M/s. Rite Pac Industries Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1796/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3895 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 28-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 26-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: VINOD KR BINDAL
• Keywords: Invalid notice; Search and seizure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F , NEW DELHI BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER AND SHRI B.P. JAIN , ACCOUNTANT MEMBER ITA NO. 1 796 /DEL/201 4 AY: 20 07 - 08 RITE PAC INDUSTRIES P.LTD. 23/05, SHAKTI NAGAR NEW DELHI 110 007 PAN: AACCR 6816 Q VS . DY.CIT, CENTRAL CIRCLE 05 NEW DELHI (APPELLANT) (RESPONDENT) APPELLAN T BY SH. V INOD KR.BINDAL, C.A. RESPONDENT BY SMT. PARAMITA TRIPATHY, CIT, DR DATE OF HEARING 25.10.2017 DATE OF PRONOUNCEMENT 27 .10.2017 ORDER PER SK YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(A) - XXXI, NEW DELHI ON VARIOUS GROUNDS WHICH READ AS UNDER. 1. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ISSUANCE OF NOTICE U/S 153C TO THE APPELLANT IGNORING THE FACT THAT NO ASSETS, DOCUMENTS AND I NCRIMINATING MATERIAL BELONGING TO THE APPELLANT - COMPANY WERE SEIZED FROM THE SEARCHED PREMISES ON 31/07/08, WHICH IS A PREREQUISITE CONDITION FOR ASSUMING JURISDICTION U/S 153C OF THE ACT. THUS, THE NOTICE ISSUED WITHOUT FULFILLING THE CONDITIONS LAID D OWN BY THE LAW IS INVALID AND THE ASSESSMENT MADE ON THE BASIS OF AN INVALID NOTICE SHOULD BE ANNULLED. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 10,00,000/ - U/S 68 FOR THE AMOUNT RECEIVED AGAINST ALLOTMENT OF SHARE CAPITAL DURING THE RELEVANT PERIOD AND WITHOUT CONSIDERING THE DOCUMENTARY EVIDENCES PLACED ON RECORD. THUS, THE ADDITION MUST BE DELETED. 2 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ENHANCING THE ADDITION BY RS. 50,00,000/ - U/S 68 FOR THE AMOUNT RECEIVED AGAINST ALLOTMENT OF SHARE CAPITAL DURING THE RELEVANT PERIOD AND WITHOUT CONSIDERING THE DOCUMENTARY EVIDENCES PLACED ON RECORD. THUS, THE ADDITION MUST BE DELETED. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIR MING THE ADDITION MADE IN THE IMPUGNED ASSESSMENT ORDER PASSED U/S 153C/143(3) [R.W.S. 153A] AND ALSO IN MAKING AN ENHANCEMENT THERETO, BECAUSE - A. THE ADDITIONS WERE NOT BASED ON ANY BOOKS OF ACCOUNT OR OTHER MATERIAL NOT PRODUCED IN THE COURSE OF SEARC H FOR AN UNDISCLOSED INCOME PROPERTY DISCOVERED THEREIN; AND B. AS THE ASSESSMENT PROCEEDINGS WERE NOT ABATED BUT WERE ALREADY COMPLETED. THUS, ALL THE ADDITIONS SO MADE IN THE ASSESSMENT ORDER SHOULD BE DELETED FOLLOWING THE SPECIAL BENCH DECISION DATED 06/07/12 IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT [2012 - TIOL - 391 - ITAT - MUM - SB] . 5. THE APPELLANT CRAVES THE LEAVE TO ADD, SUBSTITUTE, MODIFY, DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 2. THE AS SESSEE HAS ALSO MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUND WITH THE SUBMISSION THAT THE ADDITIONAL GROUND GOES TO THE ROOT OF THE CASE, THEREFORE, THE SAME MAY BE ADMITTED. THE ADDITIONAL GROUND RAISED IN THIS APPEAL IS AS UNDER. 6. THE ASSE SSING AUTHORITY ERRED IN LAW AND ON FACTS IN ISSUING THE NOTICE U/S 153C ON 18.12.2009, I.E. EVEN BEFORE THE MANDATORY SATISFACTION U/S 153C WAS RECORDED BY HIM ON 23.8.2010. THUS, THE ASSESSMENT FRAMED ON THE BASIS OF INVALID ASSUMPTION OF JURISDICTION U /S 153C MUST BE ANNULLED. 2.1. SINCE THE ADDITIONAL GROUND GOES TO THE ROOT OF THE CASE WE ADMIT THE S AME AND PREFER TO ADJUDICATE IT AT THE THRESHOLD. 3. WITH REGARD TO ADDITIONAL GROUND THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT A SEARCH WAS C ONDUCTED ON 31.07.2008 AND SATISFACTION IN THE CASE OF THE ASSESSEE WAS RECORDED ON 23 RD AUGUST, 2010 WHERE AS NOTICE 3 U/S 153C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS ISSUED ON 18.12.2009. THIS SHOWS THAT NOTICE U/S 153C O F THE ACT HAS BEEN ISSUED WITHOUT RECORDING SATISFACTION WHICH IS A PRE - CONDITION FOR FRAMING ASSESSMENT U/S 153C OF THE ACT, THE LD.COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE NOTICE U/S153C IS INVALID AND THE ASSESSMENT FRAMED CONSEQUENT THERETO , DESERVES TO BE CANCELLED. IN SUPPORT OF HIS CONTENTION THE LD.COUNSEL PLACED RELIANCE ON THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF PEPSI FOODS (P) LTD. VS. ACIT (2014) 367 ITR 112 (DEL); PRINCIPAL CIT VS. NIKKI DRUGS & CHEMICALS P LTD. (2016) 236 TAXMAN 305 (DEL) AND ON THE ORDER OF THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF DSL PROPERTIES P LTD. VS. DCIT (2013) 33 TAXMANN.COM 420 (DELHI TRIBUNAL). THE LD.COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SATISFACTION NOTE U/S 153C OF THE ACT SHOULD BE RECORDED BY THE A.O. OF THE SEARCHED PERSON AND A PERUSAL OF SATISFACTION NOTE SHOWS THAT SATISFACTION HAS BEEN RECORDED BY THE A.O. OF THE ASSESSEE AS IT REFERS TO SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH FROM OTHER PARTY. H E ALSO PLACED RELIANCE UPON CIRCULAR NO. 24/2015 DATED 31.12.2015 ISSUED BY THE CBDT AND JUDGEMENT OF HON BLE SUPREME COURT IN THE CASE OF M/S CALCUTTA KNITWEAR REPORTED IN 362 ITR 672. 4. THE LD.DR ON THE OTHER HAND SUBMITTED THAT SATISFACTION NOTE WAS R ECORDED BY THE ASSESSING OFFICER BEFORE ISSUANCE OF NOTICE U/S 153C OF THE ACT. THE LD.DR PLACED RELIANCE ON THE REPORT OF THE ASSESSING OFFICER SUBMITTED WITH REFERENCE TO SATISFACTION NOTE FURNISHED BY THE ASSESSEE WITH A SUBMISSION THAT THE A.O. HAS S TATED IN HIS COMMENTS THAT SATISFACTION NOTE WAS ALSO DRAWN ON 18.12.2009 BY THE ABOVE MENTIONED OFFICE R . THEREFORE THERE IS NO ILLEGALITY IN THE ASSESSMENT FRAMED U/S 153C OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD. DURING THE COURSE OF HEARING THE LD.COUNSEL FOR THE ASSESSEE HAS FILED A CERTIFIED TRUE COPY OF SATISFACTION NOTE DATED 23.8.2010 ACCORDING TO WHICH , SATISFACTION WAS RECORDED IN THE CASE OF THE ASSESSEE BY THE A.O. HAVING NOTED THAT A 4 SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON RAJ DARBAR GROUP OF CASES ON 31.7.2008 AND DURING THE SEARCH OPERATION BOOKS AND VARIOUS PAPERS WERE FOUND. FROM A CAREFUL PERUSAL OF THE ASSESSMENT ORDER WE F IND THAT NOTICE U/S 153C OF THE ACT WAS ISSUED ON 18.12.2009 MEANING THEREBY THE SATISFACTION WAS RECORDED BY THE A.O. OF THE ASSESSEE AFTER ISSUANCE OF NOTICE U/S 153C OF THE ACT. THE SATISFACTION NOTE WAS CONFRONTED TO THE LD.DR AND IN RESPONSE THERETO THE LD.DR FILED A REPORT OBTAINED FROM THE A.O. WHEREIN IT HAS BEEN STATED THAT NOTICE U/S 153C OF THE ACT WAS ISSUED ON 18.12.2009 BY THE THEN ACIT, CENTRAL CIRCLE 05, NEW DELHI SHRI MA ZH AR AKRAM. IT WAS FURTHER STATED THAT RECORD ALSO SHOWS THAT S ATISFACTION NOTE WAS ALSO DRAWN ON 18.12.2009 BY THE ABOVE MENTIONED OFFICER. THEREFORE FROM A BARE READING OF THIS REPORT OF THE A.O. IT IS ABUNDANTLY CLEAR THAT SATISFACTION NOTE WAS DRAWN BY THE OFFICER WHO HAS ISSUED NOTICE U/S 153C OF THE ACT ON 18. 12.2009. BUT IN THIS REPORT NOTHING WAS STATED ABOUT THE SATISFACTION NOTE DATED 23.8.2010 FILED BY THE ASSESSEE. IN ANY CASE IF WE READ THE SATISFACTION NOTE AND THE REPORT OF THE A.O. ONE THING IS VERY CLEAR THAT SATISFACTION NOTE WAS PREPARED BY THE A.O. OF THE ASSESSEE WHERE AS THE REQUIREMENT OF LAW IS THAT THE SATISFACTION FOR INITIATING PROCEEDINGS U/S 153C OF THE ACT IS TO BE RECORDED BY THE A.O. OF THE SEARCHED PERSON. THE CONTROVERSY IN THIS REGARD HAS ALREADY BEEN RESOLVED THROUGH VARIO US JUDICIAL PRONOUNCEMENTS AND MOST OF THEM WERE REFERRED TO BY THE ASSESSEE IN THE FOREGOING PARA AND IT HAS BEEN REPEATEDLY HELD THAT A SATISFACTION FOR INITIATING THE PROCEEDINGS U/S 153C OF THE ACT IS TO BE RECORDED BY THE A.O. OF THE SEARCHED PERSON. IN THIS REGARD CIRCULAR NO.24/2015 WAS ALSO ISSUED BY THE CBDT THROUGH WHICH THE BOARD HAD DIRECTED THAT PENDING LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE U/S 158B C AND 153C OF THE ACT SHOULD BE WITHDRAWN AS NOT PRESSED IF IT DOES NOT M EET GUIDELINES RAISED BY THE CIRCULAR. IN THIS CIRCULAR THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CALCUTTA KNITWEAR WAS ALSO REFERRED IN WHICH IT HAS BEEN HELD THAT RECORDING OF SATISFACTION NOTE IS THE PREREQUISITE AND SATISFACTION NOTE MUST BE PREPARED BY THE A.O. BEFORE IT TRANSMITS THE RECORD TO THE OTHER A.O. IN WHOSE JURISDICTION IT FALLS U/S 158 B D OF THE ACT. 5 6. W E HAVE ALSO CAREFULLY EXAMINED THE WRITTEN SUBMISSIONS, THE JUDGEMENTS REFERRED TO BY THE LD.DR IN THE FOLLOWING CASES. I . PCIT VS. SHEETAL INTERNATIONAL PVT.LTD. (2017 - TIOL - 1355 - HC - DEL - IT) II . PCIT VS. INSTRONICS LTD. (2017) TAXMANN.COM 357 (DEL.) III . GANPATI FINCAP SERVICES P LTD. VS. CIT (2017) TAXMANN.COM 408 (DEL.) IV . PCIT VS. SUPER MALLS P.LTD. (2016) 76 TAXMANN.COM 267 (DEL)(201 7) V . PCIT VS. M/S NAU NIDH OVERSEAS P.LTD. (ITA NO.58/2017) VI . CIT VS. CLASSIC ENTERPRISES (35 TAXMANN.COM 244). 7 . HAVING CAREFULLY EXAMINED THESE CASES WE FIND THAT THESE ARE CASES WHERE THE A.O. OF THE SEARCHED PERSON AND THE THIRD PERSON IN WHOSE CASE 153C WAS INVOKED WAS THE SAME. IN TH IS CASE IT HAS BEEN HELD THAT THE SATISFACTION NOTE WAS RECORDED BY THE SAME A.O. TO MEET THE REQUIREMENTS OF LAW . BUT IN THE INSTANT CASE THE REVENUE HAS NOT MADE OUT A CASE THAT THE A.O. IS SAME IN THE CA SE OF SEARCHED PERSON AND THIRD PERSON. MOREOVER THE ASSESSEE HAS FILED SATISFACTION NOTE DATED 23.8.2010 WHERE AS THE NOTICE U/S 153C OF THE ACT WAS ISSUED BY THE A.O. ON 18.12.2009 BEFORE THE DATE OF SATISFACTION THOUGH THE A.O. IN HIS REPORT HAS STATE D THAT SATISFACTION NOTE WAS RECORDED ON 18.12.2009 BUT NO EVIDENCE HAS BEEN FILED IN SUPPORT THEREOF. IN THE ABSENCE OF ANY OTHER SATISFACTION NOTE WE HAVE TO PRESUME THAT SATISFACTION NOTE DATED 23.8.2010 IS ONLY A SATISFACTION NOTE ON THE BASIS OF WH ICH PROCEEDINGS U/S 153C WAS INITIATED. THEREFORE WE ARE OF THE CONSIDERED OPINION THAT NOTICE U/S 153C WAS ISSUED BEFORE RECORDING THE SATISFACTION THAT THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH BELONG S TO THIRD PERSON, THEREFORE IT IS NOT A VALID NOTICE AND THE ASSESSMENT FRAMED CONSEQUENT THERETO IS NOT A VALID ASSESSMENT AND DESERVES TO BE QUASHED. WE THEREFORE HAVE NO HESITATION IN HOLDING THAT ASSESSMENT FRAMED CONSEQUENT TO INVALID NOTICE IS NOT VALID IN LAW AND ACCORDINGLY Q UASH THE SAME. SINCE THE ASSESSMENT IS QUASHED, WE FIND NO 6 JUSTIFICATION TO DEAL WITH THE APPEAL ON MERITS. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER , 2017. SD/ - SD/ - ( B.P. JAIN ) ( S.K. YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 27 .10.2017. MANGA COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES