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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 2ND DAY OF NOVEMBER 2022 / 11TH KARTHIKA, 1944 ITA NO. 2 OF 2019 AGAINST THE ORDER IN ITA 459/COCH/2016 OF I.T.A.TRIBUNAL, COCHIN BENCH APPELLANT:
MOHAMMED SHERIEF, KONCHERIL VEGETABLES, KARUNAGAPALLY.
BY ADVS. M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM RESPONDENT:
THE COMMISSIONER OF INCOME TAX, C R BUILDINGS, ISI PRESS ROAD, ERNAKULAM, KOCHI-682018.
BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX OTHER PRESENT:
ADV. NAVANEETH N NATH THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02.11.2022, ALONG WITH ITA.5/2019, 6/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 2ND DAY OF NOVEMBER 2022 / 11TH KARTHIKA, 1944 ITA NO. 5 OF 2019 AGAINST THE ORDERIN ITA 460/COCH/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT:
MOHAMMED SHERIEF KONCHERIL VEGETABLES, KARUNAGAPALLY.
BY ADVS. M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM
RESPONDENT:
THE COMMISSIONER OF INCOME TAX CR BUILDINGS, I S PRESS ROAD, ERNAKULAM, KOCHI-682 018.
BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02.11.2022, ALONG WITH ITA.2/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 2ND DAY OF NOVEMBER 2022 / 11TH KARTHIKA, 1944 ITA NO. 6 OF 2019 AGAINST THE ORDER IN ITA 462/COCH/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT:
MOHAMMED SHERIEF, KONCHERIL VEGETABLES, KARUNAGAPALLY.
BY ADVS. M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM
RESPONDENT:
THE COMMISSIONER OF INCOME TAX, C.R.BUILDINGS, I.S.PRESS ROAD, ERNAKULAM, KOCHI- 682018.
BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02.11.2022, ALONG WITH ITA.2/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 2ND DAY OF NOVEMBER 2022 / 11TH KARTHIKA, 1944 ITA NO. 8 OF 2019 AGAINST THE ORDER IN ITA 461/COCH/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT:
MOHAMMED SHERIEF AGED 41 YEARS KONCHERIL VEGETABLES, KARUNAGAPALLY
BY ADVS. M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM RESPONDENT:
THE COMMISSIONER OF INCOME TAX CR BUILDINGS, IS PRESS ROAD, ERNAKULAM, KOCHI-682 018
BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02.11.2022, ALONG WITH ITA.2/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 2ND DAY OF NOVEMBER 2022 / 11TH KARTHIKA, 1944 ITA NO. 7 OF 2019 AGAINST THE ORDER IN ITA 463/COCH/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT:
MOHAMMED SHERIEF KONCHERIL VEGETABLES, KARUNAGAPALLY.
BY ADVS. M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM RESPONDENT:
THE COMMISSIONER OF INCOME TAX CR BUILDINGS, IS PRESS ROAD, ERNAKULAM, KOCHI-682 018.
BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02.11.2022, ALONG WITH ITA.2/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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JUDGMENT (ITA Nos.2/2019, 5/2019, 6/2019, 8/2019, 7/2019)
Heard Adv. Kuryan Thomas learned Counsel for the appellant and Adv. Navaneeth N. Nath holding for Senior Counsel P.K.Ravindranatha Menon for the respondent. 2. Mohammed Sherief/assessee is the appellant and Commissioner of Income Tax, Kochi/Revenue is the respondent in the subject tax appeals. Identical questions of law and similar circumstances are present for consideration in the batch of appeals, hence are disposed of by this common judgment. The details of block assessment orders, years of assessment, and orders of the Authorities under the Act are stated as under: Sl. No. Assessment Year & date of Assessment Order of Commissioner of Income-tax (Appeals) Order of Income Tax Appellate Tribunal ITA No. 1 2003-04; dtd 30.12.2008 ITA- 46/Cent/Kollam/CI T(A)III/2008-09 dtd 30.06.2016 ITA Nos.459 to 463/coch/2016 dtd 30.01.2018 02/2019
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2 2004-05; dtd 30.12.2008 ITA- 46/Cent/Kollam/CI T(A)III/2008-09 dtd 30.06.2016 ITA Nos.459 to 463/coch/2016 dtd 30.01.2018 05/2019 3 2006-07; dtd 30.12.2008 ITA- 46/Cent/Kollam/CI T(A)III/2008-09 dtd 30.06.2016 ITA Nos.459 to 463/coch/2016 dtd 30.01.2018 06/2019 4 2007-08; dtd 30.12.2008 ITA- 46/Cent/Kollam/CI T(A)III/2008-09 dtd 30.06.2016 ITA Nos.459 to 463/coch/2016 dtd 30.01.2018 07/2019 5 2005-06; dtd 30.12.2008 ITA- 46/Cent/Kollam/CI T(A)III/2008-09 dtd 30.06.2016 ITA Nos.459 to 463/coch/2016 dtd 30.01.2018 08/2019
The counsel appearing for the parties have referred to the circumstances set out in ITA No.2/2019 and have stated that the consideration of the circumstances leading to the assessment orders, orders made thereon, and answering the substantial questions of law in the appeal would apply to other appeals as well. 4. The assessee is a resident of Karunagapally and engaged in the business of sale of vegetables. One E. Shamsudeen is the father of the assessee. On 02.08.2006, a search under Section 132 of
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the Income Tax Act, 1961 (for short ‘the Act’) at the business premises of E. Shamsudeen was carried out by the Revenue. It is a matter of record that on 02.08.2006, a survey under Section 133A of the Act was undertaken at the business premises of the assessee. A few documents, the details of which are not necessary for our present purpose, were seized from the business premises of the assessee. The Deputy Commissioner of Income-tax served notice under Section 153C read with 153A of the Act on the assessee calling upon the assessee to prepare and file a true and correct return including the undisclosed income which is assessable to tax in the financial year ending on 31.03.2003. It is relevant to note that the notice dated 14.05.2007 refers to the search conducted at the business premises of E.Shamsudeen at Edappallykotta on 02.08.2006. Similar notices were issued, for the block assessment period 2004-05 to 2007-08. The Assessing Officer through Annexure- B order dated 30.12.2008, determined the tax and interest payable by the assessee as Rs.3,62,307/-. The assessee during the pendency
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of the appeal raised a ground on the statutory requirement of recording satisfaction for proceeding under Section 153C read with 153A of the Act. The Assessing Officer through Annexure-C communication dated 30.11.2010 placed before the Commissioner of Income Tax (Appeals), the satisfaction said to have been recorded by the Assessing Officer. At a later stage of our discussion, we would excerpt the satisfaction recorded by the Assessing Officer. The assessee is unsuccessful before the Commissioner of Income Tax (appeals), resulting in Annexure- D order dated 31.06.2016. The assessee filed the second appeal before the Tribunal and the Tribunal through Annexure-F order 30.01.2018, dismissed the appeal. Hence the appeal under Section 260A of the Act. 5. Adv. Kuryan Thomas made comprehensive submissions on the following substantial questions of law: “i. Whether on the facts and circumstances of the case, the Appellate Tribunal was correct in upholding the validity of the assessment under Section 153C of the Act, more so when the "satisfaction" of the assessing authority who conducted the search, that the seized materials
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belongs to a person other than searched, which is a sine- qua-non for invoking Section 153C of the Act, is not satisfied in the instant case? ii. Whether on the facts and circumstances of the case, the Appellate Tribunal was right in validating the assessment under Section 153C of the Act, despite there being a clear finding by the Appellate Tribunal in paragraph no. 9 of the order that the seized documents may not belong to the appellant-assessee? iii. In the absence of recording of satisfaction by the assessing authority who conducted the search under Section 132 of the Act, coupled with the finding of the Tribunal that the seized documents may not belong to the appellant assessee, whether the Appellate Tribunal has acted against the scheme of the Act, in confirming the assessment initiated under Section 153C of the Act? iv. Whether the Appellate Tribunal erred in not considering/ discussing regarding the binding precedents CIT vs. Singhad Technical Education Society (2017) 397 ITR 344 (SC); Manish Maheshwari vs. Assistant CIT, reported in (2007) 289 ITR 341 (SC); CIT vs. Promy Kuriakose, reported in (2016) 386 ITR 597 (Ker); Pepsi Foods P. Ltd vs. ACIT, reported in (2014) 367 ITR 112 (Delhi); Pepsico India Holdings P. Ltd vs. ACIT and another, reported in (2015) 370 ITR 295 (Delhi), which were submitted before the Appellate Tribunal, during the course of hearing? v. Ought not the Appellate Tribunal to have held that the turnover estimation and the adoption of higher rate of Gross Profit, on an unrealistic basis, and placing reliance on the materials seized from the premises of another person, without satisfying the condition precedent mandated under Section 153C of the Act, cannot be the foundation stone for assessment under Section 153C of the Act?
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vi. Whether on the facts and circumstances of the case, ought not the Appellate Tribunal, erred in upholding the wild estimation of turnover and adoption of higher rate of Gross Profit, which were the result of mere surmises and conjectures? vii. Is not the finding of fact by the Appellate Tribunal erroneous and perverse in the light of the factual and legal aspects involved?” 5.1 The counsel for the appellant argues that on 02.08.2006, the business premises of the assessee’s father was searched under Section 132 of the Act. By inviting the attention of the Court to Annexure-A notice dated 14.05.2007, it is specifically and emphatically argued that the assessment under Section 153C of the Act is firstly, a consequence of the search undertaken on 02.08.2006, and the material against the assessee on suppression of sales, cash receipts, etc. are claimed to have been recovered by the Revenue from the search of E. Shamsudeen’s business premises. The sine qua non for setting in motion an assessment under Section 153C is recording satisfaction under Section 153C of the Act. The assessee and the searched person are different individuals for the purposes under the Act. The material alleged to have been recovered from the
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business premises of the searched person through the notice dated 14.05.2007 is put against the assessee for the proposed assessment under Section 153C of the Act. The presumption available under Section 132(4A) of the Act is kept in mind for appreciating the obligation on the part of searched Assessing Officer to record satisfaction before proceeding under Section 153C of the Act. The counsel invited our attention to Sections 132(4A) and 153C, which read thus: Section 132(4A) “(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person
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by whom it purports to have been so executed or attested”. 153C of the Act 153C. Assessment of income of any other person.- Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, - (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A. (Emphasis added) 5.2 Mr. Kuryan argues that the requirement of law under Section 153C is that where the Assessing Officer is satisfied that any books of account or documents seized or requisitioned pertains or pertain through, or any information contained therein, relates to a person other than the person referred to in Section 153A then the
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material or books, as the case may be, seized from the person searched shall be handed over to the Assessing Officer having jurisdiction over such other persons for assessment under Section 153C of the Act. 5.3 Keeping the statutory requirement in perspective, it is elaborated that in the thick of controversy the searched individual is E. Shamsudeen and such other person is the assessee herein. The Assessing Officer, in the case on hand, does not get jurisdiction, unless and until two facets of satisfaction both positive under Section 132(4A) and negative viz. that the material does not belong to the searched person, but relatable some other person are recorded by the Officer undertaking the search. To wit, he explained that the Officer conducting a search records the material or matter recovered in the search under Section 132, does not belong to a person whose premises is searched and secondly, the material or matter, recovered in the search on 02.08.2006, belongs to any other person i.e assessee in the case on hand. It is pointed out that the
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satisfaction recorded in Annexure-C dated 30.11.2010 does not satisfy the satisfaction expected for both positive and negative presumptions available in Section 132(4A) read 153C of the Act. The satisfaction recorded reads as follows: “The business premises of the assessee was covered for action u/s 133A of the Income tax Act.1961 on 02-08-2006 in connection with search action u/s 132 of the income tax Act, 1961 on the same date in the case of Shri. E. Shamsudeen. Edappallykotta. Karunagapally. Documents marked as B1 to B4 & KV-1 relating to accounts and transaction of the assessee for the period 6/2006 to 08/2006 were impounded result of survey operation. Further certain documents relating to daily transaction of the assessee seized from the business premises of the Shri. E.Shamsudeen. during the course of search, leads to the existence of unaccounted income in the case of the assessee. Consequent to the search. the jurisdiction over the case was assigned to the Deputy Commissioner of Income tax. Central Circle Kollam vide Notification in C. No.CIT KIM 201/JURIS/06-07 did. 29-12- 2006 of the CIT. Kottayam, copy of which is filed. Since the documents seized belong to the assessee, I am satisfied that this is a case fit for action u/s 153C r.w.s. 153A for A.Y. 2003- 04." 5.4. He relies on the judgments reported in Super Malls Private Limited v. Principal Commissioner of Income Tax1 , and Pepsi Foods P.Ltd v. Assistant Commissioner of Income-tax,2 and Principal
1 (2020) 4 SCC 581 2 [2014] 367 ITR 112 (Delhi)
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Commissioner of Income Tax v. N.S Software3. Therefore, in the absence of satisfaction recorded by the officer who searched the premises, the assessment under Section 153C of the Act is illegal and without jurisdiction. He prays for setting aside the order of assessment on the sole legal ground comprehensively argued in the appeal. 6. Adv. Navneeth N. Nath argues that the legal ground now stated as a substantial question for this Court must be a question arising from the beginning in the assessment proceedings and that a new question not specifically stated, which is dependent on consideration of jurisdictional facts, shall not be allowed to be raised before the court. He invited our attention to the following excerpts from the order of the Commissioner of Income Tax (Appeals): “6.2. The basic premise on which the issue has been raised is that the assessing officer has not drawn satisfaction for initiating proceedings u/s 153C. It has also been challenged that the documents relied on by the assessing officer for issuing notice u/s 153C are merely dumped documents based on which the assessing officer cannot arrive at a
3 [2018] 403 ITR 259 (Delhi)
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conclusion that these are documents belonging to the appellant.” and also the ground of appeal filed before the Tribunal. “2. The learned Commissioner of Income tax (Appeals) failed to appreciate the fact that the Assessing Officer had no jurisdiction to make an assessment under section 153C of the Income tax Act, 1961 as no relevant materials/documents belonging to your appellant had been found during the search conducted at the premises of the person searched.” 6.1 He refers to and relies on the judgment reported in Commissioner of Income Tax (Central) vs. Assam Oil Co. Ltd4 and Commissioner of Income Tax v. G.M Mittal Stainless Steel P. Ltd5 to pronounce on the objection raised by the assessee. Therefore, he objects to the raising of, altogether, a new ground in the appeal. He further contends that appreciating the grounds raised by the assessee, and conclusions recorded by the Authorities, this Court appreciates them as findings of fact and does not verify, for the first time viz. whether the satisfaction as contemplated under Section 153C is recorded or not by the officer who searched the premises of
4 (1982) 133 ITR 204 (Cal.) 5 (2003) 263 ITR 255 (SC)
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E. Shamsudeen. 7. By way of reply Mr. Kuryan Thomas argues that it cannot be gainsaid that the assessee did not object to the initiation of assessment through a notice under Section 153C of the Act. Paragraph 5 of the order of the Commissioner of Income Tax (appeals) refers to the grounds raised on Section 153C which read as follows: 1. "The assessment for the year 2003-04 made under section 153A r.w.s. 153C is bad in law and invalid, since no satisfaction has been reached and recorded by the assessing officer who searched Mr. E. Shemsudhin, that the undisclosed income revealed in the search belonged to the assessee appellant and the procedure prescribed under section 153C having not followed, the assessment made under section 153C is invalid. 2. There was also no finding by the assessing officer that any of the documents seized during the course of search belonged to your appellant. Therefore the assessment framed is without authority of law and should be treated as illegal and void abinitio." Therefore, he argues that in spite of a ground having been taken, the ground is not considered either by the Commissioner of Income Tax (Appeals) and the Tribunal on an erroneous view of the matter, viz.
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by recording a finding, rejected the ground of the appellant, as follows: “It is also admitted in the statement recorded u/s. 132(4) of the Act from that net turnover is the turnover after deducting expenditure in the sister concerns is remitted to Edapallykotta after closing the accounts. It was admitted that the slips received from Head Officer were destroyed on the same day itself. As such it cannot be stated that these slips found at the premises of the searched party have no relationship with the assessee’s case. It shows cash remittance between the parties.” The counsel alternatively submitted that the Tribunal being the final authority on the fact in issue may be called upon to decide whether the requirement of Section 153C has been complied with or not. 8. We have taken note of the arguments, put forward by the counsel appearing for the parties, and before taking up the consideration on whether the ground stated now is available or not, we would like to refer to the following judgments: Super Malls case: 6. As observed hereinabove, the short question which is posed for the consideration of this Court is, whether there is
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a compliance with the provisions of Section 153-C of the Act by the assessing officer and all the conditions which are required to be fulfilled before initiating the proceedings under Section 153-C of the Act have been satisfied or not? 7. This Court had an occasion to consider the scheme of Section 153-C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153-C of the Act in Calcutta Knitwears as well as by the Delhi High Court in Pepsi Food (P) Ltd. As held, before issuing notice under Section 153-C of the Act, the assessing officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the searched person. That thereafter, after recording such satisfaction by the assessing officer of the searched person. he may transmit the records/documents/things/papers, etc. to the assessing officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional assessing officer may proceed to issue a notice for the purpose of completion of the assessment under Section 158-BD of the Act and the other provisions of Chapter XIV-B shall apply. 7.1. It cannot be disputed that the aforesaid requirements are held to be mandatorily complied with. There can be two eventualities. It may so happen that the assessing officer of the searched person is different from the assessing officer of the other person and in the second eventuality, the assessing officer of the searched person and the other person is the same. Where the assessing officer of the searched person is different from the assessing officer of the other person, there shall be a satisfaction note by the assessing officer of the searched person and as observed hereinabove that thereafter the assessing officer of the searched person is required to transmit the documents so seized to the assessing officer of the other person. The assessing officer of the searched person simultaneously while transmitting the documents shall forward his
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satisfaction note to the assessing officer of the other person and is also required to make a note in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in Ganpati Fincap, the same is for the administrative convenience and the failure by the assessing officer of the searched person, after preparing and dispatching the satisfaction note and the documents to the assessing officer of the other person, to make a note in the file of a searched person, will not vitiate the entire proceedings under Section 153-C of the Act against the other person. At the same time, the satisfaction note by the assessing officer of the searched person that the documents, etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the assessing officer of the other person is mandatory. However, in the case where the assessing officer of the searched person and the other person is the same, it is sufficient by the assessing officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, then the requirement of Section 153-C of the Act is fulfilled. In case, where the assessing officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the assessing officer, as he himself is the assessing officer of the searched person and also the assessing officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the assessing officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself. (Emphasis added) Pepci Foods case:
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On a plain reading of section 153C, it is evident that the Assessing 6 Officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of section 153A. Therefore, before a notice under section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is after such satisfaction is arrived at that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases, it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A) (i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of “satisfaction”. 7. This would be the appropriate stage to consider the decisions referred to by the learned counsel for the Revenue.
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The decision referred to in Kamleshbhai Dharamshibhai Patel (supra) is of no relevance in so far as the present case is concerned. In that case certain documents were said to have belonged to the petitioners therein but a plea had been taken that as the land, in relation to which the documents were, no longer belonged to the petitioners, therefore, the said documents could not be regarded as belonging to the petitioners. That is an entirely different situation and the facts of that case are clearly distinguishable from the facts of the present case. Inso far as the decision of the Allahabad High Court in Classic Enterprises (supra) is concerned, we are, with respect, unable to agree with the observations that as the proceedings are at the very initial stage the "satisfaction" is neither required to be firm or conclusive. We say so because we are of the view that this conclusion of the Allahabad High Court is premised on a consideration of the provisions of section 158BD of the said Act which are entirely different from section 153C. Under section 158BD, the Assessing Officer's satisfaction is with regard to "undisclosed income" belonging to a person other than the searched person. It is obvious that such satisfaction under section 158BD by its very nature has to be prima facie and tentative. The same methodology cannot be imported into section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under sections 132(4A)(i) and 292C(1)(i) of the said Act. Therefore, the decision of the Allahabad High Court in the case of Classic Enterprises (supra) would not come to the aid of the Revenue. In so far as the decision in the SSP Aviation Ltd. (supra) is concerned we do not find anything therein which militates against the view that we are taking. In fact the very distinction between section 153C and section 158BD (although section 158BD is not mentioned) is indicated by the following observations of the Division Bench in SSP Aviation Ltd. (supra) (page 188 of 346 ITR):
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"It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income." 9.It is only in this context that the Division Bench was of the view that the issuance of the section 153C notice was only first step in the process of enquiry. xxx xxx xxx 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised, as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under section 153C of the said Act. 12. This being the position the very first step prior to the issuance of a notice 12 under section 153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under section 153C are liable to be quashed. It is ordered accordingly. The writ petitions
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are allowed as above. There shall be no order as to costs. (Emphasis added) S.N Software case. 17. The reliance by the Revenue on Sushil Kumar Jain (supra) to say that issuing a notice under section 153C was not necessary for the assessment year 2009-10 because the year immediately preceding it was the search year, i.e., 2008 is not apt, because that case was only concerned with non- issuance of notice under section 153A, and not section 153C. A normal notice issued under section 142 can serve as a substitute for a notice under section 153A because both these provisions serve the same purpose of directing the assessee to file returns. However, the function served by a satisfaction note under section 153C is completely different. The special nature of section 153C was noted in Pepsi Foods Pvt. Ltd, as follows (page 118 of 367 ITR) : "Under section 158BD, the Assessing Officer's satisfaction is with regard to 'undisclosed income' belonging to a person other than the searched person. It is obvious that such satisfaction under section 158BD by its very nature has to be prima facie and tentative. The same methodology cannot be imported into section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under sections 132(4A)(i) and 292C(1) (I) of the said Act”. xxx xxx xxx 22. This court concurs with the impugned order. In the present case, the learned Assessing Officer has not explained the steps taken by him to determine that the seized material belonged to the assessee-firm. The satisfaction note has
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been prepared in a standard mechanical format and it does not provide any details about the books of account which allegedly belong to the assessee-firm. Most importantly, a satisfaction note was not recorded by the Assessing Officer of Sh. Narendra Kumar from whose premises the documents were seized. In the light of the decision in Nikki Drugs and Chemicals Pvt. Ltd. it is now a settled proposition of law that even if the Assessing Officer for the person from whose premises the documents are seized is the same as the Assessing Officer for the person to whom the document belongs, separate satisfaction notes must be recorded. Here the Assessing Officer's note nowhere reflects whether any document was seized, on application of his mind, disclosed that it belonged to the assessee, and if so, its prima facie nature. Whilst an Assessing Officer of the searched party and that of the individual under section 153C may be the same, nevertheless, at the stage of sending notice under section 153C, the Assessing Officer has to record a specific reason or reasons, why the mate rial seized from the other person has a nexus to the assessee, to whom the notice under that provision is addressed. In this case, this never happened. Thus, for the previous years, the rule in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), ie., that in the absence of any incriminating materials, the previous years' assessments cannot be disturbed, applies. 23. In the present case, therefore, the failure of the Assessing Officer to record a specific satisfaction as to how the recovered material belonged to the assessee in the note that preceded the notice issued under it, vitiates the assessments. As far as the pending assessment year is concerned, the return was filed on September 29, 2009. No notice in terms of section 143(2) had been issued to the assessee, and the time provided by law had expired by the time its Assessing Officer received the papers from the searched party. The notice issued, necessarily, in terms of section 153C(2) had to be in the light of the satisfaction that the books of account or mate rials seized are relevant (i.e. "that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of
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the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A". As held by previous decisions, without that nexus, and fulfillment of the preconditions, clearly, the option provided by section 153C(2) to proceed against pending or assessments cannot be made recourse to. Since the satisfaction in terms of section 153C(1) was clearly inadequate (assuming that the original satisfaction, transmitting the papers to the assessee's Assessing Officer was valid), the assessment completed for these years was also invalid. The court also notices in this regard, that the non-obstante provisions in both sections 153A and 153C are identical; they override sections 136, 147, 148, 149, 151 and 153. However, they do not override the mandatory provisions of section 142(2) or 143(2). This legislative design is taken further by section 153(2)(a) to (c) which are relatable to the satisfaction under section 153C(1) notice, i.e., that if notice for pending assessments have not been issued, to take further proceedings, and the time has lapsed, the only condition when they can be taken forward, is if the satisfaction with respect to materials seized are relatable to the assessee is through application of mind and not a mechanical one, as insisted by RRJ Securities (supra), Pepsico Holdings India Ltd. (supra), Nikki Drugs (supra), etc. (Emphasis added)
The decisions excerpted above, lay down clearly that recording of satisfaction by the officer searching the premises before making over the material to the officer having jurisdiction on the person to whom the material relates to is necessary, and
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secondly, the satisfaction must conform to the principle laid down by the judgments noted above. We may at this stage of our consideration notice that the satisfaction, filed as Annexure-C cannot provide an answer to the requirement of the searching officer recording a satisfaction. We hasten to add that we do not wish to observe either way on the extent to which the said Annexure - C could be relied on by the assessee and Revenue. Both from a plain reading of Sections 132(4A) and 153C and the principles laid down by the Supreme Court in the judgments referred supra, we conclude that the assessee has been agitating on the omission in recording satisfaction as required by Section 153C of the Act. The finding of fact recorded by the Commissioner of Income Tax (Appeals) is not on this aspect of the matter. As already excerpted, the Tribunal examined yet another circumstance and recorded a finding in the common order impugned in the appeal. We are pursuaded with the argument of Adv. Navneeth N. Nath that the Tribunal being the final fact-finding court may be called upon to examine the
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issue. Therefore, the substantial questions are answered in favour of the assessee and against Revenue, and the matter remitted to the Tribunal for consideration and disposal afresh in accordance with law. In the circumstances of the case, we deem it appropriate on being satisfied that a few other findings of fact recorded by the Tribunal which again do not take note of precedents relied on by the assessee, other findings of Tribunal are set aside, and the matter is remitted in its entirety for reconsideration by the Tribunal. The assessee if so advised is given the liberty to raise additional ground within eight weeks from the date of receipt of copy of the judgment. Appeal is allowed as indicated above and matter remanded to the Tribunal.
ITA Nos. 5,6,7 and 8/2019 By adopting the very reasoning which resulted in answering the questions in favour of the assessee for statistical and against the
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Revenue, the questions in the instant appeal are answered in the same way in favour of the assessee and against the Revenue. The orders impugned are set aside and matters remitted to the Tribunal for consideration and disposal in accordance with law. Appeals are allowed as indicated above.
Sd/- S.V.BHATTI JUDGE
Sd/- BASANT BALAJI JUDGE
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APPENDIX OF ITA 5/2019
PETITIONER ANNEXURES ANNEXURE A THE TRUE COPY OF THE NOTICE DATED 14.05.2007 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, UNDER SECTION 153C READ WITH SECTION 153A OF THE ACT. ANNEXURE B THE TRUE COPY OF THE ORDER OF ASSESSMENT (WITHOUT ANNEXURES) DATED 30.12.2008 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, FOR THE A.Y 2004-05. ANNEXURE C A TRUE COPY OF THE LETTER DATED 30.11.2010 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM. ANNEXURE D THE TRUE COPY OF THE ORDER DATED 30.06.2016 ISSUED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI. ANNEXURE E THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 19.09.2016 FILED BEFORE THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE F THE TRUE COPY OF THE COMMON ORDER DATED 30.01.2018 (RELATING TO THE A.Y'S 2003-04 TO 2007-08) ISSUED BY THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE G THE TRUE COPY OF THE ORDER DATED 14.05.2018 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM.
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APPENDIX OF ITA 6/2019
PETITIONER ANNEXURES ANNEXURE A THE TRUE COPY OF THE NOTICE DATED 14.05.2007 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, UNDER SECTION 153C READ WITH SECTION 153A OF THE ACT. ANNEXURE B THE TRUE COPY OF THE ORDER OF ASSESSMENT (WITHOUT ANNEXURES) DATED 30.12.2008 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, FOR THE A.Y 2006-07. ANNEXURE C A TRUE COPY OF THE LETTER DATED 30.11.2010 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM. ANNEXURE D THE TRUE COPY OF THE ORDER DATED 30.06.2016 ISSUED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI. ANNEXURE E THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 19.09.2016 FILED BEFORE THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE F THE TRUE COPY OF THE COMMON ORDER DATED 30.01.2018 (RELATING TO THE A.Y'S 2003-04 TO 2007-08) ISSUED BY THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE G THE TRUE COPY OF THE ORDER DATED 14.05.2018 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM.
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APPENDIX OF ITA 8/2019
PETITIONER ANNEXURES ANNEXURE -A TRUE COPY OF THE NOTICE DATED 14.05.2007 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, UNDER SECTION 153C READ WITH SECTION 153A OF THE ACT. ANNEXURE -B: TRUE COPY OF THE ORDER OF ASSESSMENT (WITHOUT ANNEXURES)DATED 30.12.2008 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM FOR THE A.Y. 2005-06. ANNEXURE -C: TRUE COPY OF THE LETTER DATED 30.11.2010 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM. ANNEXURE -D TRUE COPY OF THE ORDER DATED 30.06.2016 ISSUED BY THE COMMISSIONER OF INCOME TAX(APPEALS)-IV, KOCHI. ANNEXURE-E TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 19.09.2016, FILED BEFORE THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE -F: TRUE COPY OF THE COMMON ORDER DATED 30.01.18(RELATING TO THE a.y'S 2003-2004 TO 2007- 2008) ISSUED BY THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE -G: TRUE COPY OF THE ORDER DATED 14.05.2018 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM.
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APPENDIX OF ITA 7/2019
PETITIONER ANNEXURES ANNEXURE A THE TRUE COPY OF THE ORDER OF ASSESSMENT (WITHOUT ANNEXURES) DATED 30.12.2008 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM, FOR THE A.Y 2007-08. ANNEXURE B THE TRUE COPY OF THE ORDER DATED 30.6.2016 ISSUED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI. ANNEXURE C THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 19.9.2016 FILED BEFORE THE APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE D THE TRUE COPY OF THE COMMON ORDER DATED 30.1.2018 (RELATING TO THE A.Y'S 2003-04 TO 2007-08) ISSUED BY THE APPELLATE TRIBUNAL, COCHIN BENCH.
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APPENDIX OF ITA 2/2019
PETITIONER ANNEXURES ANNEXURE A THE TRUE COPY OF THE NOTICE DATED 14.5.2007 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE KOLLAM, UNDER SECTION 153 C READ WITH SECTION 153A OF THE ACT ANNEXURE B THE TRUE COPY OF THE ORDER OF ASSESSMENT (WITHOUT ANNEXURES) DATED 30.12.2008 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM FOR THE A.Y. 2003-04 ANNEXURE C A TRUE COPY OF THE LETTER DATED 30.11.2010 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM ANNEXURE D THE TRUE COPY OF THE ORDER DATED 30.6.2016 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)IV, KOCHI ANNEXURE E THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 19.9.2016 FILED BEFORE THE APPELLATE TRIBUNAL, COCHIN BENCH Annexure F THE TRUE COPY OF THE COMMON ORDER DATED 30/01/2018 (RELATING TO THE A.Y'S 2003-04 TO 2007- 08) ISSUED BY THE APPELLATE TRIBUNAL, COCHIN BENCH Annexure G THE TRUE COPY OF THE ORDER DATED 14/5/2018 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM