,628/- to the Capital Gain of the appellant\n2. Both the lower authorities failed to appreciate that the said amount of\nRs.3,42,41,628/- was never received by the appellant and hence the same\ncannot be said to have accrued as income in the hands of the appellant.\n3. Ld. CIT(A) has further erred in not allowing opportunity to cross\nexamine persons whose statements were used against the appellant.\n4. Both the lower authorities have passed the orders without properly\nappreciating the facts and they further erred in grossly ignoring various\nsubmissions, explanations and information submitted by the appellant from\ntime to time which ought to have been considered before passing\nthe impugned order. This action of the lower authorities is in clear breach of\nlaw and Principles of Natural Justice and therefore deserves to be quashed.\n5. The learned CIT(A) has erred in law and on facts of the case in confirming\naction of the Id. AO in levying interest u/s.234A/B/C of the Act.\n6. The ld.CIT(A) has erred in law and on facts of the case in confirming\naction of the ld.AO in initiating penalty u/s.271(1)(c) of the Act.\n7. Further, the assessee has filed an application raising\nadditional grounds, vide application dated 19.9.2016, which are as\nunder:\n“The appellant, through oversight, could not raise in the original\nappeal memo, the following legal ground of appeal and therefore,\nappellant now craves leave to raise this additional ground of appeal\nbefore this Hon'ble ITAT. This, being a legal ground, can be raised\nbefore Hon'ble the ITAT as per decision of Hon'ble Supreme Court in\nthe case of \"National Thermal Power - 229 ITR 383.\n1. Both, AO and CIT(A), have erred in not appreciating the fact that\nthe satisfaction recorded for the purpose of invoking jurisdiction under\nsection 153C of the Act is not in accordance with the satisfaction\ncontemplated under the scheme of the Act.\n2. In any case, the Assessment Order is without jurisdiction since\nthe conditions prescribed for invoking jurisdiction under section 153C\nof the Act are not fulfilled.”\n8. During the course of hearing on the issue of admission of the\nadditional grounds, it was submitted by the ld. counsel for the\nassessee that the additional grounds are purely legal in nature, and\nthat it is settled law that legal grounds can be raised at any time.\nReference was made to the decision of the Hon'ble Supreme Court in\nthe case of NTPC Ltd. Vs. CIT, 229 ITR 383 (SC). On the other hand,\nthe ld. DR though objected to the admission of additional grounds\n,however was unable to controvert the fact of the grounds raised\nbeing legal grounds which could be adjudicated on the basis of facts\nalready on record.\n9. Considering the same, the additional grounds raised by the\nassessee, being legal grounds which do not require further\ninvestigation of facts for adjudication, are therefore admitted for\nadjudication following the decision of the Hon'ble Supreme Court on\nthe issue in the case of NTPC Ltd. (supra).\n10. We shall now proceed to adjudicate the present appeal\ndealing first with the legal grounds raised by the assessee, since the\nchallenge raised therein is to the validity of the assessment framed\nin the case.\nAs is evident from a bare perusal of the grounds raised, the\nchallenge to the validity of the assessment framed is on the ground\nthat the satisfaction recorded by the AO for assuming jurisdiction\nunder section 153C of the Act was not in accordance with law.\nArguments at length were made before us by both the parties. The\ncontention of the ld. counsel for the assessee primarily was to the\neffect that the satisfaction recorded was vague and unclear and did\nnot reveal any material in the possession of the AO having a bearing\non the determination of the total income of the assessee, which was\na necessary prerequisite for assuming jurisdiction u/s 153C of the\nAct. More specifically, he stated, that the absence of clarity in the\nsatisfaction note of the AO was with respect to how the documents\nin his possession from the search conducted on “SCL” had any\nbearing on determination of income of the assessee. His contention\nwas that the satisfaction note only mentioned certain documents\nrelating to the assessee which was found during the search on\n\"SCL”, but how those documents had an impact on the\ndetermination of the income of the assessee was not coming out\nfrom the satisfaction note. His contention was that the law in this\nregard is settled that the satisfaction of the AO has to be a clear\nobjective satisfaction bringing out clearly the documents found\nduring the search pertaining to the assessee which have a bearing\non the determination of its income. That therefore merely\nmentioning the documents relating to the assessee found during\nsearch, without specifying how it impacted determination of income\nof the assessee would not suffice for a valid assumption of\njurisdiction u/s 153C of the Act .\n11. The ld. DR, on the other hand, vehemently opposed this\ncontention of the ld. counsel for the assessee stating that\nconsidering the facts on record there was no case of any lack of\ncredible satisfaction of the AO for assuming jurisdiction u/s 153C of\nthe Act. He contended that the AO of the searched person, SCL, and\nthe assessee was the same. That the AO of the searched person not\nonly had documents pertaining to the assessee but inquiries\nconducted during search had revealed the documents to pertain to\nan accommodation entry taken by the assessee from the searched\nentity Sarang Chemicals Ltd.(SCL).He pointed out that during\nsearch on SCL, documents relating to transfer of an immoveable\nproperty of the assessee was found. These documents were an MOU\nsigned by the assessee with SCL for transfer of property, the\nsubsequent cancellation of this MOU and a relinquishment deed of\nthe property by SCL in favour of the entity to whom it was ultimately\nsold by the assessee i.e. Edelweiss Precious Metals Pvt. Ltd. That\nthe directors & associated persons of SCL, in their statement\nrecorded, had admitted to providing accommodation entry by\nfollowing the modus operandi of entering into such MOU's for sale\nof property,then cancelling them and thereafter relinquishing rights\ntherein for substantial sums of money received from the ultimate\nbuyer of the property,which amount was subsequently withdrawn\nin cash and handed over to the seller of property. That the AO in\npost search inquiries had found the entire fund trail of the money\nreceived by SCL from Edelweiss for relinquishing its rights in the\nimmoveable property and noted the same to have returned back to\nthe assessee. That parties involved in the process had admitted to\nthe same in their statement recorded by the AO of the searched\nperson.\n11.1 That therefore the AO of the assessee being the same as the\nAO of the searched person, he was in possession of sufficient\ninformation adversely impacting the determination of income of the\nassessee.\n11.2 His contention was that the satisfaction may not have been\nadequately and properly worded so as to bring out all the materials\nleading to his satisfaction but there could be no doubt of all\nmaterial being in the possession of the AO for assuming a valid\njurisdiction under section 153C of the Act to frame assessment\nunder section 153A of the Act in the present case.\n11.3 The Ld. Counsel for the assessee countered by stating that\ncourts have consistently held that the sufficiency of satisfaction of\nthe AO for valid assumption of jurisdiction is to be determined on\nthe basis of the satisfaction recorded by the AO in writing alone and\nnothing can be added to the same.\n11.4 The Ld. DR countered by reiterating that admittedly there was\nsufficient adverse material with the AO of the assessee for being\nsatisfied that material found during search on SCL revealed assessee\nto have taken an accommodation entry relating to capital gain. And\nthere was no question of the jurisdiction assumed by the AO\ntherefore u/s 153C of the Act being not in accordance with law.\n12. Reference was made to various case laws by both the sides and\nsubmissions in writing were filed by both the parties. The same are\nbeing reproduced hereunder:\nSubmissions of the assessee in this regard are as under:\n•\nSatisfaction note recorded by AO for initiating proceedings u/s 153C of\nthe Act has been provided by Ld. DR during the pendency of the present\nappeal pursuant to additional grounds raised in this respect by the\nassessee. Following vital aspects emerge from perusal of the said\nsatisfaction note:\n➤ Satisfaction note has been recorded by the learned AO of the\n“assessee” on 15.09.2014 (i.e. FY 2014-15 / AY 15-16).\nThus, it can be clearly inferred that the material collected during\nthe course in the case of “person searched” was sent to the office\nof learned AO during the FY 2014-15 / AY 15-16.\nSatisfaction note contains reference to the following documents\nfound during the course of search in the case of “Sarang Chemicals\nLtd” based on which, jurisdiction u/s 153C has been assumed:\nPgs.11-19 of A/1: MOU dated 20.06.2011;\n✓ Pgs.24-29 of A/1: Deed of cancellation dated 23.03.2012;\n✓ Pgs.2-10 of A/1: Relinquishment deed dated 23.03.2012;\n✓ Pgs.37-45 of A/1: Relinquishment deed dated 23.03.2012;\nIn view of the facts, -\nAO is satisfied that “above documents seized from corporate\noffice of Sarang chemicals Ltd at C-4/806, Anushruti, Near\nJain Temple, Thaltej, belongs to the assessee Modern\nConstruction Co. Pvt. Ltd\";\n✓ Since the assessee, being other than the person referred to\nin S.153A of the Act, AO has satisfaction to proceed against\nthe assessee namely Modern Construction Co. P. Ltd. as per\nthe provisions of S.153C of the Act for the Assessment\nYears 2007-08 to 2013-14.\n“Assessment Year 2013-14” would fall within the ambit of “six assessment\nyears immediately preceding the year of search”, as envisaged u/s 153C:\n• Since the seized material in question has been received by the AO of the\nassessee in FY 2014-15 / AY 15-16, proceedings u/s 153C shall be\napplicable for the “Assessment Years 2009-10 to 2014-15” (six\n assessment year immediately preceding the year of search). Reliance is\nplaced on the following provisions / decisions:\nCIT vs. Jasjit Singh – (2023) 458 ITR 437 (SC);\n1st proviso to S.153C of the Act.\n“Satisfaction note” is completely “vague”, “scanty” and “non-specific\":\n• After receipt of seized material from AO of the ‘person searched', -\nif AO of "other person' is satisfied that such material has a bearing\non determination of total income of such ‘other person'\nfor six assessment years immediately preceding the year in which\nsearch is conducted or requisition is made,\nthen AO of the ‘other person' can assume jurisdiction u/s 153C of the Act\nin the case of such ‘other person'.\n• In the present case, satisfaction note recorded by AO is completely silent\non the following aspects:\nHow such material has bearing on determination of total income;\nIncome of which Assessment Year emanates from such material;\nDocument-wise correlation for AYs 2007-08 to 2013-14.\n• Thus, it is clear that the satisfaction note is absolutely “scanty\", "vague”\nas well as “non-specific”. Hence, the same cannot justify the assumption\nof jurisdiction u/s 153C of the Act.\nThe “seized material in question” does not have bearing on determination of\nthe "income for AY 2013-14”:\n• The “seized material” referred to the in the satisfaction note is as follows\nand the same pertain to “Assessment Year 2012-13” only:\nPgs.11-19 of A/1: MOU dated 20.06.2011;\nPgs.24-29 of A/1: Deed of cancellation dated 23.03.2012;\nPgs.2-10 of A/1: Relinquishment deed dated 23.03.2012;\nPgs.37-45 of A/1: Relinquishment deed dated 23.03.2012;\n• Thus, there is “no seized material” which has bearing on determination of\nincome of the assessee for “Asst. Year 2013-14”.\n• It is well settled that assessment u/s 143(3) r.w.s.153A / 153C of the\nAct is to be framed strictly on the basis of “incriminating material” found\nduring the course of “search” action carried out in the case of “assessee\nconcerned”. Reliance is placed on the following decisions:\n+ CIT v Singhad Technical Education Society – 397 ITR 344 (SC);\n+ PCIT vs. Abhisar Buildwell P. Ltd. – (2023) 454 ITR 212 (SC);\n+ PCIT vs. Saumya Construction – (2017) 387 ITR 529 (Guj);\n+ CIT vs. Kabul Chawla – (2015) 380 ITR 573 (Del.);\n• As regards reference to “statements recorded during search”, it is well\nsettled that “statements recorded by revenue do not constitute\nincriminating material”. Reliance is placed on following decisions:\n• PCIT v Best Infrastructure (India) (P.) Ltd – 397 ITR

82. (Delhi);\n+ PCIT v. Anand Kumar Jain – MANU/DE/0347/2021 (Delhi);\n+ CIT vs. Harjeev Aggarwal – (2016) 70 taxmann.com

95. (Delhi);\n• In absence of any seized material for the Asst. Year 2013-14,\nassumption of jurisdiction u/s 153C is not justified.\n“Assumption of jurisdiction u/s 153C” has to be justified “strictly” on the\nbasis of “contents of satisfaction note”; Any material / statement coming\nto the knowledge of the revenue at a “later stage” (say, during\n“consequential assessment proceedings”) cannot be referred to / relied\nupon for justifying “assumption of jurisdiction u/s 153C\":\n• AO can assume jurisdiction under the provisions of “section 147” &\n“section 153C" of the Act subject to fulfillment of certain conditions\nprescribed by the Statute under the respective sections.\n• Prior to invoking “section 147” (as applicable at the relevant point in\ntime), AO has to mandatorily record “reasons for reopening” and in a\nsimilar manner, prior to invoking “section 153C” (as applicable at the\nrelevant point in time), AO has to mandatorily draw a “satisfaction note”.\n• It is well settled that\nAssumption of jurisdiction u/s 147 / 153C has to be justified\nstrictly on the basis of contents of “reasons recorded for\nreopening” / “satisfaction note”.\nRevenue cannot improve upon such “reasons recorded for\nreopening” / “satisfaction note” at a later stage.\nAny material / statement coming to the knowledge of the Ao\nconcerned at a “later stage” (say, during the “consequential\nassessment proceedings”) cannot be relied upon for justifying\n“assumption of jurisdiction u/s 153C”.\nReliance is placed on following decisions:\nPrashant S. Joshi vs. ITO – 324 ITR 154 (Bom) – Para

9. (Pgs.6-13);\nKantibhai D. Narola v ACIT− 436 ITR 302 (Guj) Para 32(i)\n(Pgs.14-25);\nHindustan Lever Ltd. – 268 ITR 332 (Bom) – Para

20. (Pgs.26-29);\nIn the facts of the present case, -\nContents of the satisfaction note do not indicate that the so-called\nmaterial has a bearing on determination of total income for AY\n2013-14;\nIn fact, there is no reference to any material pertaining to AY\n2013-14. Hence, there cannot be any bearing on determination of\nincome for AY 2013-14;\nContention of learned DR to the effect that \"statements of certain\npersons referred to in the body of the assessment order” would\njustify the action of initiating proceedings u/s 153C. In rebuttal to\nthis, assessee submits as follows:\nValidity of proceedings u/s 153C is to be tested strictly on\nthe basis of 'contents of satisfaction note';\nScope of 'satisfaction note' recorded by AO for initiating\nproceedings u/s 153C_cannot be expanded at a later\nstage;\nJudgments of various High Courts laying down such legal\nproposition have been cited in the earlier part of this note.\nAccordingly,‘assumption of jurisdiction u/s 153C' has to\nbe tested strictly on the basis of 'satisfaction note' recorded\nby AO without being guided by “statements of certain\npersons referred to in the body of the assessment order”.\n“Satisfaction note” recorded by AO for assumption of jurisdiction u/s 153C\nof the Act is subject to “judicial scrutiny”:\nIt is well settled that the “satisfaction note” recorded by AO for\nassumption of jurisdiction u/s 153C of the Ac tis subject to “judicial\nscrutiny" by Hon'ble the Tribunal / Courts.\nIn fact, it is clearly evident from decision of Hon'ble the Apex Court in the\ncase of “CIT v. Singhad Technical Education Society – 397 ITR 344 (SC)\n(Para 9)" that\n➤ Hon'ble the ITAT has permitted the said assessee to raised\n“additional ground” questioning the “validity of notice u/s 153C of\nthe Act\";\nHon'ble the ITAT, thereafter, quashed the notices u/s 153C of the\nAct for relevant assessment years;\nHon'ble the High Court also dismissed the appeals filed by the\nrevenue against the order of Hon'ble the High Court;\nThereafter, revenue approached Hon'ble the Apex Court pursuant\nto which, the aforesaid decision came to be delivered by Hon'ble\nthe Apex Court.\nThus, it is well settled that the “satisfaction note” recorded by AO for\nassumption of jurisdiction u/s 153C of the Ac tis subject to “judicial\nscrutiny" by Hon'ble the Tribunal / Courts.\nUnder such facts and circumstances of the present case, assumption of\njurisdiction u/s 153C of the Act by AO is not in accordance with the\nscheme of Act. Hence, notice issued u/s 153C of the Act deserve to be\nquashed.\n13. Counter filed by the Department to this is as under:\n“The Registrar,\nIncome Tax Appellate Tribunal\nD Bench ITAT Ahmedabad\nSir\nSub: Submission of argument of assessee and point-wise argument\nof the Department in the Modern Construction (ITA 3464/Ahd/2015)\nAY 2013-14\nKindly refer to the above as directed by Hon'ble bench with respect to\nwritten submission on point wise issues raised by Ld. A.R. the\nfollowing submission is being made on legal grounds and on merits.\nLegal Ground\nProceedings u/s 153C have not been validly initiated\nArguments by Assessee\nChange in Block Period i.e. Six AY immediately preceding year of\nSatisfaction note has been recorded by the learned AO on 15.09.2014\nthis inferred to the material collected during course of person\nsearched set to the office of Ld. A.O. during the FY 2014-15 being AY\n2015-16, thus proceedings 153C shall be applicable for the block\nassessment period of 2009-10 to 2014-15 (5x AY immediately\npreceding year of search) and not 2007-08 to 2013-14\nCases relied upon:\nCIT vs Jasjit Singh (2023) 458 ITR 437 (SC)\nArguments on behalf of the Department\nThe said argument stands no leg in the present situation sincematter\nwhat the calculation of block period is taken into consideration it has\nno impact on the assessment year the present appeal\nSatisfaction note is completely vague, scanty and non-specific\nIt is silent as to how such material has bearing on determination of\ntotal income, come of which AY emanates from such material and\ndocument-wise correlation for AYs 2007-06 2013-14\nArguments on behalf of the Department\nThe Satisfaction note by the learned AD clearly lists down the\nmaterial that has been seized during the course of search pertaining\nto the Assessee The learned AD has recorded satisfaction and\nthereafter initiated proceedings u/s 153C. There are no mandatory\nparticulars that need to be recorded in a satisfaction note the\nprovision simply states to record a satisfaction for proceeding u/s\n153C\nIn SSP Aviation Ltd. (2012) 20 taxmann.com 214 (Delhi), the Hon'ble\nCourt held that There is no requirement that AO must be satisfied that\nsuch documents belonging to other person must conclusively reflect or\ndisclose any undisclosed income\nIn Savesh Kumar Agarwal (2013) 35 taxmann.com

85. (Allahabad),\nthe Hon'ble Court had the Even if AO did not find anything adverse\nagainst assesses on examination, notice 153C could still be issued.\nIn relation to this view, recently, in R.K.M. Powergen (P) Ltd. (2023)\n146 taxmann.com

68. (Madras), the Hon'ble Court held that when\nthere is Proper application of mind by AD at time of recording\nsatisfaction and satisfaction contained all required references to\nseized materials veracity of such could not be doubted and\nproceedings u/s 153C is justified\nThus, it stands clear from the above facts and relied case laws, that a\nsatisfaction note need not mandatorily require to cover the questions\nthat the assessee has put forward\n(C) Material Seized have no bearing to AY 2013-14\nSeized material in question does not have bearing on determination of\nincome for AY 2013-14 since the documents seized belong to FY\n2011-12\nCases relied upon:\nCIT vs Singhad Technical Education Society 397 ITR 344 (SC)\nPCIT vs Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC)\nPCIT vs Saumya Construction (2017) 387 ITR 529 (Guj)\nCIT vs Kabul Chawla (2015) 380 ITR 573 (Del)\nPCIT vs Best Infrastructure (India) Pvt. Ltd. 397 ITR

82. (Delhi)\nPCIT vs Anand Kumar Jain- Manu/DE/0347/2021 (Delhi)\nCIT vs Harjeev Aggarwal (2016) 70 taxтапп.сот

95. (Delhi)\nArguments on behalf of the Department\nThe contention of assessee that seized material in question does not\nhave bearing on determination of income for AY 2013-14 is completely\nbaseless and lacks any justification for such. For the sake of clarity,\nbrief facts about the seized material is as under:\nReturn of income disclosed execution of Conveyance Deed between\nAssessee and Edelweiss Precious Metals Pvt. Ltd. dated 23.04.2012.\nThe said deed was executed succeeding the Relinquishment deeds\nboth dated 23.03.2012 between M/s Sarang Chemicals to M Sheetal\nBio-Agro Tech Ltd and Edelweiss Precious Metals Pvt. Ltd as well as\nDeed of Cancellation of MOU dated 23.03.2012 undertaken between\nAssessee, M/s United Builders Corporation and M/s Sarang\nChemicals Ltd. & M/s Sheetal Bio-Agro Tech Ltd. These documents\nhad to be executed because of pre-existing MOU dated 20.06.2011\nAssessee, M/s United Builders Corporation and M/s Sarang\nChemical Ltd. & Ms. Sherta Bio-Agro Tech Ltd\nFrom the sequence of event it can be inferred that the aforementioned\nthree preceding documents dated 23.03.2012 and 20.06.2011 are a\npart and parcel of the Conveyance Deed executed on 23.04.2012. The\nConveyance Deed cannot be looked into isolation without referring to\nthe afore-stated documents. In addition to that all the afore-stated\ndocuments pertaining to the same property.\nIn view of this, the Conveyance Deed being executed on 23.04.2012\nfalls under the AY 2013 2014, however, the remaining three trail\ndocuments being a part and parcel of the said Deed can be taken into\nconsideration for the purpose of Av 2013-14 The said documents form\na car of Satisfaction Note recorded by the AO, thereby invoking\nprovision of section 153C.\nThus, the contention of Assessee raised with respect to Satisfaction\nNote lacks foundation.\n2) On Merit\nCapital Gain Addition\nArguments by Assessee\n(A) Confirming addition of Rs.3,42,41,628 made in respect of capital\ngain\nAmount received in compensation by erstwhile prospective buyer from\nultimate buyer, where assessee has no role to play, cannot be added\nunder the head of ‘capital gain'.\nArguments on behalf of the Department\nThe learned AO in his Assessment Order rightly stated that in the\nincome tax proceedings, the surrounding circumstances are to be\ntaken into consideration in judging the contentions raised by the\nassessee. The proceedings being civil in nature, evidence has to be\njudged by applying principles of preponderance of probability.\nThe MoU dated 20.06.2011 was prepared on a SORS Non Judicial\nstamp piper and the same has neither been registered nor notarized.\nIt is only a self-serving document prepared by assessee in connivance\nwith two accommodation entry providers. (AO Order Para 8.8 (υ)\npg.23)\nShri Lalit K. Rathod, director of Sarang Chemicals Ltd. & Sheetal Bio-\nAgro Tech Ltd. has clearly stated in his statement that cash received\nafter discounting the cheques from Ederweiss Precious Metals Pvt.\nLtd. was handed over by him to some person at HK house where the\noffice of assessee is situated/ [AO Order Para 8.8 (viii) pg 24)\nIt is beyond doubt that the assessee used MoU as colourable device\non capital fain arising out of sale of immovable properties on the\nreserving the complete consideration (AO Order Para 8.9 pg 24)\nConsidering the sequence of events and the connection between the\nparties d no room for any doubt that the assesses in order to reduce\nthe capital gain over the of property, undertook the whole act\n(B) No Opportunity to Cross Examine\nAssessee was not given opportunity to cross-examine against the\ncores of key persons in absence of which no addition can be made\nsolely on the basis of such material collected behind the back of\nassessee. No reasonable time for cross-examination was given\nCases relied upon:\nAndaman Timber Industries 62 taxmann.com

3. (SC)\nCharters Spped P Ltd Tax Appeal 126 of 2015\nJay Ace Technologies Ltd. 154 taxman.com

45. (SC)\nJPM Tools Ltd. 154 taxmann.com

44. (Delhi)\nArguments on behalf of the Department\nThe persons whose statements have been recorded by the\nDepartment during the proceedings have already accepted the part in\nthe plat Since they me moved in the process transaction, and were\nparties to it along with the Assessee and others, there arises no\nquestion as to why assessee would want to cross-examine them then\nalready two out of the four involved parties have accepted their doing\nthere is no son for the Assessee to co examine them Demand of cross\nexamination serves is purpose only when the party toes something\naway from the facts and not supported by any documentary\nevidence. However, in the interest of justice, the Assessee, was\nprovided with the opportunity of cross-examining but he did not opt to\navail the said opportunity during the proceedings, is stated in para p\nPg 24 of the Assessment Order.\n(C) No Evidence to substantiate claim of compensation being received\nby assessee, same cannot be said to have accrued as income in the\nassessee's hands since assessee has never received any such sum.\nBased on mere presumption of AO and statements of various persons.\nSimply because cash was received at HK House which is a premise of\nassessee, presumption is drawn that cash must have been handed\nover to the assessee\nArguments on behalf of the Department\nReplaying what has been stated earlier, the learned AO in his\nAssessment Order rightly stated that in the income tax proceedings, the\nsurrounding circumstances are to be toconsideration in judging the\ncontentions raised by the assessee. The proceedings being civil in\nnature, evidence has to be judged by applying principles of\npreponderance of probability.\nDuring the course of proceedings, it was found that the funds\nreceived by Sarang Chemicals Ltd. & Sheetal Bio-Agro Ltd. had been\ntransferred to current account of M/s Ansh Traders bearing no. 2862,\nwhich was then withdrawn immediately by Shri Ashish A Thakkar\n(Manage S Control M/s Ansh Traders) who, in his statement has\nstarted that he discounted the cheques received by him from these\ntwo companies and the cash was handed over to Shi Lal Rathod\ndirector of Sarang Chemical Ltd & Sheetal Bio-Agro Tech Ltd. (AD\nPara B Pg 10)\nIt is pertinent to note here that M/s Ansh Traders is engaged in the\nbusiness of these discounting wherein cheques received from clients\nare discounted for commission and cash paid to them and Sarang\nChemicals Ltd. & Sheetal Bio-Agro Tech Ltd are also engaged\nproviding accommodation entries of various types\nFurther, Shri Lalit K. Rathod, director of Sarang Chemical Ltd. &\nSheetal Bro-Agro Tech clearly stated in his statement that cash\nreceived after discounting the cheques from En Precious Metals Pvt.\nLtd. was handed over by him to some person at HK House where the\noffice of assessee is situated, on the instructions of Shri Pratik Shah\n(AO Order Para 8.8 (viii) pg 24)\nShri Pratik R. Shah, who managed and controlled Sarang Chemicals\nLtd. & Sheet Bo-Agro Tech Ltd., could not give any satisfactory\nexplanation to the reasons for withdrawing amount in cash in lieu of\ncheque received from Edelweiss Precious Metals P. Ltd. by\ndiscounting trough M/s Ansh Traders. (CIT(A) Para 5.6 pg 4\nThus, considering the sequence of events and the connection between\nthe parties o including the connection with the place where cash\ntransaction took place there is no man the any doubt that the\nassessee in order to reduce his capital gain over the sale of property\nundertook the whole act.\"\n14. The Department's submission regarding the AO of the assessee\nand AO of the searched person being the samevide letter dated\n9.5.2024 is reproduced hereunder:\nIn this regard, it is submitted that for the sake of clarification sort by the\nHon'ble Tribunal vide its order dated 01.05.2024 with respect to\ncommunication between AO of the searched party with AO of the assessee,\nsince the assessee has raised an additional ground challenging the validity\nof the assessment framed u/s 153C, it is humbly submitted on behalf of the\nDepartment that a search action was carried out u/s 132 of the Act at the\npremises of Sarang Chemicals Ltd. wherein various incriminating\ndocuments were belonging to assessee were found and seized. The case\nwas centralised in the central circle and DDIT concerned has handed over\nthe Appraisal Report to the AO of the Central Range. The AO of the Central\nRange has duly drawn the satisfaction note for initiating proceedings U/S\n153 C and same was submitted before the Hon'ble Bench in the earlier\nhearings. Therefore the AO of the searched party and the AO of the\nassessee is the same person, i.e. AO central circle. Thus the requirement as\nto transfer of communication and subsequent drawing of satisfaction\nseparately is not done as per the provisions of the IT Act in this case.\nHon'ble Apex Court in its judgment in Supermalls (P.) Ltd. v/s PCIT [2020]\n115 taxmann.com 105 (SC) has stated the following in para 6.1 which is\nreproduced under:\n6.1 It cannot be disputed that the aforesaid requirements are held to\nbe mandatorily complied with. There can be two eventualities. It may\nso happen that the Assessing Officer of the searched person is\ndifferent from the Assessing Officer of the other person and in the\nsecond eventuality, the Assessing Officer of the searched person and\nthe other person is the same. Where the Assessing Officer of the\nsearched person is different from the Assessing Officer of the other\nperson, there shall be a satisfaction note by the Assessing Officer of\nthe searched person and as observed hereinabove that thereafter the\n/Assessing Officer of the searched person is required to transmit the\ndocuments so seized to the Assessing Officer of the other person. The\nAssessing Officer of the searched person simultaneously while\ntransmitting the documents shall forward his satisfaction note to the\nAssessing Officer of the other person and is also required to make a\nnote in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in the case of\nGanpatiFincap Services (P.) Ltd. (supra), the same is for the\nadministrative convenience and the failure by the Assessing Officer\nof the searched person, after preparing and dispatching the\nsatisfaction note and the documents to the Assessing Officer of the\nother person, to make a note in the file of a searched person, will not\nvitiate the entire proceedings under section 153C of the Act against\nthe other person. At the same time, the satisfaction note by the\nAssessing Officer of the searched person that the documents etc. so\nseized during the search and seizure from the searched person\nbelonged to the other person and transmitting such material to the\nAssessing Officer of the other person is mandatory. However, in the\ncase where the Assessing Officer of the searched person and the\nother person is the same, it is sufficient by the Assessing Officer to\nnote in the satisfaction note that the documents seized from the\nsearched person belonged to the other person. Once the note says so,\nthen the requirement of section 153C of the Act is fulfilled. In case,\nwhere the Assessing Officer of the searched person and the other\nperson is the same, there can be one satisfaction note prepared by\nthe Assessing Officer, as he himself is the Assessing Officer of the\nsearched person and also the Assessing Officer of the other person.\nHowever, as observed hereinabove, he must be conscious and\nsatisfied that the documents seized/recovered from the searched\nperson belonged to the other person. In such a situation, the\nsatisfaction note would be qua the other person. The second\nrequirement of transmitting the documents so seized from the\nsearched person would not be there as he himself will be the\nAssessing Officer of the searched person and the other person and\ntherefore there is no question of transmitting such seized documents\nto himself.\n15. Having heard the contentions of both the parties, we shall now\nbe adjudicating the issue before us.\n16. As stated above, the assessee has challenged the validity of the\nassessment framed in the present case on the ground that the AO of\nthe assessee had not recorded a valid satisfaction for assuming\njurisdiction under section 153C of the Act, and as per the ld.\ncounsel for the assessee, what is missing in the satisfaction was the\nbasis with the AO for being satisfied with the documents and\nevidences found during the search on “SCL” having an impact on the\ndetermination of the total income of the assessee.\n17. Before proceeding further, we shall be reproducing the\nprovision of section 153C of the Act for better understanding of the\nposition of law in this regard . Section 153C of the Act relevant for\nthe impugned A.Y 2013-14 read as under;\n“153C. [(1)] Notwithstanding anything contained in section 139,\nsection 147, section 148, section 149, section 151 and section 153,\nwhere the Assessing Officer is satisfied that any money, bullion,\njewellery or other valuable article or thing or books of account or\ndocuments seized or requisitioned belongs or belong to a person other\nthan the person referred to in section 153A, then the books of account\nor documents or assets seized or requisitioned shall be handed over\nto the Assessing Officer having jurisdiction over such other person\nand that Assessing Officer shall proceed against each such other\nperson and issue such other person notice and assess or reassess\nincome of such other person in accordance with the provisions of\nsection 153A:]\"\n17.1 As per the applicable provision of law for the impugned year\nonce the assessing officer is handed over material belonging to the\nassessee found during search on another person, that was sufficient\nto assume jurisdiction u/s 153C of the Act for framing assessment\nu/s 153A of the Act. Therefore on handing over of documents itself\njurisdiction u/s 153C of the Act was validly assumed.\n17.2 This section was amended by Finance (No.2) Act, 2014 w.e.f 01-\n10-2014 including the requirement of the AO to be satisfied that the\ndocuments handed over had an impact on the assessment of income\nof the assessee for assuming jurisdiction u/s 153C of the Act. The\namended provision reads as under:\n,153C. [(1)] Notwithstanding anything contained in section 139\nsection 147 section 148, section 149, section 151 and section 153,\nwhere the Assess Officer is satisfied that any money, bullion,\njewellery or other valuable article thing or books of account or\ndocuments seized or requisitioned belongs belong to a person other\nthan the person referred to in section 153A, then the books of account\nor documents or assets seized or requisitioned shall be handed over\nto the Assessing Officer having jurisdiction over such other person for\nthat Assessing Officer shall proceed against each such other person\nand issue notice and assess or reassess the income of the other\nperson in accordance with the provisions of section 153A, if, that\nAssessing Officer is satisfied that the book of account or documents or\nassets seized or requisitioned have a bearing on the determination of\nthe total income of such other person for the relevant assessment year\nor years referred to in sub-section (1) of section 153A]”\n17.3 Therefore w.e.f 01-10-2014, the AO for assuming jurisdiction\nu/s 153C of the Act, had to be handed over material pertaining to\nthe assessee found during search on another person by the AO of\nthe searched assessee and additionally he needed to be satisfied that\nthe material impacted the determination of income of the assessee.\nLd. Counsel for the assessee has drawn our attention to the decision\nof the ITAT Kolkata Bench in the case of Trishul Hi-Tech Industries\nvs Dy.CIT IT(SS)A No.84-86/Kol/2011, dated 24-09-2014 holding\nthe amendment to be retrospective in nature.\n17.4 Without dealing with the merits of the contention of the Ld.\nCounsel for the assessee and considering this to be the position of\nlaw, that for a valid assumption of jurisdiction u/s 153C of the Act,\nthe AO has to be satisfied that the material relating to the assessee\nhanded over to him by the AO of the searched person has a bearing\non the determination of income of the assessee, we shall proceed to\nthe adjudicate the issue\n17.5 The contents of the satisfaction note recorded by the AO of the\nassessee while assuming jurisdiction u/s 153C of the Act are\ntherefore to be considered for in the light of the proposition of law to\nbe applied. The same is as under:\n“During the course of search & seizure action u/s 132 of the Act on\n26/27 10 2012 at the Corporate Office of Sarang Chemicals Ltd\nsituated at C-4/806, Anushruti Apartment, Near Jain Temple, Thaltej,\nAhmedabad loose papers inventorized as Annexure A-1 was found\nand seized as per Panchnama dated 27.10.2012\nPage No 11 to 19 of Annexure AI is a Memorandum of Understanding\n(MoU) dated 20.