IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `G', NEW DELHI
Before Sh. N. K. Saini, AM And Sh. Kuldip Singh, JM
ITA No. 1693/Del/2015 : Asstt. Year : 2007-08
ITA No. 1694/Del/2015 : Asstt. Year : 2008-09
ITA No. 1695/Del/2015 : Asstt. Year : 2009-10
ITA No. 1696/Del/2015 : Asstt. Year : 2010-11
Super Malls Pvt. Ltd., Vs Deputy Commissioner of Income
Sector-12, HUDA, Tax, Central Circle,
Karnal Karnal
(APPELLANT) (RESPONDENT)
PAN No. AAICS2163F
Assessee by : Sh. Amit Goyal, CA
Revenue by : Smt. Sunita Kejriwal, CIT DR
Date of Hearing : 26.11.2015 Date of Pronouncement : 11.12.2015
ORDER
Per Bench:
These four appeals by the assessee are directed against
the separate orders each dated 20.01.2015 of ld. CIT(A)-III,
Gurgaon.
2. The issue involved in these appeals are common and the
appeals were heard together so these are being disposed off by
this consolidated order for the sake of convenience and
brevity.
2 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
3. First we will deal with the appeal in ITA No.
1695/Del/2015 for the assessment year 2009-10. Following
grounds have been raised in this appeal:
" 1. On the facts and circumstances of the case and in
law, the notice u/s 153C issued by the assessing
officer is bad-in-law, without jurisdiction and illegal
and therefore the notice alongwith the assessment
order passed on the foundation of such notice is
liable to be quashed and the Commissioner of Income
Tax (Appeals) should have held so.
2. On the facts and circumstances of the case and in
law, the notice u/s 153C is illegal & without
jurisdiction. The assessing officer has not complied
with the provisions of section 153C and other allied
provisions for issuance of such notice. Accordingly
the notice u/s 153C alongwith the assessment order
passed on the foundation of such notice is liable to
be quashed and the Commissioner of Income Tax
(Appeals) should have held so.
3. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming the action of
assessing officer of completing the assessment at
income of Rs.4,42,00,592/- instead of loss of
Rs.1,15,89,312/- as returned by the assessee.
4a. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming the action of
assessing officer of not allowing set-off of loss of
Rs.2,47,96,658/- for the year as claimed by the
assessee.
3 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
b. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming the action of
assessing officer of not allowing set-off of loss of Rs.
1,15,89,312/- for the year as claimed by the assessee.
5. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming addition of
Rs.1,54,96,623/- made by the assessing officer as
alleged unexplained expenditure u/s 69C.
6. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming the action of
assessing officer of not allowing deduction of
expenses of Rs.1,54,96,623/-.
7. On the facts and circumstances of the case and in
law, the CIT(A) erred in confirming addition of
Rs.4,42,00,592/-(Rs.2,87,03,969/- & Rs.1,54,96,623/-
) made by the assessing officer.
8. On the facts and circumstances of the case and in
law, the assessing officer has erred in charging
interest u/s 234B of Income Tax Act, 1961.
The appellant craves leave to add, alter, modify or
delete one or more ground of appeal before or at the
time of hearing of appeal.
The aforesaid grounds of appeal are without
prejudice to each other. "
4. At the first instance the ld. Counsel for the assessee argued the
Ground Nos. 1 & 2 relating to the legal issue of jurisdiction of the AO in
4 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
framing the assessment u/s 153C of the Income Tax Act, 1961
(hereinafter referred to as the Act).
5. Facts of the case in brief are that a search and seizure operation
was conducted at the premises of Sh. Ved Prakash Bharti Group on
08/09.04.2010, the residential premises of Sh. Ved Prakash Bharti, a
Director of the assessee company were also covered on 08.04.2010. A
survey u/s 133A of the Act was also conducted at the business premises
of the assessee at Karnal and at New Delhi. During the course of survey
various documents were found and impounded from Karnal office. The
AO issued notice u/s 153C of the Act to the assessee. In response the
assessee filed the return of ncome on 15.03.2013 declaring a loss of Rs.
1,15,89,312. However, the assessment was completed u/s 153C r.w.s.
153A r.w.s. 143(3) of the Act at an income of Rs.4,42,00,590/- by
making an addition of Rs.2,87,03,969/- on account of unaccounted cash
receipts and Rs.1,54,96,623/- on account of unexplained expenditure u/s
69 of the Act.
6. Being aggrieved the assessee carried the matter to the ld. CIT(A)
and challenged the validity for notice u/s 153C of the Act and submitted
that the first pre-requisite of invocation of provisions of Section 153C of
the Act is that there must be satisfaction by the AO of the searched
person, that the documents found and seized during the course of search
belonged to "other person" against whom notice u/s 153C of the Act is
5 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
proposed to be issued. It was further submitted that as per the provisions
of Section 132(4A)(i), the presumption is that the documents belong to
such person from whose possession, the documents were seized.
Therefore, the AO of the searched person is also required to record
satisfaction that documents do not belong to the searched person and
belonged to other person, but in the present case, no satisfaction had
been recorded by the AO of the searched person rebutting the
presumption u/s 132(4A)(i) of the Act. The reliance was placed on the
judgment of the Hon'ble Delhi High Court in the case of Pepsi Foods
India Pvt. Ltd. Vs ACIT (2014) 367 ITR 112. It was further submitted
that in terms of provisions of Section 153C of the Act, the satisfaction
has to be recorded by the AO of the searched person, even when the
Assessing Officer of searched person and the person other than the
searched person (against whom proceedings u/s 153C are supposed to be
initiated) are the same and that the requirement of recording the
satisfaction cannot be avoided and such satisfaction has to be recorded
by the Assessing Officer in his capacity as Assessing Officer of searched
person. It was stated that in assessee's case, the so called satisfaction
note had been recorded by the AO in his capacity as Assessing Officer
of the assessee (i.e. the person other than the searched person) and not in
his capacity as Assessing Officer of a searched person, which is evident
from the following:
6 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
"I. In the satisfaction note, it has nowhere been stated by
A.O. that he is recording satisfaction in his capacity as A.O.
of any searched person.
II. The fact that the A.O. is recording satisfaction in his
capacity as A.O. of `assessee' (a person other than searched
person) is evident from the top of the satisfaction note
wherein in the column of name and address of the assessee
it is the assessee's name and address which has been
mentioned. Thus the assessing officer has recorded the
satisfaction as assessing officer of the assessee, has recorded
the satisfaction as assessing officer of the assessee and not as
the assessing officer of searched person.
III. The fact that the A.O. is recording satisfaction in his
capacity as A.O. of `assessee' (a person other than searched
person) is evident from the opening para of the so called
`satisfaction note' in which it has been stated that:-
"The jurisdiction of this case has been assigned to
this officer u/s 127 of Income Tax Act, 1961 by the
worthy Commissioner of Income Tax-III/New Delhi
vide order F.No. CIT-III/Delhi/Centralization/2012-
13/2455, dated 15.01.2013."
From the above it is apparent that the A.O. is referring to his
jurisdiction as that of assessee's case and not that of `any
searched person'. Your honour will appreciate that for
recording satisfaction u/s 153C, the assessing officer of
searched person need not be the assessing officer of "person
other than the searched person". By referring to his
jurisdiction over the assessee's case he is establishing that he
is recording satisfaction in his capacity as assessing officer
of assessee (a person other than the searched person).
7 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
IV. Another fact that establish that the A.O. is recording
satisfaction in his capacity as A.O. of "assessee" and not as
A.O. of "searched person". U/s 153C, the A.O. of searched
person is only required to record satisfaction that documents
belong to other person and then to handover those documents
to assessing officer of person other than the searched person.
The A.O. of the searched person is not empower to issue
notice u/s 153C or to give direction for issue of notice u/s
153C. This authority of issue/giving direction for issue of
notice u/s 153C lies solely with the assessing officer of the
"other person."
As can be seen from the last para of the so called satisfaction
note the A.O. has mentioned that _Quote___ "Accordingly it
is directed to issue such person (M/s Super Malls Pvt. Ltd.)
notice and assess and reassess income in accordance with the
provisions of section 153A of the Act.___" Unquote.
The aforesaid remarks proves beyond doubt that the
satisfaction note has been recorded by the assessing officer in
his capacity as the A.O. of the assessee (the other person)
and not as the A.O. of searched person because it is only the
A.O. of "other person" who can issue/give direction for issue
of notice u/s 153C as has been given in the satisfaction note.
V. There is yet another fact that establishes that the
satisfaction u/s 153C has been issued by the A.O. in his
capacity as "A.O." of other person (i.e. the assessee) and not
as A.O. of searched person. The searched person in this case
as per the satisfaction note is Ved Prakash Bharti and date of
search is 08/09.04.2010. The assessing officer was having
jurisdiction over the assessee since at least February 2011
when notice u/s 153A was issued to Ved Prakash Bharti u/s
153A. Thus the assessing officer in his capacity as A.O. of
Ved Prakash Bhyarti was having possession of all documents
8 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
seized during search from Ved Prakash Bharti since at least
prior to Feb 2011. The satisfaction note u/s 153C has been
recorded by A.O. on 22.02.2013 i.e. after more than 2 years
since the period when he was having jurisdiction over Ved
Prakash Bharti i.e. the searched person. The A.O. in his
capacity as A.O. of Ved Prakash Bharti never recorded the
satisfaction. The satisfaction was recorded on 22.02.2013 in
his capacity as A.O. of assessee only after jurisdiction over
the assessee was transferred/vested in him in Jan 2013.
In view of the above it is submitted that the notice u/s 153C
issued by the A.O. is without jurisdiction and is bad-in-law.
The said notice is liable to be quashed and accordingly the
assessment order passed on the foundation of the such notice
is also liable to be quashed."
7. The ld. CIT(A) considered the submissions of the assessee but did
not find merit by observing as under:
"I have considered the submissions of the assessee. The
assessee has advanced that the order issued under section
153C is bad in law and against the provisions of the law. He
has also stated that no incriminating material was found to
belong to the assessee in the search conducted and that no
satisfaction was recorded by the AO of the searched party. To
fortify his case, the assessee has relied upon the decision in
Pepsico India Holdings (P) Ltd. Vs ACIT 270 CTR (Del) 467.
These were issues not taken up before the AO and is coming
for the first time before me. Be that as it may, I find that the
assessee has attached a copy of the satisfaction note at page
34 of the paper book. For sake of easy reference I am
reproducing the same, from which it is abundantly clear that
the legal issue raised by the assessee has no substance.
9 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
Name and address : M/s Super Malls (P) Ltd., Sector-
of the assesse 12, HUDA, Karnal, Regd. Officer
at 51 Transport Centre, Punjabi
Bagh, New Delhi
Asstt. Year : 2005-06 to 2010-11
PAN : AAICS2163F
Status : Company
Reasons/Satisfaction note for taking up the case of M/s Super
Malls (P) Ltd. Sector-12, HUDA, Karnal, Regd. Office at 51-
Transport Centre, Punjabi Bagh, New Delhi under section
153C of the Income Tax Act, 1961.
The jurisdiction of this case has been assigned to this office
u/s 127 of Income Tax Act, 1961 by the worthy Commissioner
of Income Tax-III, New Delhi vide order F.No. CIT-
III/Delhi/Centralization/2012-13/2455 dated 15.01.2013.
By virtue of the authorization of the Director of Income Tax
(Investigation), Chandigarh, a search & seizure operation u/s
132(1) of the Act was carried out on 08/09.04.2010 at the
residential/business premises of Sh. Tejwant Singh & Sh. Ved
Prakash Bharti Group of cases, Karnal, Panipat & Delhi and
a survey u/s 133A of the I.T. Act, 1961 was also carried out
at the business premises of M/s Super Malls (P) Ltd., Karnal
& New Delhi.
During the course of search on 08/09.04.2010 at residence of
Sh. Ved Prakash Bharti who is a Director in the assessee
company M/s Super Malls (P) Ltd., Pen drives were found
and seized as per Annexure-3 from vehicle no. HR06N-0063
parked in front of the residence of Sh. Ved Prakash Bharti.
Some documents as per Annexure A-1 were seized after
10 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
taking print out of the above said pen drives. These
documents contain the details of cash receipt on sale of
shop/offices at M/s Super Mall, Karnal also beside other
concerns. These documents are required for assessment
proceedings. During the statement of Sh. Ved Prakash Bahrti
at the time of search, he has also stated that these documents
pertain to him and M/s Super Mall (P) Ltd., Karnal in which
he is Director.
In view of the above and as per the provisions of sub-section
(1) of Section 153C of the Act, I am satisfied that the
document seized from the residence of Sh. Ved Prakash
Bharti belongs to a person i.e. Super Mall (P) Ltd., other
than the person referred in section 153A. Accordinlgy it is
directed to issue such person (M/s Super Mall Pvt. Ltd.)
notice and assess and reassess income in accordance with the
provision of section 153A of the Act.
-Sd-
(VED PRAKASH KALIA)
Asstt. Commissioner of Income Tax,
Central Circle, Karnal
Dated: 22.02.2013
The satisfaction note reproduced above does not need further
elucidation. It is self-speaking. A survey u/s 133A was carried
out on the assessee which was consequent to search
conducted on the Directors of the assessee company.
Moreover, incriminating documents were impounded/seized
after taking printouts from the Pen Drives and on confronting
the same; the Director Shri Ved Prakash Bharti surrendered
Rs. 7 crores in the hands of the assessee company and Rs. 8
crores in his individual hands. The printouts of the pen drive
revealed transactions relating to sale of shops/office
pertaining to M/s Super Malls Pvt. Ltd., bearing sr. no., name
11 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
of the purchaser, shop no. booking amount in cash and
cheque, brokerage etc. So the nature of the contents of the
documents clearly shows that it was more than a mere
reference of the assessee. It is also evident that materials
found during survey are relatable with the materials seized
during search, revealing element of "income", thereby
suggesting undisclosed income of the other person.
Furthermore, the assessee also revised its regular return of
loss of Rs.(-)2,47,96,658/- to Rs.(-)1,15,89,312/- when it
responded to notice issued u/s 153A r.w.s. 153C.
In view of the above, I am of the considered opinion that the
assessee's contentions are unfounded, and therefore fail in
Grounds of Appeal no. 1 to 3."
8. Now the assessee is in appeal. The ld. Counsel for the assessee
reiterated the submission made before the authorities below and further
submitted that a search and seizure operation u/s 132(1) of the Act was
carried out at the residence of Sh. Ved Prakash Bharti Group of cases on
08/09.04.2010, on the basis of this search, proceedings u/s 153C of the
Act were initiated against the assessee by issuing the notice dated
22.02.2013 u/s 153C of the Act but no satisfaction had been recorded by
the AO of the searched person and that no document belonging to the
assessee was found and seized during the course of search. Therefore,
the notice issued u/s 153C of the Act was bad in law and without
jurisdiction because there had been no handing over of the seized
documents as required u/s 153C before initiation of proceedings under
that section. It was stated that the even when the searched person and the
12 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
person other than the searched person (against whom proceedings u/s
153C of the Act were supposed to be initiated) are the same the
requirement of recording satisfaction by the Assessing Officer of the
searched person cannot be avoided and such satisfaction has to be
recorded by the AO in his capacity as AO of searched person. Therefore,
in the absence of such satisfaction, the proceedings initiated u/s 153C of
the Act are without jurisdiction. It was emphasized that the so called
satisfaction note has been recorded by the AO in his capacity as AO of
the assessee (i.e. a person other than a searched person) and not in his
capacity as AO of searched person which is evident from the following:
"I. In the satisfaction note, it has nowhere been stated by A.O.
that he is recording satisfaction in his capacity as A.O. of any
searched person.
II. The fact that the A.O. is recording satisfaction in his
capacity as A.O. of `assessee' (a person other than searched
person) is evident from the top of the satisfaction note wherein
in the column of name and address of the assessee it is the
assessee's name and address which has been mentioned. Thus
the assessing officer has recorded the satisfaction as assessing
officer of the assessee and not as the assessing officer of
searched person.
III. The fact that the A.O. is recording satisfaction in his
capacity as A.O. of `assessee' (a person other than searched
person) is also evident from the opening para of the so called
`satisfaction note' in which it has been state that:
13 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
"The jurisdiction of this case has been assigned to this
office u/s 127 of Income Tax Act, 1961 by the worthy
Commissioner of Income Tax-III/New Delhi vide order
F. No.CIT-III/Delhi/Centralization/2012-13/2455, dated
15.01.2013."
9. On the basis of the above facts, it was stated that in this case,
satisfaction was for taking up the case and issue of notice u/s 153C of
the Act but the AO of the searched person is not empowered to issue
notice u/s 153C of the Act or to give a direction for issuance of notice
u/s 153C of the Act because this authority lies solely with the AO of
"the other person". It was stated that in the last para of the so called
satisfaction note, the AO mentioned that "accordingly it is directed to
issue such person (M/s Super Malls Pvt. Ltd.) notice and reassess
income in accordance with the provisions of Section 153A of the Act". It
was contended that the aforesaid remarks proved beyond doubt that the
satisfaction note had been recorded by the AO in his capacity as the AO
of the assessee (the other person) and not as AO of searched person
because it is only the AO of other person who can issue/give direction
for issue of notice u/s 153C of the Act as has been given in the
satisfaction note. It was pointed out that in the satisfaction note, the AO
has stated that "these documents are required for assessment
proceedings" which clearly establishes that the satisfaction has been
recorded by the AO of the assessee and not the AO of the searched
person. It was stated that had the satisfaction been recorded by AO in his
14 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
capacity as AO of searched person then there would have been no need
for him to mention about the requirements of seized documents because
those were already in his possession. It was pointed out that the searched
person in this case as per the satisfaction note is Ved Prakash Bharti, and
date of search is 08/09.04.2010 and the AO was having jurisdiction over
the searched person since at least February 2011 when notice u/s 153A
was issued to Sh. Ved Prakash Bharti. Thus, the AO in his capacity as
AO of searched person was having possession of all the documents
seized during search since at least prior to February 2011. It was
contented that the satisfaction note u/s 153C of the Act has been
recorded by the AO on 22.02.2013 i.e. after more than 2 years from the
period when he was having jurisdiction over Sh. Ved Prakash Bharti i.e.
searched person. However, the AO in his capacity as AO of Ved Prakash
Bharti never recorded the satisfaction which was recorded on 22.02.2013
in his capacity as AO of assessee only after jurisdiction over the assessee
was transferred/vested in him in January 2013. It was stated that the
satisfaction note had been recorded by the AO in his capacity as AO of
the assessee (the other person) stands conclusively established from the
order sheet of the AO in the assessee's case wherein vide entry dated
22.02.2013 it has been recorded as under:
"Notice u/s 153C issued after recording reason."
15 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
Thus, the AO in his capacity as AO of the assessee recorded
satisfaction note on 22.02.2013 and issued the notice u/s 153C of the Act
on the same date. The reliance was placed on the following case laws:
Ø Satkar Roadlines Pvt. Ltd. Vs DCIT (ITA No. 6416 to 6421
of 2013) Delhi ITAT dated 14.08.2015
Ø Aqua Guard Marketing (P) Ltd. Vs ACIT (Delhi ITAT Order
dated 27.02.2015 ITA No. 4944 to 4948 of 2013)
Ø DCIT Vs Aakash Arogya Mandir (P) Ltd. (2015) 58
Taxmann.com 293 (Delhi-Trib).
Ø Pr. CIT Vs Aakash Arogya Mandir Pvt. Ltd. (Delhi High
Court order dated 28.07.2015)
Ø ACIT Vs Command Detective & Securities (P) Ltd. (Delhi
ITAT order dated 09.10.2015)
Ø ACIT Vs Inlay Marketing Pvt. Ltd., ITA Nos. 4200 to
4202/Del/2012 order dated 14.11.2014
Ø DCIT Vs Extra Marketing Pvt. Ltd. (2015) 3 TMI 1012
(ITAT Delhi)
Ø Pepsi Foods (P.) Ltd. Vs ACIT (2014) 52 Taxmann.com 220
(Delhi)
Ø Pepsico India Holdings (P.) Ltd. Vs ACIT (2014) 50
Taxmann.com 299 (Delhi)
Ø CIT Vs Mechmen (2015) 7 TMI 538 MP High Court order
dated 10.07.2015
10. In her rival submissions the ld. CIT DR reiterated the observations
made by the ld. CIT(A) and further submitted that the ld. CIT(A) at page
nos. 7 & 8 of the impugned order clearly stated that satisfaction was
recorded by the AO on 22.02.2013 wherein a reference was made to the
documents found and seized as per Annexure-III from the vehicle no.
16 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
HR06N-0063 parked in front of the residence of Sh. Ved Prakash Bharti
and some documents as per Annexure-A-1 were seized after taking print
out from the pen drive and those documents contained the details of cash
receipts on account of sale/office by the assessee. She further submitted
that the print out of the pen drives revealed the transaction relating to the
sale of shops/office pertaining to the assessee bearing sr. No., name of
the purchaser, shop no., booking amount in cash and cheque, brokerage
etc., which clearly shows that it was more than a mere reference of the
assessee and it was evident that materials found during the survey were
relatable with the materials seized during search, revealing element of
income, thereby suggesting undisclosed income of the person other than
the searched person. It was contended that the returns of income for the
assessment years 2007-08 and 2008-09 were not filed u/s 139(1) of the
Act and for the assessment years 2009-10 and 2010-11, unaccounted
transactions were found in the course of search/survey. Therefore, the
income or loss declared in the returns filed purportedly based on the
unreliable books could not be held to be in order and the assessee had
surrendered on the basis of documents which were clearly incriminating.
It was also submitted that the issue relating to the validity of notice u/s
153C of the Act was never raised before the AO and also a revised
return was field in response to notices u/s 153A r.w.s. 153C of the Act.
Therefore, the ld. CIT(A) was fully justified in rejecting the contention
of the assessee relating to the validity of notice u/s 153C of the Act. It
17 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
was further submitted that questioning the sanctity of satisfaction note
and further proceedings u/s 153C of the Act is arbitrary without any
basis by saying that the AO has recorded the satisfaction as AO of the
assessee and not as the AO of searched person particularly when the
Director of the assessee company is the searched person. The reliance
was placed on the following case laws:
Ø Fakir Mohd Haji Hasan Vs CIT 247 ITR 290 (Guj)
Ø Surjeet Singh Chhabra Vs Union of India AIR 1997 (SC)
2560
Ø Banarsi Das Vs Kanshi Ram AIR 1963 (SC) 1165
Ø Param Anand Builders (P) Ltd. Vs ITO (1996) 61 ITD 35
(Mum)
Ø Surender Kumar Charanjit Kumar Vs Cit (2006) 282 ITR
78 (P&H)
Ø Kim Pharma (P) Ltd. (2013) 258 CTR 454
11. The ld. Counsel for the assessee in his rejoinder submitted that the
jurisdiction u/s 153C of Act is an extra ordinary jurisdiction and can
only be exercised when condition precedent as provided in Section 153C
of the Act are exercised and the recording of satisfaction and compliance
of provision of Section 153C of the Act is a jurisdictional fact and only
on its satisfaction does the AO acquire jurisdiction to issue the notice.
Therefore, the lack of satisfaction of jurisdictional fact can never confer
jurisdiction and an objection to it can be raised at any time even in
appeal proceedings. It was further stated that no consent can confer
jurisdiction upon a court if the court has no jurisdiction and if the AO
18 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
can have jurisdiction only when he complied with the conditions laid
down in the Act, then no consent by the assessee or waiver on his part
can confer upon the AO. It was also stated that a mere acquiescence or
participation in assessment proceedings cannot confer jurisdiction to an
Assessing Officer who lacked jurisdiction. The reliance was placed on
the following case laws:
Ø Mavany Brothers Vs CIT (2015) 62 Taxmann.com 50 (Bom)
Ø CIT Vs Ramukh Motilal AIR 1955 (Bom) 227
Ø Raza Textiles Ltd. Vs ITO, Rampur (1973) 87 ITR 539 (SC)
Ø Valvoline Cummins Ltd. Vs DCIT 307 ITR 103 (Del)
Ø Sewlal Daga Vs CIT 55 ITR 406 (Cal)
Ø M/s Tansukhrai Bodulal Vs ITO 46 ITR 325 (Assam)
Ø P.V. Doshi Vs CIT 113 ITR 22 (Guj)
Ø Swaran Yash Vs CIT 138 ITR 734 (Del)
Ø Investors Industrial Corporation Ltd. VS CIT 194 ITR 548
(Bom)
Ø National Thermal Power Co. Ltd. Vs CIT (1998) 97 Taxman
358 (SC)
Ø CIT Vs Cochin Refineries Ltd. (1996) 220 ITR 398 (Ker)
12. We have considered the submissions of both the parties and gone
through the material available on the record. In the present case, it is an
admitted fact that a search was conducted at the premises of Ved
Prakash Bharti Group of cases on 08/09.04.2012 and also at the
residential premises of Sh. Ved Prakash Bharti who is a Director of the
assessee company and in assessee's case only a survey u/s 133A of the
Act was conducted. The assessee challenged the validity of the
assessment on the basis that no satisfaction was recorded in the case of
19 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
the searched person as per the provisions of Section 153 of the Act. The
said provisions read as under:
"153C.Assessment of income of any other person.- (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 :
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."
13. The aforesaid provision starts with a non-obstante clause and is
having an overriding effect on the provisions contained in Sections 139,
147, 148, 149, 151 & 153 of the Act. On a plain reading of the
provisions contained in Section 153C of the Act, it is evident that the
AO of the searched person must be satisfied that inter alia any document
20 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
seized or requisitioned belongs to a person other than the searched
person and only thereafter the AO of the searched person can handover
such documents to the AO having a jurisdiction over "such other
person" (other than the searched person) and the AO of such other
person can proceed further only after such handing over of the
documents/material seized and can issue a notice to that person to assess
or reassess his income in accordance with the provisions of Section
153A of the Act. In such type of cases, first of all the AO of the searched
person must arrive at a clear satisfaction that the documents seized from
the searched person do not belong to him but to some other person and
only after arriving at a satisfaction that the documents belonged to other
person, those documents are to be handed over to the AO of a person to
whom the said documents belonged. On receipt of the
material/documents, the AO having jurisdiction on the other person is
expected to conduct inquiry and due verification of the relevant facts
before issuing a notice to other person under his jurisdiction on the basis
of his own inquiry. Therefore, it is clear that firstly satisfaction has to be
recorded by the AO who conducted search 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 searched person. In the present case, the claim of the
department is that the satisfaction was recorded on 22.02.2013. We have
perused the copies of the order sheet in the case of the assessee as well
21 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
as the searched person Sh. Ved Prakash Bharti. In the order sheet entry
belonging to Sh. Ved Prakash Bharti, the AO simply stated as under:
"Statement of Mr. S. K. Chug recorded."
And in the case of the assessee the order sheet entry reads as under:
"Notice of 153C issued after recording reasons."
14. From the plain reading of the above notings, it is crystal clear that
no satisfaction was recorded by the AO in the case of the searched
person, the only satisfaction was recorded in the case of the person
"other than the searched person" i.e. the assessee. The contents of the
reasons recorded by the AO in the case of the assessee which has been
incorporated by the ld. CIT(A) at page nos. 7 & 8 of the impurnged
order are as under:
"Reasons/Satisfaction note for taking up the case of M/s
Super Malls (P) Ltd. Sector-12, HUDA, Karnal Regd.,
Officer at 51-Transport Centre, Punjabi Bagh, New Delhi
under section 153C of the Income Tax Act, 1961.
The jurisdiction of this case has been assigned to this office
u/s 127 of Income Tax Act, 1961 by the worthy Commissioner
of Income Tax-III, New Delhi vide order F.No. CIT-
III/Delhi/Centralization/2012-13/2455 dated 15.01.2013.
By virtue of the authorization of the Director of Income Tax
(Investigation), Chandigarh, a search & seizure operation u/s
132(1) of the Act was carried out on 08/09.04.2010 at the
residential/business premises of Sh. Tejwant Singh & Sh. Ved
22 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
Prakash Bharti Group of cases, Karnal, Panipat & Delhi and
a survey u/s 133A of the I.T. Act, 1961 was also carried out
at the business premises of M/s Super Malls (P) Ltd., Karnal
& New Delhi.
During the course of search on 08/09.04.2010 at residence of
Sh. Ved Prakash Bharti who is a Director in the assessee
company M/s Super Malls (P) Ltd., Pen drives were found
and seized as per Annexure-3 from vehicle no. HR06N-0063
parked in front of the residence of Sh. Ved Prakash Bharti.
Some documents as per Annexure A-1 were seized after
taking print out of the above said pen drives. These
documents contain the details of cash receipt on sale of
shop/offices at M/s Super Mall, Karnal also beside other
concerns. These documents are required for assessment
proceedings. During the statement of Sh. Ved Prakash Bahrti
at the time of search, he has also stated that these documents
pertain to him and M/s Super Mall (P) Ltd., Karnal in which
he is Director.
In view of the above and as per the provisions of sub-section
(1) of Section 153C of the Act, I am satisfied that the
document seized from the residence of Sh. Ved Prakash
Bharti belongs to a person i.e. Super Mall (P) Ltd., other
than the person referred in section 153A. Accordinlgy it is
directed to issue such person (M/s Super Mall Pvt. Ltd.)
notice and assess and reassess income in accordance with the
provision of section 153A of the Act.
-Sd-
(VED PRAKASH KALIA)
Asstt. Commissioner of Income Tax,
Central Circle, Karnal
Dated: 22.02.2013"
23 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
15. In the aforesaid satisfaction note, it has nowhere been stated by the
AO that he is recording satisfaction in his capacity as AO of any
searched person i.e. Sh. Ved Prakash Bharti. In the present case, the
satisfaction has been recorded by the AO of the assessee (i.e. a person
other than the searched person) which is evident from the top of the
satisfaction note wherein the assessee's name and address has been
mentioned. Therefore, it is clear that the AO of the assessee has recorded
satisfaction as Assessing Officer of the assessee and not as the Assessing
Officer of the searched person. In the instant case, the AO in order sheet
entry dated 22.02.2013 has mentioned that notice u/s 153C issued after
recording reasons but the AO of the searched person is not empowered
to issue the notice to the person other than the searched person. In our
opinion, even if the AO of the assessee and the searched person is the
same, satisfaction must be recorded by the AO of searched person. In
this regard, the Hon'ble Jurisdictional High Court in the case of Pr. CIT
Vs Aakash Arogya Mandir Pvt. Ltd. (copy of which is placed at page
nos. 1 to 6 of the assessee's paper book) held in para 8 as under:
"8. The Revenue has not placed any material to dispute the
factual finding of the ITAT that the requirement of the law
explained by this Court in Pepsi Foods regarding the
recording of satisfaction by the AO even in respect of the
searched person was not fulfilled. Consequently, the fact that
it was the same AO both for the searched person and the
Assessee makes no difference to the consequence of non-
compliance with the legal requirement regarding the
24 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
recording of satisfaction. The Court also agrees with the
ITAT that even if the AO were the same, satisfaction would
have to be recorded separately qua the searched person and
the Assessee."
16. In the instant case, the AO of the searched person has not recorded
any satisfaction, therefore, notice u/s 153C of the Act was not valid and
consequently the assessment framed was bad in law. On a similar issue
their lordships of the Jurisdictional High Court in the case of Pepsi
Foods Pvt. Ltd. Vs ACIT reported at (2014) 367 ITR 112 held as under:
"The Assessing Officer of the person in respect of whom the
search was conducted must be "satisfied" that, inter alia, any
document seized or requisitioned "belongs to" a person
other than the person in respect of whom the search was
conducted. It is only then that the Assessing Officer can hand
over such document to the Assessing Officer having
jurisdiction over such other person (other than the person in
respect of whom the search was conducted). Furthermore, it
is only after such handing over that the Assessing Officer of
such other person can issue a notice to that person and
assess or reassess his income in accordance with the
provisions of section 153A of the Income-tax Act, 1961.
Therefore, before a notice under section 153C can be issued,
two steps have to be taken. The first step is that the Assessing
Officer of the person in respect of whom the search was
conducted must arrive at a clear satisfaction that a document
seized from him does not belong to him but to some other
person. The second step is after such satisfaction is arrived at
that document is handed over to the Assessing Officer of the
person to whom the document "belongs".
25 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
Section 132(4A)(i) clearly stipulates that when, inter alia,
any document is found in the possession or control of any
person in the course of a search it may be presumed that such
document belongs to such person. It is similarly provided in
section 292C(1)(i). In other words, whenever a document is
found from a person who is being searched the normal
presumption is that the document belongs to that person. It is
for the Assessing Officer to rebut that presumption and come
to a conclusion or "satisfaction" that the document in fact
belongs to somebody else. There must be some cogent
material available with the Assessing Officer before he
arrives at the satisfaction that the seized document does not
belong to the person in respect of whom the search was
conducted but to somebody else. Surmise and conjecture
cannot take the place of "satisfaction".
It has further been held that:
"It was evident from the satisfaction note that apart from
saying that the documents belonged to the assessee and that
the Assessing Officer was satisfied that it was a fit case for
issuance of a notice under section 153C, there was nothing
which would indicate how the presumptions which were to be
normally raised had been rebutted by the Assessing Officer.
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. The satisfaction note itself must display the reasons or
basis for the conclusion that the Assessing Officer of the
person in respect of whom the search was conducted is
satisfied that the seized documents belonged to another
person. On going through the contents of the satisfaction
note, no "satisfaction" of the kind required under section
153C could be discerned. Thus, the very first step prior to the
issuance of a notice under section 153C had not been
26 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
fulfilled. Inasmuch as this condition precedent had not been
met, the notices under section 153C were liable to be
quashed."
17. In the present case, as we have already noted in the former part of
this order that no satisfaction has been recorded in the case of searched
person and the satisfaction, if any, recorded in the case of other person
will not cure the defect because it is necessary that the satisfaction must
be recorded by the AO of the searched person and thereafter the
documents are to be handed over to the AO of other person and this
position will not alter even if the AO for the searched person and the
other person i.e. the assessee is the same. In view of the aforesaid
discussion and the ratio laid down by the Hon'ble Jurisdictional High
Court in the aforesaid referred to cases, we allow Ground Nos. 1 & 2 of
the assessee's appeal and quash the assessment framed by the AO. As
the assessment itself is quashed, no findings have been given on other
issues raised by the assessee on merit.
18. The facts in all other appeals i.e. ITA Nos. 1693, 1694 &
1696/Del/2015 for the assessment years 2007-08, 2008-09 & 2010-11
respectively are identical to the facts involved in ITA No.
1695/Del/2015 for the assessment year 2009-10, therefore our findings
given relating to this appeal in the former part of the order shall apply
mutatis mutandis for the other appeals under consideration.
27 ITA Nos. 1693 to 1696/Del/2015
Super Malls Pvt. Ltd.
19. In the result, the appeals of the assessee are allowed.
(Order Pronounced in the Court on 11/12/2015)
Sd/- Sd/-
(Kuldip Singh) (N. K. Saini)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 11/12/2015
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR
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