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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 14.12.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15.
The various grounds raised by the assessee are as under: “1.1 The Learned Commissioner of Income - tax (Appeals) - 48, Mumbai, ["Ld. CIT (A)"] erred in confirming the action of the A.O. in framing the assessment order u/s. 143 (3) r.w.s. 153Cof the Income-tax Act 1961 ["the Act"].
1.2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment order framed and the addition made therein are bad, illegal and void. WITHOUT PREJUDICE TO THE ABOVE
2 Mr. Dhirajmal S. Madhavani 2.1 The Ld. CIT (A) erred in confirming the action of the A.O. in making addition of Rs. 60,50,000/- on account of alleged unexplained cash. 2.2 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.”
The first ground raised by the assessee is qua jurisdictional issue challenging the confirmation by ld CIT(A) of assessment framed u/s 143(3) r.w.s. 153C of the Act by the AO despite the same being illegal, bad and void.
The facts in brief are that the assessee is a chartered accountant in practice. A search was conducted in Essem Capital Markets Ltd a group of Ajmera Group of Companies at 22, Mansur Building, 1st Floor, 98 Princess Street, Mumbai which is in fact a professional office of the chartered accountant, the present assessee and it was found that the searched person was not carrying on any activities from the said office though the registered office of the company was at same place since incorporation. During the course of search unaccounted cash of Rs. 60.50 lacs was found in the said premises and was also admitted by the assessee as belonging to D.S. Madhavani & Co. It was also admitted by the assessee that the searched person was not carrying on any business from the said premises and it is only registered office since incorporation. The company despite several assurances to change the office has not done so. The admission made by the assessee during search in the statement recorded u/s 132(4) of the Act was retracted by way of affidavit dated 6.8.2013 filed in the office of DDIT along with letter dated 16.9.2013 stating therein that the cash belonged to Admo Hospitality Pvt. Ltd. which was kept for safe custody in the office of the assessee and the director of the said
3 Mr. Dhirajmal S. Madhavani company Shri Jesal Ajmera also filed a sworn affidavit owning up the cash found in the premises of the assessee. However, the AO rejecting all the pleas of the assessee, added the same to the income of the assessee as unexplained cash by framing assessment u/s 143(3) of the Act dated 17.2.2016 with a note appended on the page no. 13 of the assessment order that the order is passed with the prior approval u/a 153D of the Act received vide letter dated 17.2.2016. During the assessment proceedings the assessee challenged the proceedings on the ground of non issuance of any search warrant in the name of the assessee.
The legal ground was not taken before the ld CIT(A) and is being taken for the first time before the tribunal . After hearing both the parties, we are of the opinion the legal ground can be taken at any time and stage in the appellate proceedings and is being adjudicated in the ensuing paras.
The ld AR vehemently argued before the bench that the order passed by the AO u/s 143(3) of the Act was in fact order u/s 143(3) r.w.s. 153C of the Act as is clear from the fact that the said order was passed with prior approval u/s 153D of the Act vide letter dated 17.2.2016 and as observed by the ld CIT(A) at page no 3 para of the appellate order. The ld AR argued that assessee was searched despite there being no search warrant in the name of the assessee. The ld AR contended that the order u/s 143(3) r.w.s. 153C of the Act was passed in violation of provisions of section 153D of the Act as also without recording any satisfaction contemplated by section 153C of the Act. The ld AR submitted that the fact of non recording any satisfaction was 4 Mr. Dhirajmal S. Madhavani admitted by the ld DR during the hearing. The ld counsel for the assessee submitted that the assessment order u/s 143(3) r.w.s. 153C of the Act must be passed after obtaining prior approval of the Joint Commissioner of Income Tax as contemplated u/s 153D of the Act failing which the entire order is nullity and is vitiated. In defence of his arguments the ld AR relied on the following decisions:- a)Akil Gulamali Somji Vs ITO ITA No.455 to 458/Pune/2010 as affirmed by Bombay High Court in ITA No. 1416 to 1419 of 2012 in CIT Vs. Akil Gulamali Somji . SLP is also dismissed by the Hon’ble Supreme Court. b) PCIT Vs Sunrise Finlease Pvt Ltd. (2018) 252 Taxman 407 (Guj) c) Smt Shreelekha Damani Vs DCIT (2015) 173 TTJ 332 (Mumbai)
The ld AR also contended that the order passed by the AO u/s 143(3) r.w.s. 153C of the Act has to be passed only if the AO of the searched person has recorded a satisfaction note. The ld AR argued that no satisfaction note was ever recorded by the AO of searched person or AO of the assessee that the cash belonged to the assessee. The ld counsel argued that such satisfaction note is necessary even if the AO of the searched person and the assessee are same and such note is necessary even for the year of search. The fact of non recording of satisfaction was evident from the records produced at the time of hearing by the ld DR. The ld AR submitted that this was necessary in view of the fact that the cash was inventoried in the name of M/S Essem Capital Markets Ltd and was claimed to be belonging to M/S Adam Hospitality Pvt Ltd. The ld AR stated that M/S Adam Hospitality Pvt Ltd has even filed affidavit to this effect before the DDIT. In absence of the satisfaction note
5 Mr. Dhirajmal S. Madhavani the order passed u/s 143(3) r.w.s. 153C of the Act is void and has to be quashed. In defence of his arguments the ld AR placed reliance on the following decisions:- a) CIT Vs Mechmen LLC (2016) 380 ITR 591 (MP) b) CIT Vs. Lavanya Land Ltd (2017) 397 ITR 2469(Bom)
The AR also raised several other propositions challenging the validity of the assessment order such as that pre-requisite for making the addition in the hands of the assessee u/s 153C is that the said asset must belong to the assessee and AO of the search person must also records satisfaction to this effect. In support of his contentions the ld AR relied on following decisions: a)CIT Vs Sinhagad Technical Education Society (2017) 397ITR 344 SC b)CIT Vs Arpit Land Pvt Ltd. (2017) 393 ITR 276 (Bom).
Finally, the ld AR prayed before the bench that in view the serious legal infirmities in the assessment order the same is void and nullity.
The ld DR on the other hand strongly opposed the arguments advanced by the ld AR by submitting that the cash was found in the office of the assessee and he also admitted the ownership of the said cash as belonging to him, though the cash was inventorised in the hand of the M/S Essem Capital Markets Ltd. during search. The Ld DR submitted before the bench that the prior approval of the joint commissioner was duly taken and this was stated in the assessment order itself. The DR argued that once the cash was found in the office of the assessee and 6 Mr. Dhirajmal S. Madhavani though there was no search warrant in the name of the assessee but was in the name of the company whose registered office is assessee’s office , then no satisfaction is required to be recorded. It was also argued that the cash belonged to assessee only and any subsequent retraction was merely an afterthought. The ld DR therefore prayed before the bench that the assessment order was passed validly and may be affirmed.
We have heard the rival contentions and arguments and also perused the records as placed before us including the decisions cited by ld AR. The undisputed facts are that the order has been passed u/s 143(3) r.w.s. 153C of the Act as is clear from the note in the assessment order that prior approval u/s 153D was obtained to pass the assessment order. Now the only issue we are dealing with at this stage is whether the assessment framed by the AO is valid or not. In this case, the office of the assessee was searched on basis of warrant in the name of M.S Essem Capital Markets Ltd as the registered office of the said company was shown in the professional office of the assessee. This has happened because at the time of incorporation of the company, the registered office was shown in the office of the assessee and not changed till date while no business activities were being run from the said office which was confirmed in the search. In the search, Rs. 60.50 lacs was found which was initially admitted by the assessee to be owned by him but after three months retracted the statement recorded u/s 132(4) of the Act and simultaneously another group company M/S Adam Hospitality Pvt. Ltd. of Ajmera group owning up the cash found in the assessee’s premises which was rejected by the AO to be an afterthought. Now the issue before us whether order
7 Mr. Dhirajmal S. Madhavani passed without recording satisfaction by the AO of the searched person is valid or not. After considering the arguments of the both the sides we observe that no satisfaction was ever recorded which his not disputed by the revenue during the hearing. In our opinion the recording of satisfaction is must as a precondition to framing of assessment order u/s 143(3) r.w.s. 153C of the Act. We find merits in the arguments of the ld AR that even if the AO of the searched person and other person is same even then the mandatory requirement recording the satisfaction is there even for the year of search. The case of the assessee is squarely covered by the ratio laid by the jurisdictional high court in the case of CIT Vs Lavanya Land Ltd (supra) and Madhya Pradesh High Court in the case of CIT Vs Mechmen LLC(Supra) wherein it have been held that satisfaction has to be recorded by the AO of the searched person even if the AO the searched person and other person is same. We observe that in the case of the assessee no satisfaction has been recorded by the AO and consequently the assessment framed u/s 143(3) r.w.s. 153A of the Act is not valid and can not be sustained. We therefore respectfully following the decisions of the Bombay High Court and Madhya Pradesh High court , quash the assessment order framed u/s 143(3) r.w.s. 153A of the Act on the ground that no satisfaction has been recorded. The ground no. 1 is allowed.
Since we have allowed the appeal of the assessee on legal ground, the ground raised on merits need not be adjudicated.
Order pronounced in the open court on 23.04.2019.