Padmavathi Venkateswara Constructions, Nellore V. The Deputy Commissioner of Income Tax, Central Circle, Vijayawada

ITA 17/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1901 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Assessee Lawyers: D V ANJANEYULU
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Application of stay; Documents seized
• Section: 143(3); 142(1); 133A; 153A; 201; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER S.A.NO.01/VIZ/2019 (ARISING OUT OF I . T .A.NO. 17 /VIZ/201 9 ) ( / ASSESSMENT YEAR : 20 0 9 - 10 ) M/S SRI PADMAVATHI VENKATESWARA CON S TRUCTIONS NELLORE [PAN : A BNFS0671H ] VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) ./ I .T.A.NO. 17/VIZ/2019 ( / ASSESSMENT YEAR : 2009 - 10) M/S SRI PADMAVATHI VENKATESWARA CON S TRUCTIONS NELLORE [PAN : ABNFS0671H ] VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) ./ I .T.A.NO. 47/VIZ/2019 ( / ASSESSMENT YEAR : 2009 - 10) ASST.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA VS. M/S SRI PADMAVATHI VENKATESWARA CON S TRUCTIONS NELLORE [PAN : ABNFS0671H ] ( / APPELLANT) ( / RESPONDENT) 2 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE CROSS OBJECTIONS NO.44/VIZ/2019 & 49/VIZ/2019 (ARISING OUT OF I.T.A. NO.47/VIZ/2019) M/S SRI PADMAVATHI VENKATESWARA CON S TRUCTIONS NELLORE [PAN : ABNFS0671H ] ASST.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI D.V.ANJANEYULU , AR / REVENUE BY : S HRI D.K.SONOWAL , CIT DR / DATE OF HEARING : 1 9 . 06. 201 9 / DATE OF PRONOUNCEMENT : 26 .06. 201 9 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : S.A. NO.01/VIZ/2019 THE ASSESSEE FILED STAY APPLICATION REQUESTING FOR STAY OF DEMAND OF RS.1,01,01,761/ - . SINCE THE APPEALS ARE TAKEN UP SIMULTANEOUSLY, THE LD.AR DID NOT PRESS STAY APPLICATION, HENCE, STAY APPLICATION FILED BY THE ASSESSEE IS DISMISSED . I.T.A.17/VIZ/2019 & I.T.A.47/VIZ/2019, A.Y. 2009 - 10 2. THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE 3 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 3, VISAKHAPATNAM VIDE ITA NO.195/14 - 15/CIT(A) - 3/VSP/2018 - 19 DATED 30.10.2018. THE REVENUE FILED THE CROSS APPEAL AGAINST ADDITIONS DELETED BY THE CIT(A) AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE IN SU PPORT OF THE ORDER OF THE LD.CIT(A) APPEAL FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10. SINCE THE FACTS ARE IDENTICAL, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED IN A COMMON ORDER FOR THE SAKE OF CONVENIENCE AS UNDER: I.T.A.NO.17/VIZ/2019 3. THIS A PPEAL OF THE ASSESSEE IS RELATED TO THE VALIDITY OF ISSUE OF NOTICE U/S 153C AS WELL AS THE MERITS OF THE CASE ON ADDITIONS CONFIRMED BY THE LD.CIT(A). SINCE THE VALIDITY OF NOTICE ISSUED U/S 153C IS A LEGAL ISSUE AND GOES TO THE ROOT OF THE ASSESSMENT MA DE U/S 143(3) R.W.S. 153C , HENCE, WE, FIRST, TAKE UP THE ISSUE RELATING TO THE VALIDITY OF ISSUE OF NOTICE U/S 153C OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORKS FILED ITS RETURN OF INCOME ORIGINALLY ON 30.09.2009 DECLARING TOTAL INCOME OF RS.70,67,040/ - . SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE ACT WAS CONDUCTED IN THE RESIDENCE OF SRI RAVULAPALLI VENKATARAMAIAH AND DURING THE COURSE OF SEARCH INCRIMINATING MATERIAL 4 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE WAS FOUND INDICATING THE UNACCOUNTED INCOME/UNACCOUNTED PAYMENTS. THE AO HAD ISSUED THE NOTICE U/S 153C DATED 07.06.2013 WHICH WAS DULY SERVED ON TH E ASSESSEE CALLING FOR THE RETURN OF INCOME FOR THE A.Y.2009 - 10. THERE WAS NO RESPONSE FROM THE ASSESSEE, HENCE, THE AO ISSUED NOTICE U/S 142(1) AND IN RESPONSE TO WHICH THE ASSESSEE FILED E - RETURN ON 09.08.2013 DECLARING TOTAL INCOME OF RS.70,67,040/ - . SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S.153C BY AN ORDER DATED 31.03.2014 AND ASSESSED THE TOTAL INCOME AT RS.4,38,67,040/ - . IN THE REASSESSMENT, THE AO MADE THE ADDITION OF RS.3,68,00,000/ - RELATING UNEXPLAINED COMMISSION PAYMENTS. 5 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND CHALLENGED THE VALIDITY OF ISSUE OF NOTICE U/S 153C IN GROUND NO.1 AND IN GROUND NO.1 OF ADDITIONAL GROUNDS. THE ASSESSEE CHALLENGED THE VALIDITY OF ISSUE OF NOTICE ON T HE REASON THAT THE AO DID NOT FOLLOW THE PROCEDURE PRESCRIBED U/S 153C FOR ISSUE OF NOTICE AND THERE WAS NO SATISFACTION RECORDED AS PROVIDED U/S 153C OF THE ACT BY THE ASSESSING OFFICER OF THE SEARCHED PERSON. THE LD.CIT(A) HAS CALLED FOR THE REMAND REPOR T AND THE AO IN THE REMAND REPORT SUBMITTED THAT AO OF THE SEARCHED PERSON AND THAT OF THE ASSESSEE ARE ONE AND THE SAME. SINCE THE SEARCH U/S 5 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE 132 WAS CONDUCTED IN THE PARTNERS CASE I.E. R.VENKATRAMAIAH AND THE INCRIMINATING MATERIAL WAS FOUND BELONGING TO THE ASSESSEE, THE PROCEEDINGS U/S 153C W ERE INITIATED IN THE CASE OF THE ASSESSEE, AFTER DULY RECORDING THE SATISFACTION AS PER THE NOTINGS RECORDED ON THE ORDER SHEET OF THE ASSESSEE. THE CIT(A) VIEWED THAT THE AO HAD INITIATED PROCEEDINGS U/S 153C O F THE ACT, AFTER DULY RECORDING SATISFACTION IN THE CASE OF THE ASSESSEE AND CLEARLY MENTIONING THE SEIZED MATERIAL HENCE HELD THAT THE GROUNDS RAISED BY THE ASSESSEE WITH REGARD TO VALIDITY OF NOTICE U/S 153C ARE NOT TENABLE AND ACCORDINGLY DISMISSED. TH E APPEAL OF THE ASSESSEE ON THE VALIDITY OF THE ISSUE OF NOTICE WAS DISMISSED. 6. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 7. THE ASSESSEE IN GROUND NO.2 QUESTIONED THE VALIDITY OF ISSUE OF NOTICE AND ALSO PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. CALCUTTA KNITWEARS [2014] 362 ITR 673 (SC) AND CBDT CIRCULAR NO.24/2015 DATED 31.12.2015. DURING THE APPEAL HEARING, THE LD.AR ARGUED THAT SEARCH U/S 133A WAS CONDUCTED IN THE BU SINESS PREMISES AND SEARCH U/S 132 WAS CONDUCTED IN THE CASE OF PARTNER OF THE ASSESSEE FIRM. 6 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING MATERIAL WAS FOUND WHICH IS STATED TO BE BELONGING TO THE ASSESSEE. THE AO HAD ISSUED NOTICE U/S 153C AFTER RECORDING THE REASONS IN THE ASSESSEES CASE, BUT NO REASONS WERE RECORDED IN THE CASE OF SEARCHED PERSON I.E. R.VENKATRAMAIAH WHILE TRANSFERRING THE SEIZED MATERIAL TO THE AO OF THE ASSESSEE. THE LD.AR FURTHER CONTENDED THAT EVEN IF THE AO IS ONE AND THE SAME FOR BOTH THE ASSESSEE AS WELL AS THE SEARCHED PERSON, SATISFACTION NOTE IN THE CASE OF SEARCHED PERSON IS MANDATORY REQUIREMENT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA KNITWEARS AND CIRCULAR ISSUED BY THE CBDT SUPRA. THE CIRCULAR ISSUED BY THE CBDT IS BINDING ON THE DEPARTMENT. THEREFORE, ARGUED THAT THE AO HAD ISSUED NOTICE U/S 153C WITHOUT RECORDING SATISFACTION IN THE CASE OF SEARCHED PERSON, HENCE NOTICE ISSUED U/S 153C IS INVALID AND REQUIRED TO BE QUASHED. THE LD.A R ALSO RELIED ON THE DECISION OF HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. SHETTYS PHARMACEUTICALS & BIOLOGICALS LTD., 57 TAXMANN.COM 282(AP). THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. GOPI APARTMENT [2014] 365 ITR 411 (ALL). 8. ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS OF THE LD.CIT(A) AND ARGUED THAT TWO SATISFACTIONS ARE NOT NECESSARY FOR ISSUE OF NOTICE U/S 7 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE 153C. EVEN IF THE SATISFACTION IS RECORDED IN THE CASE OF THE ASSESSEE, IT IS SUFFICIENT TO ISSUE NOTICE U/S 153C, HENCE, ARGUED THAT THE NOTICE ISSUED U/S 153C IS VALID AND REQUESTED TO UPHOLD THE NOTICE ISSUED U/S 153C. THE LD.DR RELIED ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF PR.CIT VS. INSTRONICS LTD. VIDE ITA 613/2016 , 614/2016, 615/2016, 801/2016, 805/2016, 809/2016, 814/2016, 840/2016, 848/2016, 849/2016 AND GANAPATI FINCAP SERVICES PVT. LTD. VS. COMMISSIONER OF INCOME TAX DATED 25.05.2017. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE CONTENTION OF THE ASSESSEE IS THAT THE AO HAS NOT RECORDED SATISFACTION IN THE CASE OF THE SEARCHED PERSON FOR TRANSFERRING THE INCRIMINATING MATERIAL TO THE AO OF THE ASSESSEE . THE LD.CIT(A) HAS CALLED FOR THE REMAND REPORT, IN T HE REMAND REPORT ALSO, THE AO MENTIONED REGARDING RECORDING OF SATISFACTION IN THE CASE OF THE ASSESSEE, BUT NO MENTION WAS MADE IN RESPECT OF THE SATISFACTION RECORDED IN THE CASE OF SEARCHED PERSON I.E. R.VENKATRAMAIAH. THE DEPARTMENT ALSO DID NOT PLACE ANY EVIDENCE TO SHOW THAT SATISFACTION WAS RECORDED IN THE CASE OF SEARCHED PERSON, R.VENKTRAMAIAH, WHILE TRANSFERRING THE INCRIMINATING MATERIAL. AS 8 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE OBSERVED FROM THE CBDT CIRCULAR NO.24/2015 DATED 31.12.2015 WHICH IS PLACED IN PAGE NO.9B OF THE PAPER B OOK , THE CBDT HAS GIVEN GUIDELINES TO ALL THE AOS TO RECORD SATISFACTION EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARA NO.4 AND 5 OF THE CIRCULAR WHICH READS AS UN DER : 4. THE GUIDELINES OF THE HONBLE 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 PER SON 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. 5. 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 158BD/153C SHOULD BE WITHDRAWN / NOT PRESSED IF IT DOES NOT MEET THE GUIDELINES LAID DOWN BY THE APEX C OURT. 9.1. HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. SHETTYS PHARMACEUTICALS & BIOLOGICALS LTD. SUPRA HELD THAT RECORDING OF SATISFACTION BY BOTH THE AO S IS A PRE CONDITION FOR INVOKING JURISDICTION U/S 153C OF THE ACT. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT PARA NO. 5 TO 7 OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH READS AS UNDER. 5 . THE ARGUMENT APPARENTLY IS VERY ATTRACTIVE, BUT THE LAW IS OTHERWISE AND THE LEARNED TRIBUNAL HAS CORRECTLY APPLIED. WE THEREFORE APPROPRIATELY SET OUT SECTION 153C OF THE ACT. '153C. ASSESSMENT OF INCOME OF ANY OTHER PERSON. (1) NOTWITHSTANDING ANYTHING CONTAINED IX SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, WHERE THE 9 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE ASSESSING OFFICER IS SATIS FIED THAT ANY MONEY, BULLION, JEWELLER)' 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 153K THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR A SSETS 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 NOTICE AND ASSESS OR REASSESS THE INCOME OF THE OTHER P ERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A, IF, THAT ASSESSING OFFICER IS SATISFIED THAT THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON FOR THE R ELEVANT ASSESSMENT YEAR - OR YEARS REFERRED TO IN SUB - SECTION (1) OF SECTION 153A (EMPHASIS SUPPLIED) 6 . IT IS THEREFORE CLEAR THAT FIRSTLY SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER WHO CONDUCTED SEARCH, THAT ANY MONEY, BULLION, JEWELLERY OR O THER 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 OF THE ACT. THEREAFTER, THE ASSESSING OFFICER HAVING JURISDICTION OVER THIRD PARTY ON RE CEIPT OF THE SEIZED MATERIAL OR BOOKS OF ACCOUNTS OR DOCUMENT BEING HANDED OVER TO HIM SHALL RECORD HIS OWN SATISFACTION AFTER EXAMINING THE SAME INDEPENDENTLY WITHOUT BEING INFLUENCED BY THE SATISFACTION OF THE SEIZING OFFICER. IN OTHER WORDS IT IS NOT AN AUTOMATIC ACTION. WE FIND SATISFACTION OF TWO OFFICERS IS M ISS ING. IN THIS CONNECTION WE SET OUT THE TEXT OF THE ORDER OF THE ASSESSING OFFICER WHICH IS AS FOLLOWS: A SEARCH AND SEIZURE OPERATION U/S. 132 WAS CARRIED OUT IN THE GROUP EASE OF DR. T. YADHA IAH GO U D AND OTHERS ON 25.3.2010. DURING THE COURSE OF SEARCH OPERATION DOCUMENTS BELONGING TO S H ETTY PHARMACEUTICALS & BIOLOGICAL LTD., HAS BEEN SEIZED. HENCE IT IS CONSIDERED TO INITIATE PROCEED IN G S U/S. 153C OF THE I.T. ACT.' 7. THE AFORESAID SECTION MA NDATES RECORDING OF SATISFACTION OF THE ASSESSING OFFICER(S) IS A PRE - CONDITION FOR INVOKING JURISDICTION AND IT IS NOT A MERE FORMALITY BECAUSE RECORDING OF SATISFACTION POSTULATES APPLICATION OF MIND CONSCIOUSLY AS THE DOCUMENTS SEIZED MUST BE BELONGING TO THE ANY OTHER PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153 - A OF THE ACT IT IS CONTENDED THAT THE SAME ASSESSING OFFICER IS INVOLVED IN THE MATTER. THIS FACT DOES NOT DISPENSE WITH ABOVE REQUIREMENT. IT IS SETTLED POSITION OF LAW THAT WHEN A T HING IS TO BE DONE IN ONE PARTICULAR MANNER UNDER LAW THIS HAS TO BE DONE IN THAT MANNER ALONE AND NOT OTHER WAY (SEE NAZIR AHMED & KING EMPEROR). WE THINK THE LEARNED TRIBUNAL HAS CORRECTLY FOLLOWED THE PRINCIPLE. WE DO NOT FIND ANY ELEMENT OF LAW TO BE D ECIDED. 10 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE 9.2. SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN THE CASE OF SRI SESHASAI TOWNSHIP P.LTD. VS. ACIT IN I.T.A. NO.301 & 302/VIZ/2015 DATED 11.01.2019, WHEREIN THE COORDINATE BENCH OF ITAT, VISAKHAPATNAM HAS TAKEN THE SIMILAR VIEW. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT RELEVANT PART OF THE ORDER OF THIS TRIBUNAL WHICH READS AS UNDER: 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. AS PER THE INFORMATION PLACED IN THE PAPER BOOK, THE ASSESSEE HAS R EQUESTED FOR SUPPLY OF REASONS AND SATISFACTION OF THE AO OF THE SEARCHED PERSON AND THE AO HAS REPLIED VIDE LETTER DATED 23.11.2017, STATING THAT THE AO OF THE SAI TEJA HOUSING & ESTATES HAS RECORDED THE SATISFACTION THAT THERE WERE DOCUMENTS FOUND / IM POUNDED DURING THE COURSE OF SEARCH BELONGED TO THE ASSESSEE. IN RESPONSE TO QUESTION NO. 2 AND 3 RELATING TO PROVIDING THE COPIES OF THE SATISFACTION RECORDED BY THE AO OF SAITEJA HOUSING & ESTATES FOR INITIATING THE PROCEEDINGS U/S 153C OF THE ACT, IN THE CASE OF THE ASSESSEE STATING THAT THE QUERY IS SIMILAR TO THAT OF THE EARLIER QUERY AND ENCLOSED ANNEXURE A, COPY OF THE ORDER SHEET OF THE SRI SESHASAI TOWNSHIP PVT. LTD., RELATING TO THE ASSESSEE. THE AO DID NOT SUPPLY THE SATISFACTION NOTE OF T HE ASSESSING OFFICER OF THE SEARCHED PERSON, I.E. SAI TEJA HOUSING & ESTATES LTD.. AS THE ORDER SHEET PERTAINS TO THE ASSESSEE BUT NOT PERTAINING TO THE AO OF THE SEARCHED PERSON, IT IS CLEAR THAT THE AO OF THE SEARCHED PERSON HAS NOT RECORDED A SEPARATE S ATISFACTION FOR TRANSFER OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND THE DEPARTMENT DID NOT PLACE ANY MATERIAL TO SUBSTANTIATE THAT THE AO OF THE SEARCHED PERSON HAS RECORDED SEPARATE SATISFACTION FOR TRANSFERRING THE MATERIAL TO THE AO OF THE AS SESSEE AND TO INITIATE PROCEEDINGS U/S 153C. THE LD.DR CONTENDED THAT IF THE AOS OF BOTH THE SEARCHED PERSON AND THE ASSESSEE ARE ONE AND THE SAME NO SEPARATE SATISFACTION IS REQUIRED TO BE RECODED AND RELIED ON THE DECISION HONBLE DELHI HIGH COURT IN CA SE OF INSTRONICS LTD AND GANAPATI FINCAP SERVICES PVT. LTD. IN THE CASE OF INSTRONICS LTD THE HONBLE HIGH COURT OF DELHI RESTORED THE MATTER BACK TO THE FILE OF THE ITAT SINCE THERE IS NO DISCUSSION ON WHETHER THE DOCUMENTS REFERRED TO IN THE ITATS ORDER IN FACT INCRIMINATING AND THE AO OF THE SEARCHED PERSON HAS RECORDED THE SATISFACTION THAT THE SEIZED DOCUMENTS BELONGED TO THE ASSESSEE. THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF GANAPATI FINCAP SERVICES PVT. LTD. VS. CIT (SUPRA) IS AG AINST THE WRIT PETITION AND THE FACTS OF THE ASSESSEES CASE ARE DISTINGUISHABLE, THEREFORE, THE CASE LAWS RELIED UPON BY THE LD.DR ARE NOT APPLICABLE IN THE ASSESSEES CASE. 11 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE 11. IN THIS CONNECTION, IT IS PERTINENT TO MENTION SECTION 292C OF THE ACT PLACES PRESUMPTION THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH BELONGS TO THE SEARCHED PERSON AND THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE. SO IT IS THE OBLIGATION OF THE AO AS WELL AS THE SEARCHED PERSON TO PROVE THAT TH E INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN FACT DOES NOT BELONG TO THE SEARCHED PERSON, BUT BELONGED TO THE OTHER PERSON. THEREFORE, UNLESS THERE IS SATISFACTION RECORDED WITH VALID REASONS IT CANNOT BE SIMPLY PRESUMED THAT THE SEIZED M ATERIAL DOES NOT BELONG TO THE SEARCHED PERSON, BUT IN FACT BELONGED TO THE OTHER PERSON. THEREFORE, SATISFACTION OF THE ASSESSING OFFICER OF THE SEARCHED PERSON IS MANDATORY REQUIREMENT TO TRANSFER THE RECORDS AND TO HOLD THAT THE INCRIMINATING MATERIAL FOUND IN THE PREMISES OF THE SEARCHED PERSON IN FACT BELONGED TO SUCH OTHER PERSON. 12. SIMILAR VIEW IS EXPRESSED BY THE COORDINATE BENCH OF ITAT, HYDERABAD IN THE CASE OF SHRI SRINIVAS BABU, HYDERABAD VS. ACIT SUPRA RELIED UPON BY THE ASSESSEE. FOR RE ADY REFERENCE, WE EXTRACT PARA NO.6 OF THE ORDER OF THE COORDINATE BENCH OF ITAT IN THE CASE OF SHRI SRINIVAS BABU CITED SUPRA. 6. HAVING REGARD TO THE RIVAL SUBMISSIONS AND IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN LINE WITH THE VIEW TAKEN BY THE APEX COURT AND THE BINDING CIRCULAR ISSUED BY THE CBDT(BINDING UPON THE REVENUE), WE ARE OF THE VIEW THAT THE PROCEEDINGS INITIATED UNDER S.153C OF THE ACT FOR THESE TWO YEARS DESERVE TO BE QUASHED IN AS MUCH AS THE CONCERNED ASSESSING OFFICER HAS ADMITTEDLY NOT RECORDED ANY SATISFACTION BEFORE FORWARDING THE FILES TO THE ASSESSING OFFICER IN WHOSE CHARGE, THE ASSESSEE HEREIN IS ASSESSED. IN OTHER WORDS, THE ASSESSMENTS MADE UNDER S.153C OF THE ACT ARE HEREBY QUASHED. IN THIS VIEW OF THE MATTER, THE OTHER GROUNDS URGED BY THE REVENUE AS WELL AS THE ASSESSEE HAVE NO LEGS STAND, SINCE THE ASSESSMENTS FOR BOTH THE YEARS ARE QUASHED. THE ASSESSEE ALSO RELIED ON THE DECISION OF COORDINATE BENCH OF ITAT, DELHI IN THE CASE OF NARSI CREATIONS V S.DEPUTY COMMISSIONER OF INCOME TAX, (2016) 70 TAXMANN.COM 156, WHEREIN, THE COORDINATE BENCH OF ITAT HELD THAT THE SATISFACTION OF THE AO OF SEARCHED PERSON HAS TO RECORD SATISFACTION EVEN IF HE IS ALSO THE AO OF THE OTHER PERSON U/S 153C. 13. SIMILAR IS SUE WAS CONSIDERED BY THE COORDINATE BENCH OF ITAT AHMEDABAD IN PARSHWA CORPORATION. V. DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE2, BARODA [2017] 88 TAXMANN.COM 43 (AHMEDABAD - TRIB.) AND HELD THAT 18. FROM THE ABOVE, IT IS CLEAR NO SATISFACTION IS RECORDED BY THE ASSESSING OFFICER OF PERSON SEARCHED. THE ASSESSING OFFICER OF ASSESSEE DID 12 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE NOT RECORD ANY SATISFACTION PRIOR TO ISSUE OF NOTICE U/S 153C. THE SO - CALLED SATISFACTION RECORDED IN THE NOTICE U/S 153C IS TOTALLY VAGUE. IT HAS NOT SPECIFIED WHICH VALUABLE ARTICLES/THINGS/BOOKS OF ACCOUNTS/DOCUMENTS WERE FOUND FROM SHRI RAMESHBHAI B. SHAH WHICH BELONGS TO THE ASSESSEE. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MENTIONED THAT IN THE LAPTO P OF SHRI RAMESHBHAI B. SHAH THE DATA PERTAINING TO THE ASSESSEE WERE FOUND AND ON THAT BASIS NOTICES U/S 153C HAVE BEEN ISSUED. HOWEVER, IN THE NOTICE U/S 153C, WHEREIN THE ASSESSING OFFICER IS CLAIMED TO HAVE BEEN RECORDED THE SATISFACTION FOR ISSUE OF T HE NOTICE, THERE IS NO MENTION ABOUT SUCH LAPTOP OR THE ALLEGED DATA IN SUCH LAPTOP WHICH IS CLAIMED TO BE BELONGED TO THE ASSESSEE. IN VIEW OF ABOVE, WE HAVE NO HESITATION TO HOLD THAT THE BASIC CONDITION FOR ISSUE OF NOTICE U/S153C HAS NOT BEEN SATISFIED . 14. THE DEPARTMENTAL CIRCULAR DATED 31.12.2015 ALSO DIRECTED THE AO TO RECORD THE SATISFACTION, EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME AND THE CIRCULAR IS BINDING ON THE ASSESSING OFFICERS. NON RECORDING OF SATI SFACTION OF THE ASSESSING OFFICER OF THE SEARCHED PERSON RENDERS THE ASSESSMENT PROCEEDINGS U/S 153C AS INVALID. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE HIGH COURT OF DELHI IN PEPSI FOODS (P.) LTD.V. ASSISTANT COMMISSIONER OF INCOME - TAX, [2014] 52 TAXMANN.COM 220 (DELHI).HONBLE HIGH COURT OF DELHI HELD AS UNDER: 6. ON A PLAIN READING OF SECTION 153C, IT IS EVIDENT THAT THE ASSESSING OFFICER OF THE SEARCHED PERSON MUST BE 'SATISFIED' THAT INTER ALIA ANY DOCUMENT SEIZED OR REQUISITIONED 'BELONGS TO' A PERSON OTHER THAN THE SEARCHED PERSON. IT IS ONLY THEN THAT THE ASSESSING OFFICER OF THE SEARCHED PERSON CAN HANDOVER SUCH DOCUMENT TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON (OTHER THAN THE SEARCHED PERSON). FURTHERMORE, IT IS ONLY AFTER SUCH HANDING OVER THAT THE ASSESSING OFFICER OF SUCH OTH ER PERSON CAN ISSUE A NOTICE TO THAT PERSON AND ASSESS OR RE - ASSESS HIS INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. THEREFORE, BEFORE A NOTICE UNDER SECTION 153C CAN BE ISSUED TWO STEPS HAVE TO BE TAKEN. THE FIRST STEP IS THAT THE ASSESSING O FFICER OF THE PERSON WHO IS SEARCHED 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 THE DOCUMENT IS HANDED OVER TO THE A SSESSING OFFICER OF THE PERSON TO WHOM THE SAID DOCUMENT 'BELONGS'. IN THE PRESENT CASES IT HAS BEEN URGED ON BEHALF OF THE PETITIONER THAT THE FIRST STEP ITSELF HAS NOT BEEN FULFILLED. FOR THIS PURPOSE IT WOULD BE NECESSARY TO EXAMINE THE PROVISIONS OF PR ESUMPTIONS AS INDICATED ABOVE. 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 13 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE SUCH PERSON. IT IS SIMILAR LY 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 SAID 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/SHE ARRIVES AT THE SATISFACTION THAT THE SEIZED DOCUMENT DOES NOT BELONG TO THE SEARCHED PERSON BUT TO SOMEBODY ELSE. SURMISE AND CONJECTURE CANNOT TAKE THE PLACE OF 'SATISFACTION'. ------- 11. IT IS EVIDENT FROM THE ABOVE SATISFACTION NOTE THAT APART FROM SAYING THAT THE DOCUMENTS BELONGED TO THE PETITIONER AND THAT THE ASSESSING OFFICER IS SATISFIED THAT IT IS A FIT CASE FOR ISSUANCE OF A NOTICE UNDER SECTION 153C, 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 ASSESSING OFFICER. MERE USE OR MENTI ON 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 T HE CONCLUSION THAT THE ASSESSING OFFICER 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 NOTE, WE ARE UNABLE TO DISCERN ANY 'SATISFACTION' OF THE 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 SECTION153C OF THE SAID ACT HAS NOT BEEN FULFILLED. INASMUCH AS THIS CONDITION PRECEDENT HAS NOT BEEN MET, THE NOTICES UNDER SECTION 153C ARE LIABLE TO BE QUASHED. IT IS ORDERED ACCORDINGLY. HONBLE SUPREME COURT DISMISSED THE SLP FILED BY THE REVENUE AGAINST DECISION OF HONBLE HIGH COURT RULING THAT BEFORE ISSUE OF NOTICE UNDER SECTION 153C, ASSESSING OFFICER IS REQUIRED TO ARRIVE AT A CONCLUSIVE SATISFACTION THAT DOCUMENTS BELONGS TO A PERSON OTHER THAN SEARCHED PERSON IN[201 8] 89 TAXMANN.COM 10 (SC). THEREFORE, THE COURTS HELD THAT THE SATISFACTION NOT ONLY SHOULD BE RECORDED BUT ALSO SHOULD BE WRITTEN IN DETAIL WITH VALID REASONS AND IT SHOULD NOT BE VAGUE. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE DEPARTMENT COULD NOT ESTABLISH THAT THE AO OF THE SEARCHED PERSON HAS RECORDED SATISFACTION BEFORE ISSUE OF NOTICE U/S 153C OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE DECISION S HONBLE COURTS CITED SUPRA AND AS PER THE DISCUSSION IN PRECEDING PAR AGRAPHS, WE HOLD THAT THE NOTICE ISSUED U/S 153C IS UNSUSTAINABLE. 14 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE 9.3. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT OF ANDHRA PRADESH AND THE VIEW TAKEN BY THIS TRIBUNAL IN THE CASE CITED SUPRA, WE HOLD THAT THE ISSUE OF NOTICE U/S 153C WITHOUT RECORDING THE REASONS IN THE CASE OF SEARCHED PERSON RENDERS THE NOTICE ISSUED U/S 153C AS INVALID. ACCORDINGLY, WE QUASH THE NOTICE ISSUED U/S 153C AND THE CANCEL THE CONSEQUENT ASSESSMENT MADE U/S 143(3) R.W.S. 153 C. SINCE WE HAVE QUASHED THE NOTICE ISSUED U/S 153C AND CANCELLED THE CONSEQUENT ASSESSMENT, WE CONSIDER IT IS NOT NECESSARY TO ADJUDICATE THE REVENUES APPEAL WHICH IS ON QUANTUM OF ADDITIONS AND THE REMAINING GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THIS APPEAL. ACCORDINGLY, THE APPEALS OF THE ASSESSEE IS ALLOWED AND THE REVENUES APPEAL IS DISMISSED. 10. THE ASSESSEE FILED CROSS OBJECTIONS WHICH ARE NUMBERED AS 44/VIZ/2019 AND 49/VIZ/2019. BOTH ARE AGAINST THE REVENUES APPEAL. SINCE CROSS OBJECT ION NO.44/VIZ/2019 WAS DEFECTIVE, THE REGISTRY HAD ISSUED DEFECT NOTICE AND IN RESPONSE ,THE ASSESSEE FILED FRESH FORM 36A DULY RECTIFYING THE DEFECT RAISE D BY THE REGISTRY AND THE SAME WA S NUMBERED AS 49/VIZ/2019. HENCE THE CROSS OBJECTION NO.44/VIZ/201 9 IS DISMISSED AS DEFECTIVE. THE ASSESSEES CROSS OBJECTIONS IN CO NO.49/VIZ/2019 ARE SUPPORTING THE ORDER OF THE LD.CIT(A). SINCE WE HAVE 15 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE QUASHED THE NOTICE ISSUED U/S 153C, THE CO FILED BY THE ASSESSEE BECOMES INFRUCTUOUS, HENCE, DISMISSED. 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED, REVENUE S APPEAL AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. S TAY APPLICATION FILED BY THE ASSESSEE IN SA N O.1/ V IZ/2019 IS ALSO DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JUNE 2019. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 26 .06.2019 L.RAMA, SPS 16 S.A.NO.01/VIZ/2019, I.T.A. NO.17&47/VIZ/2019 AND CO NO.44&49/VIZ/2019 M/S SRI PADMAVATHI VENKATESWARA CONSTRUCTIONS, NELLORE / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S SRI PADMAVATHI VENKATESWARA CON S TRUCTIONS NELLORE 2. / THE REVENUE DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE VIJAYAWADA / ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VIJAYAWADA 3. THE PR. COMMISSIONER OF INCOME TAX (CENTRAL), VISAKHAPATNAM 4. THE COMMISSIONER OF TAX (APPEALS) - 3, VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM