Appeal Details
Counselvise Citation
[2018] 123 COUNSELVISE.COM (IT) 3603 (ITAT-NAGPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
06-03-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2004-2005
Appeal Filed On
15-12-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO S . 195/NAG/2014 TO 200/NAG/2014 ASSESSMENT YEAR S : 2004 - 05 TO 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(3), NAGPUR. VS. M/S GUPTA DOMESTIC FUELS (NAGPUR) LTD., GUPTA BHAVAN, TEMPLE BAZAR ROAD, SITABULDI, NAGPUR. PAN : AAACG5230D. (APPELLANT) (RESPONDENT) I.T.A. NO .186/NAG/2014 ASSESSMENT YEAR : 2009 - 10 M/S GUPTA DOMESTIC FUELS (NAGPUR) LTD., GUPTA BHAVAN, TEMPLE BAZAR ROAD, SITABULDI, NAGPUR. PAN : AAACG5230D. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(3), NAGPUR. (APPELLANT) (RESPONDENT) CROSS OBJECTION NO S.18/NAG/2017 TO 23/NAG/2017 (IN ITA NOS.195/NAG/2014 TO 200/NAG/2014) ASSESSMENT YEAR : 2004 - 05 TO 2009 - 10 M/S GUPTA DOMESTIC FUELS (NAGPUR) LTD., GUPTA BHAVAN, TEMPLE BAZAR ROAD, SITABULDI, NAGPUR. PAN : AAACG5230D. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(3), NAGPUR. (APPELLANT) (RESPONDENT) 2 ITA - 195/NAG/2014 & 14 OTHERS I.T.A. NO .366/NAG/2014 ASSESSMENT YEAR : 2007 - 08 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(3), NAGPUR. VS. M/S GUPTA INDUSTRIES PVT.LTD., 7 TH FLOOR, SHRIRAM TOWER, KINGSWAY, SADAR, NAGPUR. PAN : AACCG4823A. (APPELLANT) (RESPONDENT) CROSS OBJECTION NO .13/NAG/2014 (IN ITA NO.366/NAG/2014) ASSESSMENT YEAR : 2007 - 08 M/S GUPTA INDUSTRIES PVT.LTD., 4 TH FLOOR, GUPTA TOWERS, CIVIL LINES, NAGPUR. PAN : AACCG4823A. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(3), NAGPUR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R.K. BARAL, SENIOR DR. ASSESSEES BY : SHRI RAJESH LOYA, CA. DATE OF HEARING : 06 .03.2018 DATE OF PRONOUNCEMENT : 06 .03.2018 O R D E R PER BENCH : THE APPEALS BY THE REVENUE, ASSESSEE AND THE C ROSS - OBJECTIONS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004 - 05 TO 2009 - 10 ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LEARNED CIT(A) - III, NAGPUR DATED 21.01.2014 AND 28.03.2014 . 2. THE ASSESSEE IN ITS CROSS - OBJECTION NO. 18/NAG/2017 HAS RAISED THE ISSUE AS REGARDS THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER FOR FRAMING ASSESSMENT UNDER SECTION 153C OF THE INCOME - TAX 3 ITA - 195/NAG/2014 & 14 OTHERS ACT, 1961 (HEREINAFTER THE ACT). THE ISSUE IS T HAT THE ASSUMPTION OF JURISDICTION IS BAD IN LA W AND CONSEQUENT ASSESSMENT FRAMED U/S 153C OF THE ACT IS ILLEGAL AND VOID AB - INITIO. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUND NOS.1 & 2 IN ITS CROSS - OBJECTION : - 1. THAT THE ORDER OF THE LEARNED ASSESSING OFFICER IS BAD IN LAW AND WRONG ON FACTS AND THE CIT(A) ERRED IN NOT SETTING ASIDE THE SAME. 2. THAT THE NOTICE ISSUED U/S 153C OF THE INCOME TAX ACT IS ILLEGAL, INVALID AND BAD IN LAW AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO. ON THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW THE ACTION IS ILLEGAL AND THE ASSESSMENT U/S 153C IS BAD IN LAW. 3. THIS COMMON ISSUE IS RAISED BY THE ASSESSEE IN ALL OTHER CROSS - OBJECTIONS FILED BY ASSESSEE I.E., C.O. NOS.19/NAG/2018 TO 23/NAG/2017 AND 13/NAG/2014. AS THE FACTS AN D CIRCUMSTANCES ARE EXACTLY IDENTICAL AND THE ISSUE IS EMANATING FROM SAME SEARCH CONDUCTED AT THE BUSINESS PREMISES OF MUKESH GUPTA GROUP OF CASES ON 29 TH JULY, 2009 UNDER SECTION 132 OF THE ACT, HENCE, WE WILL TAKE THE FACTS FROM ONE OF THE CASES I.E. IT A NO.195/NAG/2014 AND CROSS OBJECTION NO.18/NAG/2017 IN THE CASE OF M/S GUPTA DOMESTIC FUELS (NAGPUR) LTD. FOR ASSESSMENT YEAR 2004 - 05 AND DECIDE THE ISSUE. 4. BRIEF FACTS ARE THAT SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED AT THE BUSINESS AND RESIDEN TIAL PREMISES OF MUKESH GUPTA GROUP OF CASES ON 29 TH JULY, 2009. DURING THE COURSE OF SEARCH, SEVERAL ITEMS OF BOOKS OF ACCOUNT AND INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED AS PER THE REVENUE. AS PER REVENUE, THE SEIZED MATERIAL IN THE PRESENT CASES IS ANNEXURE A - 2(25) CONTAINING PAGES 44 TO 65 BELONGING TO THE ASSESSEE WHICH ARE INCRIMINATING IN NATURE. THEREFORE, THE ASSESSING OFFICER ISSUED NOTICE U/S 153C OF THE ACT DATED 23 RD JUNE, 4 ITA - 195/NAG/2014 & 14 OTHERS 2010, W HICH WAS SERVED ON THE ASSESSEE ON 26 TH JUNE, 2010. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO NOTICE U/S 153C OF THE ACT ON 26 TH DECEMBER, 2011 AND ACCORDINGLY, ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER NOTED THE FACT THAT THE SEIZED MATERIAL AT ANNEXURE A - 2(25) CONTAINING PAGES 44 TO 65 ARE IN THE NATURE OF SEVERAL SIGNED BLANK CHEQUES, SIGNED BLANK DOCUMENTS IN THE HANDWRITING OF SHRI D.P. SARDA, BOGUS BILLS IN THE FORM OF SUB - CONTRACTORS ISSUED TO SUNIL HITECH GROUP OF COMPANIES AND OTHER SUCH COMPANIES. FURTHER, THESE BANK ACCOUNTS WERE OPENED IN THE NAME OF RELATIVES, SERVANTS, ACQUAINTANCES ETC. FOR PROVIDING BOGUS ACCOMMODATION ENTRIES TO VARIOUS COAL COMPANIES INCLUDING THE ASSESSEE GROUP. THE ASSESSING OFFICE R FINALLY DISALLOWED THE FOLLOWING AND MADE THE ADDITION TO THE RETURNED INCOME : - MANUFACTURING EXPENSES : RS.13,98,539/ - (SINCE THERE IS NO MANUFACTURING REQUIRED IN PAPER TRANSACTIONS) PROFESSIONAL & LEGAL CHARGES : RS.97,467/ - (SINCE THERE IS NO LEGAL AND PROFESSIONAL SERVICES REQUIRED FOR PAPER TRANSACTIONS) TRAVELLING EXPENSES (DIRECTOR) : RS.1,90,263/ - (SINCE THERE IS NO TRAVELLING REQUIRED FOR PAPER TRANSACTIONS) VEHICLE MAINTENANCE HIRE CHARGES : RS.76,300/ - (1/3 RD EXPENSES ARE ALLOWED FO R OFFICE WORK) CONSULTANCY CHARGES : RS.8,800/ - (SINCE THERE IS NO CONSULTANCY WORK REQUIRED IN PAPER TRANSACTIONS) SELLING EXPENSES : RS.5,74,809/ - (SINCE THERE IS NO ACTUAL/PHYSICAL SALE AND PURCHASE OF GOODS) INTEREST PAID TO BANK : RS.36,08,226/ - (INTEREST EXPENSES ARE DISALLOWED SINCE THE ASSESSEE IS ONLY CARRYING OUT PAPER TRANSACTION AND NOT ANY ACTUAL BUSINESS) INTEREST PAID TO OTHERS : RS.6,78,972/ - (INTEREST EXPENSES ARE DISALLOWED SINCE THE ASSESSEE IS ONLY CARRYING OUT PA PER TRANSACTION AND NOT ANY ACTUAL BUSINESS) 5 ITA - 195/NAG/2014 & 14 OTHERS BANK CHARGES AND COMMISSION : RS.11,12,214/ - (BANK CHARGES ARE DISALLOWED SINCE THE ASSESSEE IS ONLY CARRYING OUT PAPER TRANSACTION AND NOT ANY ACTUAL BUSINESS). 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO DELETED THE ADDITIONS ON MERITS. THE CIT(A) RECORDED HIS DECISION AT PAGES 10 TO 17 AND FINALLY OBSERVED THAT THE EXPENSES DISALLOWED BY THE ASSESSING OFFICER ARE DIRECTLY RELATABLE FOR THE PURPOSE OF BUSINESS/EARNING OF PROFIT ON T HE ACTIVITIES CARRIED OUT BY THE ASSESSEE AND, THEREFORE, DISALLOWANCE BY THE ASSESSING OFFICER IS UNJUSTIFIED AND DELETED THE SAME. AGGRIEVED AGAINST THE DELETION, NOW THE REVENUE IS IN APPEAL. THE ASSESSEE HAS CHALLENGED THE ASSUMPTION OF JURISDICTION BY ITS CROSS - OBJECTION. 6. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE READ OUT THE ENTIRE ASSESSMENT ORDER AND STATED THAT THERE IS NO INCRIMINATING MATERIAL WHICH IS USED FOR THE PURPOSE OF MAKING TH ESE ADDITION S RATHER THE ASSESSING OFFICER HAS MER ELY DISALLOWED EXPENSES ON AD - HOC BASIS WITHOUT CORRELATING WITH ANY OF THE INCRIMINATING MATERIAL. HE FURTHER FILED A PAPER BOOK CONTAINING PAGES 1 TO 44 WHEREIN HE HAS GIVEN A COPY OF SATISFACTION NOTE RECORDED IN THE CASE OF THE ASSESSEE. THE COPY IS ENCLOSED AT PAGE 1 OF THE ASSESSEES PAPER BOOK AND THE SAME READS AS UNDER : - SATISFACTION NOTE PROCEEDING U/S 153C OF THE I T ACT, 1961 FOR ASSESSMENT YEAR 2004 - 05 TO 2009 - 10 IN THE CASE OF M/S GUPTA DOMESTIC FUELS (NAGPUR) LTD. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION IN THE GUPTA GROUP OF CASES CARRIED OUT ON 29/07/2009, THE FOLLOWING MATERIAL WAS SEIZED. 1. PAGE NO.44 TO 65 OF A - 2(25) SEIZED FROM THE RESIDENCE OF SHRI MUKESH GUPTA. I AM SATISFIED THAT THE ABOVE SEIZED MATERIAL BELONGS TO M /S GUPTA DOMESTIC FUELS (NAGPUR) LTD. THEREFORE NOTICE U/S 153C OF THE IT ACT, 1961 ARE ISSUED FOR ASSESSMENT YEARS 2004 - 05 TO 2009 - 10 IN THIS ASSESSEES CASE. 6 ITA - 195/NAG/2014 & 14 OTHERS SD/ - DCIT, (CENTRAL) CIRCLE - 2(3), NAGPUR 7. LEARNED COUNSEL FOR THE ASSESSEE , FIRST OF ALL STATED THAT THERE IS NO INCRIMINATING DOCUMENT, WHICH WAS FOUND DURING THE COURSE OF SEARCH AND THE ALLEGED DOCUMENT CONTAINING PAGES 44 TO 65 OF ANNEXURE A - 2(25) ARE THE PURCHASE BILLS OF THE ASSESSEE COMPANY ON ACCOUNT OF PURCHASE OF COAL AND THESE ARE RECORDED ENTR IES. HE STATED THAT THE ENTRIES FOR THE PURCHASE BY THE COMPANY ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THESE DOCUMENTS CANNOT BE CALLED AS INCRIMINATING DOCUMENTS FOR THE PURPOSE OF ISSUANCE OF NOTICE U/S 153C OF THE ACT. FURTHERMORE, HE ARGUED TH AT ON PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT ADDITION IS NOT MADE ON THE BASIS OF SEIZED DOCUMENT OR INCRIMINATING DOCUMENT BUT THE SAME ARE AD - HOC DISALLOWANCE OF EXPENSES. THE LEARNED COUNSEL STATED THAT THE SATISFACTION NOTE CLEARLY RECORDS ONLY THE ANNEXURE SEIZED FROM THE PREMISES OF THE SEARCHED PERSON AND THERE IS NO OBSERVATION OR CONCLUSION OR EVEN PRIMA - FACIE OPINION OF THE ASSESSING OFFICER THAT THE MATERIAL SEIZED WAS INCRIMINATING IN NATURE OR IT HAS BEARING ON THE INCOME OF THE ASS ESSEE FOR WHICH THE ASSESSING OFFICER HAS TO ASSUME JURISDICTION TO FRAME ASSESSMENT U/S 153C OF THE ACT. THE LEARNED COUNSEL ALSO EXPLAINED THAT THE ALLEGED INCRIMINATING/SEIZED DOCUMENTS PERTAIN TO ASSESSMENT YEAR 2009 - 10 AND THEREFORE, THE PROCEEDINGS U/S 153C OF THE ACT FOR ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 ARE WITHOUT ANY BASIS. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY [2015] 63 TAXMANN.COM 14 (BOMBAY) FOR THE PROPOSITION THAT IF THE DOCUMENT PERTAINS TO SOME OTHER ASSESSMENT YEAR, THEN THE PROCEEDINGS U/S 153C FOR SOME OTHER ASSESSMENT YEARS CANNOT BE INITIATED. LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE PROPOSITION THAT SATISFACTION CAN BE RECORDED EITHER AT THE TIME OF 7 ITA - 195/NAG/2014 & 14 OTHERS INITIATING PROCEEDINGS FOR COMPLETION OF ASSESSMENT OF A PERSON AGAINST WHOM SEARCH WAS CONDUCTED OR DURING THE STAGE OF ASSESSMENT PROCEEDINGS BUT SATISFACTION NOTE MUST BE PREPARED BY THE ASSESSING OFFICER IN THE CA SE OF SEARCHED PERSON ONLY. THIS PROPOSITION HAS BEEN SETTLED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA KNITWEARS [2014] 362 ITR 673 (SC). THE LEARNED COUNSEL ALSO RELIED ON THE CIRCULAR NO.24/2015 IN F.NO.279/MISC./140/2015/ITJ DATED 31 ST DECEMBER, 2015 ISSUED BY THE CBDT TO GIVE EFFECT TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CALCUTTA KNITWEARS (SUPRA). HE STATED THAT OBJECTION TO THE NOTICE U/S 153C OF THE ACT ARE MADE IN ASSESSMENT PROCEEDINGS & WERE OBJECTED BY THE AS SESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE ASSESSING OFFICER IN PARAGRAPH 5 OF THE ASSESSMENT ORDER HAS OBSERVED THE CONTENTIONS RAISED BY THE ASSESSEE THAT NOTICE U/S 153C OF THE ACT IS BAD IN LAW, IS WITHOUT SUBSTANTIATING ITS CLAIM AND OBSERVED THAT SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS TAKEN ON THE ASSESSEE. HE STATED THAT THIS OBSERVATION OF THE ASSESSING OFFICER IS CLEARLY INCORRECT AND NO SEARCH IN THE CASE OF THE ASSESSEE HAS TAKEN PLACE AS ASSESSING OFFICER H IMSELF ISSUED NOTICE U/S 153C OF THE ACT, ACCEPTING THE CONTENTION OF THE ASSESSEE THAT NO SEARCH WAS THERE IN THE CASE OF THE ASSESSEE. 8. ON THE OTHER HAND, LEARNED CIT - DR RELIED ON THE ASSESSMENT ORDER AND STATED THAT INITIATION OF ASSESSMENT PROCEEDIN GS U/S 153C OF THE ACT IN THE CASE OF THE ASSESSEE FOR THESE YEARS IS AS PER THE PROVISIONS OF THE ACT. WHEN A QUERY WAS PUT TO LEARNED CIT - DR WHAT WAS THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND WHETHER HE HAS ANY INCRIMINATING MATER IAL TO SUPPORT HIS CONTENTION, HE COULD NOT ANSWER. 9. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY, THERE IS NO INCRIMINATING 8 ITA - 195/NAG/2014 & 14 OTHERS DOCUMENT FOUND DURING THE COURSE OF SEARCH IN RELATION TO ASSESSMENT YEARS 2004 - 05 TO 2008 - 09. THE DOCUMENTS CONTAINING PAGES 44 TO 65 OF ANNEXURE A - 2(25) ARE PURCHASE BILLS OF THE ASSESSEE COMPANY ON ACCOUNT OF PURCHASE OF COAL. REVENUE HAS NOT CONTESTED THE CLAIM OF THE ASSESSEE THAT THE ENTRIES FOR THE PURCHASE MADE BY THE COMPANY ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THESE DOCUMENTS CANNOT BE CALLED AS INCRIMINATING DOCUMENT FOR THE PURPOSE OF ISSUANCE OF NOTICE U/S 153C OF THE ACT. EVEN GOING BY THE SATISFACTION NOTE, WHICH IS RECORDED IN THE CASE OF THE ASSE SSEE AND NOT WHILE FRAMING ASSESSMENT OF THE SEARCHED PERSON, CLEARLY REVEALS THAT THE MATERIAL SEIZED IS PAGES 44 TO 65 OF ANNEXURE A - 2(25) FROM THE RESIDENCE OF SHRI MUKESH GUPTA. BUT, CAN THESE BE SAID TO BE INCRIMINATING MATERIAL WHEN ASSESSEE CONTEST ED THAT THESE ARE ENTRIES FOR PURCHASE OF COAL BY THE ASSESSEE COMPANY AND WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND, ON THE BASIS OF WHICH, NO ADDITION IS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ACCORDING TO US, THESE CANNOT BE TREATE D AS INCRIMINATING DOCUMENTS. EVEN OTHERWISE, THE SATISFACTION RECORDED BY THE ASSESSING OFFICER VIDE SATISFACTION NOTE DATED 23 RD JUNE, 2010 IS IN THE CASE OF THE ASSESSEE AND NOT IN THE CASE OF THE SEARCHED PERSON. THIS POSITION HAS BEEN EXPLAINED BY H ON'BLE SUPREME COURT IN THE CASE OF CALCUTTA KNITWEARS (SUPRA) WHEREIN COMPLETE PROCEDURE FOR RECORDING OF SATISFACTION HAS BEEN SET OUT FROM PARAGRAPH 38 TO 45 AS UNDER : - 38. HAVING SAID THAT, LET US REVERT TO DISCUSSION OF SECTION 158BD OF THE ACT. TH E SAID PROVISION IS A MACHINERY PROVISION AND INSERTED IN THE STATUTE BOOK FOR THE PURPOSE OF CARRYING OUT ASSESSMENTS OF A PERSON OTHER THAN THE SEARCHED PERSON UNDER SECTIONS 132 OR 132A OF THE ACT. UNDER SECTION 158BD OF THE ACT, IF AN OFFICER IS SATISF IED THAT THERE EXISTS ANY UNDISCLOSED INCOME WHICH MAY BELONG TO A OTHER PERSON OTHER THAN THE SEARCHED PERSON UNDER SECTIONS 132 OR 132A OF THE ACT, AFTER RECORDING SUCH SATISFACTION, MAY TRANSMIT THE RECORDS/DOCUMENTS/CHITS/PAPERS ETC TO THE ASSESSING 9 ITA - 195/NAG/2014 & 14 OTHERS OF FICER HAVING JURISDICTION OVER SUCH OTHER PERSON. AFTER RECEIPT OF THE AFORESAID SATISFACTION AND UPON EXAMINATION OF THE SAID OTHER DOCUMENTS RELATING TO SUCH OTHER PERSON, THE JURISDICTIONAL ASSESSING OFFICER MAY PROCEED TO ISSUE A NOTICE FOR THE PURPOSE OF COMPLETION OF THE ASSESSMENTS UNDER SECTION 158BD OF THE ACT, THE OTHER PROVISIONS OF XIV - B SHALL APPLY. 39. THE OPENING WORDS OF SECTION 158BD OF THE ACT ARE THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT UNDISCLOSED INCOME BELONGS TO ANY OTHER PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM A SEARCH WAS MADE UNDER SECTION 132 OF THE ACT OR A REQUISITION OF BOOKS WERE MADE UNDER SECTION 132A OF THE ACT AND THEREAFTER, TRANSMIT THE RECORDS FOR ASSESSMENT OF SUCH OTHER PERSON. THEREFORE, THE SHO RT QUESTION THAT FALLS FOR OUR CONSIDERATION AND DECISION IS AT WHAT STAGE OF THE PROCEEDINGS SHOULD THE SATISFACTION NOTE BE PREPARED BY THE ASSESSING OFFICER: WHETHER AT THE TIME OF INITIATING PROCEEDINGS UNDER SECTION 158BC FOR THE COMPLETION OF THE ASS ESSMENTS OF THE SEARCHED PERSON UNDER SECTION 132 AND 132A OF THE ACT OR DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT OR AFTER COMPLETION OF THE PROCEEDINGS UNDER SECTION 158BC OF THE ACT. 40. THE TRIBUNAL AND THE HIGH C OURT ARE OF THE OPINION THAT IT COULD ONLY BE PREPARED BY THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT AND NOT AFTER THE COMPLETION OF THE SAID PROCEEDINGS. THE COURTS BELOW HAVE RELIED UPON THE LIMIT ATION PERIOD PROVIDED IN SECTION 158BE(2)(B) OF THE ACT IN RESPECT OF THE ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 158BD, I.E., TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NOTICE UNDER CHAPTER XIV - B WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED ON OR AFTER 01.01.1997. WE WOULD EXAMINE WHETHER THE TRIBUNAL OR THE HIGH COURT ARE JUSTIFIED IN COMING TO THE AFORESAID CONCLUSION. 41. WE WOULD CERTAINLY SAY THAT B EFORE INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT, THE 10 ITA - 195/NAG/2014 & 14 OTHERS ASSESSING OFFICER WHO HAS INITIATED PROCEEDINGS FOR COMPLETION OF THE ASSESSMENTS UNDER SECTION 158BC OF THE ACT SHOULD BE SATISFIED THAT THERE IS AN UNDISCLOSED INCOME WHICH HAS BEEN TRACED OUT WHEN A PERSON WAS SEARCHED UNDER SECTION 132 OR THE BOOKS OF ACCOUNTS WERE REQUISITIONED UNDER SECTION 132A OF THE ACT. THIS IS IN CONTRAST TO THE PROVISIONS OF SECTION 148 OF THE ACT WHERE RECORDING OF REASONS IN WRITING ARE A SINE QUA NON. UNDER SECT ION 158BD THE EXISTENCE OF COGENT AND DEMONSTRATIVE MATERIAL IS GERMANE TO THE ASSESSING OFFICERS SATISFACTION IN CONCLUDING THAT THE SEIZED DOCUMENTS BELONG TO A PERSON OTHER THAN THE SEARCHED PERSON IS NECESSARY FOR INITIATION OF ACTION UNDER SECTION 15 8BD. THE BARE READING OF THE PROVISION INDICATES THAT THE SATISFACTION NOTE COULD BE PREPARED BY THE ASSESSING OFFICER EITHER AT THE TIME OF INITIATING PROCEEDINGS FOR COMPLETION OF ASSESSMENT OF A SEARCHED PERSON UNDER SECTION 158BC OF THE ACT OR DURING T HE STAGE OF THE ASSESSMENT PROCEEDINGS. IT DOES NOT MEAN THAT AFTER COMPLETION OF THE ASSESSMENT, THE ASSESSING OFFICER CANNOT PREPARE THE SATISFACTION NOTE TO THE EFFECT THAT THERE EXISTS INCOME TAX BELONGING TO ANY PERSON OTHER THAN THE SEARCHED PERSON I N RESPECT OF WHOM A SEARCH WAS MADE UNDER SECTION 132 OR REQUISITION OF BOOKS OF ACCOUNTS WERE MADE UNDER SECTION 132A OF THE ACT. THE LANGUAGE OF THE PROVISION IS CLEAR AND UNAMBIGUOUS. THE LEGISLATURE HAS NOT IMPOSED ANY EMBARGO ON THE ASSESSING OFFICER IN RESPECT OF THE STAGE OF PROCEEDINGS DURING WHICH THE SATISFACTION IS TO BE REACHED AND RECORDED IN RESPECT OF THE PERSON OTHER THAN THE SEARCHED PERSON. 42. FURTHER, SECTION 158BE(2)(B) ONLY PROVIDES FOR THE PERIOD OF LIMITATION FOR COMPLETION OF BLOC K ASSESSMENT UNDER SECTION 158BD IN CASE OF THE PERSON OTHER THAN THE SEARCHED PERSON AS TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NOTICE UNDER THIS CHAPTER WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH CARRIED ON AFTER 01.01.1997. THE SAID S ECTION DOES NEITHER PROVIDES FOR NOR IMPOSES ANY RESTRICTIONS OR CONDITIONS ON THE PERIOD OF LIMITATION FOR PREPARATION THE SATISFACTION NOTE UNDER SECTION 158BD AND CONSEQUENT ISSUANCE OF NOTICE TO THE OTHER PERSON. 11 ITA - 195/NAG/2014 & 14 OTHERS 43. IN THE LEAD CASE, THE ASSESSING OFFICER HAD PREPARED A SATISFACTION NOTE ON 15.07.2005 THOUGH THE ASSESSMENT PROCEEDINGS IN THE CASE OF A SEARCHED PERSON, NAMELY, S.K. BHATIA WERE COMPLETED ON 30.03.2005. AS WE HAVE ALREADY NOTICED, THE TRIBUNAL AND TH E HIGH COURT ARE OF THE OPINION THAT SINCE THE SATISFACTION NOTE WAS PREPARED AFTER THE PROCEEDINGS WERE COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 158BC OF THE ACT WHICH IS CONTRARY TO THE PROVISIONS OF SECTION 158BD READ WITH SECTION 158BE(2)(B) AN D THEREFORE, HAVE DISMISSED THE CASE OF THE REVENUE. IN OUR CONSIDERED OPINION, THE REASONING OF THE LEARNED JUDGES OF THE HIGH COURT IS CONTRARY TO THE PLAIN AND SIMPLE LANGUAGE EMPLOYED BY THE LEGISLATURE UNDER SECTION 158BD OF THE ACT WHICH CLEARLY PROV IDES ADEQUATE FLEXIBILITY TO THE ASSESSING OFFICER FOR RECORDING THE SATISFACTION NOTE AFTER THE COMPLETION OF PROCEEDINGS IN RESPECT OF THE SEARCHED PERSON UNDER SECTION 158BC. FURTHER, THE INTERPRETATION PLACED BY THE COURTS BELOW BY READING INTO THE PLA IN LANGUAGE OF SECTION 158BE(2)(B) SUCH AS TO EXTEND THE PERIOD OF LIMITATION TO RECORDING OF SATISFACTION NOTE WOULD RUN COUNTER TO THE AVOWED OBJECT OF INTRODUCTION OF CHAPTER TO PROVIDE FOR COST - EFFECTIVE, EFFICIENT AND EXPEDITIOUS COMPLETION OF SEARCH ASSESSMENTS AND AVOIDING OR REDUCING LONG DRAWN PROCEEDINGS. 44. IN THE RESULT, WE HOLD THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT A SATISFACTION NOTE IS SINE QUA NON AND MUST BE PREPARED BY THE ASSESSING OFFICER BEFORE HE TRANSMITS THE RECORDS TO THE OTHER ASSESSING OFFICER WHO HAS JURISDICTION OVER SUCH OTHER PERSON. THE SATISFACTION NOTE COULD BE PREPARED AT EITHER OF THE FOLLOWING STAGES: (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST THE SEARCHED PERSON UNDER SECTION 158 BC OF THE ACT; (B) ALONG WITH THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT; AND (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE COMPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERSON. 45. WE ARE INFORMED BY SHRI SANTOSH KRISHAN , WHO IS APPEARING IN SEVEN OF THE APPEALS THAT THE ASSESSING OFFICER HAD NOT RECORDED THE SATISFACTION NOTE AS 12 ITA - 195/NAG/2014 & 14 OTHERS REQUIRED UNDER SECTION 158BD OF THE ACT, THEREFORE, THE TRIBUNAL AND THE HIGH COURT WERE JUSTIFIED IN SETTING ASIDE THE ORDERS OF ASSESSMENT AND THE ORDERS PASSED BY THE FIRST APPELLATE AUTHORITY. WE DO NOT INTEND TO EXAMINE THE AFORESAID CONTENTION CANVASSED BY THE LEARNED COUNSEL SINCE WE ARE REMANDING THE MATTERS TO THE HIGH COURT FOR CONSIDERATION OF THE INDIVIDUAL CASES HEREIN IN LIGHT OF THE OBSERVATIONS MADE BY US ON THE SCOPE AND POSSIBLE INTERPRETATION OF SECTION 158BD OF THE ACT. 10. FURTHERMORE, WE FIND THAT THIS POSITION HAS BEEN ACCEPTED BY THE CBDT VIDE ITS CIRCULAR NO.2 4 /2015 WHEREIN THE GUIDELINES SET BY HON'BLE SUPREME COURT THAT EVEN IF THE ASSESSING OFFICER OF THE SEARCHED PERSON AND THE OTHER PERSON IS THE ONE AND THE SAME, THEN ALSO THE ASSESSING OFFICER HAS TO RECORD HIS SATISFACTION IN THE CASE OF THE OTHER PERSON I.E., OTHER THAN THE SEARCHED PERSON. IN VIEW OF THE FACTS I N ENTIRETY AND THE DICTUM OF HON'BLE SUPREME COURT, WHICH WAS FURTHER ADOPTED BY CBDT VIDE CIRCULAR NO.24/2015 DATED 31 ST DECEMBER, 2015, RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE ASSUMPTION OF JURISDICTION BY THE AS SESSING OFFICER FOR ISSUANCE OF NOTICE U/S 153C OF THE ACT AND CONSEQUENT ASSESSMENT FRAMED IS BAD IN LAW. CONSEQUENTLY, WE HOLD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS BAD IN LAW AND LEARNED CIT(A) HAS ERRED IN UPHOLDING THE SAME. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDER. G ROUND NOS.1 & 2 OF THE ASSESSEES CROSS - OBJECTION ARE ALLOWED. 11. SINCE WE HAVE ALREADY QUASHED THE ASSESSMENT ORDER, THE OTHER GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS - OBJECTION AND THE GROUNDS RAISED B Y THE REVENUE IN ITS APPEAL ON MERITS DO NOT REQUIRE ADJUDICATION. 12. AS WE HAVE ALREADY ADJUDICATED THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS - OBJECTION NO.18/NAG/2017 , THE REMAINING CROSS OBJECTION NOS.19 TO 2 3 /NAG/2017 & CROSS OBJECTION NO . 13/NA G/2014 ARE ALSO 13 ITA - 195/NAG/2014 & 14 OTHERS ALLOWED. T HE REMAINING APPEALS OF THE REVENUE IN ITA NOS.19 5 TO 200/NAG/2014 & 366/NAG/2014 ARE CONSEQUENTLY DISMISSED. A SSESSEES APPEAL IN ITA NO.186/NAG/2014 DO ES NOT REQUIRE ANY ADJUDICATION AS WE HAVE ALREADY ALLOWED THE CO OF THE ASSESSEE. 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE AND ITS CROSS - OBJECTIONS ARE ALLOWED. DECISION PRONOUNCE D IN THE OPEN COURT ON 06 .03.2018. S D / - S D / - (G.D. AGRAWAL) ( MAHAVIR SINGH ) PRESIDENT JUDICIAL MEMBER DATED : 06 .03.2018 VK. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CONCERNED CIT 4. THE CIT(A) 5. D.R. ASSISTANT REGISTRAR
