ACIT, NEW DELHI vs. SINGLA RELATORS LTD.,, DELHI

The brief facts of the case are that search u/s 132 of the Income Tax Act, 1961 (in short ‘The Act’) was conducted at the business/residential premises of the Directors of the asseessee company on 10/11/2005. The assessments for both the years were completed u/s 153C/143(3) of the Act in which substantial additions were made. For both the years the assessee raised a primary objection before the ld. CIT (A’s) that the AO was lacking in the basic jurisdiction to invoke section 153C of the Act without fulfilling the conditions laid therein. It was the assessee’s submission that the action was incorrect and unjustified in taking recourse to action u/s 153C since no books of accounts or documents or anything else belonging to the assessee was found from the persons searched. It was the assessee’s contention that the AO had taken action u/s 153C and completed the assessment without recording satisfaction in case of the person searched and hence the assessment so made u/s 153C deserves to be annulled. However, the ld. CIT(A’s) noted that it was undisputed that the papers found in the residential premises of the two 1145 & 2322/D/09 Page 2 of 8 Singla Realters Ltd. directors namely Shri Babu Ram Singla and Shri Harish Singla were belonging to the assessee company only. The ld. CIT(A’s) also referred to some loose papers found during the course of search and noted that the transactions as appearing in these loose papers were also duly accepted by the assessee as relating to its business deals and recorded in the books. The ld. CIT (A’s) also noted that even on the day of search and subsequently both the above named Directors had deposed that these papers related to the real estate business of the assessee company only. The ld. CIT (A) also noted that not only the ownership of the papers but also the continued nexus of the transactions with the assessee company was established beyond doubt. On the issue of recording of satisfaction, the ld. CIT(A’s) noted that in this case the AO of the persons searched and the AO of the third party were one in the same person and hence the requirement of a separate satisfaction was not mandatory. Accordingly, the ld. CIT (A) held that the proceedings u/s 153C/143(3) were valid and that the assessee’s legal objection was unsustainable. On merits the ld. CIT (A’s) gave some relief to the assessee.

Now the assessee has preferred an appeal before the ITAT and although numerous grounds have been raised for both the assessment years, the ld. AR chose to address the Bench on ground no. 1 only which challenges the invocation of provision of sec. 153C. Ground no. 1 is common to both the appeals and reads as under: 1145 & 2322/D/09 Page 3 of 8 Singla Realters Ltd.

The ld. AR submitted that in both the years the assessment u/s 153C was void ab initio as there was no satisfaction note on record in the case of Shri Babu ram Singla, Smt. Laxmi Singla and Shri Harish Singla for assessment years 2000- 01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09.

The ld. DR although supported the order of the ld. CIT(A’s) on the validity of proceedings u/s 153C but could not dispute the fact that the circular as aforementioned was binding in nature. , 1145 & 2322/D/09 Page 4 of 8 Singla Realters Ltd.

We have heard the rival submissions and also have perused the relevant records. At this juncture it will be a relevant to reproduce Circular No. 24/2015 issued by the CBDT which reads as under:

On going through the relevant records, especially the impugned order, it is undisputed that no satisfaction was recorded by the AO of the searched persons in this case. A communication from the ACIT to the ld. CIT-DR IV, ITAT Delhi also confirms the contention of the assessee. It is also undoubted that the Circulars 1145 & 2322/D/09 Page 6 of 8 Singla Realters Ltd. issued by the CBDT have a binding force at least as far as the assessee’s interest are to be safe guarded. Para 4 of the circular specifically directs 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. In the light of the factual matrix of the case duly supported by the circular, we find that the assessee has a strong case on this issue. We, accordingly, hold that proceedings u/s 153C/143(3) for both the assessment years under appeal were void ab initio as the fundamental requirement of recording the satisfaction note was not complied with. Hence, the assessments for both the years are quashed and ground no. 1 of the assessee’s appeal for both the years is allowed. As other grounds have become academic in nature, they are not being adjudicated upon.

In the result, & 1145/D/09 preferred by the assessee are partly allowed.

As far as preferred by the Department for AY 2006-07 is concerned. It is seen that the Department has agitated the deletion of addition of Rs. 10 lacs only. Keeping in view the CBDT Circular No.21 of 2015 dated 10.12.2015 and also the provisions of Section 268A of Income Tax Act, 1961, we are of the view that the Revenue’s appeal is liable to be dismissed. , 1145 & 2322/D/09 Page 7 of 8 Singla Realters Ltd.

In the result, the appeal filed by the Department is dismissed.

In the final result, both the appeals of the assessee are partly allowed and the appeal filed by the Department is dismissed.