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Income Tax Appellate Tribunal, DELHI BENCHES “D” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI L.P. SAHU
This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-XXXII, New Delhi, dated 20.08.2014, for the A.Y. 2008-2009, on the following grounds:
1. “The Commissioner of Income Tax (Appeals) erred in law and on facts in upholding the 2 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
ground of the assessee that provisions of section 153C of the Act could not be applied in the case and initiation of proceedings u/s 153C was not proper and bad in law.
2. The Commissioner of Income Tax (Appeals) erred in law and on facts in holding that for initiating valid jurisdiction u/s 153C, even if the AO of the searched person and the AO of such other person is same, it is mandatory that he has to first record satisfaction note in the file of the person searched and thereafter such satisfaction note along with the seized documents or books of account to be placed in the file of such other person.
3. The Commissioner of Income Tax (Appeals) erred in law and on facts in holding that no fair opportunity of hearing u/s 143(2) of the Act was given to the assessee before completing the assessment u/sl53C of the !T Act.
4. The Commissioner of Income Tax (Appeals) erred in law and on facts in deleting the addition of Rs.48,00,000/- on account of deemed income under section 68 of the Income Tax Act, 1961.”
3 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Brief facts of the case as mentioned in the impugned orders are that assessee-company is engaged in the business of a Builder and a Developer of Real Estate. A search and seizure operation u/s 132 of the I.T. Act, 1961, was conducted by the Investigation Wing of the Department in Victory group of cases (Main Jagat Group) including its Directors, Other Individuals and Connected Associates on 14.09.2010. Since one of the Directors of the assessee-company was associated with one of the cases of Jagat Group, his residential premises was also searched simultaneously. As a result of this search operation, a survey operation u/s 133A of the I.T. Act, 1961 was also conducted by the Department on the assessee’s business premises on 14.09.2010. The case of the assessee-company was centralized and notice under section 153A of the I.T. Act was issued which was objected on the ground that no action under section 132 was initiated against the assessee. The Assessing Officer on finding this contention as correct, withdrew the notice dated 04.11.2011 issued u/s 153A of the I.T. Act, 1961. The Assessing Officer observed that during the course of the 4 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
assessment proceedings u/s 153A in the case Shri Pramod Goel, it was noticed that a search and seizure operation under section 132 was conducted on 14.09.2010 at the residential premises of Shri Pramod Goel, Smt. Savita Goel and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi, wherefrom the documents belonging to the assessee-company were found and seized which is “Page No. 102 and 103 of Annexure A-l of Party V-2 is a copy of the Balance Sheet, Profit & Loss account, pertaining to M/s Victory Accommodations Pvt Ltd. for the financial year ending 31.03.2010." On the basis of the above documents found during the course of search, the Assessing Officer recorded a satisfaction note on 27.02.2013 and issued and served upon the assessee a notice under section 153C of the I.T. Act, 1961. In response to the same, the assessee filed a letter stating that the return filed under section 139(1) may be treated as return filed in response to notice under section 153C of the I.T. Act, 1961. It was claimed, it is filed in protest and objected to initiation of proceedings us 153C of the I.T. Act.
However, the contention of the assessee was rejected. The A.O.
5 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. accordingly completed the assessment under section 143(3) r.w.s.153C of the I.T. Act vide Order dated 28.03.2013 at a total income of Rs.48 lakhs as against NIL income declared by the assessee-company. The addition was made at Rs.48 lakhs under section 68 of the I.T. Act on account of unaccounted income which represented the amounts credited in the books of account of assessee as ‘share application money’ received during the assessment year under consideration.
3. The assessee-company challenged the validity of the proceedings initiated under section 153C of the I.T. Act as well as the addition on merit before Ld. CIT(A). The assessee- company contended that the assessment order under section 153C of the I.T. Act is bad in law and contrary to principles of natural justice. No incriminating material belonging to assessee-company was found during the course of search. No search was conducted in the case of the assessee-company. The A.O. did not raise any query on documents filed by the assessee- company in respect of evidence of share application money
6 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. received. The A.O. merely initiated the proceedings under section 153C of the I.T. Act, on the basis of copy of the balance sheet seized during the course of search which pertains to A.Y. 2010-2011. No undisclosed income was unearthed on examination of any documents found in search. Several case Laws were relied upon in support of the same.
3.1. The Ld. CIT(A) reproduced Section 153C of the I.T.
Act in the order and on going through the interpretation of the said provision, he noted that action under section 153C can be taken in respect of any other person other than the person searched, if the Assessing Officer of the searched person is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belong to a person other than the person searched under section 153A. In such circumstances, the Assessing Officer shall hand-over to the Assessing Officer of such other person money, jewellery, bullion or other valuable article or thing or books of account or document, and thereafter, the 7 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Assessing Officer of such other person shall proceed against the said person to assess or re-assess his income in accordance with the provisions of section 153A of the I.T. Act, 1961.
Therefore, recording of satisfaction by the Assessing Officer of the person searched that any money bullion, jewellery or other valuable article or thing or books of account or documents seized belonged to the person other than the person searched is a sine-qua-non for initiating action under section 153C of the I.T. Act, 1961. The Ld. CIT(A) in support of this interpretation of section 153C, relied upon the decision of Hon'ble Apex Court in the case of Manish Maheswari vs. ACIT & another (2007) 289 ITR 341 (SC). He has also noted that the language of section 158BD and section 153C has similarity. Therefore, it is evident that the condition for recording satisfaction by the Assessing Officer of the person searched is present in both the Sections.
To this extent, decision of Hon’ble Supreme Court in the case of Manish Maheshwari vs. ACIT and another (supra), is applicable while interpreting the provisions of Section 153C. The Ld. CIT(A) called for the assessment record of the assessee-company and 8 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. found that the AO recorded the satisfaction note in the file of the assessee-company which is reproduced as under:
"Satisfaction u/s 153C of the Income Tax Act. 1961 in the case M/s Victory Accommodations Pvt. Ltd. PAN- AACCV3923C 208. Gupta Tower. Azadpur Commercial Complex. Azadpur. Delhi- 11 0033.
During the course of assessment proceedings u/s 153A in the case of Sh. Pramod Gael, it is noticed that search and seizure operation u/s 132 was undertaken on 14.09.2010 in the case of Sh. Pramod Goel, Smt. Savita Goel, and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Accommodations Pvt. Ltd. were found and seized from the above premises.
Page no. 102 and 103 of Annexure A-l of Party V-2 is a copy of the Balance Sheet, Profit loss account, pertaining to M/s Victory Accommodations Pvt. Ltd. for the fin. year ending 31.03.2010.
The case of M/s Victory Accommodations Pvt. Ltd. was centralized with this office vide F.NO;. ClT-Delhi- Vl/Centralization/2011-12/648 dated 22.06.2011 issued by the CIT, Delhi-Vl, New Delhi.
9 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
I am therefore satisfied that the documents seized, as referred to above, belong to M/s Victory Accommodations Pvt. Ltd. warranting action u/s 153C in this case.
27.02.2013 (Sumesh Swani) Deputy Commissioner of Income Tax Central Circle-09, New Delhi
Notices u/s 153C of the Income-tax Act, 1961 are hereby issued for the assessment years 2005- 06 to 2010-11.
(Sumesh Swani) Deputy Commissioner of Income Tax Central Circle-09, New Delhi"
3.2. The Ld. CIT(A) on reading the above satisfaction note found that the Assessing Officer of the assessee-company recorded the satisfaction note under section 153C of the I.T. Act who has initiated action under section 153C of the I.T. Act, which is also supported by the fact that the said satisfaction note was recorded on 27.02.2013 and notice under section 153C have been issued on the same date. The A.O. who recorded satisfaction note in the file of assessee company is also the same A.O. who issued notice under section 153C in the case
10 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. of the assessee-company. The Ld. CIT(A) also called for the assessment record of Shri Pramod Goel who was searched under section 132 on 14.09.2010. The A.O. of the searched person Shri Pramod Goel and A.O. of the other person i.e., assessee-company may be same, but, the above two entities are two different persons, therefore, A.O. is bound to carry-out such exercise and the A.O. of the person searched should have recorded satisfaction note during the course of assessment proceedings under section 153A in the case of Shri Pramod Goel in his file and after recording such satisfaction note in the file of Shri Pramod Goel that is the person searched, the same should be placed in the file of the assessee-company i.e., other person. The Ld. CIT(A) on perusal of the assessment record of Shri Pramod Goel found that such exercise of recording satisfaction note in the case under section 153A was not carried-out and no such satisfaction note was found recorded in the case of the person searched. It is, therefore, clear that no satisfaction note was found recorded in the file of Shri Pramod Goel, the person searched under section 132 and assessed
11 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. under section 153A of the I.T. Act. Therefore, satisfaction note recorded in the case of the assessee i.e., other person is not valid under section 153C of the I.T. Act. Ld. CIT(A) also noted that the balance-sheet dated 31.03.2010 is not incriminating in nature. Ld. CIT(A) relied upon the order of ITAT in the case of CIT vs. Sinhgad Technical Education Society in ITA.No.114 to 117/PN/2010 in support of his findings that since no satisfaction note have been recorded in the case of the person searched as required under section 153C of the I.T. Act, therefore, proceedings under section 153C are not proper and bad in law. This issue was decided in favour of assessee.
3.3. The Ld. CIT(A) as regards giving opportunity to the assessee-company held that no sufficient time was given to the assessee-company to represent before A.O. Therefore, he found merit in the grievance of the assessee-company that no proper opportunity was provided to the assessee-company.
3.4. As regards the addition on merit of Rs.48 lakhs on account of unexplained share application money, Ld. CIT(A)
12 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. noted that survey was conducted under section 133A at the business premises of assessee-company at Azadpur, in which, some documents have been impounded which were Annexurised as A-5, pages 51 to 55, which contain the transactions of the Company of Victory Group with different companies in tabular form. The same were scanned in the assessment order, upon perusal, the A.O. noted that various companies purchased the shares of the company of the Victory Group at a premium of Rs.90/- to Rs.190/- per share on a face value of Rs.10/- per share. According to A.O. the transactions for M/s. Victory Apartments P. Ltd., were arranged by Shri Tarun Goel, Entry Operator, who are running several companies. The assessee-company filed several documents before A.O. in support of genuineness of the share application money received such as share application form, copy of the ITR, PAN, Board Resolution, Bank Statements, Copy of Certificate of Incorporation, Ledger Account, Challan for filing return with Registrar of Companies etc. The assessee-company, therefore, submitted that it has received genuine share application money,
13 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. on which, A.O. has not conducted any enquiry. Ld. CIT(A), accepted the contention of assessee-company that on filing documents on record, A.O. did not make any enquiry. The A.O. has gone through and relied upon report of DDIT, Kolkata, which was in respect of some other cases and not connected with the assessee-company. The Ld. CIT(A) noted that A.O. did not issue notice under section 133(6) and no further enquiry was made. Therefore, addition on merit was also deleted. The appeal of assessee-company was accordingly allowed.
4. The Ld. D.R. relied upon the order of the A.O. He has submitted that Ld. CIT(A) has reproduced satisfaction note at page No.11 of the order. The balance-sheet and profit and loss account was seized during the course of search, which led to survey under section 133A in the case of the assessee-company.
If the A.O. has used the material/evidence collected under section 133A and during the course of search in the case of Shri Tarun Goel, there is no restriction to use it under sections 153A and 153C regarding the same. Ld. D.R. relied upon decision of 14 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Hon’ble Supreme Court in the case of CIT vs. Mukundray K.
Shah 290 ITR 433. The Ld. D.R. relied upon Judgment of the Hon’ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Sheetal International Pvt. Ltd., dated 10.07.2017 in which decision of Hon’ble jurisdictional Delhi High Court in the case of Ganapati Fincap Services Pvt. Ltd., vs. CIT dated 25.05.2017 was referred in which it was held that –
“(iv) where the A.O. of the searched person and the other person is the same, such a satisfaction note qua the other person has to be recorded by the A.O. of the searched person prior to the initiation of the proceedings against the other person. This is a sine qua non for triggering the proceedings against the other person under section 153C of the Act.
(v) There do not have to be two separate satisfaction notes prepared by the A.O. of the searched person even where he is also the A.O. of the other person. In such event, the A.O. need make only one satisfaction note. That satisfaction note
15 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. is qua the other person. Further, it is sufficient that such satisfaction note is placed in the file of the other person by the A.O. in his capacity as the A.O. of such other person.”
4.1. The Ld. D.R. also relied upon the decision of Hon’ble Supreme Court in the case of CIT vs. S. Ajit Kumar in Civil Appeal No.10164 of 2010 dated 02.05.2018 in which search was conducted by the Officer of the Income Tax Department in the premises of the assessee and on the same date, there were survey in the premises of Elegant Constructions and Interiors Ltd., who constructed and decorated the house of the assessee.
Pursuant to the same, the fact that the assessee having engaged the above work of Contractor for construction of houses came out, in these premise, it was held that “the power of survey has been provided under Section 133A of the I.T. Act.
Therefore, any material or evidence found/collected in a Survey which has been simultaneously made at the premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under Section 158BB read
16 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. with Section 158 BH of the IT Act.” The Ld. D.R. relied upon order of ITAT, Delhi Bench in the case of Shri Parag Dalmia, New Delhi vs. DCIT, Central Circle-26, New Delhi in ITA.No.5499/Del./2017 dated 26.02.2018 in which the documents received by the Government of India from a Sovereign Country containing information regarding the undisclosed foreign accounts were received prior to the search and was confronted to the assessee during the course of search.
Therefore, it was held that the same constitutes incriminating material. The Ld. D.R, therefore, submitted that satisfaction note was validly recorded under section 153C of the I.T. Act. On merits, the Ld. D.R. submitted that the name of the parties tally with the additions. The entries were arranged by Shri Tarun Goel, Entry Operator, in whose case, addition have been confirmed. In case, A.O. has not conducted proper enquiry, the Ld. CIT(A) having co-terminus powers, should have exercised the same power by conducting further investigation into the matter and relied upon the decision of Hon’ble jurisdictional
17 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Delhi High Court in the case of CIT-II vs. M/s. Jansampark Advertising And Marketing (P) Ltd., 375 ITR 373 (Del.) (HC)
5. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below.
He has submitted that initially the A.O. initiated the proceedings against the assessee under section 153A of the I.T.
Act and when it was found that no search have been conducted in the case of assessee, therefore, action under section 153A was dropped. The A.O, in the case of assessee-company recorded satisfaction under section 153C of the I.T. Act, which is illegal and bad in law and is not in conformity with Section 153C of the I.T. Act because no satisfaction note have been recorded in the case of the person searched i.e., Shri Pramod Goel. Further, the balance sheet found during the course of search ending 31.03.2010 did not relate to assessment year under appeal i.e., 2008-2009. Further, the balance-sheet is in public domain and contains list of shareholders which could not be considered as incriminating material. He has submitted
18 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. that identical issue have been decided by ITAT, Delhi Bench in case of assessee in favour of assessee-company [Victory Accommodation Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 09, New Delhi] reported in 2017-(5)-TMI-1050-ITAT-Delhi for A.Ys. 2009-2010 and 2010-2011. He has relied upon decision of Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) and decision of Hon’ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Index Securities Private Limited, Vidya Shankar Investment Private Limited 2017-(9)-TMI-585 (Del.). Learned Counsel for the Assessee submitted that since no satisfaction note has been recorded in the case of the person searched and no incriminating material was found during the course of search against the assessee-company, therefore, the issue is covered in favour of the assessee-company by the Judgment of Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (supra). He has submitted that assessee- company filed all the documents before A.O. on merits but the A.O. without making any enquiry or without verifying any fact,
19 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. made the addition which was correctly deleted by the Ld. CIT(A).
A.O. relied upon the report of the Investigation Wing, Kolkata, which was not connected with the assessee-company. He has also relied upon the decision of Hon’ble jurisdictional Delhi High Court in support of his contention in cases of CIT vs. Fair Finvest Ltd., 357 ITR 146 and ACIT vs. Best Infrastructure (India) Pvt. Ltd., 2017-(8)-TMI-250.
We have considered the rival submissions. According to Section 153C of the I.T. Act, action under section 153C can be taken in respect of any other person than the person searched, if the A.O. of the searched person is satisfied that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belonged to a person other than the person searched under section 153A.
In such circumstances, the Assessing Officer shall hand over to the Assessing Officer of such other person money, jewellery, bullion or other valuable article or thing or books of account or document, and thereafter, the Assessing Officer of such other
20 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. person shall proceed against the said person to assess or re- assess his income in accordance with the provisions of Section 153A of the I.T. Act, 1961. Therefore, recording of satisfaction by the Assessing Officer of the person searched is a condition precedent for initiating action under section 153C of the I.T.
Act. The Hon’ble Supreme Court in the case of Manish Maheshwari vs. ACIT (2007) 289 ITR 341 (SC) in para-11 held as under :
“Condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefor are : (i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the 21 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person.
The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act.”
6.1. It was further held by the Hon’ble Supreme Court in para-16 in the case of Manish Maheshwari (supra) as under :
“Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 06.02.1996 satisfies the requirements of Section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer.
Documents and other assets recovered during search had 22 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. not been handed over to the Assessing Officer having jurisdiction in the matter.”
6.2. It was further held in para-22 by the Apex Court in the case of Manish Maheshwari (supra) as under :
“As the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having jurisdiction over the matter, we are of the opinion that the impugned judgments of the High
Court cannot be sustained, which are set aside accordingly.
The appeals are allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.”
6.3. The CBDT vide Circular No.24/2015 dated 31st December, 2015 issued the following directions :
"Subject : Recording of satisfaction note under section 158BD/153C of the Act - Reg.
23 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 (available in NJRS at 2014-LL- 0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages :
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person."
24 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari- materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.
The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts.
In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court."
25 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
6.4. The Hon’ble Bombay High Court in the case of CIT vs. Singhad Technical Education Society (2015) 378 ITR 84 (Bom.) held as under :
“In terms of section 153C of the Income-tax Act, 1961, the Assessing Officer should be satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A of the Act and he can hand over the seized documents to the Assessing Officer having jurisdiction over that person. The assessee was an educational institution since the assessment year 1994-95. A search and seizure operation was carried out and certain loose papers were seized from the president of the assessee. Simultaneously a survey action was conducted on the assessee. On the basis of loose papers found with and seized from the president the Assessing Officer issued a notice under section 153C on the assessee and assessed the income. The Tribunal set aside the assessments. On appeals to the High Court:
Held, dismissing the appeals, that the reasons assigned by the Assessing Officer in the satisfaction note
26 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. were silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note was not enough. There was absolutely nothing to indicate as to in which educational courses, the education was imparted and institution wise, whether the admissions were granted to the technical courses merit-wise or on the basis of marks obtained in XII standard HSC exam. Whether any fee structure was approved and cash component was, therefore, collected over and above the sanctioned fees were matters which ought to have been gone into and there could, not be a general or vague satisfaction. The Tribunal was justified in setting aside the assessments.”
6.5. The Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) held as under :
“Held, dismissing the appeals, (i) that the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of 27 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co- relation, document-wise, with these four assessment years.
The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the merits as well. The High Court was right in affirming this view of the Tribunal.
Decision of the Bombay High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed. (ii) That the assessment order passed by the Assessing
Officer covered eight assessment years. For six assessment years the assessment was under section 153C of the Act.
The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The 28 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. objection pertaining to the four assessment years in question did not relate to the other tax assessment years, namely, 2004-05 and 2005-06. Nor did this decision have a bearing in respect of assessment for assessment year
1999-2000 or assessment year 2006-07. The necessary consequence would be that the conclusions of the Assessing
Officer in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of sections 11 and 12 would not be affected by this judgment.”
6.6. The Hon’ble Madras High Court in the case of CIT vs. Late J. Chandrasekhar (HUF) (2011) 338 ITR 61 (Mad.) held as under :
“On the search conducted in the case of A and group on November 25, 2003, material pertaining to "on-money" payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that,
29 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. the Assessing Officer issued notice under section 153C of the Income-tax Act, 1961, and reworked the capital gains.
The Commissioner (Appeals) and the Tribunal held that the notice under section 153C was not valid. On appeal to the High Court :
Held, dismissing the appeals, that the Assessing
Officer did not have the benefit of the seized material while issuing the notice under section 153C. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing
Officer at the time of issuing notice, the Tribunal rightly came to the conclusion that he assumption of jurisdiction under section 153C was not valid.”
6.7. The ITAT, Agra Bench in the case of ACIT, Circle-I, Gwalior vs. Global Estate (2013) 142 ITD 740 (Agra) held as under :
• The assessee had a case for quashing of proceedings under section 153C. No material is produced to prove that 30 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. the Assessing Officer in the case of person searched was satisfied that any money, bullion, jewellery or other valuable article or things or books of account or documents seized or requisitioned belongs to or belong to a person other than the person referred to in section 153A. • No material is produced before to show if any satisfaction was recorded by the Assessing Officer in that case that the material belongs to any person other than the person with respect to whom search was made under section
Department did not produce any material to show if any such satisfaction as required under section 153C
was recorded by the Assessing Officer in the case of person searched. No material is produced in reference to above requirement. • No material is also produced before to show that books of account or documents or assets seized had been handed over to the Assessing Officer having jurisdiction over such other person. In the absence of any adequate
31 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. material produced by the department contention of the assessee was justified that in this case, the Assessing
Officer had not recorded any satisfaction that any seized document or material belongs to any person other person searched. • Since the revenue is in appeal, therefore, burden was upon them to prove that necessary ingredients of section 153C have been complied with in this case before invoking jurisdiction under section 153C. • It is added further here that the Assessing Officer has not referred to any seized document or material in the assessment orders on the basis of which, additions on merit have been made. Therefore, the conditions of section 153C as noted above are also not satisfied in this case. Therefore, there is no infirmity in the order of the Commissioner (Appeals) in quashing the proceedings under section 153C.”
32 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
6.8. The ITAT, Delhi Bench, in the case of assessee for A.Ys. 2009-2010 and 2010-2011 in the matter of Victory Accommodation Pvt. Ltd., vs. ACIT, Central Circle-09, New Delhi 2017 (5) TMI 1050-ITAT-Delhi (supra), on identical facts held as under :
“Assessment framed u/s 153C - absence of satisfaction note - Held that:- From the plain reading of the Circular
No. 24/2015 dated 31.12.2015 issued by the Central
Board of Direct Taxes, it is crystal clear that even if the AO of the searched person and of the other person is one and the same then he is required to record his satisfaction in the case of searched person.
In the present case, it is an admitted fact that the AO of the searched person has not recorded any satisfaction rather the satisfaction is recorded by the AO of the other person i.e. the assessee which is evident from the satisfaction note, copy of which is placed at page no. 21 of the assessee’s paper book. Therefore, the assessment
33 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. framed in the hands of the assessee was not valid.
Moreover, from the observation of the AO in the satisfaction note also it is crystal clear that no incriminating material was found, the addition was made only on the basis of the copy of balance sheet, profit and loss account and schedule of advances against supplies pertaining to the assessee, those documents were already in the knowledge of the department as the same were furnished along with the regular return of income. Therefore, those documents by no stretch of imagination can be said to be incriminating as those were made out of the regular books of accounts of the assessee and the return of income was filed on the basis of those documents only. - Decided in favour of assessee.”
6.9. The Hon’ble jurisdictional Delhi High Court in the case of Pr. CIT vs. Index Securities Private Limited, Vidya Shankar Investment Private Limited 2017 (9) TMI 585 (Del.)
34 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
(HC) (supra) observed that “the two seized documents referred to in the satisfaction note in the case of each assessee are the trial balance and balance-sheet for a period of 05 months in 2010. In the first place, they do not relate to the assessment years for which the assessments were reopened in the case of both assessee’s. Secondly, they cannot be said to be incriminating”. Consequently, it was found that “even the second essential requirement for assumption of jurisdiction under section 153C of the I.T. Act, was not met in the case of the two assessee’s”.
Considering the facts of the case in the light of submissions made by both the parties and finding of fact arrived by the Ld. CIT(A), we do not find any merit in the Departmental Appeal. The Ld. CIT(A) called for the assessment record of the assessee-company and found that A.O. has recorded the satisfaction note in the file of the assessee- company which is reproduced above in which the A.O. has referred to the seized paper i.e., balance sheet and P & L A/c of 35 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
the assessee-company ending 31.03.2010. The notice was issued on the same day when satisfaction note was recorded by the A.O. of the assessee i.e., other person. The same A.O. who recorded satisfaction in the case of assessee passed assessment order under section 143(3)/153C of the I.T. Act. The Ld. CIT(A) also called for the assessment record of the person searched Shri Pramod Goel and it was found that no such satisfaction have been recorded in the case of the person searched relating to the assessee-company. It is, therefore, clear that no satisfaction note as required by Law have been recorded in the case of the person searched i.e., Shri Pramod Goel so as to initiate proceedings against the assessee-company under section 153C of the I.T. Act. It may also be noted here that initially the A.O. proceeded against the assessee-company under section 153A of the I.T. Act, on the premise that search was conducted against the assessee-company under section 132 of the I.T. Act, therefore, he has issued notice under section 153A of the I.T. Act against the assessee-company. When it was found later on, that no search have been conducted in the case
36 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. of assessee-company, therefore, notice under section 153A was withdrawn. The A.O. of the assessee later on recorded satisfaction note under section 153C of the I.T. Act, which is not valid in Law. The A.O. of the assessee referred to balance sheet of the assessee-company for other year, therefore, the same cannot be considered to be incriminating in nature against the assessee-company as it is part of Department record and in public domain. Therefore, it is clear from the above facts that the condition precedent for issuing notice under section 153C are not satisfied in this case because no satisfaction have been recorded under section 153C in the case of the person searched and no incriminating material was seized pertaining to assessment year under appeal. Even during the course of survey, no incriminating material was found against the assessee-company because the same were regarding purchase of shares of the group companies and ultimately, A.O. made the addition based on books of account that the share application money have not been explained by assessee-company. Such material found in survey is not 37 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. relatable to the material found during the course of search in the case of the person searched because the balance-sheet does not belong to assessment year under appeal. Therefore, there is no incriminating material found during the course of search against the assessee-company so as to record any satisfaction note against the assessee-company. Thus, there is no reason to believe that A.O. of the searched person would have recorded any satisfaction note that any money, bullion, jewellery, or other valuable article or thing or books of account seized or requisitioned belongs or belonged to a person other than the person searched under section 153A. Therefore, conditions of Section 153C of the I.T. Act are not satisfied in this case. The issue is covered against the Revenue by Judgment of the Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (supra) and Order of the Tribunal in the case of assessee-company for A.Ys. 2009-2010 and 2010-2011 (supra). The decisions relied upon by the Ld. D.R. are, therefore, not applicable to the facts and circumstances of the case as the same are clearly distinguishable. We, therefore, do not find any 38 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi. infirmity in the order of the Ld. CIT(A) in holding that initiation of proceedings under section 153C of the I.T. Act are improper and bad in law. No interference is called for. Ground Nos. 1 and 2 of the appeal of the Revenue are accordingly dismissed.
As regards giving of no opportunity to the assessee- company, would not be significant at this stage in view of the findings given above. The addition, on merit, deleted by Ld. CIT(A) is, left with academic discussion only because the proceeding under section 153C have not been validly initiated against the assessee-company. However, we may note in brief that assessee-company filed all the relevant documents before A.O. to prove the existence of the investor companies, their creditworthiness and genuineness of the transaction, on which, A.O. has not made any enquiry. The A.O. simply relied upon report of the Investigation Wing, Kolkata, which is not relevant to the assessee-company. The A.O. did not make any independent enquiry on the documents furnished by the assessee-company. Therefore, Ld. CIT(A), correctly deleted the 39 ITA.No.6238/Del./2014 M/s. Victory Accommodations Pvt. Ltd., Delhi.
addition on merit. Since, we have confirmed the order of the Ld. CIT(A) with regard to Ground Nos. 1 and 2 that initiation of proceedings under section 153C is illegal and bad in law, therefore, no further findings are given on merits. In view of the above discussion, the Departmental Appeal stands dismissed.
In the result, appeal of the Department is dismissed.
Order pronounced in the open Court.