M/S. RITE PAC INDUSTRIES PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

This appeal is preferred by the assessee against the order of the Ld.CIT(A)-XXXI, New Delhi on various grounds which read as under. “1. The CIT(A) erred in law and on facts in confirming issuance of notice u/s 153C to the appellant ignoring the fact that no assets, documents and incriminating material ‘belonging to’ the appellant-company were seized from the searched premises on 31/07/08, which is a prerequisite condition for assuming jurisdiction u/s 153C of the Act. Thus, the notice issued without fulfilling the conditions laid down by the law is invalid and the assessment made on the basis of an invalid notice should be annulled.

The learned CIT(A) erred in law and on facts in confirming the addition of Rs.10,00,000/- u/s 68 for the amount received against allotment of share capital during the relevant period and without considering the documentary evidences placed on record. Thus, the addition must be deleted.

The learned CIT(A) erred in law and on facts in enhancing the addition by Rs.50,00,000/- u/s 68 for the amount received against allotment of share capital during the relevant period and without considering the documentary evidences placed on record. Thus, the addition must be deleted.

The Ld.DR on the other hand submitted that satisfaction note was recorded by the Assessing Officer before issuance of notice u/s 153C of the Act. The Ld.DR placed reliance on the report of the Assessing Officer submitted with reference to satisfaction note furnished by the assessee with a submission that the A.O. has stated in his comments that satisfaction note was also drawn on 18.12.2009 by the above mentioned officer. Therefore there is no illegality in the assessment framed u/s 153C of the Act. 5. We have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. During the course of hearing the Ld.Counsel for the assessee has filed a certified true copy of satisfaction note dated 23.8.2010 according to which, satisfaction was recorded in the case of the assessee by the A.O. having noted that a search and seizure operation was conducted on Raj Darbar Group of cases on 31.7.2008 and during the search operation books and various papers were found. From a careful perusal of the assessment order we find that notice u/s 153C of the Act was issued on 18.12.2009 meaning thereby the satisfaction was recorded by the A.O. of the assessee after issuance of notice u/s 153C of the Act. The satisfaction note was confronted to the Ld.DR and in response thereto the Ld.DR filed a report obtained from the A.O. wherein it has been stated that notice u/s 153C of the Act was issued on 18.12.2009 by the then ACIT, Central Circle 05, New Delhi Shri Mazhar Akram. It was further stated that record also shows that satisfaction note was also drawn on 18.12.2009 by the above mentioned officer. Therefore from a bare reading of this report of the A.O. it is abundantly clear that satisfaction note was drawn by the officer who has issued notice u/s 153C of the Act on 18.12.2009. But in this report nothing was stated about the satisfaction note dated 23.8.2010 filed by the assessee. In any case if we read the satisfaction note and the report of the A.O. one thing is very clear that satisfaction note was prepared by the A.O. of the assessee where as the requirement of law is that the satisfaction for initiating proceedings u/s 153C of the Act is to be recorded by the A.O. of the searched person. The controversy in this regard has already been resolved through various judicial pronouncements and most of them were referred to by the assessee in the foregoing para and it has been repeatedly held that a satisfaction for initiating the proceedings u/s 153C of the Act is to be recorded by the A.O. of the searched person. In this regard Circular no.24/2015 was also issued by the CBDT through which the Board had directed that pending litigation with regard to recording of satisfaction note u/s 158BC and 153C of the Act should be withdrawn as not pressed if it does not meet guidelines raised by the Circular. In this Circular the judgement of the Apex Court in the case of Calcutta Knitwear was also referred in which it has been held that recording of satisfaction note is the prerequisite and satisfaction note must be prepared by the A.O. before it transmits the record to the other A.O. in whose jurisdiction it falls u/s 158 BD of the Act.

We have also carefully examined the written submissions, the judgements referred to by the Ld.DR in the following cases. i. PCIT vs. Sheetal International Pvt.Ltd. (2017-TIOL-1355-HC-DEL- IT) ii. PCIT vs. Instronics Ltd. (2017) taxmann.com 357 (Del.) iii. Ganpati Fincap Services P Ltd. vs. CIT (2017) taxmann.com 408 (Del.) iv. PCIT vs. Super Malls P.Ltd. (2016) 76 taxmann.com 267 (Del)(2017) v. PCIT vs. M/s Nau Nidh Overseas P.Ltd. (ITA no.58/2017) vi. CIT vs. Classic Enterprises (35 taxmann.com 244).

Having carefully examined these cases we find that these are cases where the A.O. of the searched person and the third person in whose case 153C was invoked was the same. In this case it has been held that the satisfaction note was recorded by the same A.O. to meet the requirements of law. But in the instant case the Revenue has not made out a case that the A.O. is same in the case of searched person and third person. Moreover the assessee has filed satisfaction note dated 23.8.2010 where as the notice u/s 153C of the Act was issued by the A.O. on 18.12.2009 before the date of satisfaction though the A.O. in his report has stated that satisfaction note was recorded on 18.12.2009 but no evidence has been filed in support thereof. In the absence of any other satisfaction note we have to presume that satisfaction note dated 23.8.2010 is only a satisfaction note on the basis of which proceedings u/s 153C was initiated. Therefore we are of the considered opinion that notice u/s 153C was issued before recording the satisfaction that the incriminating material found during the course of search belongs to third person, therefore it is not a valid notice and the assessment framed consequent thereto is not a valid assessment and deserves to be quashed. We therefore have no hesitation in holding that assessment framed consequent to invalid notice is not valid in law and accordingly quash the same. Since the assessment is quashed, we find no justification to deal with the appeal on merits. Accordingly the appeal of the assessee is allowed.

In the result the appeal of the assessee is allowed. Pronounced in the Open Court on 27th October, 2017.