ACIT, NEW DELHI vs. M/S. SBP 87 HOTELS PVT. LTD., NEW DELHI

The brief facts of these cases are that in these appeals, the A.O. issued notice u/s 153C to the respondent assessees and the assessees raised objections about the validity of notice issued u/s 153C of the Act on the ground that the assessee has not been informed about the seizure of requisition of any money, bullion, jewellery or other valuable article or thing or books of accounts or documents belonging to the assessee found from the premises of any other person and subsequently, in the absence of such vital information regarding seizure or requisition of nay incriminating material or documents or assets, provisions contained in section153C of the Act cannot be invoked. On asking the A.O. to provide the reasons along with copies of material relied upon for the issuance of notice u/s 153C and invoking proceedings initiated u/s 153C, it was also submitted that more incriminating documents, material or evidence belonging to the assessees was found and seized during the course of search or from any other person. Notice has been issued by the A.O. showing the status of the assessee as a firm but the eventual assessment order passed u/s 153C read with section 143(3) issuance to the said notice in one another status “company”. Appropriate status has to be clearly specified in the jurisdiction notice. Failure to do so vitiates the proceedings. The A.O. did not agree with the objections of the assessee and ultimately completed the assessment u/s 153C read with Section143(3) in each of the cases making additions. The assessees went in appeal before Ld. 3 I.T.A.Nos.2884,2887,2890&2891/Del/2015 CIT(A). Ld. CIT(A) noted that the case of the assessees is duly covered by the order of Hon’ble Delhi High Court in the case of Pepsi Foods Pvt. Ltd. Vs CIT 52 Taxman.com 220 (Del.) and accordingly, allowed the appeal of each of the assessees.

I have hard rival submissions and carefully considered the same along with the orders of tax authorities below. I noted that the only issue involved in these appeals is that ht Ld. CIT(A) erred in law in quashing the order passed by the A.O. by treating the jurisdiction u/s 153C illegal following the law laid down by Hon’ble Jurisdictional High Court in the case of Pepsi Foods Pvt. Ltd. and M/s. Pepsico India Holdings Pvt. Ltd. (supra). I noted that the assessee objected the initiation of proceedings u/s 153C in each of the case and has asked the A.O. for a copy of the satisfaction note but the A.O. did not provide the copy of the satisfaction note to the assessee and dismissed the objections of the assessee. Then the assessee went before Ld. CIT(A), the assessee received the copy of satisfaction note during the course of appellate proceedings before Ld. CIT(A) and the said satisfaction note reads as under:- “A search and seizure operation u/s 132(1) of the I. T. Act was carried out at the various premises of M/s. Satya Prakash & Brothers Pvt. Ltd. Group on 28.10.2010. M/s. Satya Prakash & Brothers Pvt. Ltd. is engaged in the business of executing Govt. Contracts working for PWD, CPWD and MCD and NDMC etc. During the course of common wealth games 2010, the company executed work of street escaping and beautification of roads worth Rs.159.05 crores. During the search operation a large number of documents were seized which clearly indicated that the group including the assessee is earning huge profits which are reduced by introducing bogus expenses. The case of assessee namely M/s.SPB 87 Hotels Pvt. Ltd. is closely related/ associated entity to the main assessee i.e. M/s. Sataya Prakash & Brothers Pvt. Ltd. In view of facts narrated above, I am satisfied that the case of M/s. SPB 87 Hotels Pvt. Ltd. is a fit case for issue of notice u/s 153C of the I. T. Act, 1961. Notice u/s 153C dated 08.05.2012 is 4 I.T.A.Nos.2884,2887,2890&2891/Del/2015 issued requiring the assessee to file return of income for the A.Y. 2005-06 to 2010-11.”

A perusal of the satisfaction note reproduced above, clearly shows that the A.O. has not specified the particular documents which were seized and related to the assessee. He has merely made general observation that a large number of documents are seized during the course of search at the premises of M/s. Satya Prakash & Brothers Pvt. Ltd. and those documents clearly indicate that the group including the assessee has earned huge profits which are reduced by introducing bogus expenses. The assessee is closely related associate to the assessee in whose case search has taken place. The A.O. has not given any basis or reasons how he is satisfied that the case of the assessee is a fit case for the issuance of notice u/s 153C. I noted that under the similar facts and circumstances, Hon’ble Delhi High Court in the case of Pepsi Foods Pvt. Ltd. Vs ACIT 52 Taxman.com 220 held a under:- “11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the A.O. is satisfied that it is a fit case for issuance of a notice under section1543C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the A.O. Mere use or mention of the word “satisfaction” or the words “I am satisfied” in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the A.O. of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction noted, we are unable to discern any “satisfaction” of kind required under Section 153C of the said Act. 12. This being the position the very first step prior to the issuance of a notice under Section 153C of the said Acts has not been fulfilled. Inasmuch as this condition precedent has not been met, the noticed under Section 153C are label to be quashed. It is ordered 5 I.T.A.Nos.2884,2887,2890&2891/Del/2015 accordingly. The writ petitions are allowed as above. There shall be no order as to costs.”

From the said decision, it is apparent that he satisfaction note should specify the documents belonging to the assessee and also the said note must display the reasons or the basis for the conclusion of the A.O. of the searched person that the A.O. is satisfied that the seized documents belong to a person other than the searched person. In this case, I noted that the satisfaction note does not meet out the criteria as mentioned by the Hon’ble Jurisdictional High Court, therefore, Ld. CIT(A) has quashed the assessment order. No contrary decision or the cogent material was brought before me, which may warrant my interference in the order of Ld. CIT(A).

I noted in all the other three cases also, similar type of satisfaction has been recorded. I, therefore, confirm the order of Ld. CIT(A) quashing the assessment order passed by the A.O. in all the four cases.

In the result, all these appeals filed by the revenue are dismissed. Order pronounced in the open court on 10th Nov., 2015. 8.