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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-41, Mumbai, dated 28.03.2014, which in itself arises from the order passed by the A.O under Sec. 271(1)(c) of the Income-tax of the Act, 1961 (for short „Act‟), dated 27.02.2013 for A.Y. 2008-09. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal:-
ITA 4832/Mum/2014 – A.Y. 2008-09 2 Krupa Land Ltd. Vs. DCIT “ The Appellant objects to the order dated 28th Marchm 2014 passed by the learned Commissioner of Income-tax (Appeals)-41, Mumbai (hereinafter referred to as CIT(A) for the Assessment year 2008-09 on the following among other grounds :
1. 1. The order passed by he Learned CIT(A) is illegal, bad in law, ultra vires and contrary to the provisions of law and facts of the case and without appreciating the facts of the case in their proper perspective.
2. On the facts and circumstances of the case, the learned CIT(A) erred in confirming the penalty amounting to Rs. 1,78,09,997/- u/s 271(1)(c) of the Income-tax act, 1961 levied by the Assessing Officer on the ground that the Appellant had concealed particulars of income.
3. The learned CIT(A) failed to appreciate that the Appellant had disclosed all the facts in the return of income and during the course of assessment proceedings and there was no concealment of particulars of income or furnishing of inaccurate particulars of income on the part of the Appellant.
4. The Hon‟ble CIT(A) failed to appreciate that the undisclosed income was determined based on surmise and presumptions and were merely on the documents impounded from the third person not connected to the Appellant company.
5. The Hon‟ble CIT(A) erred in confirming penalty levied by the Assessing Officer u/s 271(1)(c) of the Income tax act, 1961 when cross appeals were pending before the Hon‟ble ITAT in quantum proceedings.
6. Each one of the above grounds of appeal is without prejudice to the other.
The Appellant reserves the right to amend, alter or add to any of the above grounds of appeal
.”.
2. Briefly stated, the facts of the case are that the assessee company which belongs to one Jai Corp group, is engaged in the business of acquisition by purchase, lease, exchange or otherwise and make advances on security of land, deal in Agricultural land to turn the same to account as may seem expedient, and in particular to carry on business of horticulturist or otherwise disposing of the same and by advancing money to and entering into contracts and arrangements of all kinds with Agricultural tenants, occupiers and others. The assessee filed its original return of income on 07.09.2008, declaring total income at Rs. Nil, claiming current year‟s loss of Rs. 10,955/-.
ITA 4832/Mum/2014 – A.Y. 2008-09 3 Krupa Land Ltd. Vs. DCIT 3. That Search & seizure action u/s 132 was carried out on 05.03.2009 in the cases of Jai Corp group on 05.03.2009, including its employees and close associates who were involved in the process of acquiring lands for various companies, including the assessee company. On the basis of certain documents found from the premises of Shri Dilip Dherai, proceedings u/s 153C of the Act were initiated in the case of the assessee. The assessment proceedings in the case of the assessee were concluded and order was passed by the A.O under Sec. 143(3) r.w.s 153C of the Act. The assessee assailed the additions, as well as assumption of jurisdiction as regards assessment framed u/s 153C. The CIT(A) though allowed part relief in respect of quantum addition and restricted the addition in the hands of the assessee for the year under consideration, viz. A.Y. 2008-09 at Rs. 5,93,66,667/-, but however, dismissed the challenge thrown by the assessee to the validity of assumption of jurisdiction by the A.O as regards the assessment framed under Sec. 153C. Aggrieved, the assessee carried the matter in appeal before the Tribunal. The assessee by way of raising an additional ground of appeal assailed the validity of the assessment before the Tribunal, on the ground that as no satisfaction note was recorded in the case of the searched person, viz. Sh. Dilip Dherai, therefore, the proceedings u/s 153C of the Act undertaken in the case of the assessee were bad in law.
4. The Tribunal while disposing of the quantum appeal of the assessee did find favour with the claim of the assessee and concluded that in the absence of the satisfaction recorded by the A.O of the searched party, which was a pre-condition for invoking of jurisdiction under Sec. 153C of the Act, the assessment framed under Sec. 153C r.w.s 143(3) was liable to be quashed. The Tribunal while concluding as hereinabove, observed as under:
ITA 4832/Mum/2014 – A.Y. 2008-09 4 Krupa Land Ltd. Vs. DCIT “5. We find that Hon‟ble Supreme Court in the case of CIT Vs. belong to a person other than the person searched, then, such documents or assets etc shall be handed over to the AO of the „other person‟ and the latter AO shall proceed against such „other person‟ to assess or reassess his income. A bare perusal of the provision indicates that before handing over such documents etc. top the AO of the „other person‟, a „satisfaction‟ has to be recorded by the A.O of the person searched that money, bullion, jewellery, etc., found from the person searched shalll and such documents or assets seized etc., are handed over to the AO of the „other person‟, a satisfaction has to bbe recorded by the AO of the person searched that money, bullion, jewellery, etc., found from the person searched belong to the „other person‟. Only when such a „satisfaction‟ is recorded by the AO of the person searched and such documents or assets seized , etc., are handed over to the AO of the „other person‟, that the later AO acquires jurisdiction to make assessment or reassessment of the „other person‟. It is, therefore, amply vivid that the AO of the „other person‟ can acquire jurisdiction to assess or reassess income of the „other person‟ only when the AO of the person searched records satisfaction in his case before handing over money, bullion, jewellery etc. to him. What emerges is that the recording of satisfaction by the AO of the person searched is a condition precedent for the AOof the „other person‟ to acquire jurisdiction. Unless such jurisdictional condition is satisfied, there can be no question of making assessment or reassessment of the „other person‟. Subsequently, the Central Board of Direct Taxes (in short CBDT) vide Circular No. 24/2015, F.No. 273/Misc./140/2015/TTJ, dated 31.12.2015 for implementation of the judgment in the case of Calcutta Knitwears (Supra), has explained the procedure in the case the AO of the search person and the “other person” is one at the same then also he is required to record his satisfaction as has been held by the courts.
The relevant circular issued by CBDT reads as under:- “Subject: Recording of Satisfaction note under section 158BD/153C of the Act-reg- The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
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 MRS 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:
ITA 4832/Mum/2014 – A.Y. 2008-09 5 Krupa Land Ltd. Vs. DCIT (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."
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.”
7. The argument of the learned CIT Departmental Representative (for short DR) that the searched person and the assessee are being assessed by the same AO, the learned counsel for the assessee contended that even in cases where the AO of the person searched and the person who is sought to be assessed u/s 153C of the Act is the same, the AO is required to record his satisfaction that the assets/documents seized belong to a person i.e the assessee, other than the searched person.. This view is finally settled by Hon‟ble Madhya Pradesh High Court in the case of CIT Vs. Mechmen (2016) 380 ITR 591(MP) wherein the view is expressed in the following manner:- 18. The concomitant of this conclusion, is that, the legal position as applicable to Section 158BD regarding satisfaction in the first instance of the first Assessing Officer forwarding the items to the Assessing Officer having jurisdiction; and in the second instance of the Assessing Officer having jurisdiction whilst sending notice to such other person (other than the person referred to in Section 153A), must apply proprio vigore. The fact that incidentally the ITA 4832/Mum/2014 – A.Y. 2008-09 6 Krupa Land Ltd. Vs. DCIT Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in Section 153A). The question as to whether that may influence the opinion of the Assessing Officer having jurisdiction over such other person, also cannot be the basis to take any other view. As a matter of fact, the other Assessing Officer to whom the items are handed over, before issuing notice must himself be satisfied after due verification of the items received and the disclosures made by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, the argument of the Department must be negatived.
After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him.”
In the given facts and circumstances of the case and the legal position clarified by CBDT and the case laws cited supra, we are of the view that the satisfaction in the case is not recorded by the AO of the searched party, which is a precondition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed u/s 153C read with Section u/s 143(3) of the Act is bad in law and hence, quashed. The jurisdictional of the assessee‟s appeal is allowed.”
4. The A.O after the disposing of the quantum appeal of the assessee by the CIT(A), therein called upon the assessee to show cause as to why penalty under Sec. 271(1)(c) for concealment of income may not ITA 4832/Mum/2014 – A.Y. 2008-09 7 Krupa Land Ltd. Vs. DCIT be imposed as regards the addition of Rs. 5,98,66,667/- that was sustained by the first appellate authority. The submissions of the assessee to drive home its contention that no penalty was called for u/s 271(1)(c) did not find favour with the A.O, who imposed a penalty of Rs. 1,78,09,997/- on the assessee. The appeal of the assessee against the imposition of penalty u/s 271(1)(c) was dismissed by the CIT(A), vide his order dated. 28.03.2014.
5. Aggrieved, the assessee had assailed the order of the CIT(A) sustaining the penalty imposed by the A.O under Sec. 271(1)(c) before us. The ld. Authorised representative (for short „A.R‟) for the assessee, Sh. Vijay Mehta, at the very outset submitted that the Tribunal while disposing of the cross appeals of the assessee and the revenue, against the order of the CIT(A) disposing of the quantum appeal of the assessee, had vide its order dated. 11.10.2017 quashed the assessment framed in the hands of the assessee under Sec. 143(3) r.w.s 153C, for want of jurisdiction. The ld. A.R placed on record the copy of the consolidate order of the Tribunal for A.Y. 2008-09, viz. JCIT (OSD), CC-39, Mumbai Vs. Krupa Land Limited (ITA NO. 605/Mum/2012) and Krupa Land Limited Vs. Dy. Commissioner of Income-tax, CC-39 (ITA No. 635/Mum/2012),dated 11.10.2017, and took us through the relevant observations of the Tribunal. The ld. Departmental representative (for short „D.R‟) did not controvert the factual position averred by the ld. A.R. 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We have deliberated on the order of the coordinate bench of the Tribunal, viz. ITAT, “A” bench, Mumbai, dated. 11.10.2017, passed while disposing of the cross appeals of the assessee and revenue against the order of the CIT(A), wherein the ITA 4832/Mum/2014 – A.Y. 2008-09 8 Krupa Land Ltd. Vs. DCIT latter had partly sustained the assessment for the year under consideration, viz. A.Y. 2008-09. We find that the Tribunal while disposing of the aforesaid quantum appeals, had quashed the assessment framed by the A.O. under Sec. 143(3) r.w.s 153C for want of jurisdiction. We are of the considered view that now when the assessment itself had been quashed by the Tribunal for lack of jurisdiction, therefore, the penalty imposed by the A.O under Sec. 271(1)(c), vide his order dated 27.02.2013 cannot be sustained. We thus in the backdrop of the fact that the assessment framed by the A.O in itself had been quashed by the Tribunal, therefore, on the said count itself quash the penalty imposed by the A.O under Sec. 271(1)(c). That as we have quashed the penalty imposed by the A.O under Sec. 271(1)(c), therefore, the grounds of appeal
raised by the assessee, therein assailing the imposition of penalty on merits is not being adverted to and is left open
7. The appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 06/12/2017. Sd/- Sd- (R.C. Sharma) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER भुंफई Mumbai; ददनांक 06.12.2017 Rohit ITA 4832/Mum/2014 – A.Y. 2008-09 9 Krupa Land Ltd. Vs. DCIT