VICTORY TOWNSHIP PVT. LTD.,DELHI vs. DCIT, NEW DELHI

Facts of the case as appearing in the orders of the authorities below in brief are that the assessee was engaged in the business of a Builder and Developer of Real Estate. A search and seizure operation u/s 132 of the Act was conducted by the Investigation Wing of the department in Victory Group of cases (Main Jagat Group) its directors, other individuals and connected associates at business & residential premises on 14.09.2010. A survey operation u/s 133A of the Act was also conducted on the business premises of the assessee on 14.09.2010. The AO issued the notice u/s 153A of the Act on 04.11.2011 for the assessment years 2005-06 to 2010-11. The assessee informed the AO that no action u/s 132 of the Act was initiated against the assessee. The AO verified the same and found the said version of the assessee as correct. Accordingly, the aforesaid notices issued u/s 153A of the Act were withdrawn vide letter dated 26.06.2013 and the assessee was informed accordingly. Thereafter, a satisfaction note u/s 153C of the Act was drawn on 27.02.2013 and the notices u/s 153C of the Act were issued for the assessment years 2005-06 to 2010-11. In response, the assessee vide letter dated 05.03.2013 stated that return of income already filed u/s 139(1) of the Act on 25.09.2009 may be treated in response to the notice u/s 153C of the Act. The AO in the body of the assessment to 6213 /Del/2014 7 ITA Nos. 6225 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. order dated 28.03.2013 observed that during the course of assessment proceedings u/s 153C of the Act in the case of Sh. Pramod Goel, it was noticed that the search and seizure operation u/s 132 of the Act was undertaken on 14.09.2010 in the cases of Sh. Pramod Goel, Smt. Savita Goel and Sh. Ashish Goel at BN-33, East Shalimar Bagh, Delhi and the documents belonging to the assessee were found and seized from the above premises. The AO thereafter framed the assessment u/s 143(3) r.w.s. 153C of the Act on 28.03.2013, assessing the income of the assessee at Rs.3.20 crores for the assessment year 2009-10 by making the additions u/s 68 of the Act on account of share capital/premium received by the assessee during the year relevant to the assessment year under consideration.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the jurisdiction of the AO assumed u/s 153C of the Act and submitted as under: “1. First the Ld AO Presumed that search has taken place on Appellant and accordingly issued notice U/s 153A of IT. Act. 2. Thereafter Notice U/s 153A of IT Act was withdrawn on appellant's objection on 26.2.2013. 3. On Realizing that no search took place on the Appellant Company then he took refuge U/s 153C of I.T. Act and issued notice u/s 153C on 27.02.2013 on the ground that copy of Audited Balance Sheets of Appellant were found in seized Records at Page No 102 & 103 of 'appellant company ' at the premises of one of to 6213 /Del/2014 8 ITA Nos. 6225 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. Director's Residence who was searched in connection to some Jagat group of cases. 4. The Ld AO was again reminded by objections filed that even Section 153C is also not applicable because even Audited Balance Sheets of Appellant Company cannot be regarded as document in term of Section 153C of I.T. Act. As Such Balance Sheet are adopted accounts of Appellant Company and are in public domain & nothing incriminating was found in such documents. 5. The Ld AO was also reminded that spirit of Section 153C of IT. Act must be respected to as Notice u/s 153C read with section 153A should be issued where some undisclosed income are unearthed by examination of certain documents found from Person who is searched which were not part of Regular Assessments. 6. The Ld AO disregarded the all principles of Natural Justice & just brushed aside all objections/case laws and went ahead in making Assessments.

Now we submit before your Honors that actions of The Ld AO in the present case be examined w.r.t to use of section 153C of IT. Act as well as on the ground of application of Principles of Natural Justice by taking cue from the held Judgments of Superior Courts.

Our first Reliance is based on leading judgment of Hon'ble Mumbai Special Bench in the Matter of All Cargo Global Logistics Ltd. Vs DCIT 181 ITR (Trib.) 106.

The reliance was placed on the following case laws: � Sinhgad Technical Education Society v. Asstt. CIT � LMJ International Ltd v. Dy CIT � Suncity Alloys P Ltd vs ACIT � Anil Kumar Bhatia Vs ACIT � ACIT Vs Mrs Ultara S Shorewala � ACIT Vs Asha kataria � Shri Vikram Khandelwal Vs DCIT � ACIT Vs Gambhir Silk mills � Vijaybhai N. Chandrani v. Asstt CIT � Meghmani Organics Ltd. v. Dy. CIT � P. Srinivas Naik v. Asstt. CIT ITA Nos. 6208 to 6213 /Del/2014 10 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd.

The ld. CIT(A) after considering the submissions of the assessee observed that the assessment folder of Sh. Pramod Goel revealed that the exercise of recording the satisfaction note during the assessment proceedings u/s 153A of the Act was not carried out and there was no satisfaction note found on the record. On the other hand, the AO recorded the satisfaction note in the file of such other person i.e. the assessee company and those facts were contrary to the provision and does not satisfy the condition for assuming the jurisdiction u/s 153C of the Act. The ld. CIT(A) categorically stated that no satisfaction note was found, recorded in the file of Sh. Pramod Goel, the person who was searched u/s 132 and assessed u/s 153A of the Act. Therefore, the satisfaction note which was recorded in the file of the assessee company could not be said to be valid within the meaning of Section 153C of the Act. The ld. CIT(A) held that the AO did not appreciate the legal frame of the condition laid down u/s 153C of the Act and he did not carry out any such exercise as mentioned in Section 153C(1) of the Act with proper application of mind, therefore, initiation of proceedings u/s 153C of the Act was not proper and was bad-in-law. The relevant findings had been given by the ld. CIT(A) in paras 8 to 8.1.12 of the impugned order which read as under: “8. I have gone through the facts of the case and considered the written submissions, details filed in the paper book of the appellant. I have also perused the citation of various case laws relied upon by the appellant in support of the contentions raised in ITA Nos. 6208 to 6213 /Del/2014 11 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. grounds of appeal. Section 153C of the I T Act, 1961 reads as under: "153C. 1(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:]." From the simple interpretation of the above section, it is evident 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 requisitioned belongs or belong to a person other than the person searched u/s 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 person shall proceed against the said person to assess or re-assess his income in accordance with the provisions of section 153A. 8.1 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 belong to the person other than the person searched is a sine qua non for initiating action u/s 153C of the IT Act, 1961. This interpretation of section 153C is supported by the decision of ITA Nos. 6208 to 6213 /Del/2014 12 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. Hon'ble Apex Court in the case of Manish Maheswari vs. ACIT & another (2007) 289 ITR 341 (SC) where the Lordships at page 348 held as under: "The 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 precedent 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 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." 8.1.1 The language of section 158BD and section 153C needs to be elaborated and appreciated while addressing the legal position of section 153C of the IT Act, 1961. Section 158BD reads as under: "158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom documents or any assets were ITA Nos. 6208 to 6213 /Del/2014 13 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. requisitioned under section 132A, then, the books of account, other 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 [under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly." 8.1.2 Reference is made to the judicial precedent in the case of CIT Vs Meghamani Organics Ltd. where the Hon'ble Gujarat High Court compared the language of 153C and 158BD at page no. 6 of their order and as under: "Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153-A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under Section 158BD if the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he shall proceed against such other person under section 158BC." 8.1.3 From the above citations and also from the comparison of language of sections 153C and 158BD, it is evident that the condition for recording satisfaction by the Assessing Officer of the person searched is present in both the sections. In section 158BD, the Assessing Officer of the person searched is to be satisfied that ITA Nos. 6208 to 6213 /Del/2014 14 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. any undisclosed income belong to any other person other than the person searched, while in the section 153C, the AO of the person searched is to be satisfied that any money bullion, jewellery or other valuable article or thing or books of account or documents belong to a person other than the person of searched. The subsequent procedure in section 158BD and section 153C is same wherein the Assessing Officer of the person searched has to handover the documents or assets seized to the AO having jurisdiction over the such other person and thereafter, the AO of such other person would assess or re-assess such other person. Thus the basic condition of recording the satisfaction by the AO of the person searched as well as handing over the books of account or other documents or assets seized to the AO of such other person is present in both the sections. To this extent the decision of the Hon'ble Apex court in the case of Manish Maheswari is applicable while interpreting the provisions of section 153C. 8.1.4 In the backdrop of the above legal position, during the course of appeal proceedings I have called for the assessment record of the appellant company and found that the AO recorded the satisfaction note in the file of the appellant company as under: "Satisfaction u/s 153C of the Income Tax Act 1961 in the case M/s Victory Dwellings Pvt. Ltd. PAN-AACCV2862N 208. Gupta Tower. Azadpur Commercial Complex. Azadpur. Delhi-110033. 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 Gael at EN- 33, East Shalimar Bagh, Delhi. Under mentioned documents belonging to M/s Victory Dwellings Pvt. Ltd. were found and seized from the above premises. Page no. 96 to 98 of Annexure A-l of Party V-2 is a copy of the Balance Sheet, Profit loss account, Schedule-A (Advance ITA Nos. 6208 to 6213 /Del/2014 15 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. against suppliers) pertaining to M/s Victory Dwellings Pvt. Ltd. for the financial year ending 31.03.2010. The case of M/s Victory Dwellings Pvt. Ltd. was centralized with this office vide F.NO;. C1T-Delhi-VI/Centralization/2011- 12/648 dated 22.06.2011 issued by the CIT, Delhi-VI, New Delhi. I am therefore satisfied that the documents seized, as referred to above, belong to M/s Victory Dwellings 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" 8.1.5 The last line of satisfaction note read as under: "I am therefore satisfied that the documents seized as referred to above belong to M/s Victory Dwellings Pvt. Ltd. warranting action u/s 153Cin this case." 8.1.6 A plain reading above indicated that the satisfaction note was recorded by the Assessing Officer who was taking action u/s 153C of the I T Act 1961, i.e. the Assessing Officer of the appellant company. This inference is drawn and strengthened from the fact that such satisfaction note was recorded on 27.02.2013 and also the notice u/s 153C was issued on the same date, The Assessing Officer who recorded the satisfaction note in the file of the appellant company and also the Assessing Officer who issued the notice u/s 153C is same i.e. Assessing Officer Central Circle-9, ITA Nos. 6208 to 6213 /Del/2014 16 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. New Delhi. This could be due to the fact that the said case was centralized with the office of Central Circle-9 New Delhi vide file no. CIT-D-VI/centralization/2011-12/648 dated 22.06.2011 issued by the CIT Delhi-VI New Delhi. 8.1.7 In the course of the appeal proceedings I have also called for the assessment record of Sh. Pramod Goel who was searched u/s 132 on 14.09.2010. Sh. Pramod Goel is the director of the appellant company i.e. M/s Victory Dwellings Pvt. Ltd. 8.1.8 The Assessing Officer of the searched person i.e. Sh. Pramod Goel and the Assessing Officer of such other person i.e. the appellant company i.e. M/s Victory Dwellings Pvt. Ltd. maybe same, but the above two entities are two different persons and the Assessing Officer is duty bound to carry out the exercise, as under: "a. As an Assessing Officer of the person searched he should have recorded a satisfaction note during the course of assessment proceedings u/s 153A in the case of Sh. Pramod Goel in his file. b. After recording such satisfaction note in the file of Sh. Pramod Goel i.e. (the person searched) the same should have been placed in the file of such other person i.e. the appellant company M/s Victory Dwellings Pvt. Ltd. c. Then in the capacity as an Assessing Officer of such other person, he should have taken cognizance of the satisfaction note and thereafter issued a notice u/s 153C of the IT Act, 1961." 8.1.9 On perusal of the assessment folder of Sh. Pramod Goel, I find that such an exercise of recording the satisfaction note during the assessment proceedings u/s 153A was not carried out and there is no satisfaction note found on record. On the other hand the Assessing Officer recorded the satisfaction note in the file of such other person, i.e. the appellant company M/s Victory ITA Nos. 6208 to 6213 /Del/2014 17 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. Dwellings Pvt. Ltd. This fact is contrary to the provisions and does not satisfy the condition for assuming the jurisdiction u/s 153C of the IT Act, 1961. No satisfaction note was found recorded in the file of Sh. Pramod Goel, the person who was searched u/s 132 and assessed u/s 153A of the IT Act, 1961. Therefore, the above satisfaction note which is recorded in the file of the appellant company i.e. M/s. Victory Dwellings Pvt. Ltd. cannot be said to be valid within the meaning of section 153C of the IT Act, 1961. 8.1.10 In the course of appeal proceedings, the AR of the appellant vehemently argued that Sh. Pramod Goel was the director of the appellant company and the document found and seized from his residential premises belonged to him in the capacity of a director to examine the financial statements of the appellant company for the year ended on 31.03.2010 and not to the appellant company. He also argued that the financial statements (balance sheet, profit & loss account and schedule A) are the documents in public domain and hence are not incriminating in nature. The contents of page nos. 96 to 98 of annexure A-1 found and seized by the searched party V-2 from the residential premises of Sh. Pramod Goel was subjected only as a tool in invoking the provisions u/s 153C of the IT Act, 1961 but the same was never examined in the course of assessment proceedings of the appellant company nor any transaction incriminating in nature was detected by the Assessing Officer. In the course of the entire assessment proceedings no queries were asked by the Assessing Officer pertaining the any item from the financial statements. However, only that material i.e. 51-55 of annexure A-5 found and impounded, in the course of the survey proceedings u/s 133A on 14.09.2010 were taken into account for framing the assessment order u/s 143(3) read with section 153C of the I T Act, 1961. 8.1.11 It is also pertinently mentioned here that the document which was found and seized from the residential premises of Sh. Pramod Goel, searched u/s 132 of the I T Act was used by the Assessing Officer of the appellant company to invoke proceedings ITA Nos. 6208 to 6213 /Del/2014 18 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. u/s 153C without recording the satisfaction note in the case of Sh. Goel in the course of the assessment proceedings u/s 153A of the I T Act, 1961, contrary to the provisions of section 153C. In the course of the assessment proceedings u/s 153C, the Assessing Officer did not raise any query pertaining to any of the transactions found recorded in the balance sheet, profit and loss account or schedule A for the year ended 31.03.2010 and no income was detected as undisclosed / unaccounted for the year under consideration from this document. Therefore, this document cannot be said to be incriminating on the basis of which action u/s 153C was taken by the Assessing Officer. In support of this inference, I rely upon the decision of the Hon'ble ITAT in the case of Singhad Technical Education Society Vs ACIT in ITA No. 114 to 117/PN/10. 8.1.12 Reference is also made here to the Proviso to section 153C which stipulates as under: "Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub- section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:]."

The above proviso refers to second proviso to sub-section (1) of Section 153A, That Section 153A(1) and its first and second provisos read as under:- "153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall - ITA Nos. 6208 to 6213 /Del/2014 19 ITA Nos. 6225 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd.

It was further submitted that the AO recorded the satisfaction in the case of the assessee and not in the case of the searched person. Therefore, the assumption of jurisdiction u/s 153C of the Act by the AO was not valid. It was also submitted that the aforesaid referred to page nos. 96 & 98 by the AO were the copies of “Balance Sheet, Profit and Loss Account and Schedule of Advances against supplies” pertaining to the assessee. Therefore, the said documents by no stretch of imagination can be said to be incriminating as those were the documents which were ITA Nos. 6208 to 6213 /Del/2014 22 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. 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. It was contended that during the course of entire assessment proceedings no query with regards to those documents was raised by the AO. Therefore, in the absence of any incriminating material found during the course of search no addition could have been made in the assessment completed u/s 153C of the Act. The reliance was placed on the following case laws: � CIT Vs RRJ Securities Ltd. (2016) 380 ITR 612 (Del.) � CIT Vs Kabul Chawla in ITA No. 709 & 713/2014 order dated 28.08.2015 (Del. H.C.) � DCIT Vs Smt. Geeta Devi Aggarwal in ITA No. 1906/Del/2013 order dated 03.10.2016 (ITAT, Del.) � ACIT Vs Sh. Devender Kumar Aggarwal in ITA Nos. 3554 & 3555/Del/2012 order dated 30.09.2016 (ITAT, Del.) � ACIT Vs Sunkan Travels Pvt. Ltd. in ITA Nos. 559 to 564/Del/2012 order dated 27.07.2016 (ITAT, Del.) � Narsi Creations Vs DCIT in ITA No. 3186, 3188 to 3194 of 2013 order dated 10.05.2016 (ITAT, Del.) � Nageshwar Investment Ltd. in ITA No. 5393/Del/2012 (ITAT, Del.) � Natural Products Bio Tech Ltd. Vs DCIT (2015) 153 ITD 58 (Del. Trib.) � Andaman Timber Industries Vs CCE in Civil Appeal No. 4228 of 2006 order dated 02.09.2015 (Hon’ble SC) � Prakash Chand Nahata Vs Union of India 163 CTR 310 (SC) � Kishan Chand Chellaram Vs CIT 125 ITR 713 (SC) � CIT Vs SMC Share Brokers Ltd. 288 ITR 345 (Del.) � Alok Aggarwal Vs DCIT (2000) 67 TTJ 109 (Del.) 12. It was further submitted that the CBDT vide Circular No. 24/2014 issued on 31.12.2015 clarified that even if the AO of the searched person and the other person is one and the same, then also the AO is required to record his satisfaction and that in the present case, no satisfaction has ITA Nos. 6208 to 6213 /Del/2014 23 ITA Nos. 6225 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. been recorded by the AO in the case of the searched person. Therefore, assumption of jurisdiction in the case of the assessee was bad-in-law and thus, the consequent assessment framed by the AO was rightly quashed by the ld. CIT(A) and when the ld. CIT(A) had decided the legal issue in favour of the assessee, the addition sustained was not justified.

In his rival submissions the ld. DR strongly supported the assessment order passed by the AO and further submitted that even if the AO/Assessing Authority receiving satisfaction note had not found anything adverse against assessee on examination of accounts books, the notice u/s 153C of the Act still could have been issued to the assessee to file the return of income. The reliance was placed on the following case laws: � SSP Aviation Ltd. Vs DCIT 20 Taxman.com 214 (Del.) � CIT Vs Classic Enterprises 358 ITR 465 (All.) � Savesh Kumar Aggarwal Vs U.O.I 353 ITR 26 (All.) � CIT Vs Nipun Builders & Developers (P.) Ltd. 350 ITR 407 (Del.) � CIT Vs Nova Promoters & Finlease P. Ltd. 342 ITR 169 (Del.) � CIT Vs Ultra Modern Exports P. Ltd. 40 Taxmann.com 458 (Del.) � CIT Vs Frostair P. Ltd. 210 Taxman 221 (Del.) � CIT Vs N R Portfolio Pvt. Ltd. 29 Taxmann.com 291 (Del.) � CIT Vs Empire Builtech P. Ltd.366 ITR 110 (Del.) � CIT Vs MAF Academy P. Ltd. 361 ITR 258 (Del.) � CIT Vs Focus Exports (P.) Ltd. 228 Taxman 88 (Del.) It was further submitted that the ld. CIT(A) was not justified in deleting the addition made by the AO.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the search did not take place at the business premises of the assessee rather it took place at the premises of Sh. Pramod Goel, Smt. Savit Goel and Sh. Ashish Goel u/s 132 of the Act on 14.09.2010 and the notices were issued to those parties u/s 153A of the Act. The AO also issued notice u/s 153A of the Act to the assessee but later on being satisfied that no search and seizure operation u/s 132 of the Act was initiated against the assessee, he withdrew the notice issued u/s 153A of the Act. Thereafter, the AO issued the notice u/s 153C of the Act on the basis that the documents pertaining to the assessee were fund from the premises of the searched person. The said documents were the copies of balance sheet, profit and loss account and schedule A (advances against supplier). In the present case, the AO assumed the jurisdiction u/s 153C(1) of the Act, the provisions contained in the said Section read as under: “Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.

On perusal of the aforesaid provisions, it would be clear that those provisions start with the non-obstante clause, so these provisions over ride the provisions contained in Sections 139, 147, 148, 149, 151 and 153 of the Act. It is also clear from the said provisions that the satisfaction of the AO of the searched person is must for assuming the jurisdiction u/s 153C of the Act in case of a person other than the searched person. In the present case, the ld. CIT(A) categorically stated in the impugned order (a relevant portion of the said order has been reproduced in the former part of this order) that the AO did not record any satisfaction during the assessment proceedings u/s 153A of the Act in the case of the searched person i.e. Sh. Pramod Goel. On the contrary, the AO recorded the satisfaction note in the file of the other person i.e. the assessee company. We have also perused the copy of satisfaction note recorded by the AO which is placed at page no. 21 of the assessee’s paper book and read as under:

Now the CBDT vide Circular No. 24/2015 dated 31.12.2015 clarify this position, the said Circular read as under: “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 ITA Nos. 6208 to 6213 /Del/2014 27 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. [2014] 43 taxmann.com 446 (SC) (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. "

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.

From the plain reading of the aforesaid Circular No. 24/2015 dated 31.12.2015 issued by the Central Board of Direct Taxes, it is crystal clear that ITA Nos. 6208 to 6213 /Del/2014 28 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. 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 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 alongwith 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.

On a similar issue the Hon’ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla reported at (2016) 380 ITR 573 held as under: ''The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 1961, is as under : (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person in respect of whom to 6213 /Del/2014 29 ITA Nos. 6225 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. search was conducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place, (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as afresh exercise. (Hi) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years in which both the disclosed and the undisclosed income would be brought to tax. (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess " to completed assessment proceedings, (vi) In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or ITA Nos. 6208 to 6213 /Del/2014 30 to 6228 & 6230 to 6235/Del/2014 Victory Structures, Dwellings, Apartments, Townsip & Accommodations Pvt. Ltd. brought on the record of the Assessing Officer, (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” It has further been held that “On the date of the search the assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed."

In view of the aforesaid discussion, we are of the confirmed view that the additions made by the AO in the absence of incriminating material while framing the assessment u/s 153A of the Act was not valid and also in the absence of the satisfaction recorded by the AO of the searched person, the assumption of jurisdiction u/s 153C of the Act in the case of persons other than searched person was also not valid. In that view of the matter, we do not see merit in the appeals filed by the department and the assessee succeeds in its appeal. Identical facts are involved in the assessee’s appeal for the A.Y. 2010-11 and the departmental appeals for the assessment years 2007-08 and 2010-11, therefore, findings given for the assessment year 2009-10 in the former part of this order shall apply with the same force.

In the result, the appeals of the assessees are allowed and that of the department are dismissed. (Order Pronounced in the Court on 24/03/2017)