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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- 37, Mumbai dated 30/03/2012 for the A.Y.2003-04 in the matter of order passed u/s.143(3) r.w.s. 153C of the IT Act. 2. In this appeal, assessee has challenged the addition made by the AO. Assessee has taken additional ground challenging the validity of the assessment order passed u/s.143(3) r.w.s. 153C of the Act on the plea that no satisfaction has been recorded by the AO while issuing notice u/s.153C of the Act. The additional ground so raised reads as under:- (a) On the facts and circumstances of the case of the Appellant and in law, the assessment order U/S 143(3) r.w.s. 153C of the LT. Act passed by the AO is illegal, bad in law and without jurisdiction in so far as no satisfaction as contemplated u/s 153C M/s. Acme Dwellers Pvt. Ltd., of the Act was recorded by the AO before issue of the notice to the Appellant u/s 153C of the Act. The Appellant submit that recording of satisfaction by the Assessing Officer of searched person is a prerequisite for issuance of notice u/s 153C of the Act and failing of which renders the proceeding u/s 153C of the Act illegal and bad in law. (b) The AO erred in passing order u/s 143(3) r.w.s 153C of the Act and failed to appreciate that since no money, bullion, jewellery or other valuable article or thing or books of accounts or documents belonging to the appellant were seized as a result of search and hence notice issued u/s 153C of the Act was illegal, invalid and unsustainable.
The AO erred in passing the order uls 143 (3) r.w.s. 153C of the IT. Act and making addition to the returned income of the Appellant in absence of any incriminating documents pertaining to the Appellant found during the course of search action pertaining to years for which no assessment or re-assessment was pending. The Appellant, in the facts and circumstances of the case and law, submits that the order u/s 153C of the LT. Act passed by the AO is contrary to the provision of law and ultra vires; hence, the same deserves to be vacated and quashed.
It was contended by learned AR that the additional ground so raised is purely legal in nature, therefore, in view of the decision of Hon’ble Supreme Court in the case of National Thermal Power Company Ltd., 229 ITR 383, the same deserves to be allowed by the Tribunal for decision.
Learned AR also placed on record CBDT Circular No. 24/15 dated 31/12/2015, wherein recording of satisfaction note u/s.158BD / 153 C of the Act was held to be mandatory. It was further stated in the circular that in case it is found that no satisfaction note has been recorded u/s.153 BD / 153C, the appeal so filed should be withdrawn / not M/s. Acme Dwellers Pvt. Ltd., pressed if it does not meet the guidelines laid down by the Apex Court in the case of Kolkata Net Wares 362 ITR 673.
5. Learned CIT DR was asked to produce the satisfaction note if any recorded by the AO on 10/07/2017. Learned CIT DR asked for two days time and appeal was again fixed on 12/07/2017 wherein learned CIT DR filed the letter of Assessing Officer dated 10/07/2017, letter No. DCIT/CC/2(3)-Acme Dwellers/ITAT/2017-18, wherein the DCIT has shown inability to provide satisfaction note as the same was not available in the record.
However, learned DR submitted that additional ground of appeal
should not be accepted. As per learned CIT DR on the merits assessee has taken a ground to the effect that CIT(A) has not admitted additional evidence filed as per Rule 46A of IT Rules, the matter should be restored back to the file of CIT(A) asking him to admit the additional evidence to examine the same and for deciding the issue afresh in the light of the evidences so filed.
7. We have considered rival contentions and carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements cited by learned AR in the context of factual matrix of the case.
8. Facts in brief are that search and seizure action u/s.132 of the Act was conducted in the case of Acme Group, residence of its Directors / partners and related persons on 24/07/2008. Thereafter, AO issued notice to the assessee company u/s.153C. The assessee has taken an M/s. Acme Dwellers Pvt. Ltd., additional ground before us to the effect that no satisfaction has been recorded by the AO of the searched person, therefore, assessment deserves to be annulled, accordingly order passed by the AO u/s.143(3) r.w.s.153C is illegal, bad in law and without jurisdiction. As per learned AR recording of satisfaction by the Assessing Officer of searched person is a pre-requisite for issuance of notice u/s.153C of the Act and failing of which renders the proceedings u/s.153C of the Act illegal and bad in law.
9. We find that the additional ground so raised by the assessee is purely legal in nature. Therefore, in view of the decision of Supreme Court in case of National Thermal Power Company, the same deserves to be admitted for decision. In this regard, learned AR has also placed on record CBDT Circular No.24/15 dated 31/12/2015 which reads as under:- Subject: Recording of satisfaction note under section 158BDI153C of the Act - reg.- The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of2014 dated 12.3.2014(available in NJRS at 2014-LL-0312- 51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or M/s. Acme Dwellers Pvt. Ltd., (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. "
3. Several High Courts have held that the provisrons 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.
4. 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 158 BD/153C should be withdrawn / not pressed if it does not meet the guidelines laid down by the Äpex Court.
It is clear from the above Circular that CBDT has directed the departmental officers to follow the decision of Hon’ble Supreme Court in case of Kolkata Knitwears (supra) wherein it was held that for the purpose of Section 158 BD /153C of the Act, recording of satisfaction note is a pre-requisite and the satisfaction note must be prepared by the AO before it transmits the record to the other AO who has jurisdiction over such other person. In the instant case it is not in dispute that no such satisfaction has been recorded by AO. Under these facts and circumstances, applying the judicial pronouncements of M/s. Acme Dwellers Pvt. Ltd., Supreme Court as stated in CBDT Circular dated 31/12/2015, we annul the assessment framed u/s.143(3) r.w.s. 153C of IT Act.
In the result, appeal of assessee is allowed.