Appeal Details
Counselvise Citation
[2018] 125 COUNSELVISE.COM (IT) 1320 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 3 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-08-2018
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
H
Next Hearing Date
08-08-2017
Assessment Year
2008-2009
Appeal Filed On
28-05-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4370/MUM/2015 ASSESSMENT YEAR: 2007-08 M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD ANDHERI (W), MUMBAI 400058 / VS. ACIT, CENTRAL CIRCLE - 4(2) 4 TH FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAZFS0404K ITA NO.3237/MUM/2015 ASSESSMENT YEAR: 2008-09 M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD ANDHERI (W), MUMBAI 400058 / VS. ACIT, CENTRAL CIRCLE - 4(2) 4 TH FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAZFS0404K SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 2 ITA NO.4371/MUM/2015 ASSESSMENT YEAR: 2009-10 M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD ANDHERI (W), MUMBAI 400058 / VS. ACIT, CENTRAL CIRCLE - 4(2) 4 TH FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAZFS0404K ITA NO.3238/MUM/2015 ASSESSMENT YEAR: 2010-11 M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD ANDHERI (W), MUMBAI 400058 / VS. ACIT, CENTRAL CIRCLE - 4(2) 4 TH FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAZFS0404K ITA NO.6199/MUM/2014 ASSESSMENT YEAR: 2011-12 M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 29 4 TH FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAZFS0404K SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 3 ITA NO.3586/MUM/2015 ASSESSMENT YEAR: 2008-09 DCIT, CENTRAL RANGE - 4 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAZFS0404K ITA NO.4201/MUM/2015 ASSESSMENT YEAR: 2009-10 DCIT, CENTRAL RANGE - 4 PR. CIT(C)-2, MUMBAI 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAZFS0404K ITA NO.3587/MUM/2015 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL RANGE-4 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAZFS0404K SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 4 ITA NO.6480/MUM/2014 ASSESSMENT YEAR: 2011-12 ACIT, CENTRAL CIRCLE - 29 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAZFS0404K ITA NO.6479/MUM/2014 ASSESSMENT YEAR: 2011-12 ACIT, CENTRAL CIRCLE-29 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILDCON PVT. LTD., 402, SAGAR AVENUE 54-B, 4 TH FLOOR, S.V. ROAD, ANDHERI (WEST) MUMBAI 400061 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAOCS9597F C.O. NO.58/MUM./2016 ARISING OUT OF ITA NO.6479/MUM/2014 ASSESSMENT YEAR: 2011-12 M/S. SKYLARK BUILD CON P. LTD 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE-4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT, MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAOCS9597F SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 5 ITA NO.6481/MUM/2014 ASSESSMENT YEAR: 2012-13 ACIT, CENTRAL CIRCLE-29 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. M/S. SKYLARK BUILDCON PVT. LTD., 402, SAGAR AVENUE 54-B, 4 TH FLOOR, S.V. ROAD, ANDHERI (WEST) MUMBAI 400061 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAOCS9597F ITA NO.2908/MUM/2015 ASSESSMENT YEAR: 2008-09 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. SMT. HEMLATA S. SHETTY 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS1866A C.O. NO.210/MUM/2016 ARISING OUT OF ITA NO.2908/MUM/2015 ASSESSMENT YEAR: 2008-09 SMT. HEMLATA S. SHETTY 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4(2) 19 TH FLOOR AIR INDIA BLDG. NARIMAN POINT MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS1866A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 6 ITA NO.2909/MUM/2015 ASSESSMENT YEAR: 2009-10 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411 4 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD MUMBAI 400 020 / VS. S MT. HEMLATA S. SHETTY 54-B, 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS1866A C.O. NO.211/MUM./2016 ARISING OUT OF ITA NO.2909/MUM/2015 ASSESSMENT YEAR: 2009-10 SMT. HEMLATA S. SHETTY 54-B, 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT, MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS1866A ITA NO.215/MUM/2016 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 PR. CIT (C)-2, 19 TH FLOOR, ROOM NO.1918 AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 058 / VS. SMT. HE MLATA S. SHETTY 54-B, 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS1866A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 7 C.O. NO.269/MUM./2017 ARISING OUT OF ITA NO.215/MUM/2016 ASSESSMENT YEAR: 2010-11 SMT. HEMLATA S. SHETTY 54-B, 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, ROOM NO.1918 AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 058 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS1866A ITA NO.2910/MUM/2015 ASSESSMENT YEAR: 2011-12 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411 4 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD MUMBAI 400 020 / VS. SMT. HEMLATA S. SHETTY 54-B, 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS1866A C.O. NO.212/MUM./2016 (ARISING OUT OF ITA NO.2910/MUM/2015) ASSESSMENT YEAR: 2011-12 SMT. HEMLATA S. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT, MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS1866A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 8 ITA NO.2911/MUM/2015 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 4 TH FLOOR, ROOM NO.411 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400020 / VS. SMT. HEMLATA S. SHETTY 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS1866A C.O. NO.213/MUM./2016 ARISING OUT OF ITA NO.2911/MUM/2015 ASSESSMENT YEAR: 2012-13 SMT. HEMLATA S. SHETTY 402, SAGAR AVENUE PLOT B-54, JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST) MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) CENTRAL CIRCLE-4(2) 19 TH FLOOR AIR INDIA BLDG. NARIMAN POINT MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS1866A ITA NO.4615/MUM/2015 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411 4 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD MUMBAI 400 020 / VS. M/S. OASIS REALTY 3 RD FLOOR, COMMERZ INTER- NATIONAL BUSINESS PARK OBEROI GARDEN CITY GOREGAON (EAST) MUMBAI 400 063 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAAAO1735B SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 9 C.O. NO.244/MUM./2017 ARISING OUT OF ITA NO.4615/MUM/2015 ASSESSMENT YEAR: 2012-13 M/S. OASIS REALTY 3 RD FLOOR, COMMERZ INTER- NATIONAL BUSINESS PARK OBEROI GARDEN CITY GOREGAON (EAST) MUMBAI 400 063 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT, MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAAAO1735B ITA NO.2904/MUM/2015 ASSESSMENT YEAR: 2008-09 DCIT, CENTRAL CIRCLE - 4 (2) CENTRAL CIRCLE-4 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN M.K. ROAD, MUMBAI 400020 / VS. SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS0603R C.O. NO.207/MUM./2016 ARISING OUT OF ITA NO.2904/MUM/2015 ASSESSMENT YEAR: 2008-09 SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) CENTRAL CIRCLE-4 ROOM NO.1918, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS0603R SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 10 ITA NO.2905/MUM/2015 ASSESSMENT YEAR: 2009-10 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL CIRCLE-4 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN M.K. ROAD, MUMBAI 400020 / VS. SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS0603R C.O. NO.208/MUM./2016 ARISING OUT OF ITA NO.2905/MUM/2015 ASSESSMENT YEAR: 2009-10 SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) CENTRAL CIRCLE-4 ROOM NO.1918, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS0603R ITA NO.3148/MUM/2016 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.1918, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 / VS. SHRI SUDHAKAR M. SHETTY A-202, NEW ASHOKA APTS. PANCHMARG, VERSOVA YARI ROAD, ANDHERI (WEST) MUMBAI 400 061 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS0603R SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 11 ITA NO.2906/MUM/2015 ASSESSM ENT YEAR: 2011-12 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN M.K. ROAD, MUMBAI 400020 / VS. SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS0603R C.O. NO.209/MUM/2016 ARISING OUT OF ITA NO.2906/MUM/2015 ASSESSMENT YEAR: 2011-12 SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) CENTRAL CIRCLE-4 ROOM NO.1918, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS0603R ITA NO.2907/MUM/2015 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE - 4(2) ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN M.K. ROAD, MUMBAI 400020 / VS. SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. ALPPS0603R SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 12 ITA NO.2450/MUM/2015 ASSESSMENT YEAR: 2012-13 SHRI SUDHAKAR M. SHETTY 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. ACIT, CENTRAL CIRCLE - 4(2) 4 TH FLOOR, AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. ALPPS0603R ITA NO.2900/MUM/2015 ASSESSMENT YEAR: 2008-09 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400020 / VS. SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAHCS4782P C.O. NO.205/MUM./2016 ARISING OUT OF ITA NO.2900/MUM/2015 ASSESSMENT YEAR: 2008-09 SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2), CENTRAL RANGE-4 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAHCS4782P SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 13 ITA NO.5275/MUM/2015 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 PR. CIT(C)-2, ROOM NO.411, 4 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400020 / VS. SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAHCS4782P C.O. NO.176/MUM./2017 ARISING OUT OF ITA NO.5275/MUM/2015 ASSESSMENT YEAR: 2010-11 SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAHCS4782P ITA NO.2902/MUM/2015 ASSESSMENT YEAR: 2011-12 DCIT, CENTRAL CIRCLE - 4(2) CENTRAL RANGE-4 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN M.K. ROAD, MUMBAI 400020 / VS. SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAHCS4782P SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 14 C.O. NO.206/MUM./2016 ARISING OUT OF ITA NO.2902/MUM/2015 ASSESSMENT YEAR: 2011-12 SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. DCIT, CENTRAL CIRCLE - 4(2) 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT MUMBAI 400 021 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAHCS4782P ITA NO.2451/MUM/2015 ASSESSMENT YEAR: 2012-13 SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 / VS. A CIT, CENTRAL CIRCLE - 4 (2) ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400020 ( !' /ASSESSEE) ( # / REVENUE) PAN. NO. AAHCS4782P ITA NO.2903/MUM/2015 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE - 4(2) ROOM NO.411, 4 TH FLOOR AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400020 / VS. SAHANA BUILDERS & DEVELOPERS PVT. LTD. 54-B, 402, SAGAR AVENUE JUNCTION OF LALLUBHAI PARK & S.V. ROAD, ANDHERI (WEST), MUMBAI 400058 ( # / REVENUE) ( !' /ASSESSEE) PAN. NO. AAHCS4782P SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 15 !' / ASSESSEE BY SHRI V.C. BOTHRA # / REVENUE BY MRS. SATHI PINJANI #$ % '& / DATE OF HEARING : 21/06/2018 % '& / DATE OF ORDER: 29/08/2018 / O R D E R PER BENCH THIS BUNCH OF 41 APPEALS INCLUDING CROSS OBJECTIONS /CROSS APPEALS IS BY DIFFERENT ASSESSEES AS WELL AS BY THE REVENUE CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE F IRST APPELLATE AUTHORITY, MUMBAI. FIRST, WE SHALL TAKE UP THE APPE ALS OF THE ASSESSEE IN M/S SKYLARK BUILD FOR ASSESSMENT YEARS 2007-08 TO 2011-12 (ITA NO.4370, 3237, 4371, 3238, & 6199/ MU M/2015). 2. THE ASSESSEE HAS RAISED ADDITIONAL GROUND WHICH IS SUMMARIZED AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND THE PROVISIONS OF LAW, THE ASSESSMENT FRAMED BY THE LEA RNED ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST THE STATUTORY PROVI SIONS OF THE ACT AND WITHOUT COMPLYING THE PROCEDURES PRESCRIBED U/S. 153C OF THE INCOME TAX ACT, 1961 AND AS SUCH THE AS SESSMENT BEING BAD IN LAW AND DESERVED TO BE QUASHED. THAT IN THE ABSENCE OF INCRIMINATING MATERIAL, NO ADDITIONS CAN BE MADE BY THE ASSESSING OFFICER AND NO ADDITIO NS CAN BE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 16 CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) IN RESPECT OF PURCHASES IN A CASE WHERE ASSESSMENT IS COMPLETED U/S. 153C OF THE INCOME TAX ACT, 1961 AND AS SUCH T HE ADDITIONS ARE BAD IN LAW AND DESERVE TO BE DELETED. 2.1. IN THE AFORESAID ADDITIONAL GROUNDS, THE ASSE SSEE HAS CHALLENGED VALIDITY OF ISSUANCE OF NOTICE U/S 153C OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). THIS ADDITIONA L LEGAL GROUND HAS BEEN RAISED FOR THE FIRST TIME BEFORE THIS TRIB UNAL. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT LEGAL GROUN D CAN BE RAISED BEFORE THIS TRIBUNAL FOR WHICH RELIANCE WAS PLACED UPON THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD VS. CIT (1998) 229 ITR 0383 ( SC). ON THE OTHER HAND, LD. CIT-DR SHRI RAHUL RAMAN, OPPOSED TH E ADMISSION OF ADDITIONAL GROUND BY CONTENDING THAT A T THIS STAGE, THE LEGAL GROUND CANNOT BE RAISED. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE AD VERTING FURTHER, IT IS OUR BOUNDED DUTY TO ANALYZE THE DECI SION FROM HON'BLE APEX COURT IN NATIONAL THERMAL POWER COMPAN Y LTD. ((SUPRA)), WHEREIN, FOLLOWING QUESTION WAS RAISED:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 17 'WHERE ON THE FACTS FOUND BY THE AUTHORITIES BELOW A QUESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHORITIES) WHICH BEARS ON THE TAX LIABILITY OF THE ASSESSEE, WHETHER THE TRIB UNAL HAS JURISDICTION TO EXAMINE THE SAME ?' THE HON'BLE APEX COURT ON THE AFORESAID QUESTION OF LAW OBSERVED/HELD AS UNDER:- 5. UNDER S. 254 OF THE IT ACT, THE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD , PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIE S IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCOR DANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN W HILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON -TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION DENIED, WE DO NOT SEE AN Y REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUES TION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVAN T FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO R ESTRICT THE POWER OF THE TRIBUNAL UNDER S. 254 ONLY TO DECIDE THE GROUND S WHICH ARISE FROM THE ORDER OF THE CIT(A). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS-OBJECTIONS BEF ORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FR OM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 8. . THE REFRAMED QUESTION, THEREFORE, IS ANSWERED IN THE AFFIRMATIVE, I.E., THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUND BY THE AUTHORITIES BELOW AN D HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESSEE. WE REMAND THE PROCEEDINGS TO THE TRIBUNAL FOR CONSIDERATION OF THE NEW GROUNDS RAISE D BY THE ASSESSEE ON THE MERITS. 2.3. IT IS ALSO NOTED THAT HON'BLE JURISDICTIONAL HIGH COURT IN DIRECTOR OF INCOME TAX VS. INGRAM MICRO (INDIA) SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 18 EXPORTS PVT. LTD. (2015) 234 TAXMAN 464 (BOM) OBSERVED/HELD AS UNDER:- AFTER HEARING BOTH SIDES AND PERUSING THE RELEVANT MATERIAL INCLUDING THE IMPUGNED ORDERS, WE ARE OF THE VIEW THAT THERE IS MUCH SUBSTANCE IN THE CONTENTION OF MR. MISTRI. THE ADDITIONAL GRO UND WAS PERMITTED AND WITH REGARD TO THE VALIDITY OF THE PROCEEDINGS UNDE R S. 153C AS THE TRIBUNAL CONCLUDED THAT THIS ISSUE OR QUESTION GOES TO THE ROOT OF THE CASE. IF IT IS ANSWERED EITHER WAY, THE MATTER WOUL D COME TO AN END. THE TRIBUNAL HAS NOTED THAT THE ADDITIONAL GROUND IS TH E LEGAL GROUND GOING TO THE ROOT OF THE CASE. THE AO DID NOT ALLOW INSPE CTION OF THE RECORD TO THE ASSESSEE OR ITS COUNSEL AND THAT IS WHY THEY HA VE RAISED ADDITIONAL GROUND ABOUT VALIDITY OF THE PROCEEDINGS UNDER S. 1 53C. THAT IS ABOUT ABSENCE OF ANY SATISFACTION BEING RECORDED BY THE O FFICER WHO WAS ASSESSING THE SEARCH PARTY. THERE IS NO DISPUTE ABO UT THE FACT THAT THE ASSESSEE WAS NOT SEARCHED AND THE SEARCH HAS BEEN C ONDUCTED IN THE CASE OF INGRAM MICRO (INDIA) EXPORTS PTE. LTD./TECH PACIFIC (INDIA) LTD. AT THEIR BUSINESS PREMISES IN MUMBAI. THEREFORE, IN TERMS OF S. 153A AND 153C OF THE IT ACT, PROCEEDINGS CAN ONLY BE INI TIATED AFTER THE AO ARRIVES AT A SATISFACTION THAT THE SEIZED MATERIAL PERTAINS TO OTHER PERSONS, NAMELY, PERSONS OTHER THAN THE SEARCHED PA RTY. IT IS ONLY THEN THE PERSONS OTHER THAN THE SEARCHED PARTIES CAN BE PROCEEDED AGAINST. THERE IS NOTHING IN THE ASSESSMENT ORDER WHICH WOUL D INDICATE THAT THE ASSESSMENT OFFICER ARRIVED AT SUCH SATISFACTION. TH E TRIBUNAL NOTED THAT IT HAS ALLOWED THIS ADDITIONAL GROUND TO BE RAISED AFTER HEARING THE DEPARTMENTAL REPRESENTATIVES' OBJECTION. TO DO COMP LETE JUSTICE AND TO BOTH SIDES THE TRIBUNAL GAVE ENOUGH OPPORTUNITY TO THE REVENUE TO PRODUCE THE FILES AND IF THE SAME CONTAIN THE SATIS FACTION OF THE AO, THEN, TO RELY UPON IT BEFORE THE TRIBUNAL. THE TRIB UNAL NOTED THAT MORE THAN 20 MONTHS PASSED AFTER THE FIRST DIRECTION TO PRODUCE THE RECORD WAS ISSUED. DESPITE REPEATED ADJOURNMENTS AND AS NO TED BY THE TRIBUNAL IN PARA 9 OF THE IMPUGNED ORDER, THE SATIS FACTION REQUISITE FOR INITIATION OF THE PROCEEDINGS UNDER S. 153C WAS NOT AVAILABLE. THE RECORD IN THAT BEHALF WAS NOT PRODUCED. IN THESE CI RCUMSTANCES, NOT ONLY DID THE TRIBUNAL FIND THAT IT WAS NECESSARY AND IN THE INTEREST OF JUSTICE TO PERMIT RAISING OF AN ADDITIONAL GROUND, BUT TO A NSWER IT. IT IS ONLY TO ENABLE IT TO ANSWER IT THAT IT RELIED ON THE SETTLE D PRINCIPLES AND THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F MANISH MAHESHWARI VS. ASSTT. CIT (2007) 208 CTR (SC) 97 : (2007) 289 ITR 341 (SC). IT IS ONLY TO ENABLE THE TRIBUNAL TO REFE R TO THE SETTLED PRINCIPLES AND FOR RE-ENFORCING ITS CONCLUSION THAT THIS JUDGMENT IS REFERRED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 19 2.4. HON'BLE DELHI HIGH COURT IN ITO VS. JASJIT S INGH CO-138 TO 142/DEL/2014 DECIDED ON 23RD SEPTEMBER, 2 014. (DELHI) HELD AS UNDER:- 6 HAVING GONE THROUGH THE ABOVE CITED DECISION, WE COME TO THE CONCLUSION THAT THE WHOLE PURPOSE OF PREFERRING THE APPEAL AND CROSS OBJECTIONS AND RAISING NEW GROUND FOR THE FIR ST TIME BEFORE THE APPELLATE AUTHORITY IS TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. WHEN WE CONSIDER THE PRESENT CASE UNDER T HE ABOVE BACK GROUND, WE FIND THAT THERE IS NO DISPUTE THAT FOR DECIDING THE ISSUE RAISED BEFORE THE ITAT IN THE CROSS OBJECTION S REGARDING VALIDITY OF THE ASSESSMENT ORDER ON THE BASIS THAT (I) THE ASSESSING OFFICER HAD NOT RECORDED SATISFACTION WHILE PROCEED INGS FOR FRAMING ASSESSMENT UNDER SEC. 153-C OF THE ACT; (II) THE AS SESSING OFFICER HAD NOT SIGNED THE MANUSCRIPT OF THE ASSESSMENT ORD ER AS REQUIRED UNDER SEC. 282A OF THE ACT; (III) NO INCRIMINATING DOCUMENTS IN RESPECT OF THE ASSESSEE WAS FOUND FROM THE POSSESSI ON OF PERSONS COVERED UNDER SEC. 153A OF THE ACT, NO NEW FACTS OU TSIDE THE RECORD OF THE AUTHORITIES BELOW IS REQUIRED TO BE CONSIDER ED. IN OTHER WORDS, THE QUESTION OF LAW RAISED ABOVE IS ARISING FROM TH E FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS. WHEN THERE IS NO NEED TO CONSIDER THE NEW FACTS OUTSIDE THE RECORD FOR THE A DJUDICATION OF THE ABOVE ISSUE AND UNDISPUTEDLY WHEN THOSE ISSUES ARE NECESSARY TO CONSIDER TO CORRECTLY ASSESS THE TAX LIABILITY OF A N ASSESSEE, AS PER THE RATIOS HELD DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF NTPC, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED. 2.5. IN THE CASE OF CIT VS SINGHAD TECHNICAL EDUCA TION SOCIETY (CIVIL APPEAL NO.11081 TO 11083 OF 2017) OR DER DATED 29/08/2017, THE HON'BLE APEX COURT HELD/OBSERVED AS UNDER:- 18. THE TRIBUNAL PERMITTED THIS ADDITIONAL GROUND B Y GIVING A REASON THAT IT WAS A JURISDICTIONAL ISSUE TAKEN UP ON THE BASIS OF FACTS ALREADY ON THE RECORD AND, THEREFORE, COULD B E RAISED. IN THIS BEHALF, IT WAS NOTED BY THE TRIBUNAL THAT AS PER TH E PROVISIONS OF S. 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS S EIZED HAD TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 20 PERTAIN TO THE ASSESSMENT YEARS IN QUESTION AND IT IS AN UNDISPUTED FACT THAT THE DOCUMENTS WHICH WERE SEIZE D DID NOT ESTABLISH ANY CO-RELATION, DOCUMENT-WISE, WITH THES E FOUR ASSESSMENT YEARS. SINCE THIS REQUIREMENT UNDER S. 1 53C OF THE ACT IS ESSENTIAL FOR ASSESSMENT UNDER THAT PROVISIO N, IT BECOMES A JURISDICTIONAL FACT. WE FIND THIS REASONING TO BE L OGICAL AND VALID, HAVING REGARD TO THE PROVISIONS OF S. 153C OF THE A CT. PARA 9 OF THE ORDER OF THE TRIBUNAL REVEALS THAT THE TRIBUNAL HAD SCANNED THROUGH THE SATISFACTION NOTE AND THE MATERIAL WHIC H WAS DISCLOSED THEREIN WAS CULLED OUT AND IT SHOWED THAT THE SAME BELONGS TO ASST. YR. 2004-05 OR THEREAFTER. AFTER T AKING NOTE OF THE MATERIAL IN PARA 9 OF THE ORDER, THE POSITION THAT EMERGES THEREFROM IS DISCUSSED IN PARA 10. IT WAS SPECIFICALLY RECORD ED THAT THE COUNSEL FOR THE DEPARTMENT COULD NOT POINT OUT TO T HE CONTRARY. IT IS FOR THIS REASON THE HIGH COURT HAS ALSO GIVEN ITS I MPRIMATUR TO THE AFORESAID APPROACH OF THE TRIBUNAL. THAT APART, LEA RNED SENIOR COUNSEL APPEARING FOR THE RESPONDENT, ARGUED THAT N OTICE IN RESPECT OF ASST. YRS. 2000-01 AND 2001-02 WAS EVEN TIME-BARRED. 19. WE, THUS, FIND THAT THE TRIBUNAL RIGHTLY PE RMITTED THIS ADDITIONAL GROUND TO BE RAISED AND CORRECTLY DEALT WITH THE SAME GROUND ON MERITS AS WELL. ORDER OF THE HIGH COURT A FFIRMING THIS VIEW OF THE TRIBUNAL IS, THEREFORE, WITHOUT ANY BLE MISH. BEFORE US, IT WAS ARGUED BY THE RESPONDENT THAT NOTICE IN RESPECT OF THE ASST. YRS. 2000-01 AND 2001-02 WAS TIME-BARRED. HOWEVER, IN VIEW OF OUR AFOREMENTIONED FINDINGS, IT IS NOT NECESSARY TO ENTER INTO THIS CONTROVERSY. IF THE AFORESAID JUDICIAL PRONOUNCEMENTS ARE KEPT I N JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEALS , THE ASSESSEE HAS RAISED JURISDICTIONAL ISSUE/LEGAL ISSUE WITH RE SPECT TO ISSUANCE OF NOTICE U/S 153C OF THE ACT, WITH RESPEC T TO ASSESSMENT YEARS 2006-07 TO 2011-12, WITHOUT COMPLY ING WITH THE STATUTORY PROVISIONS AND THE PROCEDURES PRESCRI BED U/S 153C OF THE ACT. RESPECTFULLY FOLLOWING THE AFORES AID DECISIONS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 21 FROM HON'BLE APEX COURT INCLUDING HON'BLE JURISDICT IONAL HIGH COURT, THE ADDITIONAL GROUND/LEGAL GROUND RAISED BY THE ASSESSEE IS ADMITTED. 2.6. NOW, WE SHALL DEAL WITH THE LEGAL ISSUE, RAIS ED BY THE ASSESSEE. THE CRUX OF THE ARGUMENT IS THAT WHILE IS SUING THE NOTICE U/S 153C OF THE ACT, THE PROVISIONS OF SECTI ON 153A R.W.S. 153C AND THE CONDITIONS ENSHRINED THEREIN HAS NOT B EEN COMPLIED WITH BY THE ASSESSING OFFICER OF THE OTHER PERSON, OTHER THAN SEARCHED PERSON. THE LD. COUNSEL INVITED OUR A TTENTION TO THE CONDITIONS LAID DOWN IN THE AFORESAID PROVISION . ON THE OTHER HAND, THE LD. CIT-DR CONTENDED THAT THE CONDI TIONS MENTIONED IN THE SECTIONS HAS BEEN DULY COMPLIED WI TH BY THE LD. ASSESSING OFFICER. 2.7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S IN BRIEF ARE THAT A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT WAS CARRIED ON 22/09/2011 AT THE RESIDENTIAL PREMISES O F SHRI SUDHAKAR M. SHETTY, PARTNER OF THE FIRM. AS PER THE REVENUE, VARIOUS INCRIMINATING DOCUMENTS FOUND AND SEIZED. A S PER THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 22 ASSESSEE, ONE DOCUMENT, NEITHER INCRIMINATING NOR B ELONGING TO THE ASSESSEE WAS FOUND. ON THE BASIS OF SAID DOCUME NT, THE LD. ASSESSING OFFICER ISSUED NOTICE U/S. 153C OF THE IN COME TAX ACT, 1961 IN THE CASE OF THE ASSESSEE RIGHT FROM THE ASS ESSMENT YEAR 2006-07 TO 2011-12. THE ASSESSING OFFICER HAS PASSE D THE ORDER FOR THE ASSESSMENT YEAR 2007-08 TO 2011-12 AGAINST WHICH ASSESSEE HAD PREFERRED APPEALS BEFORE THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) HAS PARTLY ALLOWED THE APPEALS, WHICH ARE UNDER CHALLENGE BEFORE THIS TRIBUNAL. 2.8. BEFORE ADVERTING FURTHER, IT IS OUR BOUNDED D UTY TO EXAMINE SECTION 153C OF THE ACT, WHICH IS REPRODUCE D HEREUNDER FOR READY REFERENCE:- 153C. (1 ) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139 , SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECT ION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT, ( A ) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING, SEIZED OR REQUISITIONED, BELONGS TO; OR ( B ) ANY BOOKS OF ACCOUNT OR DOCUMENTS, SEIZED OR REQ UISITIONED, PERTAINS OR PERTAIN TO, OR ANY INFORMATION CONTAINE D THEREIN, RELATES TO, A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTI ON 153A, THEN, THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS, SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 23 OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER S HALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE NOTICE AND ASSESS OR REASSESS THE INCOME OF THE OTHER PERSON IN ACCORDANCE WITH T HE PROVISIONS OF SECTION 153A, IF, THAT ASSESSING OFFICER IS SATI SFIED THAT THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISI TIONED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON 17 [FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE AND] FOR THE RELEV ANT ASSESSMENT YEAR OR YEARS REFERRED TO IN SUB-SECTION (1) OF SEC TION 153A : PROVIDED THAT IN CASE OF SUCH OTHER PERSON, THE REFERENCE T O THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MA KING OF REQUISITION UNDER SECTION 132A IN THE SECOND PROVISO TO SUB-SEC TION (1) OF SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSE TS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURIS DICTION OVER SUCH OTHER PERSON : PROVIDED FURTHER THAT THE CENTRAL GOVERNMENT MAY BY RULES 18 MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE, SPECIF Y THE CLASS OR CLASSES OF CASES IN RESPECT OF SUCH OTHER PERSON, I N WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NO TICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVI OUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE 19 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS AS REFERRED TO IN SUB-SECT ION (1) OF SECTION 153A] EXCEPT IN CASES WHERE ANY ASSESSMENT OR REASS ESSMENT HAS ABATED. (2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS S EIZED OR REQUISITIONED AS REFERRED TO IN SUB-SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTI ON OVER SUCH OTHER PERSON AFTER THE DUE DATE FOR FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITION IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH ASSESSMENT YEAR ( A ) NO RETURN OF INCOME HAS BEEN FURNISHED BY SUCH O THER PERSON AND NO NOTICE UNDER SUB-SECTION (1) OF SECTION 142 HAS BEEN ISSUED TO HIM, OR ( B ) A RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OT HER PERSON BUT NO NOTICE UNDER SUB-SECTION (2) OF SECTION 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NOTICE UNDER SUB-SECTION (2) OFSECTION 143 HAS EXPIRED, OR SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 24 ( C ) ASSESSMENT OR REASSESSMENT, IF ANY, HAS BEEN MAD E, BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT O R DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFF ICER HAVING JURISDICTION OVER SUCH OTHER PERSON, SUCH ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOM E OF SUCH OTHER PERSON OF SUCH ASSESSMENT YEAR IN THE MANNER PROVID ED IN SECTION 153A. 2.9. WE ARE ALSO REPRODUCING HEREUNDER THE PROVISI ONS OF SECTION 153A OF THE ACT FOR ANALYSIS:- 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 1 39, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECT ION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 13 2OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UND ER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SH ALL ( A ) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FUR NISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS 9 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS] REFERRED TO IN C LAUSE ( B ), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANN ER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SU CH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; ( B ) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSES SMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MA DE 9 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS] : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS 9 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS] : PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING T O ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX AS SESSMENT YEARS 9 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS] REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UND ER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE : PROVIDED ALSO THAT THE CENTRAL GOVERNMENT MAY BY RULES 10 MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE (EXCEPT IN CASES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED UNDER THE SECOND PROVISO), SPECIFY THE CLASS OR CLASSES OF CASES IN WHICH THE ASSESSING OFFICER SHA LL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 25 THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR R EQUISITION IS MADE 11 [AND FOR THE RELEVANT ASSESSMENT YEAR OR YEARS]: 11 [ PROVIDED ALSO THAT NO NOTICE FOR ASSESSMENT OR REASSESSMENT SHAL L BE ISSUED BY THE ASSESSING OFFICER FOR THE RELEVANT AS SESSMENT YEAR OR YEARS UNLESS ( A ) THE ASSESSING OFFICER HAS IN HIS POSSESSION BOOK S OF ACCOUNT OR OTHER DOCUMENTS OR EVIDENCE WHICH REVEAL THAT THE INCOME, REPRESENTED IN THE FORM OF ASSET, WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO FIFTY LAKH RUPEES OR MORE IN THE RELEVANT ASSESSMENT YEAR OR IN AGGREGATE IN THE RELEVANT ASSESSMENT YEARS; ( B ) THE INCOME REFERRED TO IN CLAUSE ( A ) OR PART THEREOF HAS ESCAPED ASSESSMENT FOR SUCH YEAR OR YEARS; AND ( C ) THE SEARCH UNDER SECTION 132 IS INITIATED OR REQ UISITION UNDER SECTION 132A IS MADE ON OR AFTER THE 1ST DAY OF APRIL, 2017 . EXPLANATION 1 .FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESS ION 'RELEVANT ASSESSMENT YEAR' SHALL MEAN AN ASSESSMENT YEAR PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE WHICH FALLS BEYOND SIX ASSES SMENT YEARS BUT NOT LATER THAN TEN ASSESSMENT YEARS FROM THE END OF THE ASSES SMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR R EQUISITION IS MADE. EXPLANATION 2 .FOR THE PURPOSES OF THE FOURTH PROVISO, 'ASSET' S HALL INCLUDE IMMOVABLE PROPERTY BEING LAND OR BUILDING O R BOTH, SHARES AND SECURITIES, LOANS AND ADVANCES, DEPOSITS IN BANK AC COUNT.] (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASS ESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN ANNULLED IN APP EAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDING ANYTHING CONTAINE D IN SUB-SECTION (1) OR SECTION 153, THE ASSESSMENT OR REASSESSMENT RELA TING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO S UB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNULMENT BY THE PRINCIPAL COMMISSIONER OR COMMISSI ONER: PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFECT, IF S UCH ORDER OF ANNULMENT IS SET ASIDE. EXPLANATION .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, ( I ) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, SECT ION 153B AND SECTION 153C, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION; ( II ) IN AN ASSESSMENT OR REASSESSMENT MADE IN RESPECT OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL BE CHARGEABL E AT THE RATE OR RATES AS APPLICABLE TO SUCH ASSESSMENT YEAR. 2.10. IF THE PROVISION OF SECTION 153C OF THE ACT IS ANALYZED, IT CLEARLY LAYS DOWN A PROVISION WITH RESPECT TO AS SESSMENT OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 26 INCOME OF ANY OTHER PERSON. SECTION 153C(1)(A) OF T HE ACT SPEAKS ABOUT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUAB LE ARTICLE OR THINGS SEIZED OR REQUISITIONED, WHICH BELONGS TO OR (B) ANY BOOKS OF ACCOUNT, DOCUMENTS, SEIZED OR REQUISITIONED PERT AINS TO/RELATES TO A PERSON OTHER THAN THE PERSON REFERR ED TO IN SECTION 153A OF THE ACT THEN SUCH DOCUMENTS OR BOOK S OF ACCOUNTS OR ASSETS SEIZED SHALL BE HANDED OVER TO T HE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH O THER PERSON AND ISSUE NOTICE AND ASSESS OR REASSESS THE INCOME OF OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A, IF THE ASSESSING OFFICER IS SATISFIED THAT SUCH SEIZED MAT ERIAL IS HAVING A BEARING ON DETERMINATION OF SUCH OTHER PERSON. IT IS FURTHER NOTED THAT THE OTHER CONDITIONS REQUIRED IS THAT FI RSTLY THERE SHOULD BE A SEARCH ACTION AND SECONDLY DURING COURS E OF SUCH SEARCH INCRIMINATING DOCUMENTS, WHICH BELONGS TO OT HER PERSON SHOULD BE FOUND AND THE ASSESSING OFFICER OF SUCH P ERSON SHOULD HAVE RECORDED A SATISFACTION THAT INCRIMINATING DOC UMENTS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 27 BELONGING TO THIRD PERSON HAS BEEN FOUND. THE PROVI SION IS SUMMARIZED AS UNDER:- I. THE ASSESSING OFFICER OF SEARCHED PERSON SHOULD HAV E RECORDED A SATISFACTION NOTE THAT INCRIMINATING DOCUMENTS BELONGING TO THIRD PERSON ARE FOUND; II. THE ASSESSING OFFICER OF SEARCHED PERSON SHOULD HANDOVER THE SATISFACTION NOTE AND DOCUMENTS BELONG ING TO OTHER PERSON TO THE ASSESSING OFFICER OF THE OTH ER PERSON; III. THE ASSESSING OFFICER OF THE OTHER PERSON CAN THEN ISSUE NOTICES U/S. 153C OF THE PRECEDING SIX ASSESSMENT YEARS FROM THE DATE ON WHICH SUCH DOCUMENTS ARE RECEIVED FROM THE ASSESSING OFFICER OF SEARCHED PER SON. 2.11. WE HAVE PERUSED THE RECORD AND FIND THAT THE RE IS NO DISPUTE THAT A SEARCH ACTION HAD TAKEN PLACE AT THE RESIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHETTY, WHO IS PARTNER OF ASSESSEE FIRM. HENCE CONDITIONS NO. (I) IS COMPLIED WITH. TH E REAL PROBLEM STARTS WITH CONDITION NO. (II), WHERE THERE IS A CO NDITION THAT INCRIMINATING DOCUMENTS BELONGING TO OTHER PERSONS ARE FOUND AND IN WHOSE CASE THE NOTICES U/S. 153C OF THE INCO ME TAX ACT, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 28 1961 WERE ISSUED. IN THE PRESENT APPEAL, SUCH NOTIC ES U/S. 153C WERE ISSUED ON THE BASIS OF A SINGLE PAPER FOUND DU RING THE COURSE OF SEARCH WHICH HAVE TAKEN PLACE FROM THE RE SIDENTIAL PREMISES OF ITS PARTNER SHRI SUDHAKAR M. SHETTY. T HE DOCUMENT CONTAINED ON PAGE NO. 55 OF ANNEXURE A (FOUND DURIN G THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF SHR I SUDHAKAR M. SHETTY) IS A LETTER SB-274/2003, DATED 19TH DECEMBE R 2003 WRITTEN BY ONE SHRI DILIP HATE, PROPRIETOR OF M/S. SKYLARK BUILD (A PROPRIETORSHIP FIRM OWNED BY SHRI DILIP HATE HAV ING SIMILAR NAME THAT OF THE PRESENT ASSESSEE) ADDRESSED TO ONE M/S. HEMANT PARIKH OF M/S. HEMANT PARIKH & ASSOCIATES, 7 03/704, KRUSHAL COMMERCIAL, NEAR AMAR MAHAL JUNCTION, CHEMB UR (WEST), MUMBAI. THE RELEVANT LETTER IS APPEARING I N THE PAPER BOOKS FILED IN CONNECTION WITH THE FOLLOWING APPEAL S ARE AS UNDER: APPEAL NO 4370/M/15 3237/M/15 4371/M/15 3238/M/15 6199/M/14 ASSESSMENT YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 PAPER BOOK PAGE NO. 17 495 700 246 17 A COPY OF THE SAID LETTER IS REPRODUCED HEREUNDER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 29 2.12. THE CRUX OF THE ARGUMENT BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE AFORESAID LETTER DOES NOT BELO NG TO THE ASSESSEE BECAUSE OF THE FOLLOWING REASONS:- I. THE LETTER IS DATED 19TH DECEMBER, 2003 WHEREAS THE ASSESSEE FIRM CAME INTO EXISTENCE ON 19TH MARCH, 2004 BY A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 30 PARTNERSHIP DEED EXECUTED ON THAT DATE. COPY OF THE SA ID PARTNERSHIP DEED IS ENCLOSED HEREWITH AS ANNEXURE A . HENCE, THE SAID LETTER DOES NOT BELONG TO THE ASSESSEE. II. THE ADDRESS OF SAID M/S. SKYLARK BUILD (PROPRIETORSH IP FIRM OF SHRI DILIP HATE) IS 6, SHREE SAI SHRADDHA CHS, N EAR SHARADASHRAM SOCIETY, 114, BHAWANI SHANKAR ROAD, DA DAR (W), MUMBAI - 400 028 WHEREAS ADDRESS OF THE ASSESSE E IS 402, SAGAR AVENUE, PLOT NO. 54B, JUNCTION OF S.V.ROAD AND LALLUBHAI PARK, ANDHERI (W), MUMBAI - 400 058. III. THE SAID LETTER IS NEITHER CONTAINING NOR REVEALING A NY COMMERCIAL TRANSACTION. THE SAID LETTER CONTAINS THE DE TAILS OF TOTAL NUMBER OF HUTMENTS, TOTAL NUMBER OF ELIGIBLE HUTMEN T DWELLERS, TOTAL NUMBER OF PARTICIPANTS AND % OF THE PARTICIPANTS UNDER THE VARIOUS CO-OPERATIVE HOUSING SOC IETIES MENTIONED IN THE SAID LETTER. HENCE, THE SAID LETTER IS NOT INCRIMINATING IN NATURE. IV. THE SAID M/S. SKYLARK BUILD (PROPRIETORSHIP FIRM OF SHRI DILIP HATE) IS STILL IN EXISTENCE AND CONTINUING UNDER PAN NO. AAAPH4943F. V. THE SAID LETTER IS RELATED TO ASSESSMENT YEAR 2004-05, WHICH BECOMES TIME BARRED ON THE DATE OF SEARCH . 2.13. ALL THE ABOVE FACTS SHOWS THAT THE ALLEGED DOCUMENT IS NEITHER BELONGING TO THE ASSESSEE NOR INCRIMINATING IN NATURE. THE ASSESSEE HAS FILED AN AFFIDAVIT DULY EXECUTED BY THE PARTNER OF THE ASSESSEE FIRM A ND WHICH IS SELF SPEAKING ONE. THE RELEVANT AFFIDAVIT IS APP EARING IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 31 THE PAPER BOOKS FILED IN CONNECTION WITH THE FOLLOW ING APPEALS: APPEAL NO 4370/M/15 3237/M/15 4371/M/15 3238/M/15 6199/M/14 ASSESSMENT YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 PAPER BOOK PAGE NO. 14 TO 16 492 TO 494 697 TO 699 243 TO 245 18-20 2.14. THUS, IT CAN BE CONCLUDED THAT THE CONDITIONS OF PROVISIONS OF SECTION 153A READ WITH SECTION 153C H AVE NOT BEEN COMPLIED WITH. SO FAR AS, DETERMINING THAT TH E DOCUMENTS BELONGS TO OTHER PERSON, RELIANCE HAS BEE N PLACED UPON CERTAIN DECISIONS BY THE ASSESSEE. WE HAVE PER USED THE DECISIONS AND DEAL WITH THE SAME AS UNDER:- 2.15. IN THE CASE OF ARN INFRASTRUCTURE INDIA LTD VS. ACIT (2017) 1 NYPCTR 415(DEL) (REFER PAGE NO. 355 TO 364 OF CASES RELIED UPON BY THE ASSESSEE PART 2), I T WAS OBSERVED AS UNDER:- IN THIS CASE, AS REGARDS THE SEIZED DOCUMENTS, WHA T IS MENTIONED IN THE SATISFACTION NOTE ARE TWO DOCUMENTS : THE LEDGE R ACCOUNT MAINTAINED BY THE ASSESSEE RUNNING INTO 3 PAGES SHO WING THE COMMISSION PAYMENTS MADE BY THE ASSESSEE TO REAL GA IN ESTATE (P) LTD. AND THE LETTER DT. 27TH JAN., 2010 WRITTEN BY THE ASSESSEE TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 32 REAL GAIN ESTATE (P) LTD. AS FAR AS THE LATTER DOCU MENT IS CONCERNED, IT IS A LETTER WRITTEN BY THE ASSESSEE TO REAL GAIN ESTATE (P) LTD. AND, THEREFORE, SHOULD BE TREATED AS A DOCUMENT BELONGIN G TO REAL ESTATE (P) LTD. AND NOT TO THE ASSESSEE. WHETHER IT MAY OR MAY NOT BE RELATED TO THE ASSESSEE IS NOT RELEVANT SINCE THE A MENDMENT TO S. 153C IN THAT REGARD WAS PROSPECTIVE W.E.F. 1ST J UNE, 2015 I.E., SUBSEQUENT TO THE DATE OF PREPARATION OF THE 'SATIS FACTION NOTE' IN THE PRESENT CASE. 2.16. SIMILARLY, IT IS NOTED IN THE CASE OF THE AS SESSEE, THE AFOREMENTIONED LETTER WAS WRITTEN BY SHRI DILIP HAT E IN HIS CAPACITY AS A PROPRIETOR OF M/S. SKYLARK BUILD TO O NE SHRI HEMANT PARIKH IS A DOCUMENT BELONGING TO SHRI HEMAN T PARIKH AND NOT TO THE ASSESSEE. WHILE DECIDING THE MATTER, THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF ARN INFRASTRUCTU RE INDIA LTD. VS ACIT ((SUPRA)) HELD AS UNDER:- 13 . AS REGARDS THE SEIZED DOCUMENTS, WHAT IS MENTIONE D IN THE SATISFACTION NOTE ARE TWO DOCUMENTS : THE LEDGER AC COUNT MAINTAINED BY THE PETITIONER RUNNING INTO 3 PAGES SHOWING THE COMMISS ION PAYMENTS MADE BY THE PETITIONER TO RGEPL AND THE LETTER DT. 27TH JAN ., 2010 WRITTEN BY THE PETITIONER TO RGEPL. AS FAR AS THE LATTER DOCUMENT IS CONCERNED, IT IS A LETTER WRITTEN BY THE PETITIONER TO RGEPL AND, THER EFORE, SHOULD BE TREATED AS A DOCUMENT BELONGING TO RGEPL AND NOT TO THE PET ITIONER. WHETHER IT MAY OR MAY NOT BE RELATED TO THE PETITIONER IS NOT RELEVANT SINCE THE AMENDMENT TO S. 153C OF THE ACT IN THAT REGARD WAS PROSPECTIVE W.E.F. 1ST JUNE, 2015 I.E. SUBSEQUENT TO THE DATE OF PREPARATI ON OF THE 'SATISFACTION NOTE' IN THE PRESENT CASE. 14. THE DECISION IN PEPSICO INDIA HOLDING (P) LTD. VS. ASSTT. CIT (SUPRA) WHICH INTERPRETED S. 153C OF THE ACT, AS IT STOOD PRIOR TO ITS AMENDMENT, EXPLAINED THAT THE EXPRESSION BELON GS TO' SHOULD NOT BE CONFUSED WITH THE EXPRESSION 'RELATES TO'. ONE O F THE INSTANCES SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 33 CITED IN THE SAID DECISION WAS A REGISTERED SALE DE ED, COPIES OF WHICH COULD BE AVAILABLE BOTH WITH THE VENDOR AND THE VEN DEE. THE COPY AVAILABLE WITH THE VENDEE COULD NOT BE SAID TO 'BEL ONG' TO THE VENDOR AND VICE VERSA. 15. IN PRINCIPAL CIT VS. NIKKI DRUGS & CHEMICALS LTD. (SUPRA), THE SEARCHED PERSON WAS SVP BUILDERS INDIA LTD. THE PHO TOCOPY OF DOCUMENTS, THE ORIGINAL OF WHICH WERE WITH THE ASSE SSEE IN THAT CASE, WERE RECOVERED FROM SVP BUILDERS DURING THE SEARCH. IN THE CIRCUMSTANCES, IT WAS OBSERVED BY THE COURT AS UNDE R : '21. ..... IN THE PRESENT CASE, ALTHOUGH THE PHOTOC OPIES OF THE DOCUMENTS HANDED OVER TO SVP BUILDERS INDIA LTD. MA Y BE COPIES OF THE ORIGINAL DOCUMENTS THAT BELONG TO THE ASSESSEE, THE SAID PHOTOCOPIES WOULD BELONG TO SVP BUILDERS INDIA LTD. AS THE SAME WERE HANDED OVER TO IT IN CONNECTION WITH THE INVES TMENT MADE BY THE ASSESSEE. SIMILARLY, A CERTIFIED COPY OF THE ASSESS EE'S RESOLUTION SIGNED BY ITS DIRECTORS, WOULD ALSO BELONG TO THE S VP BUILDERS INDIA LTD. EVEN THOUGH THE MINUTES OF THE BOARD MEETING FORM A PART OF THE RECORD OF THE ASSESSEE. WE FIND NO INFIRMITY WITH THE VIEW TAKEN BY THE TRIBUNAL IN THIS REGARD. THUS , NOTWITHSTANDING THE CONTROVERSY WHETHER THE AO OF THE SEARCHED PERS ONS HAD RECORDED HIS SATISFACTION THAT THE SPECIFIED SEIZED DOCUMENTS BELONGED TO THE ASSESSEE, THE INITIATION OF PROCEED INGS UNDER S. 153COF THE ACT, IN RESPECT OF THE ASSESSEE WOULD BE WITHOUT JURISDICTION.' 2.17. IN THE LIGHT OF THE ABOVE, IT CANNOT BE SAID THAT THE LETTER DT. 27TH JANUARY 2010 WRITTEN BY THE PETITIO NER TO RGEPL AND RECOVERED FROM THE PREMISES OF RGEPL WAS A DOCUMENT WHICH BELONGED TO THE PETITIONER. 2.18. IN ANOTHER CASE IN CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY CIVIL APPPEAL NO. 11081 TO 11083 OF 2017 DECIDED ON 29TH AUGUST, 2017(SC) (REFER PAG E SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 34 NO. 204 TO 221 OF CASES RELIED UPON BY THE ASSESSEE PART 1), IT WAS OBSERVED/HELD BY HON'BLE APEX COURT AS UNDER:- 20. INSOFAR AS THE JUDGMENT OF THE GUJARAT HIGH COURT RELIED UPON BY THE LEARNED SOLICITOR GENERAL IS CONCERNED, WE FIND THA T THE HIGH COURT IN THAT CASE HAS CATEGORICALLY HELD THAT IT IS AN ESSENTIAL CONDITION PRECEDENT THAT ANY MONEY, BULLION OR JEWELLERY OR OTHER VALUABLE A RTICLES OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIO NED SHOULD BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN S. 153A OF THE ACT . THIS PROPOSITION OF LAW LAID DOWN BY THE HIGH COURT IS C ORRECT, WHICH IS STATED BY THE BOMBAY HIGH COURT IN THE IMPUGNED JUDGMENT AS W ELL. THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE SAID CASE WENT IN FAV OUR OF THE REVENUE WHEN IT WAS FOUND ON FACTS THAT THE DOCUMENTS SEIZED, IN FACT, PERTAIN TO THIRD PARTY, I.E. THE ASSESSEE, AND, THEREFORE, THE SAID CONDITION PRECEDENT FOR TAKING ACTION UNDER S. 153C OF THE ACT HAD BEEN SAT ISFIED. IN THE AFORESAID CASE, THE HON'BLE APEX COURT CLEAR LY HELD THAT THE DOCUMENTS SHOULD BELONG TO THE PERSON OTHE R THAN THE SEARCHED PERSON. 2.19. IN THE CASE OF SMT. REKHABEN THAKKAR VS. ACIT (2015) TTJ 662(AHD) DECIDED ON 12TH JUNE, 2015 (REFER PAGE NO. 38 TO 44 OF CASES RELIED UPON BY T HE ASSESSEE PART 1) 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SEC. 153C OF THE IT ACT, 1961 READS AS UNDER : '153C. (1) NOTWITHSTANDING ANYTHING CONTAINED IN S. 139, S. 147, S. 148, S. 149, S. 151 AND S. 153, WHERE THE AO IS SATISFIE D THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR BOOKS OF ACCOUNT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 35 OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN S. 153A, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIO NED SHALL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT AO SHALL PROCEED AGAINST EACH SUCH OTHER PERSO N AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME O F SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF S. 153A .' 9. FROM THE ABOVE, IT IS EVIDENT THAT ACTION UNDER S. 153C CAN BE TAKEN IN RESPECT OF ANY OTHER PERSON THAN THE PERSON SEAR CHED IF THE AO OF THE PERSON SEARCHED IS SATISFIED THAT ANY MONEY, BU LLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS BELONG TO A PERSON OTHER THAN THE PERSON SEARCHED. IN SUCH CIRCUMSTANCES, HE SHALL HAND OVER TO THE AO OF SUCH OTHER PERSON MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS. THEREAFTER, THE AO OF SUCH OT HER PERSON SHALL PROCEED AGAINST THE SAID PERSON TO ASSESS OR REASSE SS HIS INCOME IN ACCORDANCE WITH THE PROVISIONS OF S. 153A. THEREFOR E, RECORDING OF SATISFACTION BY THE AO OF THE PERSON SEARCHED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED BELONG TO THE PERSON OTHER THAN TH E PERSON SEARCHED IS A SINE QUA NON FOR INITIATING ACTION UN DER S. 153C. 2.20. IN THE CASE CIT VS. RENU COSTRUCTIONS (P) LTD (2017) 1 NYPCTR 843 (DEL) (REFER PAGE NO. 248 TO 2 50 OF CASES RELIED UPON BY THE ASSESSEE PART 1), IT WAS OBSERVED/HELD AS UNDER:- 7. LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEES, ON THE OTHER HAND, POINTED OUT THAT THIS COURT HAS, IN PRI NCIPAL CIT VS. VINITA CHAURASIA (2017) 154 DTR (DEL) 145 : (2017) 394 ITR 758 (DEL) , AFTER CONSIDERING THE AFOREMENTIONED THREE DECISIONS, REITERATED THE SETTLED LEGAL POSITION AS EXPLAINED IN PEPSICO INDIA HOLDINGS (P) LTD. VS. ASSTT. CIT & ANR. (2014) 270 CTR (DEL) 467 : (2014) 108 DTR (DEL) 306 : (2015) 370 ITR 295 (DEL) , THAT FOR THE PURPOSE OF INITIATING PROCEEDINGS UNDER S. 153C OF THE ACT, THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 36 SEIZED DOCUMENTS HAD TO BE SHOWN TO BELONG TO THE O THER PERSON AND NOT MERELY PERTAINING TO SUCH OTHER PERSON. THE CHANGE BROUGHT ABOUT IN THIS REGARD IN S. 153C OF THE ACT BY WAY OF AMENDMENT HAS BEEN GIVEN PROSPECTIVE EFFECT FROM 1S T JUNE, 2015. THE AMENDED PROVISION THEREFORE HAS NO APPLIC ATION TO THE CASES ON HAND. 8. THE RECENT DECISION OF THE SUPREME COURT IN CIT VS . SINHGAD TECHNICAL EDUCATIONAL SOCIETY (2017) 297 CTR (SC) 4 41 : (2017) 156 DTR (SC) 161 : (2017) 84 TAXMANN.COM 290 (SC) SETTL ES THE LEGAL POSITION IN FAVOUR OF THE ASSESSEES. THE SUPR EME COURT, WHILE AFFIRMING THE JUDGMENT OF THE BOMBAY HIGH COURT, AP PROVED THE DECISION OF THE GUJARAT HIGH COURT IN KAMLESHBHAI DHARAMSHIB HAI PATEL VS. CIT (2013) 263 CTR (GUJ) 362 : (2013) 95 DTR (GUJ) 88 T HAT A DOCUMENT SEIZED 'SHOULD BELONG TO A PERSON OTHER THAN THE PE RSON REFERRED TO IN S. 153A OF THE ACT'. IT HAS BEEN CATEGORICALLY OBSERVE D BY THE SUPREME COURT THAT THE ABOVE POSITION OF LAW LAID DOWN BY T HE GUJARAT HIGH COURT IS CORRECT. 9. CONSEQUENTLY, THIS COURT REJECTS THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT EVEN PRIOR TO 1ST JUNE, 2015 A T THE STAGE OF INITIATION OF PROCEEDINGS UNDER S. 153C OF THE ACT, IT IS SUFFICIENT IF THE SEIZED DOCUMENT 'PERTAINED TO' THE OTHER PERSON AND IT IS NOT NECESSARY TO SHOW THAT THE SEIZED MATERIAL 'BELONGED TO' THE OTHER PERSON. THIS LEGAL POSITION HAS BEEN EXPLAINED BY THIS COURT IN ITS RECENT DECISION DT. 10TH JULY 2017 IN WRIT PETN. (CIVIL) NO. 3241 OF 20 15 ( CANYON FINANCIAL SERVICES LTD. VS. ITO) [REPORTED AT (2017) 155 DTR (DEL) 73ED.] . 2.21. LIKEWISE, IN DCIT VS. QUALITRON COMMODITIES (P) LTD (2015) 167 TTJ (DEL) 553IV. (REFER PAGE NO . 251 TO 260 OF CASES RELIED UPON BY THE ASSESSEE PART 2). T HE HON'BLE DELHI HIGH COURT HELD AS UNDER:- 13. HAVING GONE THROUGH THE DECISIONS RELIED UPON, WE F IND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF PEPSI FOODS (P) LTD. (CITED SUPRA) AFTER DISCUSSING THE ISSUE IN DETAIL HAS BEE N PLEASED TO COME TO THE CONCLUSION THAT IN THE SATISFACTION NOTE APART FROM SAYING THAT THE DOCUMENTS BELONG TO THE PETITIONER AND THAT THE AO IS SATISFIED THAT IT IS A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 37 FIT CASE FOR ISSUANCE OF NOTICE UNDER S. 153C. THUS RELEVANT EXTRACT OF THE DECISION IS BEING REPRODUCED BELOW : '11 . IT IS EVIDENT FROM THE ABOVE SATISFACTION NOTE TH AT APART FROM SAYING THAT THE DOCUMENTS BELONGED TO THE PETI TIONER AND THAT THE AO IS SATISFIED THAT IT IS A FIT CASE FOR ISSUANCE OF A NOTICE UNDER S. 153C, THERE IS NOTHING WHICH WOULD INDICATE AS TO HOW THE PRESUMPTION WHICH ARE TO BE NORMALLY RAI SED AS INDICATED ABOVE HAVE BEEN REBUTTED BY THE AO. MERE USE OR MENTION OF THE WORD SATISFACTION OR THE WORDS 1 AM SATISFIED IN THE ORDER OR THE NOTE WOULD NOT MEET THE REQUIRE MENT OF THE CONCEPT OF SATISFACTION AS USED IN S. 153C OF THE S AID ACT. THE SATISFACTION NOTE ITSELF MUST DISPLAY THE REASONS O R BASIS FOR THE CONCLUSION THAT THE AO OF THE SEARCHED PERS ON IS SATISFIED THAT THE SEIZED DOCUMENTS BELONG TO A PER SON OTHER THAN THE SEARCHED PERSON . WE ARE AFRAID THAT GOING THROUGH THE CONTENTS OF THE SATISFACTION NOTE, WE A RE UNABLE TO DISCERN ANY SATISFACTION OF THE KIND REQUIRED UND ER S. 153C OF THE SAID ACT. 12. THIS BEING THE POSITION THE VERY FIRST STEP PRI OR TO THE ISSUANCE OF A NOTICE UNDER S. 153C OF THE SAID ACT HAS NOT BEEN FULFILLED. INASMUCH AS THIS CONDITION PRECEDEN T HAS NOT BEEN MET, THE NOTICES UNDER S. 153 ARE LIABLE TO BE QUASHED. IT IS ORDERED ACCORDINGLY. THE WRIT PETITIONS ARE ALLO WED AS ABOVE. THERE SHALL BE NO ORDER AS TO COSTS.' 14. AGAIN IN THE CASE OF PEPSICO INDIA HOLDINGS (P) LTD . (CITED SUPRA), THE HONBLE HIGH COURT HAS BEEN PLEASED TO OBSERVE THAT THE FINDING OF THE PHOTOCOPIES IN THE POSSESSION OF A S EARCHED PERSON DOES NOT MEAN AND IMPLY THAT THEY 'BELONG' TO THE PERSON WHO HOLDS THE ORIGINALS. POSSESSION OF DOCUMENTS AND POSSESSI ON OF PHOTOCOPIES OF DOCUMENTS ARE TWO SEPARATE THINGS. W HILE THE JAIPURIA GROUP MAY BE THE OWNER OF THE PHOTOCOPIES OF THE DOCUMENTS AND IT IS QUITE POSSIBLE THAT THE ORIGINA LS MAY BE OWNED BY SOME OTHER PERSON. UNLESS IT IS ESTABLISHED THAT THE DOCUMENTS IN QUESTION, WHETHER THEY BE PHOTOCOPIES OR ORIGINALS DO NOT BELONG TO THE SEARCHED PERSON, THE QUESTION OF INVOKING S. 15 3C OF THE ACT DOES NOT ARISE. THE HONBLE HIGH COURT HAS ALSO BEE N PLEASED TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 38 MAKE IT CLEAR THAT THE AOS SHOULD NOT CONFUSE THE E XPRESSION 'BELONGS TO' WITH THE EXPRESSION 'RELATES TO' OR AG AIN 'REFERS TO'. A REGISTERED SALE DEED FOR EXAMPLE 'BELONGS TO' THE P URCHASER OF THE PROPERTY ALTHOUGH IT OBVIOUSLY 'RELATES TO' OR AGAI N 'REFERS TO' VENDOR. IN THIS EXAMPLE, IF THE PURCHASERS PREMISES ARE SE ARCHED AND REGISTERED WITH SALE DEED IS SEIZED, IT CANNOT BE S AID THAT IT 'BELONGS TO' THE VENDOR JUST BECAUSE HIS NAME IS MENTIONED I N THE DOCUMENT. IN THE CONVERSE CASE, IF THE VENDORS PREMISES ARE SEARCHED AND A COPY OF THE SALE DEED IS SEIZED, IT CANNOT BE SAID THAT THE SAID COPY 'BELONGS TO' THE PURCHASER JUST BECAUSE IT REFERS T O HIM AND THE PURCHASER HOLDS THE ORIGINAL SALE DEED. IN THIS LIG HT, IT IS OBVIOUS THAT NONE OF THE THREE SETS OF DOCUMENTS/COPIES OF PREFE RENCE SHARES, UNDERSIGNED LEAVES OF CHEQUE BOOKS AND THE COPY OF THE SUPPLY AND LOAN AGREEMENT CAN BE SAID TO 'BELONG TO' THE PETIT IONER. WITH THESE OBSERVATIONS THE HONBLE HIGH COURT WAS PLEASED TO HOLD THAT THE INGREDIENTS OF S. 153C OF THE ACT HAVE NOT BEEN SAT ISFIED. CONSEQUENTLY NOTICES ISSUED UNDER S. 153C WERE QUAS HED. 15. SIMILAR ARE THE FACTS OF THE PRESENT CASE BEFOR E US. THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH AND SE IZURE PROCEEDINGS FROM THE RAJ DARBAR GROUP HAVE BEEN REF ERRED AS 'RELATING TO' THE ASSESSEE, IN THE SATISFACTION NOT E RECORDED BY THE AO WHILE INITIATING THE PROCEEDINGS UNDER S. 153C O F THE ACT AGAINST THE ASSESSEE. FINDING A REFERENCE IN THE SATISFACTI ON NOTE RECORDED BY THE AO FOR INITIATION OF PROCEEDINGS UNDER S. 15 3C OF THE ACT AGAINST THE ASSESSEE ARE CERTIFICATE OF INCORPORATI ON, E-FILING RECEIPT, FORM NO. 18, FORM NO. 35. IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE DISCUSSED DECISIONS OF HONBLE HIGH COURT IN THE CA SES OF PEPSICO INDIA HOLDINGS (P) LTD. (CITED SUPRA) AND PEPSI FOO DS (P) LTD. (CITED SUPRA) THE SATISFACTION OF THE AO THAT THE SAID DOC UMENTS 'BELONG TO' THE ASSESSEE IS CONDITION PRECEDENT TO INITIATE PRO CEEDINGS UNDER S. 153C OF THE ACT. IN ABSENCE OF SUCH FINDING BY THE AO, THE NOTICE ISSUED UNDER S. 153C IN THE PRESENT CASE IS HELD IN VALID. BESIDES THERE WAS NO INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH AND THE ASSESSMENT WAS NOT PENDING OR ABATED TO JUS TIFY THE ASSESSMENT FRAMED UNDER S. 153A R/W S. 153C AS WELL AS S. 143(3) OF THE ACT AGAINST THE ASSESSEE. THIS VIEW IS SUPPORTE D WITH THE DECISIONS CITED IN PARA NO. 11 HEREINABOVE. THE ASS ESSMENT IN THE QUESTION FRAMED IN FURTHERANCE TO THE SAID INVALID NOTICE AND IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 39 ABSENCE OF INCRIMINATING MATERIAL IS THUS HELD AS V OID AND THE SAME IS QUASHED AS SUCH. THE ISSUE RAISED IN OBJECTION N OS. 1 AND 1.1 OF THE CROSS-OBJECTION IS THUS DECIDED IN FAVOUR OF TH E ASSESSEE. THESE OBJECTIONS ARE THUS ALLOWED. 16. IN VIEW OF THE ABOVE FINDING WHEN THE VERY ASSESSME NT HAS BEEN HELD AS VOID, THE REMAINING OBJECTIONS OF THE CROSS -OBJECTION QUESTIONING THE ADDITIONS SUSTAINED BY THE LEARNED CIT(A) AND THE GROUNDS OF THE APPEAL PREFERRED BY THE REVENUE QUES TIONING THE ACTION OF THE CIT(A) IN DELETING SOME ADDITIONS HAV E BECOME INFRUCTUOUS. THE SAME ARE BEING DISPOSED OF AS SUCH . 2.22. HON'BLE DELHI HIGH COURT IN PCIT VS. INDEX SECURITIES (P) LTD (2017) 1NYPCTR 835 DEL (REFER PA GE NO. 261 TO 277 OF CASES RELIED UPON BY THE ASSESSEE PART 2) HELD/OBSERVED AS UNDER:- 28.3 FROM A READING OF THE ABOVE TWO PARAGRAPHS, IT IS PLAIN THAT THE SUPREME COURT (I) AGREED WITH THE TRIBUNAL THAT THE DOCUMENTS SEIZED HAD TO RELATE TO THE ASSESSMENT YEARS WHOSE ASSESSM ENTS WERE REOPENED AND THAT THIS WAS AN ESSENTIAL JURISDICTIO NAL FACT AND (II) UPHELD THE DECISION OF THE TRIBUNAL TO PERMIT THE ADDITION AL GROUND TO BE RAISED BEFORE IT FOR THE FIRST TIME. 28.4 THE SUPREME COURT ALSO AGREED WITH THE DECISION OF THE GUJARAT HIGH COURT IN KAMLESHBHAI DHARAMSHIBHAI PATEL (SUPRA) TO THE EXTENT IT HELD THAT 'IT IS AN ESSENTIAL CONDITION PRECEDENT T HAT ANY MONEY, BULLION OR JEWELLERY OR OTHER VALUABLE ARTICLES OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN S. 153A OF THE ACT.' THE SUPREME COURT OBSERVED : 'THIS PROPOSITION OF LAW LAID DOWN BY TH E HIGH COURT IS CORRECT, WHICH IS STATED BY THE BOMBAY HIGH COURT I N THE IMPUGNED JUDGMENT AS WELL.' 28.5 THE ABOVE CATEGORICAL PRONOUNCEMENT OF THE SUPREME COURT CANNOT, BY ANY STRETCH OF IMAGINATION, BE TERMED AS OBITER AS HAS BEEN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 40 SUGGESTED BY MR. MANCHANDA. EVEN THE OBITER DICTA O F THE SUPREME COURT IS BINDING ON THIS COURT. 29. THE SEARCH IN THE CASE BEFORE THE SUPREME COURT WA S PRIOR TO 1ST JUNE, 2015. APART FROM THE FACT THE SUPREME COURT A PPROVED THE ABOVE DECISION OF THE GUJARAT HIGH COURT HOLDING THAT THE SEIZED DOCUMENTS SHOULD 'BELONG' TO THE OTHER PERSON, THE LEGAL POSI TION IN THIS REGARD WHERE THE SEARCH HAS TAKEN PLACE PRIOR TO 1ST JUNE, 2015 HAS BEEN SETTLED BY THE DECISION OF THIS COURT IN PEPSICO IN DIA HOLDINGS (P) LTD. VS. ASSTT. CIT (SUPRA). IN CIT VS. VINITA CHAURASIA (SU PRA), THIS COURT REITERATED THE ABOVE LEGAL POSITION AFTER DISCUSSIN G THE DECISIONS IN PRINCIPAL CIT VS. SUPER MALLS (P) LTD. (SUPRA) A ND CIT VS. NAU NIDH OVERSEAS (P) LTD. (SUPRA). THE ESSENTIAL JURISDICTI ONAL REQUIREMENT FOR ASSUMPTION OF JURISDICTION UNDER S. 153C OF THE ACT (AS IT STOOD PRIOR TO ITS AMENDMENT W.E.F. 1ST JUNE, 2015) QUA THE 'OTHER PER SON' (IN THIS CASE THE ASSESSEES) IS THAT THE SEIZED DOCUMENTS FORMING THE BASIS OF THE SATISFACTION NOTE MUST NOT MERELY 'PERTAIN' TO THE OTHER PERSON BUT MUST BELONG TO THE 'OTHER PERSON'. 30. IN THE PRESENT CASE, THE DOCUMENTS SEIZED WERE THE TRIAL BALANCE AND BALANCE SHEETS OF THE TWO ASSESSEES FOR THE PERIOD 1ST APRIL TO 13TH SEPT., 2010 (FOR ISRPL) AND 1ST APRIL TO 4TH SEPT., 2010 (FOR VSIPL). BOTH SETS OF DOCUMENTS WERE SEIZED NOT FROM THE RES PECTIVE ASSESSEES BUT FROM THE SEARCHED PERSON I.E. JAGAT AGRO COMMOD ITIES (P) LTD. IN OTHER WORDS, ALTHOUGH THE SAID DOCUMENTS MIGHT 'PER TAIN' TO THE ASSESSEES, THEY DID NOT BELONG TO THEM. THEREFORE, ONE ESSENTIAL JURISDICTIONAL REQUIREMENT TO JUSTIFY THE ASSUMPTIO N OF JURISDICTION UNDER S. 153C OF THE ACT WAS NOT MET IN THE CASE OF THE TWO ASSESSEES. 31. AS REGARDS THE SECOND JURISDICTIONAL REQUIREMENT V IZ., THAT THE SEIZED DOCUMENTS MUST BE INCRIMINATING AND MUST RELATE TO THE ASSESSMENT YEARS WHOSE ASSESSMENTS ARE SOUGHT TO BE REOPENED, THE DECISION OF THE SUPREME COURT IN CIT VS. SINHGAD TECHNICAL EDUC ATION SOCIETY(SUPRA) SETTLES THE ISSUE AND HOLDS THIS TO BE AN ESSENTIAL REQUIREMENT. THE DECISIONS OF THIS COURT IN CIT VS. RRJ SECURITIES (SUPRA) AND ARN INFRASTRUCTURE INDIA LTD . VS. ASSTT. CIT (2017) 153 DTR (DEL) 185 : (2017) 394 ITR 569 (DEL) ALSO H OLD THAT IN ORDER TO JUSTIFY THE ASSUMPTION OF JURISDICTION UNDER S. 153 C OF THE ACT THE DOCUMENTS SEIZED MUST BE INCRIMINATING AND MUST REL ATE TO EACH OF THE ASSESSMENT YEARS WHOSE ASSESSMENTS ARE SOUGHT TO BE REOPENED. SINCE THE SATISFACTION NOTE FORMS THE BASIS FOR INI TIATING THE PROCEEDINGS UNDER S. 153C OF THE ACT, IT IS FUTILE FOR MR. MANC HANDA TO CONTEND THAT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 41 THIS REQUIREMENT NEED NOT BE MET FOR INITIATION OF THE PROCEEDINGS BUT ONLY DURING THE SUBSEQUENT ASSESSMENT. 32. IN THE PRESENT CASE, THE TWO SEIZED DOCUMENTS REFE RRED TO IN THE SATISFACTION NOTE IN THE CASE OF EACH ASSESSEE ARE THE TRIAL BALANCE AND BALANCE SHEET FOR A PERIOD OF FIVE MONTHS IN 2010. IN THE FIRST PLACE, THEY DO NOT RELATE TO THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS WERE REOPENED IN THE CASE OF BOTH ASSESSEES. SECONDLY, T HEY CANNOT BE SAID TO BE INCRIMINATING. EVEN FOR THE ASSESSMENT YEAR T O WHICH THEY RELATED, I.E. ASST. YR. 2011-12, THE AO FINALISED THE ASSESS MENT AT THE RETURNED INCOME QUA EACH ASSESSEE WITHOUT MAKING ANY ADDITIO NS ON THE BASIS OF THOSE DOCUMENTS. CONSEQUENTLY EVEN THE SECOND ESSEN TIAL REQUIREMENT FOR ASSUMPTION OF JURISDICTION UNDER S. 153C OF THE ACT WAS NOT MET IN THE CASE OF THE TWO ASSESSEES. 2.23. WE OBSERVE THAT HON'BLE DELHI HIGH COURT IN PEPSI FOODS PVT. LTD VS. ACIT (2014) 270 CTR 459(DEL) (RE FER PAGE NO. 601 TO 608 OF CASES RELIED UPON BY THE AS SESSEE PART 3) HELD AS UNDER:- 11. IT IS EVIDENT FROM THE ABOVE SATISFACTION NOTE THAT APART FROM SAYING THAT THE DOCUMENTS BELONGED TO THE PETITIONER AND T HAT THE AO IS SATISFIED THAT IT IS A FIT CASE FOR ISSUANCE OF A NOTICE UNDE R S. 153C, THERE IS NOTHING WHICH WOULD INDICATE AS TO HOW THE PRESUMPTIONS WHI CH ARE TO BE NORMALLY RAISED AS INDICATED ABOVE, HAVE BEEN REBUTTED BY TH E AO. 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 C ONCEPT OF SATISFACTION AS USED IN S. 153C OF THE SAID ACT. THE SATISFACTIO N NOTE ITSELF MUST DISPLAY THE REASONS OR BASIS FOR THE CONCLUSION THAT THE AO OF THE SEARCHED PERSON IS SATISFIED THAT THE SEIZED DOCUMENTS BELON G 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 S. 153C OF THE SAID ACT. 12. THIS BEING THE POSITION THE VERY FIRST STEP PRI OR TO THE ISSUANCE OF A NOTICE UNDER S. 153C OF THE SAID ACT HAS NOT BEEN FULFILLED. IN AS MUCH AS THIS CONDITION PRECEDENT HAS NOT BEEN MET, THE NOTICES UNDER S. 153C ARE LIABLE TO BE QUASHED. IT IS ORDER ED ACCORDINGLY. THE WRIT PETITIONS ARE ALLOWED AS ABOVE. THERE SHAL L BE NO ORDER AS TO COSTS. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 42 2.24. IF THE AFORESAID CONCLUSION DRAWN BY HON'BLE COURTS ARE KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRE SENT APPEALS, IT IS NECESSARY THAT THE DOCUMENTS MUST BELONG TO OTHE R PERSON OTHER THAN THE SEARCHED PERSON. THIS CONDITION IS M ISSING IN THE PRESENT CASE. THIS PROPOSITION IS FURTHER SUPPORTE D BY DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ARPIT LAND PRIVATE LIMITED (2017) 393 ITR 276(BOM.), ORDE R DATED 07 TH FEBRUARY 2017. THE AFORESAID DECISION OF HON'BLE BO MBAY HIGH COURT IS REPRODUCED HEREUNDER: 1. THESE TWO APPEALS UNDER SECTION 260-A OF THE INCOM E TAX ACT, 1961 (THE ACT) CHALLENGES THE COMMON IMPUGNED ORDER DATE D 22ND MARCH, 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE TR IBUNAL). THE COMMON IMPUGNED ORDER DISPOSED OF 67 APPEALS PERTAINING TO 52 DIFFERENT ASSESSEES, AMONGST THEM WERE THE PRESENT TWO RESPONDENTS BEFOR E US. THE REVENUE HAS FILED THESE TWO APPEALS BEING AGGRIEVED BY THE IMPU GNED ORDER OF THE TRIBUNAL TO THE EXTENT IT RELATES TO ASSESSMENT YEA R 2007-08 IN INCOME TAX APPEAL NO.150 OF 2014 IN THE CASE OF AMBIT REALTY (P.) LTD. AND IT RELATES FOR ASSESSMENT YEAR 2008-09 IN INCOME TAX APPEAL NO.83 OF 2014 IN THE CASE OF ARPIT LAND (P.) LTD. 2. ALTHOUGH MULTIPLE QUESTIONS HAVE BEEN FORMULATED I N THE APPEAL MEMO, MR.KOTANGALE, LEARNED COUNSEL APPEARING ON BEHALF O F THE REVENUE URGES ONLY FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION : '( I ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN IGNORING CRUCIAL EVIDENCE AND SURROUNDING CIRCUMSTANCES AND PROCEEDING TO IN TERPRET SECTION 153C OF THE ACT, NARROWLY AND MECHANICALLY, AND DELETING THE ADDITIO NS MADE UNDER SECTION 69C OF THE ACT BOTH ON MERITS AND POINT OF LAW ?' 3. THE UNDISPUTED FACTS BEFORE US ARE THAT IN SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN CASE OF J AY CORPORATION GROUP, ITS EMPLOYEES AND CLOSE ASSOCIATES WHO WERE INVOLVED IN THE PROCESS OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 43 ACQUIRING LAND. MR.DILIP DHERAI WAS MANAGING AND HA NDLING LAND ACQUISITION ON BEHALF OF JAY CORPORATION GROUP. DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND IN POSSESSION OF MR.DILIP DHERAI ON THE BASIS OF WHICH THE ASSESSING OFFICER AFTER RECORDING SATISFACTION UNDER SECTION 153C OF THE ACT PROCEEDED TO INITIATE PROCEEDINGS IN RESPECT OF BOTH RESPONDENTS - ASSESSEES BEFORE US. 4. THE TRIBUNAL BY THE IMPUGNED ORDER FOUND THAT THE DOCUMENTS SEIZED FROM POSSESSION OF MR. DILIP DHERAI DID NOT BELONG TO TH E ASSESSEE. CONSEQUENTLY, IT HELD THAT THE ASSESSING OFFICER DID NOT HAVE JURISD ICTION TO INITIATE PROCEEDINGS UNDER SECTION 153C OF THE ACT, AS AT THE RELEVANT T IME JURISDICTION OF ASSESSING OFFICER TO PROCEED CONSEQUENT TO THE SEARCH IS ONLY WHEN MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONGED TO A PE RSON OTHER THAN THE PERSON WHO HAS BEEN SEARCHED, THEN THE ASSESSING OFFICER HAVIN G JURISDICTION OVER SUCH PERSON ON BEING HANDED OVER SEIZED DOCUMENT ETC CAN PROCEED AGAINST SUCH OTHER PERSON BY RECORDING SATISFACTION AND ISSUING A NOTI CE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. THE IMPUGNED ORDER OF THE TRIBUNAL RECORDS THE FACT THAT THE DOCUMENTS SEIZED FROM THE POSSESSION OF MR.DILIP DHERAI DO NOT BELONG TO ANY OF TWO RESPONDENTS-ASSESSEES B EFORE US, CONSEQUENTLY, THE ASSESSING OFFICER DID NOT HAVE JURISDICTION UNDER S ECTION 153C OF THE ACT TO ISSUE NOTICE TO THE RESPONDENTS-ASSESSEES. CONSEQUENTLY, THE TRIBUNAL ALSO HELD THAT SATISFACTION RECORDED BY THE ASSESSING OFFICER BEFO RE INITIATING ASSESSMENT PROCEEDINGS IN RESPECT OF TWO RESPONDENTS-ASSESSEES BEFORE US WERE ALSO NOT SUSTAINABLE. IN THE ABOVE VIEW, THE IMPUGNED ORDER OF THE TRIBUNAL HELD THAT THE ASSESSING OFFICER DID NOT HAVE JURISDICTION TO INIT IATE PROCEEDINGS UNDER SECTION 153C OF THE ACT ON THE TWO RESPONDENTS - ASSESSEE'S BEFORE US. 5. THE GRIEVANCE OF THE REVENUE BEFORE US IS THAT THE RESPONDENT-ASSESSEES AND MR.DILIP DHERAI ARE ALL HAND IN GLOVE WORKING IN TA NDEM TO ACQUIRE LAND. THEREFORE, IN THE ABOVE FACTS THE IMPUGNED NOTICE U NDER SECTION 153C OF THE ACT AND ALSO SATISFACTION NOTE RECORDED BY THE ASSESSIN G OFFICER CANNOT BE FOUND FAULT WITH. THUS THE IMPUGNED ORDER OF THE TRIBUNAL CALLS FOR INTERFERENCE AND THESE APPEALS BE ADMITTED. 6. WE NOTE THAT IN TERMS OF SECTION 153C OF THE ACT A T THE RELEVANT TIME I.E. PRIOR TO 1ST JUNE, 2015 THE PROCEEDINGS UNDER SECTION 153 C OF THE ACT COULD ONLY BE INITIATED/PROCEEDED AGAINST A PARTY - ASSESSEE IF T HE DOCUMENT SEIZED DURING THE SEARCH AND SEIZURE PROCEEDINGS OF ANOTHER PERSON BE LONGED TO THE PARTY - ASSESSEE CONCERNED. THE IMPUGNED ORDER RECORDS A FINDING OF FACT THAT THE SEIZED DOCUMENTS WHICH FORMED THE BASIS OF INITIATION OF P ROCEEDINGS AGAINST THE RESPONDENT ASSESSEES DO NOT BELONG TO IT. THIS FIND ING OF FACT HAS NOT BEEN SHOWN TO US TO BE INCORRECT. FURTHER, THE IMPUGNED ORDER PLACED RELIANCE UPON A DECISION OF GUJARAT HIGH COURT IN VIJAYBHAI N. CHANDRANI V. ASSTT. CIT [2011] 333 ITR 436 WHICH RECORDS THAT THE CONDITION PRECEDENT FOR ISSUING NOTICE UNDER SECTION 153C OF THE ACT IS THAT THE DOCUMENT FOUND DURING S EARCH PROCEEDINGS SHOULD BELONG TO ASSESSEE TO WHOM NOTICE IS ISSUED UNDER S ECTION 153C OF THE ACT. IT WAS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 44 FAIRLY POINTED OUT TO US BY MR.MISTRY, THE LEARNED SENIOR COUNSEL FOR THE RESPONDENT-ASSESSEE THAT THE ABOVE DECISION WAS REV ERSED BY THE SUPREME COURT IN CIT V. VIJAYBHAI N. CHANDRANI [2013] 357 ITR 713/217 TAXMAN 138/35 TAXMANN.COM 580. HOWEVER, WE FIND THAT THE APEX COU RT REVERSED THE VIEW OF GUJARAT HIGH COURT ON THE GROUND THAT EFFICACIOUS A LTERNATIVE REMEDY WAS AVAILABLE TO THE PETITIONER TO RAISE ITS OBJECTIONS BEFORE THE AUTHORITIES UNDER THE ACT. THEREFORE, THE GUJARAT HIGH COURT SHOULD NOT H AVE EXERCISED ITS EXTRA ORDINARY WRIT JURISDICTION TO ENTERTAIN THE PETITIO N. HOWEVER, THE APEX COURT ALSO CLARIFIED THAT IT WAS NOT EXPRESSING ANY OPINION OF THE CORRECTNESS OR OTHERWISE OF CONSTRUCTION PLACED BY THE HIGH COURT ON SECTION 15 3C OF THE ACT. THE REVENUE HAS NOT POINTED OUT ANY REASON WHY THE CONSTRUCTION PUT ON SECTION 153C OF THE ACT BY GUJARAT HIGH COURT IS NOT CORRECT/APPROPRIAT E. WE FIND THAT IN ANY CASE OUR COURT HAS ALSO TAKEN A SIMILAR VIEW IN CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY [2015] 378 ITR 84/235 TAXMAN 163/63 TAXMANN.COM 14 (BOM.) AND REFUSED TO ENTERTAIN REVENUE'S APPEAL. 7. THE GRIEVANCE OF THE REVENUE AS SUBMITTED BY MR.KO TANGALE IS A SUBMISSION MADE ON THE BASIS OF SUSPICION AND NOT ON THE BASIS OF ANY EVIDENCE ON RECORD WHICH WOULD INDICATE THAT THE RESPONDENT - ASSESSEE AND PERSONS SEARCHED WERE ALL PART OF THE SAME GROUP. BE THAT AS IT MAY, THE REQU IREMENT OF SECTION 153C OF THE ACT CANNOT BE IGNORED AT THE ALTER OF SUSPICION. TH E REVENUE HAS TO STRICTLY COMPLY WITH SECTION 153C OF THE ACT. WE ARE OF THE VIEW THAT NON SATISFACTION OF THE CONDITION PRECEDENT VIZ. THE SEIZED DOCUMENT MU ST BELONG TO THE RESPONDENT - ASSESSEE IS A JURISDICTIONAL ISSUE AND NON SATISFAC TION THEREOF WOULD MAKE THE ENTIRE PROCEEDINGS TAKEN THEREUNDER NULL AND VOID. THE ISSUE OF SECTION 69C OF THE ACT CAN ONLY ARISE FOR CONSIDERATION IF THE PROCEED INGS UNDER SECTION 153C OF THE ACT ARE UPHELD. THEREFORE, IN THE PRESENT FACTS, TH E ISSUE OF SECTION 69C OF THE ACT IS ACADEMIC. 8. IN VIEW OF THE ABOVE REASONS AND PARTICULARLY THE FINDING OF FACT THAT SEIZED DOCUMENT WHICH FORMS THE BASIS OF THE PRESENT PROCE EDINGS, DO NOT BELONG TO THE PETITIONER AND THE SAME NOT BEING SHOWN TO BE PERVE RSE, THE QUESTION AS RAISED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF L AW AND THUS NOT ENTERTAINED. 9. APPEAL DISMISSED. NO ORDER AS TO COSTS. 2.25. IT IS NOTED THAT WHILE COMING TO THE AFORESA ID CONCLUSION, THE HON'BLE BOMBAY HIGH COURT FOLLOWED/ CONSIDERED THE FOLLOWING DECISIONS ALSO:- I. VIJAYBHAI N. CHANDRANI V. ASSTT. CIT [2011] 333 ITR 436 (GUJ.) (PARA 6), SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 45 II. CIT V. VIJAYBHAI N. CHANDRANI [2013] 357 ITR 713/217 TAXMAN 138/35 TAXMANN.COM 580 (SC) (PARA 6) III. CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY [2015] 378 ITR 84/235 TAXMAN 163/63 TAXMANN.COM 14 (BOM.) IV. CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY [2015] 378 ITR 84/235 TAXMAN 163/63 TAXMANN.COM 14 (BOM.) IN THE AFORESAID ORDER, THE QUESTION BEFORE THE HON'BLE HIGH COURT FOR CONSIDERATION WAS AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN IGNORING CRUCIAL EVIDENCE AND SURROUNDING CIRCUMSTANCES AND PROCEEDING TO INTERPR ET SECTION 153C OF THE ACT, NARROWLY AND MECHANICALLY, AND DELETING THE ADDITIONS MADE UNDER SECTION 69C OF THE ACT BOTH ON MERITS AN D POINT OF LAW ?' IN THE AFORESAID CASE, A SEARCH AND SEIZURE ACTION WAS CARRIED OUT UNDER SECTION 132 OF THE ACT IN THE CAS E OF JAY CORPORATION GROUP AND ONE MR. DILIP DHERAI, EMPLOYE E OF THE ASSESSEE COMPANY WAS INVOLVED IN PROCESS OF ACQUIRI NG LAND. PROCEEDINGS UNDER SECTION 153C OF THE ACT WERE INIT IATED AGAINST SUCH EMPLOYEE. THE HON'BLE HIGH COURT CONSIDERED TH E FACTUAL ASPECTS AND THEN ARRIVED AT A PARTICULAR CONCLUSION . THE HON'BLE HIGH COURT CONCLUDED THAT IN TERMS OF SECTION 153C OF THE ACT, THE PROCEEDINGS COULD ONLY BE INITIATED AGAINST THE PARTY, IF THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 46 DOCUMENTS SEIZED DURING SEARCH, FIRST SHOULD BE FOU ND TO BE BELONGING TO THAT PARTY AND THAT SHOULD BE INCRIMIN ATING. IDENTICAL IS THE SITUATION IN THE CASE BEFORE US, B ECAUSE, THE DOCUMENT SO FOUND FIRSTLY SHOULD BE FROM THE POSSES SION OF THE ASSESSEE AND MORE IMPORTANT IS, IT SHOULD RELATE TO THE ASSESSEE AND IT SHOULD BE INCRIMINATING. THE REVENUE HAS NOT PRODUCED ANY EVIDENCE IN ITS SUPPORT, THEREFORE, WE FIND FOR CE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. 2.26. THE SECOND CONDITION IS THAT THE DOCUMENT SH OULD BE INCRIMINATING IN NATURE. IF THIS DOCUMENT IS ANALYZ ED, THIS DOCUMENT NEITHER REVEALS ANY COMMERCIAL TRANSACTION NOR EVEN REFERRED TO BY THE ASSESSING OFFICER IN THE IMPUGNE D ASSESSMENT ORDERS, CONSEQUENTLY, IT CAN BE CONCLUDED THAT THIS DOCUMENT IS NOT INCRIMINATING IN NATURE. IN THE ABSENCE OF INCR IMINATING NATURE, THE ASSESSMENT ORDER PASSED U/S 153C OF THE ACT CANNOT BE VALIDATED. OUR VIEW FINDS SUPPORT FROM THE DECIS ION IN CIT VS REFAM MANAGMENT SERVICES (P) LTD (2016) 386 ITR 693 (DEL) , WHEREIN IN THE CATCH NOTE, IT WAS HELD AS UNDER:- SEARCH AND SEIZUREASSESSMENT UNDER S. 153CVALIDIT YNO INCRIMINATING MATERIAL FOR THE ASSESSMENT YEAR IN Q UESTION HAVING BEEN RECOVERED DURING SEARCH, ASSESSMENT UNDER S. 1 53C WAS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 47 INVALIDTHE ONLY DOCUMENT SEIZED DURING THE SEARCH IN QUESTION WAS A CHEQUE BOOK PERTAINING TO THE ASSESSEE WHICH REFLECTED ISSUE OF CHEQUES DURING THE PERIOD AUG., 2008 TO OC TOBER, 2008, RELEVANT TO THE ASST. YR. 2009-10CIT VS. RRJ SECUR ITIES LTD. (2016) 282 CTR (DEL) 321 : (2015) 128 DTR (DEL) 57 FOLLOWED CONCLUSION NO INCRIMINATING MATERIAL FOR THE ASSESSMENT YEAR IN QUESTION HAVING BEEN RECOVERED DURING SEARCH, ASSESSMENT UND ER S. 153C WAS INVALID. 2.27. LIKEWISE, IN THE CASE OF DCIT VS. SATKAR ROADLINES PVT LTD (2016) 175 TTJ 198 (DEL), THE HON 'BLE DELHI HIGH COURT OBSERVED/HELD AS UNDER:- 19. IN THE LIGHT OF THE CASE LAW CITED ABOVE AND O N A READING OF SS. 153A AND 153C THE EXERCISE THAT IS REQUIRED TO BE D ONE BY THE AO HAS BEEN SPELT OUT BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DSL PROPERTIES (P) LTD. VS. DY. CIT 33 TAXM AN.COM 420 VIDE PARA 15 HAS HELD THAT IF THE AO IS ASSESSING THE PE RSON SEARCHED AS WELL AS OTHER PERSON WHOSE ASSETS, BOOKS OF ACCOUNT OR DOCUMENTS WERE FOUND AT THE TIME OF SEARCH, THEN ALSO, FIRST WHILE MAKING THE ASSESSMENT IN THE CASE OF THE PERSON SEARCHED, HE H AS TO RECORD THE SATISFACTION THAT THE MONEY BULLION, JEWELLERY OR O THER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGED TO THE PERSON OTHER THAN THE PERSON SEARCHED. THEN THE COPY OF TH IS SATISFACTION NOTE IS TO BE PLACED IN THE FILE OF SUCH OTHER PERS ON AND THE RELEVANT DOCUMENT SHOULD ALSO BE TRANSFERRED FROM THE FILE O F THE PERSON SEARCHED TO THE FILE OF SUCH OTHER PERSON. THEREAFT ER, IN THE CAPACITY OF THE AO OF SUCH OTHER PERSON, HE HAS TO ISSUE THE NOTICE UNDER S. 153A R/W S. 153C. THE AO OF THE SEARCHED PERSON AND SUCH OTHER PERSON MAY BE THE SAME BUT THESE ARE TWO DIFFERENT ASSESSEES AND THEREFORE THE AO HAS TO CARRY OUT THE DUAL EXERCISE FIRST AS THE AO OF THE PERSON SEARCHED IN WHICH HE HAS TO RECORD THE S ATISFACTION, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE PERSON SEARCHED. WE CONCUR WITH THE SAID VIEW OF THE CO-OR DINATE BENCH AND WOULD LIKE TO ADD THAT THIS SATISFACTION MUST B E AN OBJECTIVE SATISFACTION BASED ON AN ENQUIRY BY THE AO TO ESTAB LISH THAT THE DOCUMENTS REFERRED TO IN S. 153C WHICH IS FOUND DUR ING THE SEARCH SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 48 UNDER S. 132, WHICH ARE SEIZED OR REQUISITIONED B ELONG TO A PERSON OTHER THAN THE PERSON SEARCHED; AND THERE SHOULD BE A CLEAR FINDING TO THAT EFFECT BASED ON WHICH ONLY SATISFACTION AS ENVISAGED UNDER S. 153C CAN BE INFERRED. SUCH A FINDING BY THE AO IS R EQUIRED FOR ATTAINING THE SAID SATISFACTION AND THEN IT SHOULD BE RECORDED IN THE FILE OF THE ASSESSEE WHICH IS A SINE QUA NON TO T RIGGER THE JURISDICTION FOR THE AO TO PROCEED AGAINST SUCH OTHER PERSON. IN THIS CASE THIS EXERCISE OF RECORDING THE SATISFACTION DURING THE A SSESSMENT PROCEEDINGS OF THE PERSON SEARCHED HAS NOT BEEN CAR RIED OUT AND THE SATISFACTION DOES NOT SATISFY THE REQUIREMENT OF S. 153C. WE COULD NOT FIND ANY MENTION OF ANY SEIZED MATERIALS LIKE V ALUABLE ARTICLES OR THINGS OR ANY BOOKS OF ACCOUNT OR DOCUMENTS HAVE BE EN REFERRED EVEN IN THE IMPUGNED ASSESSMENT ORDERS. THE AO LACK S JURISDICTION TO INITIATE PROCEEDINGS UNDER S. 153C AGAINST THE A SSESSEE AND THEREFORE, THE ISSUANCE OF NOTICE ITSELF IS NULL AN D VOID AND THEREFORE QUASHED. CONSEQUENTLY, THE IMPUGNED ASSESSMENT ORDE R PASSED UNDER S. 153C IS ALSO A NULLITY. 20 . SINCE WE HAVE QUASHED THE NOTICE UNDER S. 153C OF T HE ACT ITSELF, THE OTHER GROUNDS ARE NOT ADJUDICATED BEING ACADEMI C. 21 . AS THE FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE IN OTHER FIVE ASST. YRS. I.E. 2004-05 TO 2008-09 ARE S IMILAR TO ASST. YR. 2003-04, WE ORDER THAT THE IMPUGNED ASSESSMENT ORDE RS PASSED UNDER S. 153C IN ASST. YRS. 2004-05 TO 2008-09 ARE ALSO A NULLITY. 22 . BEFORE WE PART WITH THIS ORDER, WE WERE WONDERING W HETHER DURING SEARCH, REVENUE AUTHORITIES CAN RESORT TO CARTE BLA NCHE SEIZURE OF ANYTHING AND EVERYTHING FROM THE PREMISES OF THE RA IDED PARTY WITHOUT THE SAID DOCUMENTS HAVING ANY BEARING IN ASSESSMENT OF INCOME AS PER LAW. IT SHOULD BE REMEMBERED THAT ANY EXERCISE OF POWER UNDER S. 153C HAS CATASTROPHIC EFFECT ON THE PARTY AGAINST W HOM PROCEEDINGS ARE REOPENED FOR SCRUTINY FOR SIX ASSESSMENT YEARS. SO THE RAIDING PARTY HAS TO APPLY ITS MIND AT LEAST TO PRIMA FACIE SATISFY ITSELF THAT THE DOCUMENTS SEIZED HAVE A NEXUS WITH INCOME. ANY ARBI TRARY EXERCISE OF POWER WHICH IS UNBRIDLED IS A SWORN ENEMY OF THE ART. 14 OF THE CONSTITUTION AND SUCH EXERCISE OF POWER WOULD OFFEN D THE RIGHT TO PRIVACY AND RULE OF LAW WHICH IS A BASIC FEATURE OF THE CONSTITUTION. THEREFORE, THE OFFICERS CONDUCTING THE SEARCH WHILE SEIZING THE DOCUMENTS HAS TO EXERCISE THE SAID POWERS WITH EXTR EME CARE AND CAUTION; AND SEIZURE MUST BE USED WITH CIRCUMSPECTI ON. THE HONBLE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 49 APEX COURT AND THE HONBLE DELHI HIGH COURT IN N.K. TEXTILE MILLS VS. CIT (1966) 62 ITR 58 (DEL), HAS FROWNED UPON THE PR ACTICE OF INDISCRIMINATE SEIZURE PAVING WAY FOR REOPENING OF ASSESSMENTS WHICH FINALLY WILL FALL IN CASE IT IS NOT INCRIMINA TING AND WILL BE AN EXERCISE OF FUTILITY. 23 . IN THE RESULT, ALL THE APPEALS PREFERRED BY THE R EVENUE ARE DISMISSED AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. 2.28. IN ANOTHER DECISION IN M/S. IDEAL APPLIANCES CO PVT. LTD VS. DCIT, IT WAS HELD AS UNDER:- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED DECISION O F THE TRIBUNAL IN THE CASE OF SHRI GOVIND AGARWAL V. ACIT BEING ITA NO: 3389/MUM/2011 DATED 10.01.2014 (SUPRA); ALL CARGO GLOBAL LOGISTICS V. ADDL.CIT (SUPRA); SKS ISPAT AND POWER LIMITED VS. DCIT CC 45 (ITA 8746/M/12 AND ITA 8747/M/12) (SUPRA) AS WELL AS THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF CIT V. ALL CARGO GLOBAL LOGISTIC (374 ITR 645) (SUPRA), COPIES OF WHICH ARE PLACED ON RECORD. ON PERUSAL OF THE SAID DECISIONS, WE FIND THEY ARE RELEVANT FOR THE PROPOSITION THAT WH EN NO ASSESSMENT HAS ABATED, THE QUESTION OF MAKING ANY A DDITION OR MAKING DISALLOWANCE WHICH ARE NOT BASED ON ONLY MAT ERIAL FOUND DURING THE SEARCH IS BAD IN LAW. IN THIS REGARD, W E FIND IT RELEVANT TO EXTRACT THE RELEVANT PARAS FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI GOVIND AGARWAL (SUPRA) AND THE SAM E IS AS FOLLOWS : 12. WE HAVE HEARD THE PARTIES AND THEIR DIVERGENT STANDS ON THE LEGAL ISSUE AND THE VALIDITY OF THE INSTANT ASSESSMENT/REASSESSMENT WITH THE ROUTINE ADDITIONS U/S 68 AND SECTION 14A OF THE ACT BASED ON THE ACCOUNTED TRANSACTIONS. THE INSTANT CASE FOR THE AY 2002-03 D EALS WITH THE CASE OF DISTURBING THE COMPLETED ASSESSMENT. EARLIER THE ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT. COMPLETENESS OF THE SUMMARY ASSESSMENT IS CONSIDE RED AND HELD IN FAVOUR OF THE ASSESSEE VIDE MANY JUDGME NTS CITED ABOVE. IN THE ASSESSMENT U/S 153A, THE AO MADE (I) ADDITION SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 50 U/S 68 ON ACCOUNT OF ARTIFICIALLY INFLATED INVESTMENT IN H OUSE DULY DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE RS.31,33,070/-; AND (II) DISALLOWANCE U/S 14A: RS. 23,31,469/-. ADMITTEDLY, THERE IS NO INCRIMINATING MATERIAL BEFO RE THE AO TO SUPPORT THE ABOVE ADDITIONS. THE VALUATION REPORT, WHICH IS GARNERED BY THE AUTHORITIES CONSTITUTES MERE ESTIMA TES AND THE PROVISION OF SECTION 132 IS NOT REQUIRED TO OBT AIN SUCH REPORT FROM THE DVO. AS SUCH, FOR MAKING AFORESAID ADDITIONS OF RS 31,33,070/-, AO HAS NOT USED EVEN THE SAID VA LUATION REPORT AND THE AO DISALLOWED WHAT IS REPORTED IN TH E BOOKS. SIMILAR IS THE CASE WITH THE ADDITIONS U/S 14A OF T HE ACT. THEREFORE, UNDISPUTEDLY, THE IMPUGNED QUANTUM ADDIT IONS ARE MADE MERELY BASED ON THE ENTRIES IN THE ACCOUNTED B OOKS AND CERTAINLY NOT BASED ON EITHER THE UNACCOUNTED BOOKS OF ACCOUNTS OF THE ASSESSEE OR BOOKS NOT PRODUCED TO T HE AO EARLIER OR THE INCRIMINATING MATERIAL GATHERED BY T HE INVESTIGATION WING OF THE REVENUE. CONSIDERING THE LEGAL PROPOSITIONS PLACE BEFORE US BY THE ASSESSEES COUN SEL, WE ARE OF THE OPINION, SUCH ASSESSMENTS OR ADDITIONS A RE UNSUSTAINABLE IN LAW. 9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE IS SUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADDITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAIN ABLE IN LAW, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITIONS MADE IN THE INSTANT CASE ARE NOT SUSTAINABLE AND ACCORDINGLY, W E DELETE THE SAME. CONSIDERING OUR DECISION ON THE LEGAL ISSUE I N FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS DEMAND NO SPECIFIC ADJU DICATION. THUS, ON THE LEGAL GROUND, THE ASSESSEE SUCCEEDS AND REST OF THE GROUNDS ARE DISMISSED AS ACADEMIC. 2.29. LIKEWISE, IN THE CASE OF PCIT VS. INDEX SECURITIES (P) LTD (2017) 1NYPCTR 835 DEL, THE HON' BLE COURT HELD/OBSERVED AS UNDER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 51 32. IN THE PRESENT CASE, THE TWO SEIZED DOCUMENTS REFE RRED TO IN THE SATISFACTION NOTE IN THE CASE OF EACH ASSESSEE ARE THE TRIAL BALANCE AND BALANCE SHEET FOR A PERIOD OF FIVE MONTHS IN 20 10. IN THE FIRST PLACE, THEY DO NOT RELATE TO THE ASSESSMENT YEARS F OR WHICH THE ASSESSMENTS WERE REOPENED IN THE CASE OF BOTH ASSES SEES. SECONDLY, THEY CANNOT BE SAID TO BE INCRIMINATING. EVEN FOR THE ASSESSMENT YEAR TO WHICH THEY RELATED, I.E. ASST. Y R. 2011-12, THE AO FINALISED THE ASSESSMENT AT THE RETURNED INCOME QUA EACH ASSESSEE WITHOUT MAKING ANY ADDITIONS ON THE BASIS OF THOSE DOCUMENTS. CONSEQUENTLY, EVEN THE SECOND ESSENTIAL REQUIREMENT FOR ASSUMPTION OF JURISDICTION UNDER S. 153C OF THE ACT WAS NOT ME T IN THE CASE OF THE TWO ASSESSEES. 2.30. IN THE CASE OF CIT VS. RRJ SECURITIES LTD (2 016) 282 CTR (DEL) 321 , THE HON'BLE COURT HELD AS UNDER :- 34. IN SSP AVIATION (SUPRA), THIS COURT HAD NOTED THE DIFFERENCE BETWEE N THE PROVISIONS OF S. 158BD OF THE ACT AND THE PROVI SIONS OF S. 153C. WHEREAS S. 158BD REFERRED TO THE SATISFACTION OF AN AO WITH REGARD TO ANY 'UNDISCLOSED INCOME' BELONGING TO A PERSON OTHER TH AN THE SEARCHED PERSON, S. 153C(1) OF THE ACT IN CONTRAST REFERRED MERELY TO THE AO BEING SATISFIED THAT ASSETS/DOCUMENTS SEIZED DURING A SEA RCH BELONGED TO A PERSON OTHER THAN ONE SEARCHED. IT IS, THUS, CLEAR THAT IT WAS NOT NECESSARY FOR THE AO, AT THE STAGE OF RECORDING THE SATISFACT ION UNDER S. 153C TO COME TO A CONCLUSION THAT SEIZED ASSETS WHICH BELON G TO ANOTHER PERSON REPRESENT ANY UNDISCLOSED INCOME. IF THE AO OF A SE ARCHED PERSON IS SATISFIED THAT AN ASSET/DOCUMENTS SEIZED BELONG TO ANOTHER PERSON, HE HAS A DUTY TO FORWARD THE DOCUMENTS OR THE VALUABLE ASSETS SEIZED TO THE AO OF THE PERSON CONCERNED; APART FROM DOING SO, TH E AO CAN DO NOTHING MORE. 35. THE AO OF THE PERSON OTHER THAN THE ONE SEARCHE D ALSO, IS NOT, AT THE STAGE OF ISSUING NOTICE UNDER S. 153C/153A OF THE A CT, REQUIRED TO CONCLUDE THAT THE ASSETS/DOCUMENTS HANDED OVER TO H IM BY THE AO OF THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 52 SEARCHED PERSON REPRESENT OR INDICATE ANY UNDISCLOS ED INCOME OF THE ASSESSEE UNDER HIS JURISDICTION. AS EXPLAINED IN SS P AVIATION (SUPRA), S. 153C ONLY ENABLES THE AO OF A PERSON OTHER THAN THE ONE SEARCHED, TO INVESTIGATE INTO THE DOCUMENTS SEIZED AND/OR THE AS SETS SEIZED AND ASCERTAIN THAT THE SAME DO NOT REFLECT ANY UNDISCLO SED INCOME OF THE ASSESSEE (I.E A PERSON OTHER THAN THE ONE SEARCHED) FOR THE RELEVANT ASSESSMENT YEARS. IF THE SEIZED MONEY, BULLION, JEW ELLERY OR OTHER VALUABLE ARTICLE OR THING SEIZED AS HANDED OVER TO THE AO OF THE ASSESSEE, ARE DULY DISCLOSED AND REFLECTED IN THE RETURNS FIL ED BY THE ASSESSEE, NO FURTHER INTERFERENCE WOULD BE CALLED FOR. SIMILARLY , IF THE BOOKS OF ACCOUNTS/DOCUMENTS SEIZED DO NOT REFLECT ANY UNDISC LOSED INCOME, THE ASSESSMENTS ALREADY MADE CANNOT BE INTERFERED WITH. MERELY BECAUSE VALUABLE ARTICLES AND/OR DOCUMENTS BELONGING TO THE ASSESSEE HAVE BEEN SEIZED AND HANDED OVER TO THE AO OF THE ASSESSEE WO ULD NOT NECESSARILY REQUIRE THE AO TO REOPEN THE CONCLUDED ASSESSMENTS AND REASSESS THE INCOME OF THE ASSESSEE. 36. THE DECISION IN SSP AVIATION (SUPRA) CANNOT BE UNDERSTOOD TO MEAN THAT THE AO HAS THE JURISDICTION TO MAKE A REA SSESSMENT IN EVERY CASE, WHERE SEIZED ASSETS OR DOCUMENTS ARE HANDED O VER TO THE AO. THE QUESTION WHETHER THE DOCUMENTS/ASSETS SEIZED CO ULD POSSIBLY REFLECT ANY UNDISCLOSED INCOME HAS TO BE CONSIDERED BY THE AO AFTER EXAMINING THE SEIZED ASSETS/DOCUMENTS HANDED OVER T O HIM. IT IS ONLY IN CASES WHERE THE SEIZED DOCUMENTS/ASSETS COULD PO SSIBLY REFLECT ANY UNDISCLOSED INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS, THAT FURTHER ENQUIRY WOULD BE WARRANTED IN R ESPECT OF THOSE YEARS. WHILST, IT IS NOT NECESSARY FOR THE AO TO BE SATISFIED THAT THE ASSETS/DOCUMENTS SEIZED DURING SEARCH OF ANOTHER PE RSON REFLECT UNDISCLOSED INCOME OF AN ASSESSEE BEFORE COMMENCING AN ENQUIRY UNDER S. 153C OF THE ACT, IT WOULD BE IMPERMISSIBLE FOR HIM TO COMMENCE SUCH ENQUIRY IF IT IS APPARENT THAT THE DO CUMENTS/ASSETS IN QUESTION HAVE NO BEARING ON THE INCOME OF THE ASSES SEE FOR THE RELEVANT ASSESSMENT YEARS. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 53 37. AS EXPRESSLY INDICATED UNDER S. 153C OF THE ACT , THE ASSESSMENT OR REASSESSMENT OF INCOME OF A PERSON OTHER THAN A SEA RCHED PERSON WOULD PROCEED IN ACCORDANCE WITH THE PROVISIONS OF S. 153A OF THE ACT. THE CONCLUDED ASSESSMENTS CANNOT BE INTERFERED WITH UNDER S. 153A OF THE ACT UNLESS THE INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE HAS BEEN SEIZED. 38. AS INDICATED ABOVE, IN THE PRESENT CASE, THE DO CUMENTS SEIZED HAD NO RELEVANCE OR BEARING ON THE INCOME OF THE ASSESS EE FOR THE RELEVANT ASSESSMENT YEARS AND COULD NOT POSSIBLY REFLECT ANY UNDISCLOSED INCOME. THIS BEING THE UNDISPUTED POSITION, NO INVE STIGATION WAS NECESSARY. THUS, THE PROVISIONS OF S. 153C, WHICH A RE TO ENABLE AN INVESTIGATION IN RESPECT OF THE SEIZED ASSET, COULD NOT BE RESORTED TO; THE AO HAD NO JURISDICTION TO MAKE THE REASSESSMENT UNDER S. 153C OF THE ACT. 2.31. IN VIEW OF ABOVE CITED DECISION, IT IS CLEAR THAT INCRIMINATING DOCUMENTS RELATING TO OTHER PERSON SH OULD BE FOUND DURING THE COURSE OF SEARCH. IF NO INCRIMINAT ING DOCUMENTS ARE FOUND AND/OR ON THE BASIS OF SEIZED DOCUMENTS, NO ADDITIONS CAN BE MADE IN THE ASSESSME NT ORDER OR IF SUCH SEIZED DOCUMENTS ARE NOT REFERRED TO IN THE ASSESSMENT ORDER, SUCH DOCUMENTS WILL NOT BE INCRIM INATING DOCUMENTS. ANY NOTICE ISSUED U/S. 153C ON THE BASIS OF SUCH NOTICE IS BAD IN LAW. THUS, THE MANDATORY REQU IREMENT MENTIONED IN THE SECTION HAS NOT BEEN FULFILLED AND HENCE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 54 THE NOTICES ISSUED U/S 153C AND CONSEQUENT ASSESSME NT ORDER PASSED ON THE BASIS OF SUCH NOTICE, NO ADDITI ON CAN BE SUSTAINED. 2.32. SO FAR AS, CONDITION NO. (III), IS CONCERNE D, THAT THE ASSESSING OFFICER OF SEARCHED PERSON SHOULD HAV E RECORDED A SATISFACTION NOTE THAT INCRIMINATING DOC UMENTS BELONGING TO THIRD PERSON ARE FOUND; THE ASSESSING OFFICER, IN HIS CAPACITY AS THE ASSESSING OFFICER OF SHRI SUDHA KAR M. SHETTY (SEARCHED PERSON) HAS NEITHER ISSUED ANY SAT ISFACTION NOTE NOR HANDED OVER THE DOCUMENTS TO HIMSELF (IN T HE CAPACITY OF ASSESSING OFFICER OF THE OTHER PERSON) BY PASSING A HANDOVER NOTE, THUS, FROM THIS ANGLE ALSO, THE AS SESSEE IS HAVING A GOOD CASE IN ITS FAVOUR, THEREFORE, RESPEC TFULLY, FOLLOWING THE AFORESAID DECISIONS FROM HON'BLE VARI OUS HIGH COURTS, INCLUDING HON'BLE JURISDICTIONAL HIGH COURT , WE DECIDE THIS ISSUE, FROM THIS ANGLE, IN FAVOUR OF TH E ASSESSEE. 2.33. NOW, WE SHALL ANALYZE THE REASONS RECORDED B Y THE ASSESSING OFFICER (IN HIS CAPACITY AS AN ASSESSING OFFICER OF OTHER PERSON I.E. THE ASSESSEE) FOR ISSUING NOT ICE U/S. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 55 153C OF THE ACT TO THE ASSESSEE. THE RELEVANT NOTE IS APPEARING IN THE PAPER BOOKS FILED IN CONNECTION WI TH THE FOLLOWING APPEALS ARE AS UNDER:- APPEAL NO 4370/M/15 3237/M/15 4371/M/15 3238/M/15 6199/M/14 AY 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 PAPER BOOK PAGE NO. 1 TO 2 2 2 2 2 TO 3 A COPY OF THE SAID SATISFACTION NOTE IS APPEARING H EREINAFTER : 2.34. IF THE AFORESAID RECORDING OF REASONS IS ANALYZED, IT EMERGES THAT THE REASONS SO RECORDED B Y THE ASSESSING OFFICER IN HIS CAPACITY OF OTHER PERSON A ND NOT BY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 56 THE ASSESSING OFFICER IN A CAPACITY OF SEARCHED PER SON. THIS CAN BE PROVED ON ACCOUNT OF FOLLOWING REASONS:- A) NAME AND PAN OF THE ASSESSEE ARE MENTIONED ON THE T OP OF THE REASONS AND NOT THE NAME OF SHRI SUDHAKAR M. SHETTY, IN WHOSE CASE THE SEARCH HAD TAKEN PLACE. B) NOTHING IS MENTIONED EITHER ABOUT HANDOVER OF THE DOCUMENTS BY THE ASSESSING OFFICER OR RECEIVING OF DOCUMENTS BY THE ASSESSING OFFICER OF THE ASSESSEE. C) AGAIN AND AGAIN, THE WORD ASSESSEE IS USED WHICH IS THE ASSESSEE ONLY. D) IN PARA 3, IT WAS MENTIONED THAT I AM SATISFIED T HAT DOCUMENTS SEIZED AS ABOVE BELONG TO THE ASSESSEE A LSO SHOWS THAT THIS REASONS ARE RECORDED BY THE ASSESSI NG OFFICER IN HIS CAPACITY AS A ASSESSING OFFICER OF T HE ASSESSEE AND NOT BY HIM IN HIS CAPACITY AS ASSESSIN G OFFICER OF SEARCHED PERSON. E) THE ASSESSING OFFICER OF THE SEARCHED PERSON CANNOT SAY AND WRITE THAT ISSUE NOTICE U/S. 153C. ON THE OTH ER HAND, ONLY THE ASSESSING OFFICER OF OTHER PERSON, O THER THAN ASSESSING OFFICER OF SEARCHED PERSON CAN SAY A ND WRITE ISSUE NOTICE U/S. 153C 2.35. THE ABOVE FACTS REFLECTS THAT NEITHER SATISF ACTION NOTE WAS ISSUED BY THE ASSESSING OFFICER IN HIS CAPACITY AS A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 57 ASSESSING OFFICER OF THE SEARCHED PERSON NOR THE DO CUMENTS WERE HANDED OVER (BY WAY OF NOTE FOR TRANSFER OF DO CUMENTS) TO THE ASSESSING OFFICER OF THE OTHER PERSON. IT WAS A RGUED BY THE LEARNED DR THAT THE ASSESSING OFFICER OF THE SEARCH ED PERSON AND OTHER PERSON IS ONE AND SAME, THEN, WHY THE SAT ISFACTION NOTE PREPARED BY THE ASSESSING OFFICER OF OTHER PER SON SHOULD NOT BE TREATED AS A SATISFACTION NOTE PREPARED BY T HE ASSESSING OFFICER OF SEARCHED PERSON. 2.36. WHILE GOING THROUGH VARIOUS JUDGMENTS CITED BEFORE US, WE WOULD FURTHER DRAW ATTENTION THAT IN SOME OF THOSE CITED CASES, ALTHOUGH THE ASSESSING OFFICER OF THE SEARCH ED PERSON AND OTHER PERSON WAS THE SAME OFFICER, EVEN IN THOSE CA SES, IT WAS HELD THAT SATISFACTION NOTE BY THE ASSESSING OFFICE R IN HIS CAPACITY OF SEARCHED PERSON IS PRECONDITION REQUIRE D TO CONFER JURISDICTION ON THE ASSESSING OFFICER OF OTHER PERS ON. EVEN THE CBDT HAS ISSUED A CIRCULAR IN THIS REGARD MAKING IT CLEAR THAT EVEN IF THE ASSESSING OFFICER OF SEARCHED PERSON AN D OTHER PERSON IS SAME, A SATISFACTION NOTE IS REQUIRED TO BE PASSED BY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 58 THE ASSESSING OFFICER IN HIS CAPACITY OF SEARCH PER SON. OUR VIEW FIND SUPPORT FROM THE FOLLOWING DECISION:- I. ZIADUN LEENG SDN BHD ARTEFACT PROJECTS LTD. (JV) V S. DCIT ITA NO. 382 & 383/NAG/2014 DECIDED ON 22ND MAR CH, 2017 BY ITAT NAGPUR BENCH. IN THIS CASE, THERE WAS SEARCH OPERATION AT THE PRE MISES OF M/S ARTEFACT PROJECTS LTD. DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND. THESE WERE OBSERVED BY THE ASSESSING OF FICER TO BE RELATED TO THE ASSESSEE. HENCE PROCEEDINGS U/S 153C WERE INITIATED AGAINST THE ASSESSEE. DURING THE COURSE OF ASSESSME NT, THE ASSESSEE OBJECTED AS TO THE VALIDITY OF NOTICE U/S 153C. HOWEVER, THE AO REJECTED THIS CONTENTION HOLDING THAT THE NOTICE S WERE ISSUED TO THE ASSESSEE ON THE BASIS OF INCRIMINATING EVIDENCE FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPER ATION AND ONLY AFTER RECORDING PROPER SATISFACTION THAT PROCEEDING U/S 153C WAS INITIATED. THE MATTER WAS CARRIED BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS), WHO HAS ALSO CONFIRMED THE ORDER OF THE ASSESSING OFFICER, CONFIRMING THE VALIDITY OF NOTICE ISSUED U /S. 153C OF THE INCOME TAX ACT, 1961. BUT THE COMMISSIONER OF INCOM E TAX (APPEALS) HAD DELETED THE ADDITIONS ON MERITS. HENCE, BOTH THE ASSESSEE AND THE REVENUE APPROACHED THE HONBLE INCOME TAX APPELLATE TRIBUNAL. THE RELEVANT SATISFA CTORY NOTE IS REPRODUCED HEREWITH WHICH IS SIMILAR TO IN THE ASSE SSEES CASE. SATISFACTION NOTE PROCEEDINGS U/S 153C OF THE INCOME TAX ACT, 1961 FO R ASSESSMENT YEARS 2005-06 TO 2010-11 IN THE CASE OF ZAIDUN LEEN G SON BHD ARTEFACT PROJECTS (JV) 54/3, CHHATRAPATI NAGAR SQUA RE, WARDHA ROAD, NAGPUR (AAAAZ0129L) DURING THE COURSE OF SEARCH AND SEIZURE/SURVEY OPER ATIONS IN THE CASE OF M/S. ARTEFACT PROJECT LTD. GROUP OF CASES OF NAG PUR ON 10.03.2011, THE FOLLOWING MATERIAL WAS SEIZED/IMPOUNDED. ANNEXURE B-1/6, SEIZED/IMPOUNDED DURING THE COURS E OF ACTION ON THE RESIDENTIAL/OFFICE PREMISES OF M/S ARTEFACT PRO JECTS LTD. GROUP OF CASES OF ASSESSEE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 59 I AM SATISFIED THAT THE ABOVE SEIZED/IMPOUNDED MATE RIAL BELONGS TO ZAIDUM LEENG SDN BHD ARTEFACT PROJECTS (JV), 54/3, CHHATRAPATI NAGAR SQUARE, WARDHA ROAD, NAGPUR (AAAAZO129L). THE REFORE, NOTICE U/S 153C OF THE I.T. ACT, 1961 ARE BEING ISS UED FOR ASSESSMENT YEARS 2005-06 TO 2010-11 IN THE CASE OF ASSESSEE. NAGPUR, SD/ (ANOOP SINGH) DATE : 16/02/2012 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), NAGPUR. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LE ARNED COUNSEL OF THE ASSESSEE HAS MADE THE FOLLOWING SUBMISSIONS, AS MENTIONED IN PARA NUMBER 7 OF THE SAID CASE, THE RE LEVANT PARA WHICH RESEMBLES FACTS OF OUR CASE IN RESPECT OF SAT ISFACTION NOTE IS REPRODUCED AS UNDER : 7. LEARNED COUNSEL OF THE ASSESSEE MADE WRITTEN AS WELL ORAL SUBMISSIONS. THE WRITTEN SUBMISSIONS ARE AS UNDER : A) SATISFACTION NOTE AS RECORDED BY AO OF ASSESSEE REFERS TO SEIZED DOCUMENT INVENTORISED AS B-1/6 FROM THE PREM ISES OF M/S. ARTEFACT PROJECT LTD. FOR ASSUMPTION OF JURISDICTIO N U/S 153C OF I.T. ACT 1961. B) SEIZED DOCUMENTS INVENTORISED AS B-1/6 FROM THE PREMISES OF M/S. ARTEFACT PROJECT LTD. ARE PLACED IN PAPER BOOK . (P- 50 - 74) [VOL.- I]. COMPILATION OF B-1/6 COMPRISES OF PAGE N OS. 1 TO 22 BEING THE BANK STATEMENTS OF ASSESSEE FOR THE PERIO D COMMENCING FROM 1/4/2010 TILL MARCH 2011. AFORESAID BANK STATE MENTS ARE RELATING TO ACCOUNT OF ASSESSEE WITH CANARA BANK, N AGPUR. AFORESAID BANK TRANSACTIONS ARE DULY RECORDED IN RE GULAR BOOKS OF ACCOUNT OF ASSESSEE FOR ENDING 31/03/2011. SEIZED D OCUMENTS IN NO MANNER OF CONSIDERATION CAN BE CONSTRUED AS INCR IMINATING EVIDENCE FOUND AT THE PREMISES OF M/S. ARTEFACT PRO JECT LTD. SO AS TO ASSUME JURISDICTION TO ISSUE NOTICE U/S 153C OF I.T. ACT 1961. C) NO ADDITION HAS BEEN MADE ON THE BASIS OF SUCH D OCUMENTS IN ASSESSMENT FRAMED FOR THE PERIOD ENDING 31/03/2011 FOR WHICH THE SEIZED DOCUMENTS RELATE. ORDER PASSED U/S 143(3) OF I.T. ACT, 1961 FOR ASSTT. YEAR 2011-12 IS PLACED IN PAPER BOO K. THIS SUBSTANTIATES THAT DOCUMENTS SEIZED ARE NOT OF ANY INCRIMINATING NATURE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 60 D) IMPUGNED YEARS UNDER APPEAL ARE ASSESSMENT YEARS 2007-08 TO 2009-10. SEIZED DOCUMENTS ON THE BASIS OF WHICH NOTICE ULS 153C OF IT ACT, 1961 IS ISSUED ARE IN RELATION TO A SSESSMENT YEAR 2011-12. THUS NOTICE ISSUED FOR ASSESSMENT YEARS 20 07 -08 TO 2009-10 IS NOT IN ACCORDANCE WITH LAW AS THERE BEIN G NO INCRIMINATING MATERIAL OR EVIDENCE FOUND RELATING T O SUCH ASSESSMENT YEARS IN THE COURSE OF SEARCH AT THE PRE MISES OF M/S. ARTEFACT PROJECT LTD. E) TRANSACTIONS IN SEIZED DOCUMENTS ARE ALREADY REC ORDED IN REGULAR BOOKS OF ACCOUNTS. THERE IS NO INCRIMINATIN G VALUE IN THE SAME AND HAVE NO BEARING ON ASSESSABLE INCOME. IT I S SETTLED PROPOSITION OF LAW THAT PROCEEDINGS UNDER SECTION 1 53C OF LT. ACT, 1961 CAN BE INITIATED IN RESPECT TO PERSON OTHER TH AN SEARCHED ONLY IF INCRIMINATING MATERIAL BELONGING TO SUCH PE RSON HAS BEEN FOUND AND SEIZED FROM THE PREMISES OF PERSON SEARCH ED. NO INCRIMINATING DOCUMENTS FOUND AT THE PERSON SEARCHE D BEING M/S. ARTEFACT PROJECTS LTD. NO VALID PROCEEDINGS UNDER S ECTION 153C OF IT ACT, 1961 COULD HAVE BEEN INITIATED IN THE CASE OF ASSESSEE. F) THE SATISFACTION NOTICE AS OBSERVED IN THE FILE OF ASSESSEE REFERS TO DOCUMENTS SEIZED FROM THE RESIDENCE/OFFICE PREMI SES OF M/S. ARTEFACT PROJECT LTD. GROUP OF CASES FOR ISSUE OF N OTICE U/S 153C OF IT ACT, 1961. IT IS OBSERVED THAT IT IS NO SATISFAC TION IN TERMS OF PROVISION OF SECTION 153C OF IT ACT, 1961 MANDATORI LY REQUIRED TO BE RECORDED BY AO. OF PERSON SEARCHED I.E. M/S. ARTEFA CT PROJECT LTD. IT IS SPECIFICALLY ASSERTED THAT NO SATISFACTION OF SE IZED DOCUMENTS BELONGING TO ASSESSEE IS RECORDED BY AO. OF PERSON SEARCHED. THUS NO VALID NOTICE U/S 153C OF LT. ACT 1961 IS IS SUED IN CASE OF ASSESSEE AND ASSESSMENT FRAMED IS BAD IN LAW AND LI ABLE TO BE CANCELLED. G) A BARE DISCUSSION MADE IN THE ASSESSMENT ORDER I N RESPECT TO DOCUMENTS SEIZED FROM M/S. ASHOKA BUILDCON LTD., NA SHIK WOULD REVEAL THAT THE AFORESAID DOCUMENT IS NOT BELONGING TO ASSESSEE BUT NAME OF THE ASSESSEE WAS APPEARING IN THE DOCUMENT BELONGING M/S. ASHOKA BUILDCON LTD., NASHIK. DOCUMENT ON THE BASIS OF WHICH ADDITION IS MADE BEING NOT BELONGING TO ASSESSEE, T HERE COULD BE NO VALID ASSUMPTION OF JURISDICTION TO INITIATE PRO CEEDINGS U/S 153C OF I.T. ACT, 1961 AND MAKING ADDITION FOR THE SAME AT THE HANDS OF ASSESSEE. H) NOTICES U/S 153C OF I.T. ACT 1961 HAVE BEEN ISSU ED IN CASE OF ASSESSEE ON 21/02/2012 FOR ASST. YEAR 2007-08 TO 20 09-10. PERUSAL OF NOTICE U/S 153C DOES NOT INDICATE THE SA TISFACTION OF AO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 61 AS TO DOCUMENTS FOUND AT PREMISES OF THE PERSON SEA RCHED BELONGING TO ASSESSEE. IT DOES NOT MENTION AS TO IN CRIMINATING NATURE OF DOCUMENTS OR ITS BEARING ON ASSESSABLE IN COME OF ASSESSEE FOR WHICH JURISDICTION IN THE CASE OF ASSE SSEE U/S 153C OF I.T. ACT, 1961 IS ASSUMED. THE NOTICE DOES NOT SATI SFY THE REQUIREMENT OF VALID NOTICE U/S 153C OF I.T. ACT, 1 961. IN VIEW OF ABOVE, CONSEQUENT ASSESSMENT FRAMED THEREUPON IS LI ABLE TO BE CANCELLED. 2.37. AFTER HAVING AN ELABORATE DISCUSSION, THE TRIBUNAL HELD AS UNDER:- 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SATISFACTION OF THE AO OF THE SEARCHED PERSONS AS ENVISAGED U/S 153 C OF THE I.T. ACT HAS NOT BEEN RECORDED BEFORE INITIATING THE PRO CEEDINGS AGAINST THE ASSESSEE U/S 153C OF THE ACT WHICH VITI ATES THE ENTIRE IMPUGNED ASSESSMENTS. FOR THIS PROPOSITION, LEARNED COUNSEL REFERRED TO THE CBDT CIRCULAR NO. 24/2015 DATED 31S T DECEMBER, 2015 WHICH HAS BEEN ISSUED ON THIS VERY SUBJECT. LE ARNED COUNSEL SUBMITTED THAT FROM THE ABOVE SAID CBDT NOTIFICATIO N, IT IS CLEAR THAT IN ABSENCE OF APPROPRIATE SATISFACTION RECORDE D BY THE AO OF THE RAIDED PARTY EVEN IF HE IS THE SAME AO AS THAT OF ASSESSEE, THE ASSESSMENT WILL BE DEVOID OF JURISDICTION. LEARNED COUNSEL SUBMITTED THAT NO SATISFACTION NOTE IS THERE AS EMA NATING FROM THE ASSESSMENT RECORDS OF THE SEARCHED PARTY. THAT THIS MAKES IT VERY CLEAR THAT THE APPROPRIATE SATISFACTION HAS NOT BEE N RECORDED THEREIN. HE ASSERTED THAT NO SATISFACTION OF SEIZED DOCUMENTS BEING INCRIMINATING AND/OR BELONGING TO THE ASSESSE E IS RECORDED BY THE AO OF THE SEARCHED PERSON. THUS NO VALID NOT ICE U/S 153C IS ISSUED IN THE CASE OF THE ASSESSEE AND ASSESSMEN T FRAMED IS BAD IN LAW AND LIABLE TO BE QUASHED. LEARNED COUNSE L SUBMITTED THAT THIS PROPOSITION IS DULY SUPPORTED BY CASE LAW S CITED ABOVE. 10. FURTHER MORE, LEARNED COUNSEL SUBMITTED THAT TH E ADDITION HAS NOT BEEN MADE ON THE BASIS OF SEIZED MATERIAL. IN T HIS REGARD, LEARNED COUNSEL SUBMITTED THAT THE ASSESSMENTS IN A LL THESE CASES HAVE BEEN COMPLETED EARLIER. HENCE, IN THE ABSENCE OF INCRIMINATING MATERIAL FOUND DURING THE SEARCH, NO ADDITION IS SUSTAINABLE U/S 153C. LEARNED COUNSEL FURTHER SUBMI TTED THAT NO INCRIMINATING DOCUMENT WAS FOUND DURING SEARCH. HE SUBMITTED THAT THE DOCUMENTS SEIZED WHICH HAVE BEEN COMPILED IN T HE PAPER BOOK WERE DOCUMENTS RELATING TO ASSESSMENT YEAR 2011-12. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 62 NO DOCUMENT PERTAINING TO THE ASSESSMENT YEARS CONC ERNED IN THIS CASE HAS BEEN FOUND. THE DOCUMENTS RELATING TO ASSE SSMENT YEAR 2011-12 FOUND ARE ALSO NOT INCRIMINATING DOCUMENTS. THEY RELATE TO TRANSACTIONS WHICH WERE DULY RECORDED IN THE REGULA R BOOKS OF ACCOUNTS. HENCE, LEARNED COUNSEL SUBMITTED THAT THE JURISDICTION ASSUMED IN THIS CASE IS INVALID. FOR THE PROPOSITIO N THAT DEHORSE ANY INCRIMINATING SEIZED MATERIAL, NO ADDITION IS SUSTA INABLE WHERE ASSESSMENTS HAVE ALREADY BEEN COMPLETED EARLIER. LE ARNED COUNSEL RELIED UPON SEVERAL CASE LAWS AS MENTIONED ABOVE IN HIS WRITTEN SUBMISSION. 11. WE FIND THAT AT THE OUTSET WE NEED TO ADJUDICAT E THE JURISDICTIONAL ASPECT. THE FIRST LIMB OF ARGUMENT IN THIS REGARD I S THAT THERE IS NO VALID SATISFACTION IN THE CASE OF THE PERSON SEARCH ED THAT INCRIMINATING MATERIAL FOUND MAY RELATE TO THE ASSE SSEE IN WHOSE CASE ACTION HAS BEEN TAKEN U/S 153C. THE SEARCH REC ORDS OF THE SEARCHED PERSON, NAMELY, M/S ARTEFACT PROJECTS LTD. WERE CALLED FOR AND EXAMINED. NO SATISFACTION NOTE WHATSOEVER WAS F OUND RECORDED IN THE CASE OF THE SEARCHED PERSON. NEITHER ANY SAT ISFACTION WAS MENTIONED IN THE ORDER SHEETS NOR ANY SATISFACTION NOTE WAS FOUND IN THE FILE WHICH WAS NOT NUMBERED. THE FACT THAT NO S ATISFACTION NOTE IS THERE IN THE CASE OF THE SEARCHED PERSON IS ALSO EV IDENT FROM THE FINDING OF THE LEARNED CIT(APPEALS) IN HIS APPELLAT E ORDER REPRODUCED HEREIN ABOVE WHEREIN HE ALSO HAS REFERRED TO THE SA TISFACTION NOTE WHICH IS RECORDED IN THE CASE OF THE ASSESSEE AND N OT IN THE CASE OF THE SEARCHED PERSON. 13. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT WHE RE THE AO OF THE PERSONS SEARCHED IS SATISFIED THAT ANY MONEY, BULLI ON, JEWELLERY, BOOKS OF ACCOUNTS OR OTHER DOCUMENTS ETC. BELONG TO A PERSON OTHER THAN A SEARCHED PERSON, THEN SUCH DOCUMENT OR ASSET S ETC. SHALL BE HANDED OVER TO THE AO OF THE OTHER PERSON AND THE L ATER AO SHALL PROCEED AGAINST SUCH OTHER PERSON TO ASSESS OR REAS SESS HIS INCOME. THUS IT IS MANIFEST BEFORE HANDING OVER SUCH DOCUME NTS TO THE AO OF THE OTHER PERSON, A SATISFACTION HAS TO BE RECORDED BY THE AO OF THE SEARCHED PERSONS, THAT MONEY, BULLION OR JEWELLERY, ETC.,FOUND FROM THE PERSON SEARCHED BELONG TO THE 'OTHER PERSON'. O NLY WHEN SUCH 'SATISFACTION' IS RECORDED BY THE AO OF THE PERSON SEARCHED AND SUCH DOCUMENTS OR ASSETS SEIZED, ETC., ARE HANDED OVER T O THE AO OF THE 'OTHER PERSON', THAT THE LATER AO ACQUIRES JURISDIC TION TO MAKE ASSESSMENT OR REASSESSMENT OF THE 'OTHER PERSON.' I T IS, THEREFORE, CLEAR THAT THE AO OF THE 'OTHER PERSON' CAN ACQUIRE JURISDICTION TO ASSESS OR REASSESS INCOME OF THE 'OTHER PERSON' ONL Y WHEN THE AO OF THE PERSONS SEARCHED RECORDS SATISFACTION IN HIS CA SE (SEARCHED PERSON) BEFORE HANDING OVER MONEY, BULLION, JEWELLE RY, ETC. TO HIM. SO, WHAT EMERGES IS THAT THE RECORDING OF SATISFACT ION BY THE AO OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 63 THE PERSON SEARCHED IS A CONDITION PRECEDENT FOR TH E AO OF THE 'OTHER PERSON' TO ACQUIRE JURISDICTION. UNLESS SUCH JURISD ICTIONAL FACT IS SATISFIED, THERE CAN BE NO QUESTION OF MAKING ASSES SMENT OR REASSESSMENT OF THE 'OTHER PERSON.' IN THE CASE OF ANIL KUMAR & ORS. VS. UOI & ORS. REP ORTED IN 155 TAXMAN 659 (5C),THE HON'BLE APEX COURT OBSERVED THA T 'A JURISDICTIONAL FACT IS A FACT WHICH MUST EXIST BEFO RE A COURT, A TRIBUNAL OR AN AUTHORITY ASSUMES JURISDICTION OVER A PARTICULAR MATTER. A JURISDICTIONAL FACT IS ONE ON EXISTENCE O R NON-EXISTENCE OF WHICH DEPENDS JURISDICTION OF A COURT, A TRIBUNAL O R AN AUTHORITY. IT IS THE FACT UPON WHICH AN ADMINISTRATIVE AGENCY'S P OWER TO ACT DEPENDS. IF THE JURISDICTIONAL FACT DOES NOT EXIST, THE COURT, AUTHORITY OR OFFICER CANNOT ACT. IF A COURT OR AUTH ORITY WRONGLY ASSUMES THE EXISTENCE OF SUCH FACT, THE ORDER CAN B E QUESTIONED BY A WRIT OF CERTIORARI. THE UNDERLYING PRINCIPLE I S THAT BY ERRONEOUSLY ASSUMING EXISTENCE OF SUCH JURISDICTION AL FACT, NO AUTHORITY CAN CONFER UPON ITSELF JURISDICTION WHICH IT OTHERWISE DOES NOT POSSESS. THE EXISTENCE OF 'JURISDICTIONAL FACT' IS SINE QUA NON FOR THE EXERCISE OF POWER BY A COURT OF LIMITED JUR ISDICTION. AS NOTED EARLIER, SECTION 153C PROVIDES FOR TAKING RECOURSE TO ASSESSMENT IN RESPECT OF ANY OTHER PERSON, THE CONDITIONS PREC EDENT WHEREFORE ARE : (I) SATISFACTION MUST BE RECORDED BY THE AO T HAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THA N THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S. 132; (II) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS SEIZE D OR REQUISITIONED HAD BEEN HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON; AND (III) THE AO HAS PROCEE DED UNDER S. 153C AGAINST SUCH OTHER PERSON. THE CONDITIONS PREC EDENT FOR INVOKING THE PROVISIONS OF S. 153C, THUS, ARE REQUI RED TO BE SATISFIED BEFORE THE PROVISIONS OF SAID SECTION ARE APPLIED IN RELATION TO ANY PERSON OTHER THAN THE PERSON WHOSE PREMISES HAD BEEN SEARCHED OR WHOSE DOCUMENTS AND OTHER ASSETS H AD BEEN REQUISITIONED UNDER S. 132A. THAT THE RECORDING OF SATISFACTION BY THE AO HAVING JURISDICTION OVER THE PERSON SEARCHED IS AN ESSENTIAL AND PREREQUISITE CONDITION FOR BESTOWING JURISDICTION TO THE AO OF THE OTHER PERSONS. 14. NOW IN THIS REGARD THE CBDT HAS ALSO ISSUED NOT IFICATION AS UNDER : CIRCULAR NO. 24/20 5 F.NO.279/MISC.L140 /2015/IT J GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 64 CENTRAL BOARD OF DIRECT TAXES NEW DELHI, 31ST DECEMBER, 2015 SUBJECT: RECORDING OF SATISFACTION NOTE UNDER SECTI ON 158BD/153C OF THE ACT - REG.- THE ISSUE OF RECORDING OF SATISFACTION FOR THE PURP OSES OF SECTION 158BD/153C HAS BEEN SUBJECT MATTER OF LITIGATION. 2. THE HON'BLE SUPREME COURT IN THE CASE OF MLS CAL CUTTA KNITWEARS IN ITS DETAILED JUDGMENT IN CIVIL APPEAL NO.3958 OF 20 14 DATED 12.3.2014(AVAILABLE IN NJRS AT 2014-LL-0312-51) HAS LAID DOWN THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT, RECORDING OF A SATISFACTION NOTE IS A PREREQUISITE AND THE SATISFACTION NOTE MUST BE PREPARED BY THE AO BEFORE HE TRANSMITS THE RECORD TO THE OTHER AO WHO HAS JURISDICTION OVER SU CH OTHER PERSON ULS. 158BD. THE HON'BLE COURT HELD THAT 'THE SATISFACTIO N NOTE COULD BE PREPARED AT ANY OF THE FOLLOWING STAGES : (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST THE SEARCHED PERSON UNDER SECTION 158BC OF THE ACT; OR (B) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS UND ER SECTION 158BC OF THE ACT; OR (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS AR E COMPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERS ON.' 3. SEVERAL HIGH COURTS HAVE HELD THAT THE PROVISION S OF SECTION 153C OF THE ACT ARE SUBSTANTIALLY SIMILAR/PARI-MATERIA T O THE PROVISIONS OF SECTION 158BO OF THE ACT AND THEREFORE, THE ABOVE G UIDELINES OF THE HON'BLE SC, APPLY TO PROCEEDINGS U/S 153C OF THE IT ACT, FOR THE PURPOSES OF ASSESSMENT OF INCOME OF OTHER THAN THE SEARCHED PERSON. THIS VIEW HAS BEEN ACCEPTED BY CBDT. 4. THE GUIDELINES OF THE HON'BLE SUPREME COURT AS R EFERRED TO IN PARA 2 ABOVE, WITH REGARD TO RECORDING OF SATISFACTION N OTE, MAY BE BROUGHT TO THE NOTICE OF ALL FOR STRICT COMPLIANCE. IT IS FURTHER CLARIFIED THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE 'OTHER PERSON' IS ONE AND THE SAME, THEN ALSO HE IS REQUIRED TO RECOR D HIS SATISFACTION AS HAS BEEN HELD BY THE COURTS. 5. IN VIEW OF THE ABOVE, FILING OF APPEALS ON THE I SSUE OF RECORDING OF SATISFACTION NOTE SHOULD ALSO BE DECIDED IN THE LIG HT OF THE ABOVE JUDGEMENT. ACCORDINGLY, THE BOARD HEREBY DIRECTS TH AT PENDING SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 65 LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE UNDER SECTION 158BO /153C SHOULD BE WITHDRAWN/NOT PRESSED IF IT D OES NOT MEET THE GUIDELINES LAID DOWN BY THE APEX COURT. 15. FROM THE ABOVE CBDT NOTIFICATION, IT IS CLEAR T HAT EVEN IF THE AO OF THE SEARCHED PERSONS AND THE ASSESSEE ARE SAME, STILL PROPER SATISFACTION QUA THE DOCUMENTS ETC. FOUND RELATING TO THE ASSESSEE HAS TO BE RECORDED IN THE CASE OF THE SEARCHED PERS ONS. FROM THE PERUSAL OF THE CONCERNED RECORDS IN THE CASE OF THE SEARCHED PERSONS AS MENTIONED ABOVE, IT IS EVIDENT THAT THER E IS NO SUCH SATISFACTION THAT ANY BULLION, JEWELLERY, BOOKS OF ACCOUNTS, OTHER DOCUMENTS ETC. BELONGING TO THE ASSESSEE HAS BEEN F OUND AND THE SAME IS BEING HANDED OVER TO THE AO OF THE ASSESSEE . THUS THE ABSENCE OF REQUISITE SATISFACTION DENUDES THE LEGAL ITY OF JURISDICTION IN THIS CASE. HENCE, IT HAS TO BE HELD THAT SINCE PROP ER SATISFACTION AS ENVISAGED U/S 153C HAS NOT BEEN RECORDED, THE ASSES SMENTS ARE LIABLE TO BE QUASHED ON ACCOUNT OF LACK OF VALIDITY OF JURISDICTION. IN THIS REGARD, THE CASE LAWS REFERRED ABOVE BY THE LE ARNED COUNSEL OF THE ASSESSEE SUPPORT THIS PROPOSITION. WE MAY GAINF ULLY REFER TO SOME OF THEM AS UNDER : (I) CIT VS. SHETTY PHARMACEUTICALS & BIOLOGICAL LTD . 232 TAXMAN 0268. (ANDHRA PRADESH H.C.) IN THIS CASE, IT WAS HELD THAT SECTION 153C AND 153 A MANDATES RECORDING OF SATISFACTION OF THE ASSESSING OFFICER( S) AS A PRECONDITION FOR INVOKING JURISDICTION AND IT IS NOT A MERE FORM ALITY BECAUSE RECORDING OF SATISFACTION POSTULATES APPLICATION OF MIND CONSCIOUSLY AS THE DOCUMENTS SEIZED MUST BE BELONGING TO THE AN Y OTHER PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153-A OF THE ACT. IT IS CONTENDED THAT THE SAME ASSESSING OFFICER IS INVOLV ED IN THE MATTER. THIS FACT DOES NOT DISPENSE WITH ABOVE REQUIREMENT. IT IS SETTLED POSITION OF LAW THAT WHEN A THING 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 V. KING EMPEROR). WE THI NK THE LEARNED TRIBUNAL HAS CORRECTLY FOLLOWED THE PRINCIPLE. WE D O NOT FIND ANY ELEMENT OF LAW TO BE DECIDED. CONCLUSION : RECORDING OF SATISFACTION OF AO(S) IS PRE-CONDITION FOR INVOKING JURISDICTION AND IT IS NOT A MERE FORMALIT Y BECAUSE RECORDING OF SATISFACTION POSTULATES APPLICATION OF MIND CONS CIOUSLY AS DOCUMENTS SEIZED MUST BE BELONGING TO ANY OTHER PER SON OTHER THAN PERSON REFERRED TO IN S. 153-A. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 66 I) HONBLE HIGH COURT OF MADHYA PRADESH HIGH COURT DECISION IN THE CASE OF CIT VS. MECHMEN IN ITA NO. 44/2011, ITA NO. 45/2011 & OTHERS VIDE ORDER DATED 10-07-15. IN THIS CASE, THE RELEVANT EXPOSITION FROM THE HON BLE HIGH COURT IS AS UNDER : EVEN FOR THE PURPOSE OF SECTION 153C, THE ASSESSING OFFICER BEFORE HANDING OVER THE ITEMS TO THE ASSESSING OFFICER HAV ING JURISDICTION MUST BE SATISFIED THAT THE ITEMS BELONGS OR BELON G TO THE PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. THAT SATISFACTION OF THE CONCERNED ASSESSING OFFICER IS A SINE QUA NON. THE CONSEQUENCES FLOWING FROM THE ACTION TO BE TAKEN ON THE BASIS OF SUCH INFORMATION HANDED OVER TO THE ASSESSING OFFIC ER HAVING JURISDICTION, FOR THE ASSESSEE, WHO IS A PERSON OTH ER THAN THE PERSON REFERRED TO IN SECTION 153A, IS DRASTIC OF ASSESS MENT OR REASSESSMENT OF HIS INCOME FALLING WITHIN SIX ASSES SMENT YEARS. THE FACT THAT INCIDENTALLY THE ASSESSING OFFICER IS COMMON AT BOTH THE STAGES WOULD NOT EXTRICATE HIM FROM RECORDING SATIS FACTION AT THE RESPECTIVE STAGES. IN THAT, THE ASSESSING OFFICER I S SATISFIED THAT THE ITEMS REFERRED TO IN SECTION 153C BELONGS OR BELONG TO A PERSON (OTHER THAN THE PERSON REFERRED TO IN SECTION 153A) , BEING SINE QUA NON. HE CANNOT ASSUME JURISDICTION TO TRANSMIT THOS E ITEMS TO ANOTHER FILE WHICH INCIDENTALLY IS PENDING BEFORE HIM CONCE RNING OTHER PERSON (PERSON OTHER THAN THE PERSON REFERRED TO IN SECTIO N 153A). SIMILARLY, AS THERE IS NO PROVISION EITHER EXPRESS OR IMPLIED (IN THE ACT) TO DISPENSE WITH THE REQUIREMENT OF SATISFACTI ON, IF THE ASSESSING OFFICER HAPPENS TO BE THE SAME, AS IN THIS CASE, TH E ARGUMENTS OF THE DEPARTMENT MUST BE NEGATIVE. WE CONCLUDE THAT THE C ONDITION PRECEDENT FOR RESORTING TO ACTION UNDER SECTION 158 BD DELINEATED BY THE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (SUPRA) AND IN THE RECENT CASE OF COMMISSIONER OF INCOME-TAX-III V S. CALCUTTA KNITWEARS (SUSPRA), WOULD APPLY ON ALL FOURS MANDAT ING SATISFACTION OF THE ASSESSING OFFICER(S) DEALING WITH THE CASE AT T HE RESPECTIVE STAGES REFERRED TO IN SECTION 153C. (III)HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF DIRECTOR OF INCOME TAX VS. M/S INGRAM MICRO (INDIA) EXPORTS PTE LTD. IN ITA NO. 1337 OF 2013 & OTHERS VIDE ORDER DATED 29-04-2015. IN THIS CASE, IT WAS EXPOUNDED THAT AS PER PROVISIO NS OF SECTION 153A AND SECTION 153C OF THE I.T. ACT, PROCEEDINGS CAN O NLY BE INITIATED AFTER THE AO ARISE AT THE SATISFACTION THAT THE SEI ZED MATERIAL PERTAINS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 67 TO OTHER PERSONS, NAMELY, PERSONS OTHER THAN SEARCH ED PERSONS. IT IS ONLY THEN THE PERSONS OTHER THAN THE SEARCHED PARTY CAN BE PROCEEDED AGAINST. IF THERE IS A SATISFACTION REQUI RED AND TO BE RECORDED AS A PRECONDITION AND WHICH IS MANDATORY, THEN, IN THE ABSENCE THEREOF ALL FURTHER STEPS STAND VITIATED. IV) IN A BATCH OF APPEALS IN ITA NO. 60/2016 & OTHE RS IN THE PRINCIPAL CIT VS. SATKAR ROADLINES PVT. LTD. VIDE ORDER DATED JANUARY 12, 2016, THE HONBLE DELHI HIGH COURT NOTED AS UNDER : IT IS STATED BY MS. SURUCHI AGGARWAL, SENIOR COUNSE L FOR THE REVENUE, THAT IN LIGHT OF THE CIRCULAR NO. 24/2015 DATED 31 ST DECEMBER, 2015 ISSUED BY THE CENTRAL BOARD OF DIREC T TAXES ON THE SUBJECT RECORDING OF SATISFACTION NOTE UNDER SECTI ON 158BD/153C OF THE ACT, THESE APPEALS ARE NOT PRESSED. THESE APPEALS ARE, ACCORDINGLY, DISMISSED AS NOT PR ESSED. 16. FROM THE ABOVE CASE LAWS AND CBDT CIRCULAR, IT IS EVIDENT THAT RECORDING OF REQUISITE SATISFACTION IN THE CASE OF A SEARCHED PARTY IS A SINE QUA NON FOR ASSUMING JURISDICTION FOR THE IS SUE OF NOTICE U/S 153C EVEN IF THE AO OF THE SEARCHED PERSON AND THE ASSESSEE ARE SAME. IT IS ABUNDANTLY CLEAR FROM THE RECORDS IN TH E CASE OF THE SEARCHED PERSON THAT THERE IS NO REQUISITE SATISFAC TION GRANTING THE AO JURISDICTION FOR ISSUING NOTICE TO THE ASSESSEE U/S 153C OF THE I.T. ACT. NO SATISFACTION NOTE WHATSOEVER IS FOUND IN THE CASE OF THE SEARCHED PERSON, NAMELY, M/S ARTEFACT PROJECTS LTD. IN ABSENCE OF ANY SATISFACTION NOTE IN THE CASE OF M/S ARTEFACT P ROJECTS LTD. THAT ANY SEIZED MATERIAL BELONGING TO THE ASSESSEE HAS B EEN FOUND WHICH IS INCRIMINATING IN NATURE WHICH IS TO BE HAN DED OVER TO THE AO OF THE ASSESSEE, THE JURISDICTION ASSUMED IN THI S CASE IS ILLEGAL AND THE SAME DESERVES TO BE QUASHED. ACCORDINGLY, I N THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDEN T, IN OUR CONSIDERED OPINION, THE ASSESSEE DESERVE TO SUCCEED ON THIS ACCOUNT AND THE ASSESSMENTS ARE LIABLE TO BE QUASHE D ON ACCOUNT OF LACK OF VALIDITY OF JURISDICTION. ACCORDINGLY, W E SET ASIDE THE ORDERS OF THE LEARNED CIT(APPEALS) ON THIS ASPECT OF JURIS DICTION AND QUASH THE ASSESSMENTS BY HOLDING THAT REQUISITE SATISFACT ION WAS NOT RECORDED BEFORE ISSUE OF NOTICE U/S 153C. 2.38. IF THE AFORESAID DECISION IS ANALYZED, WHERE IN CBDT CIRCULAR AND THE DECISION FROM HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT VS M/S INGRAM MICRO (INDIA) EXPORTS PVT. LTD. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 68 (ITA NO.1337 OF 2013 & ORS) ORDER DATED 29/04/2015 HAS BEEN CONSIDERED, IT WAS HELD THAT RECORDING OF REQUISITE SATISFACTION IN THE CASE OF A SEARCHED PARTY IS A SINE QUA NON FOR ASSUMING JURISDICTION FOR THE ISSUE OF NOTICE U/S 153C OF TH E ACT EVEN IF THE ASSESSING OFFICER OF THE SEARCHED PERSON AND THE A SSESSEE ARE SAME. IT IS ABUNDANTLY CLEAR FROM THE RECORDS IN TH E CASE OF THE SEARCHED PERSON THAT THERE IS NO REQUISITE SATISFAC TION GRANTING THE ASSESSING OFFICER JURISDICTION FOR ISSUING NOTI CE TO THE ASSESSEE U/S 153C OF THE I.T. ACT. 2.39. LIKEWISE, IN THE CASE OF SMT. REKHABEN THAKK AR VS. ACIT (2015) 174 TTJ 662, SIMILAR ISSUE WAS CONS IDERED, WHEREIN, THE ASSESSING OFFICER OF THE SEARCHED PERS ON AND THE OTHER PERSON WAS SAME. ASSESSING OFFICER OF THE SEARCHED PERSON HAS NOT RECORDED THE SATISFACTION NOTE THAT UNDISCLOSED INCOME AND DOCUMENTS FOUND DURING THE COURSE OF SEA RCH ARE BELONGING TO OTHER PERSON, THE PROCEEDINGS IN THE C ASE OF OTHER PERSON WERE HELD AS INVALID. THE TRIBUNAL HELD AS U NDER:- 12. IN THE ABOVE LEGAL BACKGROUND, LET US NOW EXAMINE T HE FACTS OF THE ASSESSEES CASE SO AS TO FIND OUT WHETHER THE JURIS DICTION ASSUMED UNDER S. 153C IS VALID. THE SATISFACTION NOTE RECORDED BY TH E AO READS AS UNDER : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 69 'NAME OF THE ASSESSEE SMT. REKHABEN K. THAKKAR PROP. M/S DURGA FINANCE ASST. YR. 1999 -2000 TO 2004-05 SATISFACTION NOTE FOR ISSUING NOTICE UNDER S. 153C OF THE ACT SEARCH AND SEIZURE PROCEEDINGS UNDER SECTION WERE C ARRIED OUT ON 4TH MARCH, 2005 AT THE RESIDENTIAL / BUSINESS PREMISES IN THE KABHAI CHAUHAN GROUP OF CASES. DURING THE COURSE OF SEARCH , CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. ON S CRUTINY OF THE DOCUMENTS SO SEIZED, IT IS NOTICED THAT CERTAIN DOC UMENTS WERE FOUND TO BE PERTAINING TO THE ABOVE ASSESSEE, INCLUDING THE FOLLOWING DOCUMENTS : UNDATED CHEQUE ISSUED BY M/S DURGA FINANCE IN FAVOU R OF SHRI VIJAY K. CHAUHAN SEIZED FROM THE PREMISES OF SHRI BRIJESH K. CHAUHAN. SINCE, THE ABOVE DOCUMENTS, PERTAINING TO THE ABOVE NAMED ASSESSEE HAVE BEEN FOUND, I AM SATISFIED THAT THE PROVISIONS OF S. 153C OF THE ACT APPLY IN THIS CASE AND, THEREFORE, NOTICE UNDER S. 153C IS BEING ISSUED. BARODA DATE : 8TH NOV., 2005 (AMAL GARG) DY. CIT CENTRAL CIRCLE -1, BARODA' THE ABOVE SATISFACTION NOTE IS SIMILAR TO NOTE RECO RDED BY THE ASSESSING OFFICER OF THE PRESENT ASSESSEE. THE TRIBUNAL FURTHER OBSERVED/HELD AS UNDER:- 13. FROM THE ABOVE, IT IS EVIDENT THAT THE SATISFAC TION IS RECORDED IN THE CASE OF SMT. REKHABEN K. THAKKAR, PROPRIETOR OF M/S DURGA FINANCE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 70 THUS, THE SATISFACTION IS RECORDED IN THE CASE OF T HE PERSON OTHER THAN THE PERSON SEARCHED. AS WE HAVE ALREADY MENTIONED T HAT AS PER S. 153C, THE AO OF THE PERSON SEARCHED SHOULD BE SATIS FIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS BELONG TO A PERSON OTHER THAN THE PERSON SEARCHED. ADMITTEDLY, IN THIS CASE, THE SATISFACTIO N IS RECORDED NOT BY THE AO OF THE PERSON SEARCHED BUT BY THE AO OF THE PERSON TO WHOM SUCH DOCUMENT CLAIMED TO BE BELONGING. IT WAS CONTE NDED BY THE LEARNED COUNSEL THAT SINCE THE AO OF THE PERSON SEA RCHED AS WELL AS THE AO OF SUCH OTHER PERSON IS THE SAME; THEREFORE, THE SATISFACTION RECORDED BY THE AO SHOULD BE CONSIDERED AS THE PROP ER COMPLIANCE OF S. 153C. WE ARE UNABLE TO AGREE WITH THIS VIEW OF T HE LEARNED DEPARTMENTAL REPRESENTATIVE. EVEN IF THE AO ASSESSI NG THE PERSON SEARCHED AS WELL AS OTHER PERSON WHOSE ASSETS, BOOK S OF ACCOUNT OR DOCUMENTS WERE FOUND AT THE TIME OF SEARCH IS SAME, THEN ALSO, FIRST WHILE MAKING THE ASSESSMENT IN THE CASE OF THE PERS ON SEARCHED, HE HAS TO RECORD THE SATISFACTION THAT THE MONEY, BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DO CUMENTS BELONG TO THE PERSON OTHER THAN THE PERSON SEARCHED. THEN, TH E COPY OF THIS SATISFACTION NOTE IS TO BE PLACED IN THE FILE OF SU CH OTHER PERSON AND THE RELEVANT DOCUMENT SHOULD ALSO BE TRANSFERRED FROM T HE FILE OF PERSON SEARCHED TO THE FILE OF SUCH OTHER PERSON. THEREAFT ER, IN THE CAPACITY OF THE AO OF SUCH OTHER PERSON, THE AO HAS TO ISSUE TH E NOTICE UNDER S. 153C. THE AO OF THE PERSON SEARCHED AND SUCH OTHER PERSON MAY BE THE SAME BUT THESE ARE TWO DIFFERENT ASSESSEES AND, THEREFORE, THE AO HAS TO CARRY OUT THE DUAL EXERCISE, FIRST AS THE AO OF THE PERSON SEARCHED IN WHICH HE HAS TO RECORD THE SATISFACTION , DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE PERSON SEARCHED. A FTER RECORDING SUCH SATISFACTION NOTE IN THE FILE OF THE PERSON SE ARCHED, THE SAME IS TO BE PLACED IN THE FILE OF SUCH OTHER PERSON. THEN, I N HIS CAPACITY AS THE AO OF SUCH OTHER PERSON, HE SHOULD TAKE COGNIZANCE OF SUCH SATISFACTION NOTE AND THEREAFTER ISSUE NOTICE UNDER S. 153C. IN THIS CASE, THIS EXERCISE OF RECORDING THE SATISFACTION D URING THE ASSESSMENT PROCEEDINGS OF THE PERSON SEARCHED HAS NOT BEEN CAR RIED OUT. ON THE OTHER HAND, THE AO RECORDED THE SATISFACTION IN THE CASE OF SUCH OTHER PERSON WHICH DOES NOT SATISFY THE CONDITION OF ASSU MING JURISDICTION UNDER S. 153C. 14. NOTICES UNDER S. 153C HAVE BEEN ISSUED FOR ASST . YRS. 1999-2000 TO 2004-05. THE ONLY DOCUMENT ON THE BASIS OF WHICH THE NOTICES HAVE BEEN ISSUED IS AN UNDATED CHEQUE FOUND DURING THE C OURSE OF SEARCH AT THE PREMISES OF KABHAI CHAUHAN GROUP ON 4TH MARC H, 2005. AN UNDATED CHEQUE FOUND ON 4TH MARCH, 2005 CANNOT PERT AIN TO THE PREVIOUS YEARS 1998-99 TO 2003-04. IT CAN PERTAIN T O PREVIOUS YEAR 2004-05 AND THUS, CAN BE RELEVANT ONLY FOR ASST. YR . 2005-06 AND NOT IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 71 EARLIER YEARS. ADMITTEDLY, THERE IS NO SEIZED MATER IAL IN THE YEARS FOR WHICH NOTICES UNDER S. 153C HAVE BEEN ISSUED. 17. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE FACTS OF THE CASE, WE ARE UNABLE TO AGREE WITH THE CONTEN TION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE AO, WHO RECORDED T HE SATISFACTION FOR THE PURPOSE OF ISSUE OF NOTICE UNDER S. 153C, H AS MENTIONED 'ON SCRUTINY OF THE DOCUMENTS SO SEIZED, IT IS NOTICED THAT CERTAIN DOCUMENTS WERE FOUND TO BE PERTAINING TO THE ABOVE ASSESSEE'. THUS, EVEN AS PER AO, WHO RECORDED THE SATISFACTION FOR I SSUE OF NOTICE UNDER S. 153C, THE DOCUMENT I.E., THE UNDATED CHEQU E WAS 'PERTAINING TO' THE ASSESSEE AND NOT 'BELONGING TO' THE ASSESSE E. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT RELIED UPON B Y THE LEARNED CIT- DEPARTMENTAL REPRESENTATIVE IS ON DIFFERENT FACTS. IN THE ABOVE CASE, THE ASSESSEE SOLD CERTAIN LAND TO THE COMPANY NAMED S. SUBSEQUENTLY, DURING THE COURSE OF SEARCH AT THE PR EMISES OF S, CERTAIN DOCUMENTS INCLUDING THE SALE DEED AS WELL A S AN AGREEMENT BETWEEN THE TENANT AND THE ASSESSEE WAS FOUND. THE AGREEMENT BETWEEN THE ASSESSEE AND THE TENANT WAS RELATING TO THE VACATION OF THE PLOT OF LAND ON CERTAIN PAYMENT MADE BY THE ASS ESSEE. THEIR LORDSHIPS OF THE JURISDICTIONAL HIGH COURT HAVE HEL D 'AGREEMENT BETWEEN TENANTS OF THE PETITIONER WOULD CERTAINLY S ATISFY THE REQUIREMENT OF S. 153C OF THE ACT.' THUS, THE AGREE MENT BETWEEN THE TENANT AND THE PETITIONER FOUND FROM S WAS HELD T O BE BELONGING TO THE ASSESSEE BECAUSE IT WAS NOT BELONGING TO THE PE RSON SEARCHED. HOWEVER, CHEQUE ISSUED BY THE ASSESSEE WAS IN THE N AME OF VIJAY K. CHAUHAN I.E., THE PERSON OF THE GROUP WHICH WAS SEA RCHED. THE CHEQUE WAS FOUND FROM THE PERSON UPON WHOM THE CHEQ UE WAS DRAWN. THEREFORE, IN OUR OPINION, THE CHEQUE 'BELON GS TO' THE PERSON UPON WHOM IT WAS DRAWN AND CANNOT BE SAID TO BE CON TINUED TO 'BELONGING TO' THE PERSON WHO ISSUED THE CHEQUE. TH EREFORE, IN OUR OPINION, THE CONDITIONS FOR ISSUE OF NOTICE UNDER S . 153C WERE NOT SATISFIED. FOR READY REFERENCE, WE MAY SUMMARIZE TH E REASONS ON THE BASIS OF WHICH WE FORM OPINION THAT THE CONDITION O F ISSUE OF NOTICE UNDER S. 153C WAS NOT SATISFIED, AS UNDER : (A) NO SATISFACTION IS RECORDED BY THE AO OF THE PE RSON SEARCHED. ON THE OTHER HAND, SATISFACTION IS RECORDED BY THE AO OF SUCH OTHER PERSON IN WHOSE CASE NOTICE UNDER S. 153C WAS ISSUE D. (B) THE ONLY DOCUMENT ON THE BASIS OF WHICH NOTICE UNDER S. 153C WAS ISSUED FOR SIX YEARS WAS THE UNDATED CHEQUE FOUND D URING THE COURSE OF SEARCH ON 4TH MARCH, 2005. THUS, THE CHEQUE WAS NOT PERTAINING TO ANY OF THE YEARS FOR WHICH NOTICE WAS ISSUED UNDER S. 153C. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 72 (C) THE CHEQUE, ON THE BASIS OF WHICH THE NOTICE UN DER S. 153C WAS ISSUED, CANNOT BE SAID TO BE BELONGING TO THE ASSES SEE. IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT THE CO NDITIONS FOR ISSUE OF NOTICE UNDER S. 153C WERE NOT SATISFIED. ACCORDINGL Y, WE QUASH THE NOTICES ISSUED FOR ASST. YRS. 1999-2000 TO 2004-05. CONSEQUENTLY, THE ASSESSMENT ORDERS PASSED IN PURSUANCE TO SUCH NOTIC ES ARE ALSO QUASHED. 2.40. IN THE CASE OF TANVEER COLLECTIONS PVT LTD VS. ACIT ITA NO. 2421/DEL/2014 DECIDED ON 16 TH JANUARY, 2015, IT WAS HELD AS UNDER:- 15. THE LD. DR VEHEMENTLY ACCENTUATED ON THE POINT THAT SINCE THE AO OF THE PERSONS SEARCHED AND THE ASSESSEE IS SAME, I T DOES NOT MAKE ANY DIFFERENCE WHETHER THE SATISFACTION IS RECORDED IN THE CASE OF THE PERSONS SEARCHED OR OTHER PERSON. SHE EMPHASIZED ON THE FACTUM OF RECORDING SATISFACTION BY THE AO, WHICH CONDITION I N HER OPINION STOOD SATISFIED, BY VIRTUE OF IT HAVING BEEN RECORDED BY THE COMMON AO. 16. IN OUR CONSIDERED OPINION, THIS CONTENTION ADVA NCED ON BEHALF OF THE REVENUE IS DEVOID OF MERIT. WE FAIL TO COMPREHE ND AS TO HOW THE REQUIREMENT OF RECORDING SATISFACTION BY THE AO OF THE PERSON SEARCHED PROVIDED BY THE STATUTE CAN BE SUBSTITUTED WITH ANYTHING ELSE. THERE IS AN UNDERLYING RATIONALE IN PROVIDING FOR RECORDING OF SUCH SATISFACTION BY THE AO OF THE PERSON SEARCHED. AS T HE MONEY, BULLION, JEWELLERY, BOOKS OF ACCOUNT OR DOCUMENTS, ETC. ALWA YS COME TO THE POSSESSION OF THE AO OF THE PERSON SEARCHED WHO HAS TO FRAME ASSESSMENT, IT IS ONLY HE WHO CAN FIND OUT THAT WHI CH OF SUCH DOCUMENTS ETC. DO NOT BELONG TO THE PERSON SEARCHED AND ARE RELEVANT FOR THE ASSESSMENT OF THE OTHER PERSON. IT IS NOT A S IF ALL THE BOOKS OF ACCOUNT AND DOCUMENTS ETC. FOUND DURING THE COURSE OF A SEARCH ARE EVALUATED BY A SEPARATE AUTHORITY TO FIGURE OUT THA T WHICH OF THESE DOCUMENTS BELONG TO THE PERSON SEARCHED AND TO THE OTHERS AND THUS, HANDED OVER TO THE CONCERNED AOS OF THE PERSON SEAR CHED AND OTHERS FOR MAKING ASSESSMENT. AS IT IS ONLY THE AO OF THE PERSON SEARCHED WHO CAN REACH A CONCLUSION THAT SOME OF THE DOCUMEN TS ETC. DO NOT BELONG TO THE PERSON SEARCHED BUT TO SOME OTHER PER SON, THE LEGISLATURE HAS PROVIDED FOR RECORDING OF SUCH SATI SFACTION BY THE AO OF THE PERSON SEARCHED. IT IS NOT PERMISSIBLE UNDER TH E LAW TO REQUIRE THE AO OF THE OTHER PERSON TO RECORD SUCH SATISFACTION BY THE AO. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 73 17. AS REGARDS THE OTHER ARGUMENT OF THE LD. DR THA T SINCE THE AO OF BOTH THE PERSONS SEARCHED AND THE ASSESSEE IS THE S AME PERSON, HENCE THE REQUIREMENT OF RECORDING SATISFACTION BY THE AO OF THE PERSONS SEARCHED SHOULD BE DEEMED TO HAVE BEEN FULF ILLED WITH THE RECORDING OF SATISFACTION BY THE AO OF THE ASSESSEE . WE ARE AGAIN UNABLE TO APPRECIATE THIS CONTENTION THAT THE COMMO NNESS OF THE AO WOULD MAKE NO DIFFERENCE IN SO FAR AS THE RECORDING OF SATISFACTION IN THE CASE OF THE PERSONS SEARCHED IS CONCERNED. WHAT IS RELEVANT FOR THIS PURPOSE IS NOT THE IDENTITY OF THE PERSON ASSE SSING BUT HIS POSITION AND THE CAPACITY. WHEN THE LAW REQUIRES THE AO OF T HE PERSON SEARCHED TO RECORD THE NECESSARY SATISFACTION, IT I S THE AO HAVING JURISDICTION OVER THE PERSON SEARCHED WHO IS OBLIGE D TO RECORD SUCH SATISFACTION IN THE CAPACITY OF THAT AO AND THAT TO O IN THE CASE OF THE PERSON SEARCHED. THE MERE FACT THAT THE AO OF THE P ERSON SEARCHED AND THE ASSESSEE IS THE SAME PERSON, DOES NOT, IN A NY MANNER, OBLITERATE THE REQUIREMENT OF LAW NECESSITATING THE RECORDING OF SATISFACTION IN THE CASE OF THE PERSON SEARCHED THA T MONEY, BULLION, JEWELLERY, ETC., FOUND FROM THE PERSON SEARCHED BEL ONGS TO THE OTHER PERSON. WHAT IS CRUCIAL TO NOTE IS CAPACITY OF THE AO AND NOT HIS IDENTITY. IN VIEW OF THE FACT THAT WHEN THE STATUTO RY STIPULATION IS FOR RECORDING THE SATISFACTION BY THE AO OF THE PERSON SEARCHED, THEN, IT CANNOT BE SUBSTITUTED WITH THE SATISFACTION OF THE AO OF THE OTHER PERSON. THIS CONTENTION ALSO FAILS. 2.41. LIKEWISE, IN DCIT VS. SATKAR ROADLINE PVT. L TD (2016) 175 TTJ 198(DEL), IT WAS OBSERVED/HELD AS UN DER:- 26. COMING BACK TO FACTS OF THE INSTANT CASE, IT I S PALPABLE THAT THE AO OF SHRI B.K. DHINGRA, SMT. POONAM DHINGRA AND M/ S MADHUSUDAN BUILDCON (P) LTD., DID NOT RECORD ANY SA TISFACTION THAT SOME MONEY, BULLION, JEWELLERY OR BOOKS OF ACCOUNTS OR OTHER DOCUMENTS FOUND FROM THESE PERSONS BELONGED TO THE ASSESSEE. THE ABSENCE OF SUCH SATISFACTION, IN OUR CONSIDERED OPINION, FAILED TO CONFER ANY VALID AND LAWFUL JURISDICTION ON THE AO OF THE ASSESSEE TO PROCEED WITH THE MATTER OF THE ASSESSMENT UNDER S. 153C OF THE ACT. WE, ERGO, SET ASIDE THE INITIATION AND THE ENS UING ASSESSMENT ON THE ASSESSEE AS VOID AB INITIO. 27. THE RELIANCE OF THE LEARNED DEPARTMENTAL REPRES ENTATIVE ON SOME DECISIONS ON OTHER LEGAL ISSUES OR MERITS IS O F NO CONSEQUENCE IN VIEW OF THE LACK OF JURISDICTION OF THE AO TO PROCEED WITH THE ASSESSMENTS UNDER S. 153C OF THE ACT. IN V IEW OF OUR DECISION ON THE FIRST LEGAL ISSUE, THERE IS NO NEED TO ESPOUSE THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 74 OTHER GROUNDS TAKEN BY THE ASSESSEE DEALING WITH OT HER LEGAL ISSUES OR MERITS. 28. IN THE RESULT, THE APPEAL IS ALLOWED.' 2.42. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SUPER MALLS PVT LTD VS. DCIT (2015) ITA NO.1693 TO 1696/DEL/2015 DECIED ON 11TH DECEMBER, HELD AS UNDER:- 14. FROM THE PLAIN READING OF THE ABOVE NOTINGS, I T 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 P ERSON 'OTHER THAN THE SEARCHED PERSON' I.E., THE ASSESSEE. THE CONTENTS O F THE REASONS RECORDED BY THE AO IN THE CASE OF THE ASSESSEE WHICH HAS BEE N INCORPORATED BY THE LEARNED CIT(A) AT PP. NOS. 7 AND 8 OF THE IMPUGNED ORDER ARE AS UNDER : 'REASONS/SATISFACTION NOTE FOR TAKING UP THE CASE O F M/S SUPER MALLS (P) LTD., SECTOR-12, HUDA, KARNAL, REGD., OFFICE AT 51-TRANSP ORT CENTRE, PUNJABI BAGH, NEW DELHI UNDER S. 153C OF THE IT ACT, 1961. THE JURISDICTION OF THIS CASE HAS BEEN ASSIGNED TO THIS OFFICE UNDER S. 127 OF IT ACT, 1961 BY THE WORTHY CIT-III, NEW DELHI VIDE ORDER F.NO. CITIII/ DEL/CENTRALIZATION/2012-13/2455, DT. 15TH JAN., 201 3. BY VIRTUE OF THE AUTHORIZATION OF THE DIRECTOR OF I T (INV.), CHANDIGARH, A SEARCH AND SEIZURE OPERATION UNDER S. 132(1) OF THE ACT WAS CARRIED OUT ON 8TH/9TH APRIL, 2010 AT THE RESIDENTIAL/BUSINESS PRE MISES OF SH. TEJWANT SINGH AND SH. VED PRAKASH BHARTI GROUP OF CASES, KARNAL, PANIPAT AND DELHI AND A SURVEY UNDER S. 133A OF THE IT ACT, 1961 WAS ALSO C ARRIED OUT AT THE BUSINESS PREMISES OF M/S SUPER MALLS (P) LTD., KARNAL AND NE W DELHI. DURING THE COURSE OF SEARCH ON 8TH/9TH APRIL, 2010 AT RESIDENCE OF SH. VED PRAKASH BHARTI WHO IS A DIRECTOR IN THE ASSESSEE CO MPANY M/S SUPER MALLS (P) LTD., PEN DRIVES WERE FOUND AND SEIZED AS PER A NNEX.-3 FROM VEHICLE NO. HR06N-0063 PARKED IN FRONT OF THE RESIDENCE OF SH. VED PRAKASH BHARTI. SOME DOCUMENTS AS PER ANNEX. A-1 WERE SEIZED AFTER TAKING PRINTOUT OF THE ABOVE SAID PEN DRIVES. THESE DOCUMENTS CONTAIN THE DETAILS OF CASH RECEIPT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 75 ON SALE OF SHOP/OFFICES AT M/S SUPER MALL, KARNAL A LSO BESIDE OTHER CONCERNS. THESE DOCUMENTS ARE REQUIRED FOR ASSESSMENT PROCEED INGS. DURING THE STATEMENT OF SH. VED PRAKASH BHARTI 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 S UB-S. (1) OF S. 153C OF THE ACT, I AM SATISFIED THAT THE DOCUMENT SEIZED FROM T HE RESIDENCE OF SH. VED PRAKASH BHARTI BELONGS TO A PERSON I.E. SUPER MALL (P) LTD., OTHER THAN THE PERSON REFERRED IN S. 153A. ACCORDINGLY, IT IS DIRE CTED TO ISSUE SUCH PERSON (M/S SUPER MALL (P) LTD.) NOTICE AND ASSESS AND REA SSESS INCOME IN ACCORDANCE WITH THE PROVISION OF S. 153A OF THE ACT . DATED : 22ND FEB., 2013' -SD- (VED PRAKASH KALIA) ASSTT. CIT, CENTRAL CIRCLE, KARNAL 15. IN THE AFORESAID SATISFACTION NOTE, IT HAS NOWHERE BEEN STATED BY THE AO THAT HE IS RECORDING SATISFACTION IN HIS CAPACITY A S 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 O THER THAN THE SEARCHED PERSON) WHICH IS EVIDENT FROM THE TOP OF THE SATISF ACTION NOTE WHEREIN THE ASSESSEE'S NAME AND ADDRESS HAVE BEEN MENTIONED. TH EREFORE, IT IS CLEAR THAT THE AO OF THE ASSESSEE HAS RECORDED SATISFACTI ON AS AO OF THE ASSESSEE AND NOT AS THE AO OF THE SEARCHED PERSON. IN THE IN STANT CASE, THE AO IN ORDER-SHEET ENTRY DT. 22ND FEB., 2013 HAS MENTIONED THAT NOTICE UNDER S. 153C IS ISSUED AFTER RECORDING REASONS BUT THE AO O F THE SEARCHED PERSON IS NOT EMPOWERED TO ISSUE THE NOTICE TO THE PERSON OTH ER THAN THE SEARCHED PERSON. IN OUR OPINION, EVEN IF THE AO OF THE ASSES SEE AND THE SEARCHED PERSON IS THE SAME, SATISFACTION MUST BE RECORDED B Y THE AO OF SEARCHED PERSON. IN THIS REGARD, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. AAKASH AROGYA MANDIR (P) LTD. (SU PRA) (COPY OF WHICH IS PLACED AT PP. NOS. 1 TO 6 OF THE ASSESSEE'S PAPER B OOK) HELD IN PARA 8 AS UNDER : '8. THE REVENUE HAS NOT PLACED ANY MATERIAL TO DISP UTE THE FACTUAL FINDING OF THE TRIBUNAL THAT THE REQUIREMENT OF THE LAW EXPLAI NED BY THIS COURT IN PEPSI FOODS REGARDING THE RECORDING OF SATISFACTION BY TH E 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 ASSESS EE MAKES NO DIFFERENCE TO THE CONSEQUENCE OF NON-COMPLIANCE WIT H THE LEGAL REQUIREMENT REGARDING THE RECORDING OF SATISFACTION. THE COURT ALSO AGREES WITH THE TRIBUNAL THAT EVEN IF THE AO WERE THE SAME, SATISFA CTION WOULD HAVE TO BE RECORDED SEPARATELY QUA THE SEARCHED PERSON AND THE ASSESSEE.' SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 76 16. IN THE INSTANT CASE, THE AO OF THE SEARCHED PER SON HAS NOT RECORDED ANY SATISFACTION, THEREFORE, NOTICE UNDER S. 153C OF TH E 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 (P) LTD. VS. ASST. CIT (SUPRA) HELD AS UNDER : 'THE AO OF THE PERSON IN RESPECT OF WHOM THE SEARCH WAS CONDUCTED MUST BE SATISFIED THAT, INTER ALIA, ANY DOCUMENT SEIZE D OR REQUISITIONED BELONGS TO A PERSON OTHER THAN THE PERSON IN RESPECT OF WH OM THE SEARCH WAS CONDUCTED. IT IS ONLY THEN THAT THE AO CAN HAND OVE R SUCH DOCUMENT TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON (OTHE R THAN THE PERSON IN RESPECT OF WHOM THE SEARCH WAS CONDUCTED). FURTHERM ORE, IT IS ONLY AFTER SUCH HANDING OVER THAT THE AO OF SUCH OTHER PERSON CAN ISSUE A NOTICE TO THAT PERSON AND ASSESS OR REASSESS HIS INCOME IN AC CORDANCE WITH THE PROVISIONS OF S. 153A OF THE IT ACT, 1961. THEREFOR E, BEFORE A NOTICE UNDER S. 153C CAN BE ISSUED, TWO STEPS HAVE TO BE TAKEN. THE FIRST STEP IS THAT THE AO OF THE PERSON IN RESPECT OF WHOM THE SEARCH WAS CON DUCTED 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 AO O F THE PERSON TO WHOM THE DOCUMENT BELONGS. SEC. 132(4A)(I) CLEARLY STIPULATES THAT WHEN, INTER ALIA, ANY DOCUMENT IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE C OURSE OF A SEARCH, IT MAY BE PRESUMED THAT SUCH DOCUMENT BELONGS TO SUCH PERS ON. IT IS SIMILARLY PROVIDED IN S. 292C(1)(I). IN OTHER WORDS, WHENEVER A DOCUMENT IS FOUND FROM A PERSON WHO IS BEING SEARCHED THE NORMAL PRESUMPTI ON IS THAT THE DOCUMENT BELONGS TO THAT PERSON. IT IS FOR THE AO T O REBUT THAT PRESUMPTION AND COME TO A CONCLUSION OR SATISFACTION THAT THE DOCUMENT IN FACT BELONGS TO SOMEBODY ELSE. THERE MUST BE SOME COGENT MATERIA L AVAILABLE WITH THE AO BEFORE HE ARRIVES AT THE SATISFACTION THAT THE S EIZED DOCUMENT DOES NOT BELONG TO THE PERSON IN RESPECT OF WHOM THE SEARCH WAS CONDUCTED BUT TO SOMEBODY ELSE. SURMISE AND CONJECTURE CANNOT TAKE T HE PLACE OF SATISFACTION. IT HAS FURTHER BEEN HELD THAT : 'IT WAS EVIDENT FROM THE SATISFACTION NOTE THAT APA RT FROM SAYING THAT THE DOCUMENTS BELONGED TO THE ASSESSEE AND THAT THE AO WAS SATISFIED THAT IT WAS A FIT CASE FOR ISSUANCE OF A NOTICE UNDER S. 15 3C, THERE WAS NOTHING WHICH WOULD INDICATE HOW THE PRESUMPTIONS WHICH WER E TO BE NORMALLY RAISED HAD BEEN REBUTTED BY THE AO. MERE USE OR MENTION OF THE WORD SATISFACTION OR THE WORDS I AM SATISFIED IN THE ORDER OR THE N OTE WOULD NOT MEET THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 77 REQUIREMENT OF THE CONCEPT OF SATISFACTION AS USED IN S. 153C. THE SATISFACTION NOTE ITSELF MUST DISPLAY THE REASONS O R BASIS FOR THE CONCLUSION THAT THE AO OF THE PERSON IN RESPECT OF WHOM THE SE ARCH WAS CONDUCTED IS SATISFIED THAT THE SEIZED DOCUMENTS BELONGED TO ANO THER PERSON. ON GOING THROUGH THE CONTENTS OF THE SATISFACTION NOTE, NO SATISFACTION OF THE KIND REQUIRED UNDER S. 153C COULD BE DISCERNED. THUS, TH E VERY FIRST STEP PRIOR TO THE ISSUANCE OF A NOTICE UNDER S. 153C HAD NOT BEEN FULFILLED. INASMUCH AS THIS CONDITION PRECEDENT HAD NOT BEEN MET, THE NOTI CES UNDER S. 153C WERE LIABLE TO BE QUASHED.' 17. IN THE PRESENT CASE, AS WE HAVE ALREADY NOTED I N 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 SATISFA CTION MUST BE RECORDED BY THE AO OF THE SEARCHED PERSON AND THEREAFTER THE DO CUMENTS ARE TO BE HANDED OVER TO THE AO OF OTHER PERSON AND THIS POSI TION 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 T HE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASES, WE ALLOW GROUND NOS. 1 AND 2 OF THE ASSESSEE'S APPEAL AND QU ASH THE ASSESSMENT FRAMED BY THE AO. AS THE ASSESSMENT ITSELF IS QUASH ED, NO FINDINGS HAVE BEEN GIVEN ON OTHER ISSUES RAISED BY THE ASSESSEE O N MERIT. 2.43. NOW, WE SHALL ANALYZE CIRCULAR NO.24/2015 DATED 31/12/2015 ISSUED BY CBDT, WHICH IS REPRODUCE D HEREUNDER:- CIRCULAR NO. 24/20 5 F.NO.279/MISC.L140 /2015/IT J GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, 31ST DECEMBER, 2 015 SUBJECT: RECORDING OF SATISFACTION NOTE UNDER SECTI ON 158BD/153C OF THE ACT - REG.- THE ISSUE OF RECORDING OF SATISFACTION FOR THE PURP OSES OF SECTION 158BD/153C HAS BEEN SUBJECT MATTER OF LITIGATION. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 78 2. THE HON'BLE SUPREME COURT IN THE CASE OF MLS CAL CUTTA KNITWEARS IN ITS DETAILED JUDGMENT IN CIVIL APPEAL NO.3958 OF 2014 D ATED 12.3.2014(AVAILABLE IN NJRS AT 2014-LL-0312-51) HAS LAID DOWN THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT, RECORDING OF A SATISFACTION NOTE IS A PREREQUISITE AND THE SATISFACTION NOTE MUST BE PREP ARED BY THE AO BEFORE HE TRANSMITS THE RECORD TO THE OTHER AO WHO HAS JURISDICTION OVER SU CH OTHER PERSON ULS 158BD. THE HON'BLE COURT HELD THAT 'THE SATISFACTIO N NOTE COULD BE PREPARED AT ANY OF THE FOLLOWING STAGES : (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST THE SEARCHED PERSON UNDER SECTION 158BC OF THE ACT; OR (B) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS UND ER SECTION 158BC OF THE ACT; OR (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS AR E COMPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERSON.' 3. SEVERAL HIGH COURTS HAVE HELD THAT THE PROVISION S OF SECTION 153C OF THE ACT ARE SUBSTANTIALLY SIMILAR/PARI-MATERIA TO THE P ROVISIONS OF SECTION 158BD OF THE ACT AND THEREFORE, THE ABOVE GUIDELINES OF T HE HON'BLE SC, APPLY TO PROCEEDINGS U/S 153C OF THE IT ACT, FOR THE PURPOSE S OF ASSESSMENT OF INCOME OF OTHER THAN THE SEARCHED PERSON. THIS VIEW HAS BEEN ACCEPTED BY CBDT. 4. THE GUIDELINES OF THE HON'BLE SUPREME COURT AS R EFERRED TO IN PARA 2 ABOVE, WITH REGARD TO RECORDING OF SATISFACTION NOT E, MAY BE BROUGHT TO THE NOTICE OF ALL FOR STRICT COMPLIANCE. IT IS FURTHER CLARIFIED THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE 'OTHER PERSON' IS ONE A ND THE SAME, THEN ALSO HE IS REQUIRED TO RECORD HIS SATISFACTION AS HAS BE EN HELD BY THE COURTS. 5. IN VIEW OF THE ABOVE, FILING OF APPEALS ON THE I SSUE OF RECORDING OF SATISFACTION NOTE SHOULD ALSO BE DECIDED IN THE LIG HT OF THE ABOVE JUDGEMENT. ACCORDINGLY, THE BOARD HEREBY DIRECTS THAT PENDING LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE UNDER SECTION 158BO /153C SHOULD BE WITHDRAWN/NOT PRESSED IF IT DOES NOT MEET THE GUIDE LINES LAID DOWN BY THE APEX COURT. 2.44. IN VIEW OF ABOVE CIRCULAR, IT IS CLEAR THAT SEVERAL HON'BLE HIGH COURTS HAVE HELD THAT THE PROVISIONS O F SECTION 153C OF THE ACT ARE SUBSTANTIALLY SIMILAR/PARI-MATE RIA TO THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 79 PROVISIONS OF SECTION 158BD OF THE ACT AND THEREFOR E, THE ABOVE GUIDELINES OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S CALCUTTA KNITWEARS IN ITS DETAILED JUDGMENT HAS LAI D DOWN THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT, RECORD ING OF A SATISFACTION NOTE IS A PREREQUISITE AND THE SATISFA CTION NOTE MUST BE PREPARED BY THE ASSESSING OFFICER BEFORE HE TRAN SMITS THE RECORD TO THE OTHER ASSESSING OFFICER WHO HAS JURIS DICTION OVER SUCH OTHER PERSON U/S. 158BD ALSO APPLY TO PROCEED INGS U/S 153C OF THE INCOME TAX ACT, FOR THE PURPOSES OF ASS ESSMENT OF INCOME OF OTHER THAN THE SEARCHED PERSON. THIS VIEW HAS BEEN ACCEPTED BY CBDT IN PRINCIPLE. IT IS FURTHER CLARI FIED THAT EVEN IF THE ASSESSING OFFICER OF THE SEARCHED PERSON AND TH E 'OTHER PERSON' IS ONE AND THE SAME, THEN ALSO THE ASSESSIN G OFFICER OF THE SEARCHED PERSON IS REQUIRED TO RECORD HIS SATIS FACTION NOTE AS HAS BEEN HELD BY THE COURTS. THUS, IT IS CLEAR THA T THE PAPER SEIZED DURING THE COURSE OF SEARCH AT THE RESIDENTI AL PREMISES OF SHRI SUDHAKAR M. SHETTY DO NOT BELONG TO THE ASSESS EE. FURTHER, THE SAID PAPER IS NOT INCRIMINATING IN NATURE. LASTLY, THE SATISFACTION WAS NOT RECORDED BY THE ASSESSING OFFI CER OF SHRI SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 80 SUDHAKAR M. SHETTY IN HIS CAPACITY AS A ASSESSING O FFICER OF SEARCHED PERSON. HENCE, THE NOTICE ISSUED U/S. 153C IS BAD IN LAW AND THEREBY PASSING OF ASSESSMENT ORDERS U/S. 1 43(3) R.W.S. 153C OF THE INCOME TAX ACT, 1961 ARE BAD AB-INITIO. 2.45. SO FAR AS THE MERITS OF THE CASE ARE CONCERN ED, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT NO INCRIMIN ATING DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH, WH ICH HAS TAKEN PLACE AT THE RESIDENTIAL PREMISES OF SHRI SUD HAKAR M. SHETTY, PARTNER OF THE ASSESSEE PARTNERSHIP FIRM. B UT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS HELD CERTAIN PURCHASES TO BE BOGUS. THESE PURCHASES ARE SUBDIVIDED INTO TWO PARTS AND SHOWN IN THE TABLE FORMAT IN RES PECT OF ASSESSMENT YEAR 2008-09, 2009-10 AND 2010-11. THE F IRST PART OF THE TABLE CONTAINS THE NAME OF THOSE PARTIES WHE RE THE FIGURES COULD NOT BE RECONCILED AS CONFIRMATION OF THE SAME COULD NOT BE SUBMITTED TILL THE DATE OF ASSESSMENT. THE SECOND P ART OF THE TABLE CONTAINS THE PURCHASES FROM THOSE PARTIES WHI CH WERE HELD TO BE HAWALA OPERATORS BY MAHARASHTRA VAT DEPARTMEN T ON ACCOUNT OF NON-PAYMENT OF VAT, ETC. AND HELD AS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 81 ACCOMMODATION ENTRY PROVIDERS BY THE DIRECTORATE OF INVESTIGATION, INCOME TAX, MUMBAI. ON THE OTHER HAN D, THE LD. CIT-DR DEFENDED THE ADDITION MADE BY THE LD. ASSESS ING OFFICER. 2.46. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FOLLO WING TABLE SHOWS THE QUANTUM OF PURCHASE MADE FROM BOTH TYPE O F SUPPLIERS IN RESPECTIVE ASSESSMENT YEAR FOR WHICH T HE ASSESSING OFFICER HAS MADE THE ADDITIONS: S.N. ASSESSMENT YEAR PURCHASES WHERE CONFIRMATION COULD NOT BE FILED. ALLEGED HAWALA PURCHASES TOTAL 1 2008-2009 1,84,80,257 1,35,29,342 3,20,09,599 2 2009-2010 1,23,00,071 66,06,020 1,89,06,091 3 2010-2011 18,58,439 51,55,132 70,13,571 IN RESPECT OF ADDITIONS MADE ON ACCOUNT OF THOSE PURCHASES, WHERE CONFIRMATION COULD NOT BE FILED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAVE DELETED THE ADDITIONS AS THE CON FIRMATION HAVE BEEN RECEIVED EITHER BY THE ASSESSING OFFICER AFTER PASSING OF THE ASSESSMENT ORDER OR FURNISHED BY THE ASSESSEE ALONG WITH COPY OF THEIR LEDGER ACCOUNT, THEIR BANK ACCOUNT AND REL ATED BILLS. THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 82 REVENUE IS IN APPEAL AGAINST DELETION OF THOSE ADDI TIONS AND THE SAME IS ARGUED WHILE DEALING WITH THE REVENUE'S APP EAL. 2.47. BEFORE THIS TRIBUNAL, THE ASSESSEE HAS CHALL ENGED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED HAWALA PURCHASES AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE PASSING THEIR RESPECTIVE ORDERS. FIRST, WE WILL DEAL WITH THE REASONS FOR SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS PASSED B Y HIM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN WHY THE P URCHASES FROM BOGUS HAWALA PARTIES SHOULD NOT ADDED TO THE I NCOME. IN RESPONSE TO THE SAID LETTER, ASSESSEE FILED A DETAI LED EXPLANATION VIDE ITS LETTER DATE 11/03/2014. THE SAME IS DISCUS SED BY THE ASSESSING OFFICER ON PAGE 14 AND PARA 10.7 OF HIS O RDER FOR THE ASSESSMENT YEAR 2008-09 AND ALL OTHER ASSESSMENT OR DERS. IN PARA (G) ON PAGE 17 OF ASSESSMENT ORDER FOR THE ASS ESSMENT YEAR, THE ASSESSEE HAS SUBMITTED AS UNDER : 'I.SIR, ON THE BASIS OF THE LIST DISPLAYED ON THE M AHAVAT WEBSITE, IT CANNOT BE SAID THAT THE PURCHASES MADE FROM SUCH PARTIES A RE BOGUS. IT IS SUBMITTED THAT: SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 83 I. MERE APPEARANCE OF THE NAME OF THE DEALER ON THE WEBSITE OF THE SALES TAX AUTHORITIES IS NOT SUFFICIENT TO TREAT PURCHASES FR OM HIM AS BOGUS FOR INCOME-TAX PURPOSES; II. WITHOUT PROVIDING US WITH THE COPY OF THE STATE MENT/AFFIDAVIT MADE BY SUCH DEALER BEFORE THE SALES TAX AUTHORITIES OR PROVIDIN G US WITH AN OPPORTUNITY OF CROSS EXAMINING SUCH PERSONS, IT WOULD BE INSUFF ICIENT TO HOLD PURCHASES FROM SUCH DEALER AS BOGUS; III. THE PURCHASES MADE BY US CANNOT BE DOUBTED HAV ING REGARD TO THE FACT THAT ON THE DATE OF SALES BY THE DEALERS, THE DEALE RS WERE HOLDING VALID TIN NO. / SALES TAX REGISTRATION NO. ' 2.48. IT IS NOTED THAT THROUGH ABOVE SUBMISSIONS, THE ASSESSEE HAS REQUESTED THE ASSESSING OFFICER TO PRO VIDE THE COPY OF THE STATEMENT/AFFIDAVIT MADE BY SUCH DEALER BEFO RE THE SALES TAX AUTHORITIES AND PROVIDE THE ASSESSEE AN OPPORTU NITY OF CROSS EXAMINING SUCH PERSON. NONE OF THESE REQUESTS WERE CONSIDERED BY THE ASSESSING OFFICER. EVEN, THE ASSESSING OFFIC ER HAS NOT MADE ANY ENQUIRY IN RESPECT OF THESE PARTIES. THIS IS EVIDENT FROM READING PARA 10.2 ON PAGE NO. 12 OF HIS ORDER FOR THE ASSESSMENT YEAR 2008-09 AND SIMILAR OBSERVATIONS WE RE MADE IN OTHER ASSESSMENT YEARS ALSO. WE ARE REPRODUCING THE SAME PARA WHICH READ AS UNDER :- '10.2 TO ASCERTAIN THE GENUINENESS OF THE PURCHAS ES MADE BY THE ASSESSEE, THE ASSESSEE WAS DIRECTED TO PROVIDE THE LIST OF ALL PURCHASE PARTIES, WITH NAMES, ADDRESSES AND VAT TIN , FROM WHOM IT HAD MADE PURCHASES OF CONSTRUCTION MATERIAL DURI NG THE YEAR. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 84 THIS DATA WAS RECONCILED WITH THE DATA IN POSSESSIO N OF THIS OFFICE AND THE ESTABLISHED BOGUS PARTIES WERE IDENTIFIED F ROM THE BOOKS OF THE ASSESSEE. SUCH PARTIES WERE ADMITTED BOGUS BILL ERS AND NO FURTHER INVESTIGATION WAS REQUIRED IN A CONSIDERED OPINION. THEY HAD ALSO PROVIDED BOGUS BILLS OF THE ASSESSEE DURING TH E YEAR. TO THE EXTENT OF THESE BILLS, THE ASSESSEE HAD INFLATED IT S COST OF CONSTRUCTION.' FROM THE READING OF ABOVE PARA, IT IS CLEAR THAT TH E ASSESSING OFFICER HAS NOT DEEMED IT FIT TO MAKE FUR THER INVESTIGATION AND ACCEPTED THE OPINION OF THE SALES TAX DEPARTMENT AS FINAL. THE ASSESSING OFFICER HAS NOT PROVIDED THE COPY OF THE STATEMENT/AFFIDAVIT MADE BY SUCH DEALER BEFORE THE SALES TAX DEPARTMENT. NOT ONLY THIS, THE ASSESSING OFFICER HAS NOT THOUGHT IT FIT TO SEND A REMAND REPORT SPECIALL Y ASKED FOR BY THE COMMISSIONER OF INCOME TAX (APPEALS). IN THIS C ONNECTION, IT IS NOTED THAT DURING THE COURSE OF PROCEEDING BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS FILED, THE COPIES OF LEDGER ACCOUNTS, INVOICES, VOUCHERS C ONTAINING XEROX COPY OF CHEQUES ISSUED AND PURCHASE ORDER ISS UED TO THESE ALLEGED HAWALA PARTIES. COPY OF THIS LETTER IS AVAI LABLE ON PAGE NO. 70 TO 72 OF PAPER BOOK. A CHART IS ALSO ENCLOSE D HEREWITH SHOWING THE PAGE NUMBERS OF PAPER BOOK ON WHICH THE RELATED DETAILS/DOCUMENTS ARE AVAILABLE. THESE DETAILS WE RE FORWARDED SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 85 BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSING OFFICER VIDE HIS OFFICE LETTER DATED 23RD SEPTEMBE R, 2014 FOR EXAMINATION AND REMAND REPORT. THE ASSESSING OFFICE R HAS SUBMITTED AN INTERIM REPORT BUT NOTHING WAS MENTION ED ABOUT THESE ALLEGED HAWALA DEALERS. HE HAS SOUGHT FURTHER TIME TO SUBMIT THE REPORT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GRANTED TIME TILL 23RD JANUARY, 2015. L ATER, THE TIME WAS EXTENDED TO 23RD FEBRUARY, 2015. HOWEVER, NO REPORT WAS SUBMITTED BY THE ASSESSING OFFICER. IN BETWEEN, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DISCUSSED THE MATTER WITH THE ASSESSING OFFICER AND THE ADDITIONAL COMMI SSIONER OF INCOME TAX, CENTRAL RANGE 4, MUMBAI ON TWO DIFFEREN T OCCASIONS, WHEREIN THE ASSESSING OFFICER HAS MENTIO NED THAT HE WILL SUBMIT THE REMAND REPORT SHORTLY. HOWEVER, NO REMAND REPORT WAS SUBMITTED. (REFER PARA 18 ON PAGE 17 & 1 8 OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)). NOT ONLY THIS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF ALLEGED HAWALA PURCHASES. THE COMMISSIONER OF INCOM E TAX SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 86 (APPEALS) HAS DISCUSSED THE SAME IN PARA 21 ON PAGE NO. 19 OF HIS ORDER AS UNDER : 'AS REGARDS BOGUS PURCHASES OF RS. 135293 42/- FROM 14 PARTIES. AS PER PARA 10.6 OF THE ASSESSMENT ORDER IS CONCERNED ,I AM NOT IN A POSITION TO ACCEPT THE CONTENTION OF THE ASSESSEE T HAT THESE PURCHASES WERE GENUINE .IT IS GATHERED THAT AFTER DETAILED EN QUIRIES THE MAHARASHTRA VAT DEPARTMENT IDENTIFIED 2049 PARTIES WHICH WERE ENGAGED ONLY IN PROVIDING ACCOMMODATION BILLS OF PU RCHASES / SALES AND NAMES OF SUCH PARTIES WERE PUT UP ON THE WEBSITE OF MAHARASHTRA VAT DEPARTMENT. APPARENTLY NAMES OF ALL THESE 14 PARTIE S ARE APPEARING THEREIN. FURTHER THESE PARTIES HAVE BEEN INVESTIG ATION BY THE DIRECTORATE OF INCOME TAX (INVESTIGATION ), MUMBAI AND IN SEVE RAL CASES SEARCH / SURVEY ACTION HAD BEEN CARRIED OUT AND STATEMENTS E TC . WERE RECORDED , WHEREIN APPARENTLY, THESE PARTIES CONFIRMED ABOUT P ROVIDING ACCOMMODATION ENTRIES. WITHOUT ANY REAL TRANSACTIO N OF SALES AND PURCHASE. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS OR DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HAD AN Y CREDIBLE EVIDENCE IN SUPPORT OF ITS CLAIM THAT PURCHASES FRO M THESE PARTIES WERE GENUINE. THE ASSESSEE HAS ONLY MADE A GENERAL EXPLA NATION THAT MATERIALS FROM THESE PARTIES WERE ACTUALLY PURCHASE D AND WERE USED IN CONSTRUCTION . HOWEVER ON RELIANCE EVIDENCE IN T HIS REGARD HAS BEEN FURNISHED .IN FACT EVEN CONFIRMATION FROM SUCH PART IES HAVE NOT BEEN SUBMITTED . THERE IS NO EVIDENCE TO SUGGEST THAT MA TERIAL FROM THESE PARTIES WAS ACTUALLY RECEIVED ON THE PROJECT SITE O F THE ASSESSEE AND WAS USED FOR CONSTRUCTION OF THE BUILDING . IN HE C IRCUMSTANCES THE CLAIM OF THE ASSESSEE THAT PURCHASES FROM PARTIES WERE GE NUINE, CANNOT BE ACCEPTED BY ANY STRETCH OF IMAGINATION. THE SAME IS, THEREFORE, HELD TO BE BOGUS AND TO THAT EXTENT (RS.1,35,29,342) REDUCT ION OF CLOSING WORK- IN-PROGRESS AS BY THE AO IS UPHELD.' 2.49. IF THE AFORESAID OBSERVATION IS ANALYZED, TH E FACTS REVEALS THE APPROACH OF THE ASSESSING OFFICER IN NE ITHER MAKING ANY ENQUIRY IN RESPECT OF THESE PARTIES NOR PROVIDI NG ANY COPY OF STATEMENT/AFFIDAVIT FILED BY THESE PARTIES BEFORE T HE SALES TAX DEPARTMENT, THE ADDITIONS MADE BY THE ASSESSING OFF ICER AND SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 87 CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) ON ACCOUNT ALLEGED HAWALA PURCHASES BE TREATED AS BAD IN LAW AND AGAINST THE PRINCIPAL OF NATURAL JUSTICE. IT IS FU RTHER NOTED THAT DURING APPELLATE PROCEEDING BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE CITED VARIOUS JU DGMENTS IN RESPECT OF ALLEGED HAWALA PURCHASES AND IN RESPECT OF PRINCIPAL OF NATURAL JUSTICE, BUT NONE OF THE CASES WERE DISC USSED BY HIM IN HIS ORDER. REFER PAGE NO. 21 TO 23 OF PAPER BOOK FOR THE ASSESSMENT YEAR 2008-09). IT IS ALSO INTERESTING TO NOTE THAT COPY OF THE ASSESSMENT ORDER PASSED BY THE SALES TAX AUT HORITIES WERE ALSO FILED BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS). REFER PAGE NO. 496 TO 498 OF PAPER BOOK FOR THE ASSESSMEN T YEAR 2008-09). THIS ASSESSMENT ORDER DOES NOT REVEAL ANY HAWALA PARTIES. WE ALSO OBSERVED THAT THE ASSESSEE HAS DI SCHARGED ITS BURDEN OF PROOF; THE ADDITIONS HAVE BEEN MADE WHICH IS CONTRARY TO THE PRINCIPLE OF NATURAL JUSTICE. APART FROM ABO VE, IT WAS ALSO POINTED OUT WHILE ARGUING THE MATTER ON LEGAL ISSUE THAT DURING THE COURSE OF SEARCH, NO INCRIMINATING DOCUMENTS WE RE FOUND AND HENCE, NO ADDITIONS CAN BE MADE AS DECIDED BY T HE HON'BLE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 88 SUPREME COURT IN THE CASE OF CIT VS. SINHGAD TECHNI CAL EDUCATION SOCIETY, CIVIL APPEAL NO. 11081 TO 11083 OF 2017 DECIDED ON 29TH AUGUST, 2017 (SC) (REFER PAGE NO. 204 TO 221 OF CASES RELIED UPON BY THE ASSESSEE PART 1)THUS , IN VIEW OF THE FOREGOING DISCUSSION, THE ADDITION MADE ON ACCO UNT OF ALLEGED HAWALA PURCHASES DESERVES TO BE DELETED. FINALLY, ON THE ISSUE OF JURISDICTIONAL/LEGAL ISSUE AS WELL AS ON MERITS, THE APPEALS OF THE ASSESSEE ARE ALLOWED. 3. NOW, WE SHALL TAKE UP THE CROSS APPEALS OF THE REVENUE (ITA NO.3586, 4201, 3587/MUM/2015 AND ITA NO.6481/MUM/2014) FOR ASSESSMENT YEARS 2008-09 TO 2 011-12. 3.1. WHEREIN, THE REVENUE HAS RAISED FOLLOWING GRO UNDS:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER NOT TO REDUCE RS.1,82,73,257/- (AY-2008-09), RS.1,21,43,430/- (AS SESSMENT YEAR 2009-10), RS.18,58,439/- AND FURTHER THE ADDIT ION OF RS. 3,28,95,595/- MADE AS SHORT TERM CAPITAL GAIN ON TR ANSFER OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 89 WIP ON THE BUILDING UNDER CONSTRUCTION (ASSESSMENT YEAR 2010-11), RS.14,10,00,000/- WITHIN THE PROVISIONS O F SECTION 45(4) OF THE ACT HOLDING THAT THE RECONSTITUTION OF THE FIRM BY RELINQUISHING THE RIGHT OF OLD PARTNERS TO NEW PART NERS DOES NOT FALL WITHIN THE PURVIEW OF SECTION 45(4) OF THE ACT (ASSESSMENT YEAR 2011-12) FROM CLOSING WORK IN PROGRESS (WIP) O F THE PROJECT UNDER CONSTRUCTION WHEREAS THE ASSESSING OF FICER REDUCED THE WIP AS THE ASSESSEE HAD BOGUS PURCHASES TO INFLATE THE CLOSING WIP (ASSESSMENT YEAR 2008-09). 3.2. THE LD. CIT-DR ADVANCED ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED IN THE RESPECTIVE AP PEAL. WHEREAS, THE LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT A SEARCH ACTION HAD TAKEN PLACE AT THE RES IDENTIAL PREMISES OF SHRI SUDHAKAR M. SHETTY, PARTNER OF THE FIRM ON 22 ND SEPTEMBER, 2011. ONE DOCUMENT, NEITHER INCRIMINATI NG NOR BELONGING TO THE ASSESSEE WAS FOUND. ON THE BAS IS OF SAID SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 90 DOCUMENT, THE ASSESSING OFFICER HAS ISSUED NOTICE U /S. 153C OF THE INCOME TAX ACT, 1961 IN THE CASE OF THE ASSE SSEE RIGHT FROM THE ASSESSMENT YEARS 2006-07 TO 2011-12. THE A SSESSING OFFICER HAS PASSED THE ORDER FOR THE ASSESSMENT YEA R 2007-08 TO 2011-12 AGAINST WHICH THE ASSESSEE HAS PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) HAS PARTLY ALL OWED THE APPEALS. THE ASSESSEE, THEREAFTER, HAS PREFERRED FU RTHER APPEALS BEFORE THIS TRIBUNAL ON THOSE POINTS WHICH WERE NOT ALLOWED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS ON LEGAL ISSUES INVOLVED IN THOSE APPEALS. IT IS FURTHER NOTED THAT ADDITIONS HAVE BEEN MADE ON ACCOUNT OF CERTAIN PURCHASES WHERE EITHER CONFIRMATION HAVE NOT BEEN R ECEIVED OR ACCOUNT WAS NOT TALLIED BEFORE PASSING THE ASSESSME NT ORDER BY THE ASSESSING OFFICER, IN SPITE OF THE FACT THAT NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH. O NLY ON THE BASIS OF SINGLE PAPER (WHICH ALSO DOES NOT BELO NG TO THE ASSESSEE) PROCEEDINGS WERE INITIATED U/S. 153C OF T HE INCOME TAX ACT, 1961. THESE ADDITIONS HAVE BEEN MADE FOR T HE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 91 ASSESSMENT YEARS 2008-09, 2009-10 & 2010-2011. TH E COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THESE ADDITIONS AS THE NECESSARY CONFIRMATION WAS EITHER RECEIVED BY THE ASSESSING OFFICER AFTER PASSING THE ASSESSMENT ORDER OR PRODUCED BY THE ASSESSEE DURING THE COURSE OF HEARI NG BEFORE COMMISSIONER OF INCOME TAX (APPEALS). THE REVENUE I S IN APPEAL AGAINST SUCH DELETIONS . THE DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE REDUCED FROM THE CLOSING WOR K-IN- PROGRESS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THESE ADDITIONS AND HENCE CLOSING WORK-IN-P ROGRESS OF EACH YEAR WAS INCREASED BY THE AMOUNT OF RELIEF GRA NTED BY THE COMMISSIONER OF INCOME TAX (APPEALS). SIMILARLY, IN THE ASSESSMENT YEAR 2010-11, THE PROJECT WAS TRANSFERRE D TO AOP AND HENCE THE WORK-IN-PROGRESS AS INCREASED BY THE AMOUNT OF RELIEF GRANTED BY THE COMMISSIONER OF INCOME TAX (A PPEALS) WAS CONSIDERED FOR DETERMINING THE INCOME FROM SALE OF PROJECT. FOR THE ASSESSMENT YEAR, 2011-12, THE ADDI TIONS WERE MADE U/S. 45(4) ON ACCOUNT OF RECONSTITUTION OF PAR TNERSHIP FIRM, WHERE PARTNERS WERE ADMITTED. THE ASSESSING O FFICER HAS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 92 TREATED THE RECONSTITUTION OF PARTNERSHIP FIRM LIAB LE TO TAX U/S. 45(4). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE SAID ADDITIONS ON THE BASIS OF JUDICIAL PRONOUN CEMENT. THE REVENUE HAS PREFERRED APPEAL AGAINST SUCH DELETION. 3.4. DURING THE COURSE OF ARGUMENTS BEFORE THIS TRIBUNAL, THE LEARNED CIT-DR HAS RELIED UPON THE DE CISION OF THE ASSESSING OFFICER WHEREAS THE LD. AR HAS RELIED UPON THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS ). APART FROM THIS, THE AR HAS ALSO ARGUED THAT THE ASSESSEE HAS CHALLENGED THE ASSESSMENT ORDERS AND NOTICES ISSUED U/S. 153C IN ITS OWN APPEAL FILED FOR THE ABOVE ASSESSME NT YEARS. THE ASSESSEE HAS ALSO CONTENDED THAT AS NO INCRIMIN ATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH, N O ADDITION CAN BE MADE IN THE ASSESSMENT ORDER PASSED U/S. 153C OF THE ACT. A DETAILED SUBMISSION ALONG WITH R ELATED JUDGMENTS WAS ALSO FILED WHILE SUBMITTING THE DETAI LED EXPLANATION IN RESPECT OF APPEALS FILED BY THE ASSE SSEE. FOR THE SAKE OF CONVENIENCE, WE ARE SHOWING THE ASSESSMENT YEAR WISE RESPECTIVE PARAS WHERE THE ASSESSING OFFICER AND TH E SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 93 COMMISSIONER OF INCOME TAX (APPEALS) HAS DEALT WITH THE RESPECTIVE ADDITIONS/DELETION IN THEIR RESPECTIVE O RDERS. APPEAL NO. 3586/M/15 4201/M/2015 3587/M/15 6480/M/15 ASSESSMENT YEAR 2008 - 09 2009 - 10 2010 - 11 2011 - 12 DESIGNATION OF OFFICER ASSESSING OFFICER ADDITIONS ON ACCOUNT OF CONFIRMATION NOT RECEIVED. PARA NO. 10.6 ON PAGE 13. PARA NO.10.10 ON PAGE 20 PARA NO. 10.6 ON PAGE 13. PARA NO.10.10 ON PAGE 20 PARA NO. 10.6 ON PAGE 13. PARA NO.10.10 ON PAGE 20 ADDITIONS ON ACCOUNT OF RECONSTITUTION OF FIRM LIABLE TO TAX U/S. 45(4) OF THE ACT. PARA NO. 10.51 TO 10.56 ON PAGE NO. 34 TO 36 COMMISSIONER OF INCOME TAX (APPEALS) DELETION ON ACCOUNT OF CONFIRMATION RECEIVED/PRODUCED PARA 18 ON PAGE 16 & 17 PARA 21 TO 23 ON PAGE 20 TO 22 REFER ANNEXURE A SHOWING RELEVANT DOCUMENTS IN PAPER BOOK PARA 18 ON PAGE 17 PARA 22 TO 25 ON PAGE 19 TO 22 REFER ANNEXURE B SHOWING RELEVANT DOCUMENTS IN PAPER BOOK PARA 18 & 19 ON PAGE 16 TO 18 PARA 22 TO 23 ON PAGE 19 TO 21 REFER ANNEXURE C SHOWING RELEVANT DOCUMENTS IN PAPER BOOK DELETION ON ACCOUNT OF RECONSTITUTION OF FIRM IS NOT LIABLE TO TAX U/S. 45(4) OF THE ACT. PARA 10.1 TO 10.12 ON PAGE NO. 8 TO 21. 3.5. WE HAVE PERUSED THE IMPUGNED ORDERS AND THE FACTUAL UNCONTROVERTED FINDING RECORDED THEREIN. D URING ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER T REATED PURCHASES FROM FOURTEEN PARTIES TO BE BOGUS AS MENT IONED IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 94 THE RESPECTIVE APPEAL IN VIEW OF THE INFORMATION FR OM THE MAHARASHTRA SALES TAX/VAT DEPARTMENT. THE NAME OF T HE PARTIES HAS BEEN MENTIONED AT PAGE-16 (ITA NO.3586/MUM/2015) AND CONSEQUENT ADDITION WAS MADE. THE DETAILED SUBMISSIONS OF THE ASSESSEE VIDE LETTER DA TED 22/09/2014 WERE CONSIDERED, WHEREIN, THE COPIES OF THE ACCOUNTS OF THE CONCERNED PARTIES, BILLS FOR PURCHA SE OF THE MATERIALS, PROOF OF PAYMENT THROUGH CHEQUE WERE FUR NISHED BY CLAIMING THAT THE PURCHASES WERE GENUINE. IN PARA-1 9 OF THE IMPUGNED ORDER, IT HAS BEEN MENTIONED THAT THE ASSE SSEE WAS PROVIDED ONLY 14-15 DAYS TIME TO RESPOND TO THE VAR IOUS QUERIES RAISED BY THE ASSESSING OFFICER. THE ASSESS EE SUBMITTED ITS REPLY VIDE LETTER DATED 11/03/2014. T HE LD. COMMISSIONER OF INCOME TAX (APPEAL) GRANTED PART RE LIEF TO THE ASSESSEE, WHICH IS UNDER CHALLENGE BY THE REVENUE. ON PERUSAL OF RECORDS, CONFIRMATION BY THE PARTIES VIDE LETTER DATED 04/02/2015 ALONG WITH OTHER DETAILS, WE ARE SATISFI ED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) JUSTIFIABLY GRANTED RELIEF TO THE ASSESSEE. THE GENUINENESS OF THE TRAN SACTIONS WAS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 95 FOUND TO BE IN THE LIGHT OF THE BONA-FIDE REASONS A ND THERE IS UNCONTROVERTED FINDING THAT THESE PARTIES WERE NOT PART OF THE HAWALA DEALERS. THUS, WE FIND NO MERIT IN THE APPEA LS OF THE REVENUE, CONSEQUENTLY, DISMISSED. 4. NOW, WE SHALL TAKE UP THE APPEALS OF THE REVENU E IN THE CASE OF M/S SKYLARK BUILDCON PVT. LTD. FOR ASSE SSMENT YEAR 2011-12 (ITA NO.6479/MUM/2014) AND C.O. NO.58/MUM/2016 (ASSESSMENT YEAR 2011-12) OF THE ASS ESSEE AND IDENTICALLY ITA NO.6481/MUM/2014 FOR ASSESSMENT YEAR 2012-13, WHEREIN, NO CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13. 4.1. IN THE APPEAL OF THE REVENUE FOR ASSESSMENT Y EAR 2011-12, DELETING THE ADDITION WITHIN THE PROVISION S OF SECTION 47A(III) OF THE ACT HAS BEEN CHALLENGED. THE ASSESS EE HAS ALSO FILED CROSS OBJECTION AND CHALLENGE THE ORDER ON LE GAL ISSUE. THE GROUND RAISED BY THE REVENUE ARE SUMMARIZED AS UNDE R:- 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD THE CIT(A), WAS JUSTIFIED IN DIRECTING T HE AO TO DELETE THE ADDITION OF RS. 281,79,21,589/-WITHIN TH E PROVISION OF SECTION 47A(3) OF THE IT ACT WHEN THE ASSESSEE IS FULFILLING THE CONDITIONS OF SECTION 47(XIII) OF TH E IT ACT. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 96 2. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD THE CIT(A), WAS JUSTIFIED IN HOLDING THA T THE ASSESSEE'S CASE IS FULFILLING THE PROVISIONS OF SEC TION 47(XIII) OF THE IT ACT WHEREAS THE ERSTWHILE PARTNERS HAD ALREA DY GOT THEIR CAPITAL INFLATED BECAUSE OF THE GOODWILL. 3. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD THE CIT(A), WAS JUSTIFIED IN HOLDING THA T THERE IS NO CAPITAL GAIN WITHIN THE PROVISION OF SECTION 47A(3) OF THE IT ACT EVEN WHEN THE FRESH GOODWILL HAS BEEN CREATED A S ON 31.03.2010 AND THERE WAS NO GOODWILL AS ON 31.03.20 09. 4. THE APPELLANT CRAVES TO LEAVE, TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 4.2. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND OF A PPEAL AGAINST THE STATUTORY PROVISION OF THE ACT WITHOUT COMPLYING WITH THE PROCEDURES PRESCRIBED U/S 153C OF THE ACT AND AS SUCH THE ASSESSMENT BEING BAD IN LAW AND DESERVES T O BE QUASHED. THE LD. COUNSEL FOR THE ASSESSEE ADVANCED ARGUMENTS ON LEGAL ISSUE/JURISDICTIONAL ISSUE AS WELL AS ON M ERITS. ON THE OTHER HAND, THE LD. CIT-DR DEFENDED THE ADDITION MA DE BY THE ASSESSING OFFICER BY CONTENDING THAT THE LD. COMMIS SIONER OF INCOME TAX (APPEAL) WAS NOT JUSTIFIED IN DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER. 4.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRI EF, ARE THAT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 97 THE CASE WAS MENTIONED IN THE CROSS OBJECTION FILED BY THE ASSESSEE. A SEARCH ACTION HAD TAKEN PLACE AT THE RE SIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHETTY, DIRECTOR OF TH E ASSESSEE COMPANY, ON 22ND SEPTEMBER, 2011. ONE DOCUMENT, NEI THER INCRIMINATING NOR BELONGING TO THE ASSESSEE WAS FOU ND. ON THE BASIS OF SAID DOCUMENT, THE ASSESSING OFFICER HAS I SSUED NOTICE U/S. 153C OF THE INCOME TAX ACT, 1961 IN THE CASE O F THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12. THE ASSES SING OFFICER HAS PASSED THE ORDER FOR THE ASSESSMENT YEA R 2011-12. CONSIDERING THE TOTALITY OF FACTS, SO FAR AS, THE J URISDICTIONAL ISSUE U/S 153C IS CONCERNED, IN THE LIGHT OF THE FO REGOING DISCUSSION, THE CASE OF THE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE AS WE HAVE MADE AN ELABORATE DISCUSSION IN EARLIER PARAS OF THIS ORDER. WE HAVE ALREADY ADMITTED THE L EGAL ISSUE IN VIEW OF VARIOUS DECISIONS INCLUDING THE DECISION FR OM HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO MPANY LTD. VS CIT ((SUPRA)) ALONG WITH OTHER DECISIONS. F OR THE SAKE OF BREVITY, THE SAME IS NOT BEING REPEATED AND MAY BE READ AS PART AND PARTIAL OF THIS ORDER. SO FAR AS THE REASO NS FOR SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 98 ISSUANCE OF NOTICE IS CONCERNED, THE SAME HAS ALREA DY BEEN DELIBERATED BY US ALONG WITH THE SATISFACTION NOTE IN EARLIER PARAS OF THIS ORDER. FOLLOWING THE CONCLUSION DRAWN IN THE EARLIER PARAS OF THIS ORDER, WE FIND NO MERIT IN TH E APPEALS OF THE REVENUE ON JURISDICTIONAL ISSUE. 4.4. SO FAR AS, MERITS OF THE ISSUE IS CONCERNED, THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE COMPANY WAS INCORPO RATED AS ON 12/08/2010, THEREFORE, THIS IS THE FIRST YEAR OF BU SINESS OF CONSTRUCTION AND REAL ESTATE DEVELOPMENT. IT IS REL EVANT TO MENTION THAT UPTO 11/08/2010, THE BUSINESS WAS BEIN G RUN IN THE NAME OF PARTNERSHIP FIRM I.E. M/S SKYLARK BUILD , HAVING SEVEN PARTNERS, WHEREAS, W.E.F. 12/08/2010, THE FIR M WAS CONVERTED INTO A COMPANY UNDER CHAPTER-IX OF THE CO MPANIES ACT, 1956. THE CHRONOLOGY OF EVENTS HAS BEEN SUMMER IZED BY THE FIRST APPELLATE AUTHORITY AT PAGE-2 OF THE IMPUGNED ORDER. THE GROUNDS RAISED BY THE ASSESSEE BEFORE THE LD. COMMI SSIONER OF INCOME TAX (APPEAL) HAS BEEN SUMMERIZED AT PAGE-3 ( PARA-3 & 4) OF THE IMPUGNED ORDER. BEFORE THE LD. ASSESSING OFFICER AS WELL AS BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEA L), THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 99 ASSESSEE DISPUTED VALIDITY OF NOTICE ISSUED U/S 153 C OF THE ACT. THE RELEVANT DISCUSSION IS APPEARING IN PARA 9.1 TO 9.13 (PAGES 6 TO 11) OF THE ASSESSMENT ORDER, WHEREIN, THE LD. AS SESSING OFFICER REFERRED PAGE-55 OF THE SEIZED ANNEXURE A WHICH IS A LETTER WRITTEN BY M/S SKYLARK BUILD TO ONE SHRI HEM ANT PARIKH. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), PLEA WAS RAISED BY THE ASSESSEE THAT ALL THE CONDITIONS PRES CRIBED U/S 47(XIII) HAVE BEEN FULFILLED AS IS EVIDENT FROM PAG E-13 ONWARDS OF THE IMPUGNED ORDER. SO FAR AS, VESTING OF PROPERTIE S OF A PARTNERSHIP FIRM IN A COMPANY UNDER PART IX OF THE COMPANIES ACT MAKE IT LIABLE FOR CAPITAL GAINS TAX UNDER 45 O F THE ACT IS CONCERNED, THE LD. COMMISSIONER OF INCOME TAX (APPE AL) AT PAGE-13 HAS MADE AN ELABORATE DISCUSSION WITH RESPE CT TO DEFINITION OF CAPITAL ASSET U/S 2(14) AND TRANSFER OF CAPITAL ASSET DEFINED U/S 2(47) OF THE ACT. THE DECISION FROM HON 'BLE BOMBAY HIGH COURT IN CIT VS TEXSPIN ENGINEERING AND MFG. L TD. (2003) 263 ITR 345 (BOM.) HAS BEEN DISCUSSED. THE HON'BLE HIGH COURT HELD AS UNDER:- 5. IN THIS MATTER, WE ARE CONCERNED WITH ASSESSMENT Y EAR 1996- 97. SECTION 45(1) IS A CHARGING SECTION AS FAR AS CAPITAL GAINS IS C ONCERNED. UNDER SECTION 45(4) , PROFITS ARISING FROM TRANSFER OF A CAPITAL ASSET BY WAY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 100 OF DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTIO N OF A FIRM IS CHARGEABLE TO TAX AS INCOME OF THE FIRM IN A PREVIOUS YEAR IN WHI CH THE TRANSFER TAKES PLACE AND FOR THE PURPOSES OF SECTION 48 , THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH TRANSFER IS DEEMED TO BE THE FU LL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER. SECTION 48 DEALS WITH MODE OF COMPUTATION. IT, INTER ALIA, LA YS DOWN THAT THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' SH ALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION, THE EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER AND THE CO ST OF ACQUISITION OF THE ASSET. THEREFORE, UNDER SECTION 45(4) , TWO CONDITIONS ARE REQUIRED TO BE SATISFIED VIZ. TRANSFER BY WAY OF DISTRIBUTION OF C APITAL ASSETS AND SECONDLY, SUCH TRANSFER SHOULD BE ON DISSOLUTION OF THE FIRM OR OTHERWISE. ONCE THESE TWO CONDITIONS ARE SATISFIED THEN, IN THAT EVENT, F OR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS UNDER SECTION 48 , THE MARKET VALUE ON THE DATE OF THE TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. 6. NOW, ACCORDING TO THE ASSESSING OFFICER, IN THIS CA SE, ON VESTING OF THE PROPERTIES OF THE FIRM IN THE LIMITED COMPANY, THERE WAS A TRANSFER BY WAY OF DISTRIBUTION OF CAPITAL ASSETS. FURTHER, ACC ORDING TO THE ASSESSING OFFICER, ON VESTING OF THE PROPERTIES OF THE FIRM I N THE COMPANY, THERE WAS A RESULTANT DISSOLUTION OF THE FIRM. THEREFORE, ACC ORDING TO THE ASSESSING OFFICER, BOTH THE CONDITIONS UNDER SECTION 45(4) STOOD SATISFIED AND, THEREFORE, HE WAS ENTITLED TO TAKE THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF THE TRANSFER TO BE THE FULL VALUE OF THE CO NSIDERATION RECEIVED AS A RESULT OF THE TRANSFER. IT IS FOR THIS REASON THAT THE ASSESSING OFFICER HAS COMPUTED THE CAPITAL GAINS UNDER SECTION 48 BY REFERRING TO THE COMPARATIVE FIGURES OF THE BOOK VALUE AND THE MARKE T VALUE. AS STATED ABOVE, IN THIS CONNECTION, THE ASSESSING OFFICER HA S COMPUTED CAPITAL GAINS ARISING TO THE ASSESSEE-FIRM AT RS. 9 LAKHS O N THE BASIS OF THE DIFFERENCE BETWEEN THE MARKET VALUE AND THE WRITTEN DOWN VALUE. THE ASSESSING OFFICER HAS TAKEN THE WRITTEN DOWN VALUE AS ON 1ST APRIL, 1995 AND HE HAS TAKEN THE MARKET VALUE AS ON 8TH NOVEMBE R, 1995 (ALLEGED DATE OF TRANSFER) AND ON THAT BASIS, HE HAS COMPUTED THE CAPITAL GAINS. HOWEVER, AS STATED, COMPUTATION UNDER SECTION 45(4) READ WITH SECTION 48 WOULD ARISE ONLY IF THE AFORESTATED TWO CONDITIONS ARE SA TISFIED TO ATTRACT SECTION 45(4) . 7. IN THIS CASE, THE ERSTWHILE FIRM HAS BEEN TREATED A S A LIMITED COMPANY BY VIRTUE OF SECTION 575 OF THE COMPANIES ACT. IT IS NOT IN DISPUTE THAT IN THIS CASE, THE ERSTWHILE FIRM BECAME A LIMI TED COMPANY UNDER PART IX OF THE COMPANIES ACT. NOW, SECTION 45(4) CLEARLY STIPULATES THAT THERE SHOULD BE TRANSFER BY WAY OF DISTRIBUTION OF CAPITA L ASSETS. UNDER PART IX OF THE COMPANIES ACT, WHEN A PARTNERSHIP FIRM IS TREAT ED AS A LIMITED SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 101 COMPANY, THE PROPERTIES OF THE ERSTWHILE FIRM VESTS IN THE LIMITED COMPANY. THE QUESTION IS WHETHER SUCH VESTING STAND S COVERED BY THE EXPRESSION 'TRANSFER BY WAY OF DISTRIBUTION' IN SEC TION 45(4) OF THE ACT. THERE IS A DIFFERENCE BETWEEN VESTING OF THE PROPER TY, IN THIS CASE, IN THE LIMITED COMPANY AND DISTRIBUTION OF THE PROPERTY. O N VESTING IN THE LIMITED COMPANY UNDER PART IX OF THE COMPANIES ACT, THE PROPERTIES VEST IN THE COMPANY AS THEY EXIST. ON THE OTHER HAND, DI STRIBUTION ON DISSOLUTION PRESUPPOSES DIVISION, REALISATION, ENCASHMENT OF AS SETS AND APPROPRIATION OF THE REALISED AMOUNT AS PER THE PRIORITY LIKE PAYMEN T OF TAXES TO THE GOVERNMENT, BMC ETC., PAYMENT TO UNSECURED CREDITOR S ETC. THIS DIFFERENCE IS VERY IMPORTANT. THIS DIFFERENCE IS AMPLY BROUGHT OUT CONCEPTUALLY IN THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABA R FISHERIES CO. V. CIT [1979] 120 ITR 49 2 TAXMAN 409. IN THE PRESENT CASE , THEREFORE, WE ARE OF THE VIEW THAT SECTION 45(4) IS NOT ATTRACTED AS THE VERY FIRST CONDITION OF TRANSFER BY WAY OF DISTRIBUTION OF CAPITAL ASSETS I S NOT SATISFIED. IN THE CIRCUMSTANCES, THE LATTER PART OF SECTION 45(4) , WHICH REFERS TO COMPUTATION OF CAPITAL GAINS UNDER SECTION 48 BY TREATING FAIR MARKET VALUE OF THE ASSET ON THE DATE OF TRANSFER, DOES NOT ARISE. 4.5. THE HON'BLE JURISDICTIONAL HIGH COURT FURTHER ANALYZED SECTION 45(1) OF THE ACT AND HELD AS UNDER :- 6. AS STATED ABOVE, IN THIS CASE WE ARE CONCERNED WITH THE ASSESSMENT YEAR 1996-97. THEREFORE, IN THIS CASE, WE ARE NOT C ONCERNED WITH CLAUSE (XIII) INSERTED BY FINANCE (NO. 2) ACT, 1998 IN SEC TION 47 UNDER WHICH IT IS PROVIDED THAT WHERE A FIRM IS SUCCEEDED BY A COM PANY IN THE BUSINESS CARRIED ON BY IT AS A RESULT OF SALE OR OTHERWISE, OF ANY CAPITAL ASSETS, THEN SUCH TRANSACTION SHALL NOT BE REGARDED AS TRANSFER. THIS CLAUSE WAS INSERTED WITH EFFECT FROM 1ST APRIL, 1999. THEREFOR E, WE ARE NOT CONCERNED WITH THAT AMENDMENT. HOWEVER, IT PROVIDES A CLUE TO THE LEGISLATIVE INTENT. IN OUR OPINION, THIS CLAUSE HAS BEEN INTRODUCED WITH EFFECT FROM 1ST APRIL, 1999 IN ORDER TO ENCOURAGE M ORE AND MORE FIRMS BECOMING LIMITED COMPANIES. IT ALSO INDICATES THE D IFFERENCE BETWEEN TRANSFER AND TRANSMISSION. BASICALLY, WHEN A FIRM I S TREATED AS A COMPANY UNDER PART IX, IT IS A CASE SIMILAR TO TRANSMISSION . THIS IS AMPLY MADE CLEAR BY CLAUSE (XIII) TO SECTION 47, WHICH STATES THAT WHERE A FIRM IS SUCCEEDED BY A COMPANY IN THE BUSINESS, THE TRANSAC TION SHALL NOT BE TREATED AS A TRANSFER. NOW, THIS AMENDMENT HAS BEEN MADE IN SECTION 47 IN VIEW OF THE CONTROVERSY ARISING ON SECTION 45 (1) READ WITH SECTION 2(47)(II). SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 102 AS STATED ABOVE, SECTION 45(1) IS A CHARGING SECTIO N. SECTION 45, READ WITH THE COMPUTATION SECTION VIZ. 48 ETC., FORM ONE COMPOSITE SCHEME. THIS POINT IS VERY IMPORTANT. SECTION 45(1) PROVIDE S THAT WHERE ANY PROFIT, ARISING FROM TRANSFER OF A CAPITAL ASSET IS EFFECTED IN THE PREVIOUS YEAR THEN SUCH PROFIT SHALL BE CHARGEABLE TO INCOME -TAX UNDER THE HEAD 'CAPITAL GAINS'. THE EXPRESSION 'TRANSFER OF A CAPI TAL ASSET' IN SECTION 45(1) IS REQUIRED TO BE READ WITH SECTION 2(47)(II) WHICH STATES THAT TRANSFER IN RELATION TO A CAPITAL ASSET SHALL INCLU DE EXTINGUISHMENT OF ANY RIGHTS THEREIN. THE MOOT POINT WHICH AROSE ON INTER PRETATION OF SECTION 45(1) IN NUMEROUS MATTERS WAS THAT ON EXTINGUISHMEN T OF THE RIGHTS IN THE CAPITAL ASSETS, THERE WAS A TRANSFER AND IN CERTAIN CASES OF RECONSTITUTION OF FIRMS AND INTRODUCTION OF NEW PARTNERS, THERE WA S A RESULTANT EXTINGUISHMENT OF THE RIGHTS IN THE CAPITAL ASSETS PROPORTIONATELY. IN ORDER TO GET OVER THIS CONTROVERSY, AND KEEPING IN MIND T HE OBJECT OF ENCOURAGING FIRMS BEING TREATED AS COMPANIES, THE C ONTROVERSY IS RESOLVED BY THE LEGISLATURE BY INTRODUCING CLAUSE ( XIII) IN SECTION 47WITH EFFECT FROM 1ST APRIL, 1999. NOW, IN THE PRESENT CASE, IT IS ARGUED ON BEHALF OF THE DEPARTMENT BEFORE THE TRIBUNAL, FOR THE FIRST TIME, THAT IN THIS CASE , ON VESTING OF THE PROPERTIES OF THE ERSTWHILE FIRM IN THE LIMITED COM PANY, THERE WAS A TRANSFER OF CAPITAL ASSETS AND, THEREFORE, IT WAS C HARGEABLE TO INCOME-TAX UNDER THE HEAD 'CAPITAL GAINS' AS, ON SUCH VESTING, THERE WAS EXTINGUISHMENT OF ALL RIGHT, TITLE AND INTEREST IN THE CAPITAL ASSETS QUA THE FIRM. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT. IN THE PRESENT CASE, WE ARE CONCERNED WITH A PARTNERSHIP FIRM BEING TREATED AS A COMPANY UNDER THE STATUTORY PROVISIONS OF PART IX OF THE COMPANIE S ACT. IN SUCH CASES, THE COMPANY SUCCEEDS THE FIRM. GENERALLY, IN THE CA SE OF A TRANSFER OF A CAPITAL ASSET, TWO IMPORTANT INGREDIENTS ARE : EXIS TENCE OF A PARTY AND A COUNTERPARTY AND, SECONDLY, INCOMING CONSIDERATION QUA THE TRANSFEROR. IN OUR VIEW, WHEN A FIRM IS TREATED AS A COMPANY, THE SAID TWO CONDITIONS ARE NOT ATTRACTED. THERE IS NO CONVEYANCE OF THE PR OPERTY EXECUTABLE IN FAVOUR OF THE LIMITED COMPANY. IT IS NO DOUBT TRUE THAT ALL PROPERTIES OF THE FIRM VESTS IN THE LIMITED COMPANY ON THE FIRM B EING TREATED AS A COMPANY UNDER PART IX OF THE COMPANIES ACT, BUT THA T VESTING IS NOT CONSEQUENT OR INCIDENTAL TO A TRANSFER. IT IS A STA TUTORY VESTING OF PROPERTIES IN THE COMPANY AS THE FIRM IS TREATED AS A LIMITED COMPANY. ON VESTING OF ALL THE PROPERTIES STATUTORILY IN THE COMPANY, THE CLOAK GIVEN TO THE FIRM IS REPLACED BY A DIFFERENT CLOAK AND THE SAME FIRM IS NOW TREATED AS A COMPANY, AFTER A GIVEN DATE. IN TH E CIRCUMSTANCES, IN OUR VIEW, THERE IS NO TRANSFER OF A CAPITAL ASSET A S CONTEMPLATED BY SECTION 45(1) OF THE ACT. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THERE IS A TRANSFER OF A CAPITAL ASSET UNDER SECTIO N 45(1) BECAUSE OF THE DEFINITION OF THE WORD 'TRANSFER' IN SECTION 2(47)( III), EVEN THEN WE ARE OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 103 THE VIEW THAT LIABILITY TO PAY CAPITAL GAINS WOULD NOT ARISE BECAUSE SECTION 45(1) IS REQUIRED TO BE READ WITH S ECTION 48, WHICH PROVIDES FOR MODE OF COMPUTATION. THESE TWO SECTION S ARE REQUIRED TO BE READ TOGETHER AS THE CHARGING SECTION AND THE COMPU TATION SECTION CONSTITUTE ONE PACKAGE. NOW, UNDER SECTION 48 IT IS LAID DOWN, INTER ALIA, THAT THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION RECEIVED OR ACCRUED AS A RESULT OF THE TRANSFER, THE COST OF ACQUISITION OF THE ASSET AND THE EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER. SECTION 45(4) IS MUTUALLY EXCLUSIVE TO SECTION 45(1). SECTI ON 45(4)CATEGORICALLY STATES THAT WHERE THERE IS A TRANSFER BY WAY OF DIS TRIBUTION OF CAPITAL ASSETS AND WHERE SUCH TRANSFER IS DUE TO DISSOLUTIO N OR OTHERWISE OF THE FIRM, THE ASSESSING OFFICER WAS ENTITLED TO TREAT T HE MARKET VALUE OF THE ASSET ON THE DATE OF THE TRANSFER AS FULL VALUE OF THE CONSIDERATION RECEIVED. THIS LATTER PART OF SECTION 45(4) IS NOT THERE IN SECTION 45(1). THEREFORE, ONE HAS TO READ THE EXPRESSION 'FULL VAL UE OF THE CONSIDERATION RECEIVED/ACCRUING' UNDER SECTION 48 DE HORS SECTION 45(4) AND IF ONE READS SECTION 48 WITH SECTION 45(1) DE HORS SECTION 45(4) THEN THE EXPRESSION 'FULL VALUE OF CONSIDERATION' IN SECTION 48 CANNOT BE THE MARKET VALUE OF THE CAPITAL ASSET ON THE DATE OF TR ANSFER. IN SUCH A CASE, WE HAVE TO READ THE SAID EXPRESSION IN THE LIGHT OF THE TWO JUDGMENTS OF THE SUPREME COURT IN THE CASES OF GEORGE HENDERSON & CO. LTD. (SUPRA) AND GILLANDERS ARBUTHNOT & CO. (SUPRA) IN WHICH IT HAS BEEN HELD THAT THE EXPRESSION 'FULL VALUE OF THE CONSIDERATION' DOES N OT MEAN THE MARKET VALUE OF THE ASSET TRANSFERRED, BUT IT SHALL MEAN T HE PRICE BARGAINED FOR BY THE PARTIES TO THE TRANSACTION. IT HAS BEEN FURTHER HELD THAT CONSIDERATION FOR THE TRANSFER OF A CAPITAL ASSET IS WHAT THE TRA NSFEROR RECEIVES IN LIEU OF THE ASSETS HE PARTS WITH VIZ. MONEY OR MONEY'S WORT H AND, THEREFORE, THE VERY ASSET TRANSFERRED OR PARTED WITH CANNOT BE THE CONSIDERATION FOR THE TRANSFER AND, THEREFORE, THE EXPRESSION 'FULL VALUE OF THE CONSIDERATION' CANNOT BE CONSTRUED AS HAVING A REFERENCE TO THE MA RKET VALUE OF THE ASSET TRANSFERRED AND THAT THE SAID EXPRESSION ONLY MEANS THE FULL VALUE OF THE THINGS RECEIVED BY THE TRANSFEROR IN EXCHANGE OF TH E CAPITAL ASSET TRANSFERRED BY HIM. IN THE CIRCUMSTANCES, EVEN IF W E WERE TO PROCEED ON THE BASIS THAT VESTING IN THE COMPANY UNDER PART IX CONSTITUTED TRANSFER UNDER SECTION 45(1), STILL THE ASSESSEE OUGHT TO SU CCEED BECAUSE THE FIRM CAN BE ASSESSED ONLY IF THE FULL VALUE OF THE CONSI DERATION IS RECEIVED BY THE FIRM OR IF IT ACCRUES TO THE FIRM. IN THE PRESE NT CASE, THE COMPANY HAD ALLOTTED SHARES TO THE PARTNERS OF THE ERSTWHIL E FIRM, BUT THAT WAS IN PROPORTION TO THE CAPITAL OF THE PARTNERS IN THE ER STWHILE FIRM. THAT ALLOTMENT OF SHARES HAD NO CORRELATION WITH THE VES TING OF THE PROPERTIES IN THE LIMITED COMPANY UNDER PART LX OF THE ACT. LA STLY, SECTION 45(1) AND SECTION 45(4) ARE MUTUALLY EXCLUSIVE. UND ER SECTION 45(4) IN CASES OF TRANSFER BY WAY OF DISTRIBUTION AND WHERE SUCH TRANSFER IS AS A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 104 RESULT OF DISSOLUTION, THE DEPARTMENT IS CERTAINLY ENTITLED TO TAKE THE FULL MARKET VALUE OF THE ASSET AS FULL VALUE OF CONSIDER ATION PROVIDED THERE IS TRANSFER BY DISTRIBUTION OF ASSETS. IN THIS CASE, W E HAVE HELD THAT THERE IS NO SUCH TRANSFER BY WAY OF DISTRIBUTION AND, THEREF ORE, SECTION 45(4) IS NOT APPLICABLE. THIS DEEMING PROVISION, REGARDING F ULL VALUE OF CONSIDERATION, IS NOT THERE IN SECTION 45(1) READ W ITH SECTION 48. IF ONE READS SECTION 45(1) WITH SECTION 48, IT IS CLEAR TH AT THE FORMER IS A CHARGING SECTION AND IF THAT SECTION IS APPLICABLE, THE COMPUTATION HAS TO BE DONE UNDER SECTION 48, WHICH ONLY REFERS TO DEDU CTIONS FROM FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING. SECTIO N 48 DOES NOT EMPOWER THE ASSESSING OFFICER TO TAKE MARKET VALUE AS FULL VALUE OF CONSIDERATION AS IN THE CASE OF SECTION 45. IN THE CIRCUMSTANCES, EVEN IF WE WERE TO HOLD THAT VESTING AMOUNTS TO TRANSFER, T HE COMPUTATION IS NOT POSSIBLE BECAUSE IT HAS BEEN LAID DOWN IN THE ABOVE JUDGMENT OF THE SUPREME COURT THAT FULL CONSIDERATION CANNOT BE CON STRUED TO MEAN MARKET VALUE OF THE ASSET TRANSFERRED. THE LEGISLAT URE, IN ITS WISDOM, HAS AMENDED ONLY SECTION 45(4) BY WHICH THE MARKET VALU E OF THE ASSET ON THE DATE OF THE TRANSFER IS DEEMED TO BE THE FULL V ALUE OF CONSIDERATION. HOWEVER, SUCH AMENDMENT IS NOT THERE IN SECTION 45( 1). IN THE CIRCUMSTANCES, NEITHER SECTION 45(1) NOR SEC TION 45(4) STAND ATTRACTED. 4.6. IN THE PRESENT APPEAL, UNDISPUTEDLY, THE PART NERSHIP FIRM GOT CONVERTED INTO A REGISTERED COMPANY UNDER PART (IX) OF THE COMPANIES ACT AND THUS THE PROPERTIES OF THE FI RM STATUTORILY VESTED IN THE COMPANY, MEANING THEREBY, THE PROPERT Y OF THE FIRM BECAME THE PROPERTY OF THE COMPANY. THERE WAS NO DI STRIBUTION OF CAPITAL ASSET TO THE PARTNERS OR ANY OTHER PERSO NS ON REGISTRATION OF A FIRM A COMPANY, CONSEQUENTLY, IT DOES NOT MAKE EITHER PARTY LIABLE TO TAX U/S 45 OF THE ACT, THUS, IN VIEW OF THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 105 TEXSPIN ENGINEERING & MFG LTD. ((SUPRA)) DEALT WITH BY THE FIRST APPELLATE AUTHORITY ALSO ALONG WITH THE DECISION IN THE CASE OF MALABAR FISHERIES COMPANY LTD. VS CIT 120 ITR 49 AN D THE DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN UNIT Y CARE & HEALTH SERVICES (2007) 106 TTJ (BANG.) 1086, WHEREI N, THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF MAL ABAR FISHERIES COMPANY LTD. WAS RELIED UPON HOLDING THAT WHEN A CONVERSION OF A FIRM INTO A COMPANY TAKES PLACE UND ER THE PROVISIONS OF COMPANY ACT, SUCH CONVERSION CAN BE C ONSTRUED ONLY AS OCCASIONED BY OPERATION OF LAW AND HENCE NO CONTROVERSY CAN ARISE ON THE APPLICATION OF THIS PRINCIPLE EVEN FOR THE PURPOSES OF CAPITAL GAINS UNDER SECTIONS 45(4) OF T HE ACT. THUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WITH RESPECT TO NON- TAXABILITY U/S 45(1) OR 45(4) OF THE ACT. 5. SO FAR AS APPLICABILITY OF SECTION 47(XIII) R.W .S. 47A(3) OF THE ACT IS CONCERNED, IT IS OUR BOUNDED DUTY TO EXAMINE THE AFORESAID SECTIONS, THEREFORE, THE SAME ARE REPRODU CED HEREUNDER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 106 47. NOTHING CONTAINED IN SECTION 45 SHALL APPLY TO THE FOLLOWING TRANSFERS : ( I ) ANY DISTRIBUTION OF CAPITAL ASSETS ON THE TOTAL OR PARTIAL PARTITION OF A HINDU UNDIVIDED FAMILY; ( II ) [***] ( III ) ANY TRANSFER OF A CAPITAL ASSET UNDER A GIFT OR WILL OR AN IRREVOCABLE TRUST : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO TRANSFER UNDER A GIFT OR AN IRREVOCABLE TRUST OF A CAPITAL ASSET BEING SHARES, DEBENTURES OR WARRANTS ALLOTTED BY A COMPANY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES UNDER ANY EMPLOYEES' STOCK OPTION PLAN OR SCHEME OF THE COMPA NY OFFERED TO SUCH EMPLOYEES IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE CENTRAL GOVERNMENT IN THIS BEHALF; ( IV ) ANY TRANSFER OF A CAPITAL ASSET BY A COMPANY TO ITS SUBSIDIARY COMPANY, IF ( A ) THE PARENT COMPANY OR ITS NOMINEES HOLD THE WHOL E OF THE SHARE CAPITAL OF THE SUBSIDIARY COMPANY, AND ( B ) THE SUBSIDIARY COMPANY IS AN INDIAN COMPANY; ( V ) ANY TRANSFER OF A CAPITAL ASSET BY A SUBSIDIARY COMPANY TO THE HOLDING COMPANY, IF ( A ) THE WHOLE OF THE SHARE CAPITAL OF THE SUBSIDIARY COMPANY IS HELD BY THE HOLDING COMPANY, AND ( B ) THE HOLDING COMPANY IS AN INDIAN COMPANY : PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( IV ) OR CLAUSE ( V ) SHALL APPLY TO THE TRANSFER OF A CAPITAL ASSET MADE AFTER THE 29TH DAY OF FEBRUARY, 1988, AS STOCK- IN-TRADE; ( VI ) ANY TRANSFER, IN A SCHEME OF AMALGAMATION, OF A C APITAL ASSET BY THE AMALGAMATING COMPANY TO THE AMALGAMATED COMPANY IF THE AMALGAMATED COMPANY IS AN INDIAN COMPANY; ( VIA ) ANY TRANSFER, IN A SCHEME OF AMALGAMATION, OF A CAPITAL ASSET BEING A SHARE OR SHARES HELD IN AN INDIAN COMPANY, BY THE A MALGAMATING FOREIGN COMPANY TO THE AMALGAMATED FOREIGN COMPANY, IF ( A ) AT LEAST TWENTY-FIVE PER CENT OF THE SHAREHOLDER S OF THE AMALGAMATING FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE AMALGAMATED FOREIGN COMPANY, AND ( B ) SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GA INS IN THE COUNTRY, IN WHICH THE AMALGAMATING COMPANY IS INCORPORATED; ( VIAA ) ANY TRANSFER, IN A SCHEME OF AMALGAMATION OF A BA NKING COMPANY WITH A BANKING INSTITUTION SANCTIONED AND BROUGHT INTO F ORCE BY THE CENTRAL GOVERNMENT UNDER SUB-SECTION (7) OF SECTION 45 OF T HE BANKING REGULATION ACT, 1949 (10 OF 1949), OF A CAPITAL ASSET BY THE B ANKING COMPANY TO THE BANKING INSTITUTION. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 107 ( I ) 'BANKING COMPANY' SHALL HAVE THE SAME MEANING AS SIGNED TO IT IN CLAUSE ( C ) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); ( II ) 'BANKING INSTITUTION' SHALL HAVE THE SAME MEANIN G ASSIGNED TO IT IN SUB- SECTION (15) OF SECTION 45 OF THE BANKING REGULATIO N ACT, 1949 (10 OF 1949); ( VIAB ) ANY TRANSFER, IN A SCHEME OF AMALGAMATION, OF A C APITAL ASSET, BEING A SHARE OF A FOREIGN COMPANY, REFERRED TO IN THE EXPLANATION 5 TO CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 9, WHICH DERIVES, DIRECT LY OR INDIRECTLY, ITS VALUE SUBSTANTIALLY FROM THE SHARE OR SHARES OF AN INDIAN COMPANY, HELD BY THE AMALGAMATING FOREIGN COMPANY TO THE AMALGAMATED FOR EIGN COMPANY, IF ( A ) AT LEAST TWENTY-FIVE PER CENT OF THE SHAREHOLDERS OF THE AMALGAMATING FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE AMALGAMATED FOREIGN COMPANY; AND ( B ) SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GAI NS IN THE COUNTRY IN WHICH THE AMALGAMATING COMPANY IS INCORPORATED; ( VIB ) ANY TRANSFER, IN A DEMERGER, OF A CAPITAL ASSET B Y THE DEMERGED COMPANY TO THE RESULTING COMPANY, IF THE RESULTING COMPANY IS AN INDIAN COMPANY; ( VIC ) ANY TRANSFER IN A DEMERGER, OF A CAPITAL ASSET, B EING A SHARE OR SHARES HELD IN AN INDIAN COMPANY, BY THE DEMERGED FOREIGN COMPA NY TO THE RESULTING FOREIGN COMPANY, IF ( A ) THE SHAREHOLDERS HOLDING NOT LESS THAN THREE-FOU RTHS IN VALUE OF THE SHARES OF THE DEMERGED FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE RESULTING FOREIGN COMPANY; AND ( B ) SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GA INS IN THE COUNTRY, IN WHICH THE DEMERGED FOREIGN COMPANY IS INCORPORATED : PROVIDED THAT THE PROVISIONS OF SECTIONS 391 TO 394 63 OF THE COMPANIES ACT, 1956 (1 OF 1956) SHALL NOT APPLY IN CASE OF DEMERGE RS REFERRED TO IN THIS CLAUSE; ( VICA ) ANY TRANSFER IN A BUSINESS REORGANISATION, OF A C APITAL ASSET BY THE PREDECESSOR CO-OPERATIVE BANK TO THE SUCCESSOR CO-O PERATIVE BANK; ( VICB ) ANY TRANSFER BY A SHAREHOLDER, IN A BUSINESS REOR GANISATION, OF A CAPITAL ASSET BEING A SHARE OR SHARES HELD BY HIM IN THE PR EDECESSOR CO-OPERATIVE BANK IF THE TRANSFER IS MADE IN CONSIDERATION OF THE ALL OTMENT TO HIM OF ANY SHARE OR SHARES IN THE SUCCESSOR CO-OPERATIVE BANK. EXPLANATION. FOR THE PURPOSES OF CLAUSES ( VICA ) AND ( VICB ), THE EXPRESSIONS 'BUSINESS REORGANISATION', 'PREDECESSOR CO-OPERATIV E BANK' AND 'SUCCESSOR CO-OPERATIVE BANK' SHALL HAVE THE MEANINGS RESPECTI VELY ASSIGNED TO THEM IN SECTION 44DB; ( VICC ) ANY TRANSFER IN A DEMERGER, OF A CAPITAL ASSET, B EING A SHARE OF A FOREIGN COMPANY, REFERRED TO IN THE EXPLANATION 5 TO CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 9, WHICH DERIVES, DIRECTLY OR INDIRECTLY , ITS VALUE SUBSTANTIALLY FROM THE SHARE OR SHARES OF AN INDIAN COMPANY, HELD BY T HE DEMERGED FOREIGN COMPANY TO THE RESULTING FOREIGN COMPANY, IF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 108 ( A ) THE SHAREHOLDERS, HOLDING NOT LESS THAN THREE-FO URTHS IN VALUE OF THE SHARES OF THE DEMERGED FOREIGN COMPANY, CONTINUE TO REMAIN SHAREHOLDERS OF THE RESULTING FOREIGN COMPANY; AND ( B ) SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GA INS IN THE COUNTRY IN WHICH THE DEMERGED FOREIGN COMPANY IS INCORPORATED: PROVIDED THAT THE PROVISIONS OF SECTIONS 391 TO 394 64 OF THE COMPANIES ACT, 1956 (1 OF 1956) SHALL NOT APPLY IN CASE OF DEMERGE RS REFERRED TO IN THIS CLAUSE; ( VID ) ANY TRANSFER OR ISSUE OF SHARES BY THE RESULTING COMPANY, IN A SCHEME OF DEMERGER TO THE SHAREHOLDERS OF THE DEMERGED COMPAN Y IF THE TRANSFER OR ISSUE IS MADE IN CONSIDERATION OF DEMERGER OF THE UNDERTA KING; ( VII ) ANY TRANSFER BY A SHAREHOLDER, IN A SCHEME OF AM ALGAMATION, OF A CAPITAL ASSET BEING A SHARE OR SHARES HELD BY HIM IN THE AM ALGAMATING COMPANY, IF ( A ) THE TRANSFER IS MADE IN CONSIDERATION OF THE ALL OTMENT TO HIM OF ANY SHARE OR SHARES IN THE AMALGAMATED COMPANY EXCEPT WHERE T HE SHAREHOLDER ITSELF IS THE AMALGAMATED COMPANY, AND ( B ) THE AMALGAMATED COMPANY IS AN INDIAN COMPANY; ( VIIA ) ANY TRANSFER OF A CAPITAL ASSET, BEING BONDS OR G LOBAL DEPOSITORY RECEIPTS REFERRED TO IN SUB-SECTION (1) OF SECTION 115AC, MADE OUTSIDE INDIA BY A NON-RESIDENT TO ANOTHER NON-RESIDENT; 65 [ ( VIIAA ) ANY TRANSFER, MADE OUTSIDE INDIA, OF A CAPITAL AS SET BEING RUPEE DENOMINATED BOND OF AN INDIAN COMPANY ISSUED OUTSID E INDIA, BY A NON- RESIDENT TO ANOTHER NON-RESIDENT; ] FOLLOWING CLAUSE ( VIIAB ) SHALL BE INSERTED AFTER CLAUSE ( VIIAA ) OF SECTION 47 BY THE FINANCE ACT, 2018, W.E.F. 1-4-2019 : ( VIIAB ) ANY TRANSFER OF A CAPITAL ASSET, BEING ( A ) BOND OR GLOBAL DEPOSITORY RECEIPT REFERRED TO IN SUB-SECTION (1) OF SECTION 115AC; OR ( B ) RUPEE DENOMINATED BOND OF AN INDIAN COMPANY; OR ( C ) DERIVATIVE, MADE BY A NON-RESIDENT ON A RECOGNISED STOCK EXCHAN GE LOCATED IN ANY INTERNATIONAL FINANCIAL SERVICES CENTRE AND WHERE T HE CONSIDERATION FOR SUCH TRANSACTION IS PAID OR PAYABLE IN FOREIGN CURRENCY. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, ( A ) 'INTERNATIONAL FINANCIAL SERVICES CENTRE' SHALL H AVE THE MEANING ASSIGNED TO IT IN CLAUSE ( Q ) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 (28 OF 2005); ( B ) 'RECOGNISED STOCK EXCHANGE' SHALL HAVE THE MEANIN G ASSIGNED TO IT IN CLAUSE ( II ) OF EXPLANATION 1 TO CLAUSE ( 5 ) OF SECTION 43; ( C ) 'DERIVATIVE' SHALL HAVE THE MEANING ASSIGNED TO I T IN CLAUSE ( AC ) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 195 6 (42 OF 1956); SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 109 ( VIIB ) ANY TRANSFER OF A CAPITAL ASSET, BEING A GOVERNM ENT SECURITY CARRYING A PERIODIC PAYMENT OF INTEREST, MADE OUTSIDE INDIA TH ROUGH AN INTERMEDIARY DEALING IN SETTLEMENT OF SECURITIES, BY A NON-RESID ENT TO ANOTHER NON-RESIDENT. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'GOVERNMENT SECURI TY' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( B ) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956); 66 [( VIIC ) ANY TRANSFER OF SOVEREIGN GOLD BOND ISSUED BY THE RESERVE BANK OF INDIA UNDER THE SOVEREIGN GOLD BOND SCHEME, 2015, B Y WAY OF REDEMPTION, BY AN ASSESSEE BEING AN INDIVIDUAL;] ( VIII ) ANY TRANSFER OF AGRICULTURAL LAND IN INDIA EFFEC TED BEFORE THE 1ST DAY OF MARCH, 1970; ( IX ) ANY TRANSFER OF A CAPITAL ASSET, BEING ANY WORK O F ART, ARCHAEOLOGICAL, SCIENTIFIC OR ART COLLECTION, BOOK, MANUSCRIPT, DRA WING, PAINTING, PHOTOGRAPH OR PRINT, TO THE GOVERNMENT OR A UNIVERSITY OR THE NATIONAL MUSEUM, NATIONAL ART GALLERY, NATIONAL ARCHIVES OR ANY SUCH OTHER PU BLIC MUSEUM OR INSTITUTION AS MAY BE NOTIFIED BY THE CENTRAL GOVER NMENT IN THE OFFICIAL GAZETTE TO BE OF NATIONAL IMPORTANCE OR TO BE OF RE NOWN THROUGHOUT ANY STATE OR STATES. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'UNIVERSITY' MEAN S A UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND INCLUDES AN INSTITUTION DECLARED UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 1956), TO BE A UNIVERSITY FOR THE PURPOSES OF THAT ACT; ( X ) ANY TRANSFER BY WAY OF CONVERSION OF BONDS OR DE BENTURES, DEBENTURE- STOCK OR DEPOSIT CERTIFICATES IN ANY FORM, OF A COM PANY INTO SHARES OR DEBENTURES OF THAT COMPANY; ( XA ) ANY TRANSFER BY WAY OF CONVERSION OF BONDS REFERR ED TO IN CLAUSE ( A ) OF SUB-SECTION (1) OF SECTION 115AC INTO SHARES OR DEB ENTURES OF ANY COMPANY; 67 [ ( XB ) ANY TRANSFER BY WAY OF CONVERSION OF PREFERENCE SHARES OF A COMPANY INTO EQUITY SHARES OF THAT COMPANY; ] ( XI ) ANY TRANSFER MADE ON OR BEFORE THE 31ST DAY OF D ECEMBER, 1998 BY A PERSON (NOT BEING A COMPANY) OF A CAPITAL ASSET BEI NG MEMBERSHIP OF A RECOGNISED STOCK EXCHANGE TO A COMPANY IN EXCHANGE OF SHARES ALLOTTED BY THAT COMPANY TO THE TRANSFEROR. EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION ' MEMBERSHIP OF A RECOGNISED STOCK EXCHANGE' MEANS THE MEMBERSHIP O F A STOCK EXCHANGE IN INDIA WHICH IS RECOGNISED UNDER THE PROVISIONS OF T HE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956); ( XII ) ANY TRANSFER OF A CAPITAL ASSET, BEING LAND OF A SICK INDUSTRIAL COMPANY, MADE UNDER A SCHEME PREPARED AND SANCTIONED UNDER S ECTION 18 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) WHERE SUCH SICK INDUSTRIAL COMPANY IS BEING MANAGED BY ITS WOR KERS' CO-OPERATIVE : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 110 PROVIDED THAT SUCH TRANSFER IS MADE DURING THE PERIOD COMMEN CING FROM THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THAT ACT AND ENDING WITH THE PREVIOUS YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( GA ) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986); ( XIII ) ANY TRANSFER OF A CAPITAL ASSET OR INTANGIBLE AS SET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESSION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM, OR ANY TRANSFER OF A CAPITAL ASSET TO A COMPANY IN THE COURSE OF DEMUTUALISATION OR CORPORATISATION OF A RECOGNISED STOCK EXCHANGE IN INDIA AS A RESULT OF WHICH AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IS SUCCEEDED BY SUCH COMPANY : PROVIDED THAT ( A ) ALL THE ASSETS AND LIABILITIES OF THE FIRM OR OF THE ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS RELATING TO THE BUSINESS IMMEDI ATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY; ( B ) ALL THE PARTNERS OF THE FIRM IMMEDIATELY BEFORE THE SUCCESSION BECOME THE SHAREHOLDERS OF THE COMPANY IN THE SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION; ( C ) THE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONS IDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER, OTHE R THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY; AND ( D ) THE AGGREGATE OF THE SHAREHOLDING IN THE COMPANY OF THE PARTNERS OF THE FIRM IS NOT LESS THAN FIFTY PER CENT OF THE TOTAL V OTING POWER IN THE COMPANY AND THEIR SHAREHOLDING CONTINUES TO BE AS SUCH FOR A PERIOD OF FIVE YEARS FROM THE DATE OF THE SUCCESSION; ( E ) THE DEMUTUALISATION OR CORPORATISATION OF A RECO GNISED STOCK EXCHANGE IN INDIA IS CARRIED OUT IN ACCORDANCE WITH A SCHEME FO R DEMUTUALISATION OR CORPORATISATION WHICH IS APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992); ( XIIIA ) ANY TRANSFER OF A CAPITAL ASSET BEING A MEMBERSH IP RIGHT HELD BY A MEMBER OF A RECOGNISED STOCK EXCHANGE IN INDIA FOR ACQUISITION OF SHARES AND TRADING OR CLEARING RIGHTS ACQUIRED BY SUCH MEMBER IN THAT RECOGNISED STOCK EXCHANGE IN ACCORDANCE WITH A SCHEME FOR DEMUTUALIS ATION OR CORPORATISATION WHICH IS APPROVED BY THE SECURITIES AND EXCHANGE BO ARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOAR D OF INDIA ACT, 1992 (15 OF 1992); ( XIIIB ) ANY TRANSFER OF A CAPITAL ASSET OR INTANGIBLE AS SET BY A PRIVATE COMPANY OR UNLISTED PUBLIC COMPANY (HEREAFTER IN THIS CLAUS E REFERRED TO AS THE COMPANY) TO A LIMITED LIABILITY PARTNERSHIP OR ANY TRANSFER OF A SHARE OR SHARES SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 111 HELD IN THE COMPANY BY A SHAREHOLDER AS A RESULT OF CONVERSION OF THE COMPANY INTO A LIMITED LIABILITY PARTNERSHIP IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 56 OR SECTION 57 OF THE LIMITED LIABILIT Y PARTNERSHIP ACT, 2008 (6 OF 2009): PROVIDED THAT ( A ) ALL THE ASSETS AND LIABILITIES OF THE COMPANY IM MEDIATELY BEFORE THE CONVERSION BECOME THE ASSETS AND LIABILITIES OF THE LIMITED LIABILITY PARTNERSHIP; ( B ) ALL THE SHAREHOLDERS OF THE COMPANY IMMEDIATELY BEFORE THE CONVERSION BECOME THE PARTNERS OF THE LIMITED LIABILITY PARTNE RSHIP AND THEIR CAPITAL CONTRIBUTION AND PROFIT SHARING RATIO IN THE LIMITE D LIABILITY PARTNERSHIP ARE IN THE SAME PROPORTION AS THEIR SHAREHOLDING IN THE CO MPANY ON THE DATE OF CONVERSION; ( C ) THE SHAREHOLDERS OF THE COMPANY DO NOT RECEIVE A NY CONSIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MAN NER, OTHER THAN BY WAY OF SHARE IN PROFIT AND CAPITAL CONTRIBUTION IN THE LIM ITED LIABILITY PARTNERSHIP; ( D ) THE AGGREGATE OF THE PROFIT SHARING RATIO OF THE SHAREHOLDERS OF THE COMPANY IN THE LIMITED LIABILITY PARTNERSHIP SHALL NOT BE LESS THAN FIFTY PER CENT AT ANY TIME DURING THE PERIOD OF FIVE YEARS FR OM THE DATE OF CONVERSION; ( E ) THE TOTAL SALES, TURNOVER OR GROSS RECEIPTS IN T HE BUSINESS OF THE COMPANY IN ANY OF THE THREE PREVIOUS YEARS PRECEDING THE PR EVIOUS YEAR IN WHICH THE CONVERSION TAKES PLACE DOES NOT EXCEED SIXTY LAKH R UPEES; 68 [***] 68A [( EA ) THE TOTAL VALUE OF THE ASSETS AS APPEARING IN TH E BOOKS OF ACCOUNT OF THE COMPANY IN ANY OF THE THREE PREVIOUS YEARS PREC EDING THE PREVIOUS YEAR IN WHICH THE CONVERSION TAKES PLACE DOES NOT EXCEED FI VE CRORE RUPEES; AND] ( F ) NO AMOUNT IS PAID, EITHER DIRECTLY OR INDIRECTLY , TO ANY PARTNER OUT OF BALANCE OF ACCUMULATED PROFIT STANDING IN THE ACCOU NTS OF THE COMPANY ON THE DATE OF CONVERSION FOR A PERIOD OF THREE YEARS FROM THE DATE OF CONVERSION. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSIONS ' PRIVATE COMPANY' AND 'UNLISTED PUBLIC COMPANY' SHALL HAVE T HE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE LIMITED LIABIL ITY PARTNERSHIP ACT, 2008 (6 OF 2009); ( XIV ) WHERE A SOLE PROPRIETARY CONCERN IS SUCCEEDED BY A COMPANY IN THE BUSINESS CARRIED ON BY IT AS A RESULT OF WHICH THE SOLE PROPRIETARY CONCERN SELLS OR OTHERWISE TRANSFERS ANY CAPITAL ASSET OR INTANGI BLE ASSET TO THE COMPANY : PROVIDED THAT ( A ) ALL THE ASSETS AND LIABILITIES OF THE SOLE PROPR IETARY CONCERN RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECOME T HE ASSETS AND LIABILITIES OF THE COMPANY; ( B ) THE SHAREHOLDING OF THE SOLE PROPRIETOR IN THE C OMPANY IS NOT LESS THAN FIFTY PER CENT OF THE TOTAL VOTING POWER IN THE COM PANY AND HIS SHAREHOLDING SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 112 CONTINUES TO REMAIN AS SUCH FOR A PERIOD OF FIVE YE ARS FROM THE DATE OF THE SUCCESSION; AND ( C ) THE SOLE PROPRIETOR DOES NOT RECEIVE ANY CONSIDE RATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER, OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY; ( XV ) ANY TRANSFER IN A SCHEME FOR LENDING OF ANY SECU RITIES UNDER AN AGREEMENT OR ARRANGEMENT, WHICH THE ASSESSEE HAS EN TERED INTO WITH THE BORROWER OF SUCH SECURITIES AND WHICH IS SUBJECT TO THE GUIDELINES ISSUED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA, ESTABLI SHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (1 5 OF 1992) OR THE RESERVE BANK OF INDIA CONSTITUTED UNDER SUB-SECTION (1) OF SECTION 3 OF THE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934), IN THI S REGARD; ( XVI ) ANY TRANSFER OF A CAPITAL ASSET IN A TRANSACTION OF REVERSE MORTGAGE UNDER A SCHEME MADE AND NOTIFIED BY THE CENTRAL GOVERNMEN T; ( XVII ) ANY TRANSFER OF A CAPITAL ASSET, BEING SHARE OF A SPECIAL PURPOSE VEHICLE TO A BUSINESS TRUST IN EXCHANGE OF UNITS ALLOTTED B Y THAT TRUST TO THE TRANSFEROR. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION 'SP ECIAL PURPOSE VEHICLE' SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO CLAUSE ( 23FC ) OF SECTION 10; ( XVIII ) ANY TRANSFER BY A UNIT HOLDER OF A CAPITAL ASSET, B EING A UNIT OR UNITS, HELD BY HIM IN THE CONSOLIDATING SCHEME OF A MUTUAL FUND, MADE IN CONSIDERATION OF THE ALLOTMENT TO HIM OF A CAPITAL ASSET, BEING A UNIT OR UNITS, IN THE CONSOLIDATED SCHEME OF THE MUTUAL FUND: PROVIDED THAT THE CONSOLIDATION IS OF TWO OR MORE SCHEMES OF EQUITY ORIENTED FUND OR OF TWO OR MORE SCHEMES OF A FUND OTHER THAN EQUITY ORIENTED FUND. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, ( A ) 'CONSOLIDATED SCHEME' MEANS THE SCHEME WITH WHIC H THE CONSOLIDATING SCHEME MERGES OR WHICH IS FORMED AS A RESULT OF SUC H MERGER; ( B ) 'CONSOLIDATING SCHEME' MEANS THE SCHEME OF A MUT UAL FUND WHICH MERGES UNDER THE PROCESS OF CONSOLIDATION OF THE SC HEMES OF MUTUAL FUND IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE BOARD O F INDIA (MUTUAL FUNDS) REGULATIONS, 1996 MADE UNDER THE SECURITIES AND EXC HANGE BOARD OF INDIA ACT, 1992 (15 OF 1992); ( C ) 'EQUITY ORIENTED FUND' SHALL HAVE THE MEANING AS SIGNED TO IT IN CLAUSE ( 38 ) OF SECTION 10; ( D ) 'MUTUAL FUND' MEANS A MUTUAL FUND SPECIFIED UNDE R CLAUSE ( 23D ) OF SECTION 10; 69 [( XIX ) ANY TRANSFER BY A UNIT HOLDER OF A CAPITAL ASSET , BEING A UNIT OR UNITS, HELD BY HIM IN THE CONSOLIDATING PLAN OF A MUTUAL F UND SCHEME, MADE IN CONSIDERATION OF THE ALLOTMENT TO HIM OF A CAPITAL ASSET, BEING A UNIT OR UNITS, IN THE CONSOLIDATED PLAN OF THAT SCHEME OF THE MUTU AL FUND. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 113 ( A ) 'CONSOLIDATING PLAN' MEANS THE PLAN WITHIN A SCH EME OF A MUTUAL FUND WHICH MERGES UNDER THE PROCESS OF CONSOLIDATION OF THE PLANS WITHIN A SCHEME OF MUTUAL FUND IN ACCORDANCE WITH THE SECURITIES AN D EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1996 MADE UNDER T HE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992); ( B ) 'CONSOLIDATED PLAN' MEANS THE PLAN WITH WHICH TH E CONSOLIDATING PLAN MERGES OR WHICH IS FORMED AS A RESULT OF SUCH MERGE R; ( C ) 'MUTUAL FUND' MEANS A MUTUAL FUND SPECIFIED UNDE R CLAUSE ( 23D ) OF SECTION 10.] WE ARE ALSO REPRODUCING HEREUNDER THE PROVISIONS OF SECTION 47A OF THE ACT FOR READY REFERENCE AND ANAL YSIS:- 47A. (1) WHERE AT ANY TIME BEFORE THE EXPIRY OF A PERIO D OF EIGHT YEARS FROM THE DATE OF THE TRANSFER OF A CAPITAL ASSET REFERRE D TO IN CLAUSE ( IV ) OR, AS THE CASE MAY BE, CLAUSE ( V ) OF SECTION 47, ( I ) SUCH CAPITAL ASSET IS CONVERTED BY THE TRANSFERE E COMPANY INTO, OR IS TREATED BY IT AS, STOCK-IN-TRADE OF ITS BUSINESS; OR ( II ) THE PARENT COMPANY OR ITS NOMINEES OR, AS THE CA SE MAY BE, THE HOLDING COMPANY CEASES OR CEASE TO HOLD THE WHOLE OF THE SH ARE CAPITAL OF THE SUBSIDIARY COMPANY, THE AMOUNT OF PROFITS OR GAINS ARISING FROM THE TRA NSFER OF SUCH CAPITAL ASSET NOT CHARGED UNDER SECTION 45 BY VIRTUE OF THE PROVISION S CONTAINED IN CLAUSE ( IV ) OR, AS THE CASE MAY BE, CLAUSE ( V ) OF SECTION 47 SHALL, NOTWITHSTANDING ANYTHING CONTAINED IN THE SAID CLAUSES, BE DEEMED TO BE INCO ME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TOOK PLACE. (2) WHERE AT ANY TIME, BEFORE THE EXPIRY OF A PERIO D OF THREE YEARS FROM THE DATE OF THE TRANSFER OF A CAPITAL ASSET REFERRED TO IN CLAUSE ( XI ) OF SECTION 47, ANY OF THE SHARES ALLOTTED TO THE TRANSFEROR IN EXCHANG E OF A MEMBERSHIP IN A RECOGNISED STOCK EXCHANGE ARE TRANSFERRED, THE AMOU NT OF PROFITS AND GAINS NOT CHARGED UNDER SECTION 45 BY VIRTUE OF THE PROVISION S CONTAINED IN CLAUSE ( XI ) OF SECTION 47SHALL, NOTWITHSTANDING ANYTHING CONTAI NED IN THE SAID CLAUSE, BE DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEAD ' CAPITAL GAINS' OF THE PREVIOUS YEAR IN WHICH SUCH SHARES ARE TRANSFERRED. (3) WHERE ANY OF THE CONDITIONS LAID DOWN IN THE PR OVISO TO CLAUSE ( XIII ) OR THE PROVISO TO CLAUSE ( XIV ) OF SECTION 47 ARE NOT COMPLIED WITH, THE AMOUNT O F PROFITS OR GAINS ARISING FROM THE TRANSFER OF SUCH CAPITAL ASSET OR INTANGIBLE ASSET NOT CHARGED UNDER SECTION 45 BY VIRTUE OF CONDITION S LAID DOWN IN THE PROVISO TO CLAUSE ( XIII ) OR THE PROVISO TO CLAUSE ( XIV ) OF SECTION 47 SHALL BE DEEMED TO BE THE PROFITS AND GAINS CHARGEABLE TO TAX OF THE SUCC ESSOR COMPANY FOR THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 114 PREVIOUS YEAR IN WHICH THE REQUIREMENTS OF THE PROV ISO TO CLAUSE ( XIII ) OR THE PROVISO TO CLAUSE ( XIV ), AS THE CASE MAY BE, ARE NOT COMPLIED WITH. (4) WHERE ANY OF THE CONDITIONS LAID DOWN IN THE PR OVISO TO CLAUSE ( XIIIB ) OF SECTION 47 ARE NOT COMPLIED WITH, THE AMOUNT OF PROFITS OR GAINS ARISING FROM THE TRANSFER OF SUCH CAPITAL ASSET OR INTANGIBLE AS SETS OR SHARE OR SHARES NOT CHARGED UNDER SECTION 45 BY VIRTUE OF CONDITIONS LA ID DOWN IN THE SAID PROVISO SHALL BE DEEMED TO BE THE PROFITS AND GAINS CHARGEA BLE TO TAX OF THE SUCCESSOR LIMITED LIABILITY PARTNERSHIP OR THE SHAREHOLDER OF THE PREDECESSOR COMPANY, AS THE CASE MAY BE, FOR THE PREVIOUS YEAR IN WHICH THE REQUIREMENTS OF THE SAID PROVISO ARE NOT COMPLIED WITH. 5.1. IF THE AFORESAID PROVISIONS OF THE ACT ARE AN ALYZED, SECTION 47 SPEAKS ABOUT TRANSACTIONS NOT REGARDED A S TRANSFER AND SECTION 47A DEALS WITH WITHDRAWAL OF EXEMPTION IN CERTAIN CASES. AS PER SECTION 47(XIII) SUBSTITUTED FOR THE PORTION BEGINNING WITH THE WORDS WHERE AS FIRM IS SUCCEEDE D AND ENDING WITH THE WORD INTANGIBLE ASSET TO THE COMPA NY BY THE FINANCE ACT, 2001 W.E.F. 01/04/2002, PRIOR TO ITS S UBSTITUTION, THE QUOTED PORTION READS AS WHERE A FIRM IS SUCCEE DED BY A COMPANY IN THE BUSINESS CARRIED BY IT AS A RESULT O F WHICH, THE FIRM SALES OR OTHERWISE TRANSFERS OF ANY CAPITAL AS SET OR INTANGIBLE ASSETS TO THE COMPANY PROVIDED THAT:- (A) ALL THE ASSETS AND LIABILITIES OF THE FIRM 84[ OR OF THE ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS] REL ATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY; (B) ALL THE PARTNERS OF THE FIRM IMMEDIATELY BEFORE THE SUCCESSION BECOME THE SHAREHOLDERS OF THE COMPANY IN THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 115 SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STOOD I N THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION; (C) THE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONSID ERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER , OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY; AND (D) THE AGGREGATE OF THE SHAREHOLDING IN THE COMPANY OF THE PARTNERS OF THE FIRM IS NOT LESS THAN FIFTY PER CENT OF THE TOTAL VOTING POWER IN THE COMPANY AND THEIR SHAREHOLDING CONTINUES TO BE AS SUCH FOR A PERIOD OF FIVE YEARS FR OM THE DATE OF THE SUCCESSION; (E) THE 83[DEMUTUALISATION OR] CORPORATISATION OF A REC OGNISED STOCK EXCHANGE IN INDIA IS CARRIED OUT IN ACCORDANCE WITH A SCHEME FOR 83[DEMUTUALISATION OR] CORPORATISATION WHIC H IS APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDI A ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCH ANGE BOARD OF INDIA ACT, 1992. 5.2. IF THE AFORESAID PROVISION OF THE ACT IS ANAL YZED EVEN IF SUCH AN ARRANGEMENT AMOUNTS TO SUCCESSION OF A F IRM, THE ARRANGEMENT DOES NOT ATTRACT CAPITAL GAIN TAX, IF T HE ASSESSEE IS FULFILLED THE CONDITIONS LAID DOWN IN SECTION 47(XI II) OF THE ACT. IT IS NOTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WHILE COMING TO A PARTICULAR CONCLUSION, HAS DEALT WITH THE OBJECTIONS (PARA-22 OF THE IMPUGNED ORDER) RAISED B Y THE LD. ASSESSING OFFICER, SUBMISSIONS OF THE ASSESSEE AND INCORPORATION OF THE FIRM VIDE INCORPORATION CERTIF ICATE DATED 12/08/2010 ISSUED BY ROC FROM WHICH IT IS ABUNDANTL Y CLEAR SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 116 THAT THE ASSESSEE COMPANY I..E. M/S SKYLARK BUILDCO N PVT. LTD. WAS INCORPORATED UNDER CHAPTER IX OF THE COMPANIES ACT, 1956, WHICH IS FURTHER FORTIFIED BY THE MOA OF THE ASSESSEE COMPANY AND FIXED SHARE CAPITAL OF ALL THE PARTNERS OF THE EARST WHILE FIRM, WHICH HAS BEEN DEALT WITH IN PARA-24 ON WARDS OF THE IMPUGNED ORDER. THE SHARE HOLDING ON THE DATE O F CONVERSION ETC HAS BEEN DEALT WITH IN PARA 28 ONWAR DS OF THE IMPUGNED ORDER. THIS STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS FORTIFIED BY THE DECISION FROM HON' BLE APEX COURT IN THE CASE OF MALABAR FISHERIES COMPANY LTD. VS CIT (1979) 120 ITR 49, WHEREIN, IT WAS HELD/OBSERVED AS UNDER:- THESE APPEALS BY SPECIAL LEAVE RAISE AN INTERESTIN G QUESTION OF LAW WHETHER THE DISTRIBUTION OF ASSETS OF A FIRM CONSEQUENT ON ITS DISSOLUTION AMOUNTS TO A TRANSFER OF ASSETS WITHIN THE MEANING OF THE EXPRESSION ' OTHERWISE TRANSFERRED' OCCURRING IN S. 34(3)(B) OF THE I.T. ACT, 1961, HAVING REGARD TO THE DEFINITION OF ' TRANSFER ' IN S. 2(47) OF THE ACT. THE FACTS GIVING RISE TO THE QUESTION LIE IN A NARR OW COMPASS. THE APPELLANT (M/S. MALABAR FISHERIES CO.) IS A DIS SOLVED FIRM REPRESENTED BY ONE OF ITS ERSTWHILE PARTNERS. THE F IRM AS ORIGINALLY CONSTITUTED ON APRIL 1, 1959, CONSISTED OF FOUR PARTNERS AND CARRIED ON SIX DIFFERENT BUSINESSES IN SIX DIFFERENT NAMES AND STYLES, NAMELY, (A) MALABAR FISHERIES CO. , (B) COASTAL ENGINEERING CO., (C) COCHIN TIN FACTORY, (D ) GOODWILL INDUSTRIES, ALL AT PALLURUTHY, (E) COMBINE STEEL IN DUSTRIES AT THE INDUSTRIAL ESTATE AT OLAVAKKOT AND (F) LITE MET AL INDUSTRIES AT VISAKHAPATNAM IN ANDHRA PRADESH. THE FIRM WAS DI SSOLVED ON MARCH 31, 1963, AND UNDER THE DEED OF DISSOLUTIO N SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 117 EXECUTED BY AND BETWEEN THE PARTNERS, THE FIRST BUS INESS CONCERN WAS TAKEN OVER BY ONE OF THE PARTNERS, THE REMAINING FIVE CONCERNS BY TWO OF THE OTHER PARTNERS AND THE FOURTH PARTNER RECEIVED A SUM OF RS. 3,81,082 IN LIEU OF H IS RESPECTIVE SHARES IN THE ASSETS OF ALL THE BUSINESES OF THE FI RM. IT APPEARS THAT DURING THE FOUR ASSESSMENT YEARS 1960-61 TO 19 63-64, THE FIRM HAD INSTALLED VARIOUS ITEMS OF MACHINERY I N RESPECT OF WHICH IT RECEIVED DEVELOPMENT REBATE IN ITS RESPECT IVE TAX ASSESSMENTS UNDER S. 33 OF THE ACT. ON DISSOLUTION OF THE FIRM ON MARCH 31, 1963, THE ITO TOOK THE VIEW THAT S. 34 (3)(B) OF THE ACT APPLIED ON THE GROUND THAT THERE WAS A SALE OR TRANSFER OF THE MACHINERY BY THE FIRM WITHIN THE PERIOD MENT IONED IN THAT SECTION AND ACCORDINGLY ACTING UNDER S. 155(5) OF THE ACT HE WITHDREW THE DEVELOPMENT REBATE ALLOWED TO THE F IRM FOR THE SAID ASSESSMENT YEARS, THE AMENDING ORDERS BEIN G PASSED AGAINST THE DISSOLVED FIRM. THE ASSESSEE, I.E., THE DISSOLVED FIRM THROUGH ONE OF ITS ERSTWHILE PARTNERS PREFERRE D APPEALS AGAINST THE ORDER OF THE ITO WITHDRAWING THE DEVELO PMENT REBATE BUT THE AAC BY HIS ORDER DATED JULY 24, 1964 , DISMISSED THE APPEALS HOLDING THAT S. 155(5) WAS RI GHTLY RESORTED TO SINCE S. 34(3)(B) OF THE ACT APPLIED TO THE CASE. THE MATTER WAS CARRIED IN FURTHER APPEALS BY THE DI SSOLVED FIRM TO THE INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH, ERNAKULAM, AND IT WAS CONTENDED THAT THE DISTRIBUTI ON OF THE ASSETS OF THE FIRM CONSEQUENT ON ITS DISSOLUTION DI D NOT AMOUNT TO A SALE OR TRANSFER AND, THEREFORE, THE TRANSACTI ON WOULD NOT COME WITHIN THE PURVIEW OF S. 34(3)(B). THE TRIBUNA L BY ITS COMMON ORDER DATED JANUARY 6, 1970, ALLOWED THE APP EALS HOLDING THAT THE CASE FELL WITHIN THE PRINCIPLE LAI D DOWN BY THIS COURT IN THE CASE OF CIT V. DEWAS CINE CORPORATION [1968] 68 ITR 240 (SC) AND THAT THERE WAS NO QUESTION OF ANY SALE OR TRANSFER WITHIN THE MEANING OF S. 34(3)(B) IN A TRA NSACTION INVOLVING THE ADJUSTMENT OF THE RIGHTS OF THE PARTN ERS OF A DISSOLVED FIRM. AT THE INSTANCE OF THE REVENUE, THE TRIBUNAL REFERR ED TWO QUESTIONS OF LAW TO THE HIGH COURT FOR ITS OPINION, NAMELY : ' (1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE APPELLATE TRIBUNAL WAS LEGALLY CORRECT IN HOLDING THAT THERE WAS NO QUESTION OF SALE AND THAT IT WAS ONLY AN ADJUSTMENT OF THE MUTUAL RIGHTS OF THE PARTNERS AND THAT THE PROVISIONS OF SECTION 34(3) WERE NOT APPLICABLE ? SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 118 (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THERE WAS A TRANSFER OF ASSETS WITHIN THE MEA NING OF THE WORDS 'OTHERWISE TRANSFERRED ', OCCURRING IN SECTIO N 34(3)(B) OF THE INCOME-TAX ACT ? ' THE HIGH COURT ANSWERED THE SECOND QUESTION IN THE AFFIRMATIVE AND AGAINST THE ASSESSEE AND, IN VIEW O F THAT ANSWER, DECLINED TO ANSWER THE FIRST QUESTION AS BE ING UNNECESSARY. THE HIGH COURT TOOK THE VIEW THAT THIS COURT'S DECISIONS IN DEWAS CINE CORPORATION'S CASE [1968] 68 ITR 240 (SC) AND BANKEY LAL VAIDYA'S CASE [1971] 79 ITR 594 (SC), TO THE EFFECT THAT THE DISTRIBUTION, DIVISION OR ALLOT MENT OF ASSETS BETWEEN PARTNERS OF A FIRM CONSEQUENT ON ITS DISSOL UTION AMOUNTS TO A MUTUAL ADJUSTMENT OF RIGHTS OF THE PAR TNERS AND DOES NOT AMOUNT TO A SALE OR TRANSFER HAD BEEN REND ERED UNDER THE INDIAN I.T. ACT, 1922, WHEREIN THE EXPRES SION ' SALE' OR ' TRANSFER ' HAD NOT BEEN DEFINED WHEREAS IN THE 1961 ACT BY WHICH THE CASE WAS GOVERNED, THE EXPRESSION ' TR ANSFER HAD BEEN DEFINED BY S.2(47) IN A VERY WIDE MANNER SO AS TO INCLUDE NOT MERELY A SALE OR EXCHANGE BUT ALSO ' EXTINGUISHMENT OF ANY RIGHTS ' IN CAPITAL ASSETS. T HE HIGH COURT HELD THAT A DISSOLUTION OF A FIRM AMOUNTED TO EXTINGUISHMENT OF THE RIGHTS OF THE FIRM IN THE ASS ETS OF THE PARTNERSHIP AND ACCORDINGLY WAS A TRANSFER WITHIN T HE MEANING OF S. 2(47) OF THE ACT AND THAT, THEREFORE, THE PRO VISIONS OF S. 34(3)(B) APPLIED TO THE CASE. IT IS THIS VIEW OF TH E HIGH COURT THAT IS BEING CHALLENGED BEFORE US IN THESE APPEALS BY THE ASSESSEE. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE HIGH CO URT HAS CLEARLY ERRED IN TAKING THE VIEW THAT THE DISSOLUTI ON OF A FIRM AMOUNTS TO EXTINGUISHMENT OF THE RIGHTS OF THE FIRM IN THE ASSETS OF THE PARTNERSHIP. HE POINTED OUT THAT IN T HE TWO DECISIONS REFERRED TO ABOVE THIS COURT HAS CLEARLY ENUNCIATED WHAT HAPPENS IN LAW UPON THE DISSOLUTION OF A FIRM, NAMELY, THAT THE DISTRIBUTION, DIVISION OR ALLOTMENT OF ASS ETS BETWEEN THE PARTNERS ON DISSOLUTION OF THE FIRM IS MERELY A N ADJUSTMENT OF RIGHTS INTER SE BETWEEN THEM AND THAT NO SALE OR TRANSFER IS INVOLVED IN SUCH DISTRIBUTION, DIVISION OR ALLOTMEN T. ACCORDING TO HIM, THERE IS NO CHANGE IN THIS LEGAL POSITION E VEN AFTER THE ENACTMENT OF THE DEFINITION OF ' TRANSFER' IN S. 2( 47) IN THE 1961 ACT. REFERENCE WAS MADE TO THIS COURT'S DECISI ON IN CIT V. R. M. AMIN [1977] 106 ITR 368 (SC), WHERE THIS COURT HAS HELD THAT NO TRANSFER OF CAPITAL ASSETS WITHIN THE MEANING OF S. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 119 2(47) OF THE 1961 ACT WAS INVOLVED WHEN A SHAREHOLD ER RECEIVED MONEY REPRESENTING HIS SHARES ON THE DISTR IBUTION OF THE NET ASSETS OF THE COMPANY IN LIQUIDATION, THAT HE MUST BE REGARDED AS HAVING RECEIVED THAT MONEY IN SATISFACT ION OF THE RIGHTS WHICH BELONGED TO HIM BY VIRTUE OF HIS HOLDI NG THE SHARES AND THAT THE TRANSACTION DID NOT AMOUNT TO A NY SALE, EXCHANGE OR RELINQUISHMENT OF CAPITAL ASSETS OR EXTINGUISHMENT OF ANY RIGHTS THEREIN. IN ANY CASE, HE CONTENDED THAT IN EVERY CASE DISSOLUTION MUST BE AN TERIOR IN POINT OF TIME TO THE DISTRIBUTION THAT TAKES PLACE AFTER MAKING ACCOUNTS AND DISCHARGING ALL DEBTS AND LIABILITIES AND AS SUCH THERE IS NO TRANSFER OF ANY ASSETS BY THE ASSESSEE (I.E., THE DISSOLVED FIRM) TO ANY PERSON AS CONTEMPLATED BY S. 34(3)(B), BUT ALL THAT HAPPENS IS THAT UPON DISSOLUTION AND U PON MAKING UP OF ACCOUNTS AND DISCHARGE OF LIABILITIES IT IS T HE ERSTWHILE PARTNERS WHO MUTUALLY ADJUST THEIR RIGHTS AND IT IS BY WAY OF ADJUSTMENT OF SUCH RIGHTS THAT DISTRIBUTION, DIVISI ON OR ALLOTMENT OF ASSETS TAKES PLACE. HE, THEREFORE, URG ED THAT S. 34(3)(B) WAS INAPPLICABLE TO THE CASE. ON THE OTHER HAND, COUNSEL FOR THE REVENUE PRESSED THE HIGH COURT'S VIEW FOR OUR ACCEPTANCE. HE URGED THAT THE QUESTION HAS TO BE CONSIDERED UNDER THE 1961 ACT IN THE LIGH T OF THE DEFINITION OF ' TRANSFER ' CONTAINED IN S. 2(47) WH ICH INCLUDES WITHIN ITS SCOPE EVEN ' EXTINGUISHMENT OF RIGHTS IN CAPITAL ASSETS '. ACCORDING TO HIM, DURING THE CONTINUANCE OF THE PARTNERSHIP, THE MACHINERY UNDOUBTEDLY BELONGED TO THE FIRM, THE FIRM AS A SEPARATE TAXABLE ENTITY GOT THE BENEF IT OF DEVELOPMENT REBATE WHICH WAS SOUGHT TO BE WITHDRAWN INASMUCH AS THE FIRM'S RIGHTS IN THE MACHINERY GOT EXTINGUISHED UPON DISSOLUTION AND THE SAME GOT TRAN SFERRED OR VESTED IN INDIVIDUAL PARTNER OR PARTNERS AS A RESUL T OF DISTRIBUTION OR ALLOTMENT MADE BETWEEN THEM. HE STA TED, QUA THE ERSTWHILE PARTNERS, THERE MAY NOT BE ANY TRANSF ER OF ASSETS AND THERE MAY BE A MUTUAL ADJUSTMENT OF RIGHTS BUT, QUA THE FIRM, THERE IS CERTAINLY EXTINGUISHMENT OF ITS RIGH TS IN THE ASSETS OF THE PARTNERSHIP AND IN THAT SENSE THERE I S A TRANSFER OF ASSETS WITHIN THE DEFINITION UNDER S. 2(47) OF T HE ACT. SINCE IN THESE APPEALS THE QUESTION RAISED RELATES TO THE WITHDRAWAL OF DEVELOPMENT REBATE UNDER S. 34(3)(B) READ WITH S. 155(5) OF THE 1961 ACT IN THE LIGHT OF THE DEFIN ITION OF THE EXPRESSION ' TRANSFER ' GIVEN UNDER S. 2(47) OF THE ACT, IT WILL SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 120 BE DESIRABLE TO NOTE WHAT THESE PROVISIONS ARE. SEC TION 34(3)(B), IN SO FAR AS IS MATERIAL, READS : ' 34. CONDITIONS FOR DEPRECIATION ALLOWANCE AND DEV ELOPMENT REBATE.--........ 3(B) IF ANY SHIP, MACHINERY OR PLANT IS SOLD OR OTH ERWISE TRANSFERRED BY THE ASSESSEE TO ANY PERSON AT ANY TI ME BEFORE THE EXPIRY OF EIGHT YEARS FROM THE END OF THE PREVI OUS YEAR IN WHICH IT WAS ACQUIRED OR INSTALLED, ANY ALLOWANCE M ADE UNDER SECTION 33 OR UNDER THE CORRESPONDING PROVISIONS OF THE INDIAN INCOME-TAX ACT, 1922 (XI OF 1922), IN RESPECT OF TH AT SHIP, MACHINERY OR PLANT SHALL BE DEEMED TO HAVE BEEN WRO NGLY MADE FOR THE PURPOSES OF THIS ACT, AND THE PROVISIO NS OF SUB- SECTION (5) OF SECTION 155 SHALL APPLY ACCORDINGLY. ' SECTION 155(5) IS A PROCEDURAL PROVISION ENABLING T HE ITO IN A CASE FALLING UNDER S.34(3)(B) TO RECOMPUTE THE TOTA L INCOME OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR AND MAK E THE NECESSARY AMENDMENTS; IN OTHER WORDS, ACTING UNDER THIS PROVISION, THE ITO WITHDRAWS THE DEVELOPMENT REBATE ALREADY GRANTED BY PASSING AN AMENDING ORDER. IT FURTHER PR OVIDES THAT SUCH AMENDING ORDER HAS TO BE PASSED WITHIN A PERIO D OF 4 YEARS TO BE RECKONED FROM THE END OF THE PREVIOUS Y EAR IN WHICH THE SALE OR TRANSFER TOOK PLACE. SECTION 2(47) DEFINES THE EXPRESSION ' TRANSFER ' T HUS : ' 2. (47) 'TRANSFER ', IN RELATION TO A CAPITAL ASS ET, INCLUDES THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSET OR TH E EXTINGUISHMENT OF ANY RIGHTS THEREIN OR THE COMPULS ORY ACQUISITION THEREOF UNDER ANY LAW. ' ON A PLAIN READING OF S. 34(3)(B) IT WILL APPEAR CL EAR THAT BEFORE THAT PROVISION CAN BE INVOKED OR APPLIED THR EE CONDITIONS ARE REQUIRED TO BE SATISFIED: (A) THAT T HE SHIP, MACHINERY OR PLANT MUST HAVE BEEN SOLD OR OTHERWISE TRANSFERRED, (B) THAT SUCH A SALE OR TRANSFER MUST BE BY THE ASSESSEE, AND (C) THAT THE SAME MUST BE BEFORE THE EXPIRY OF 8 YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH IT WAS ACQUIRED OR INSTALLED. IT IS ONLY WHEN THESE THREE CONDITIONS ARE SATISFIED THAT ANY ALLOWANCE MADE UNDER S. 33 SHALL BE DEEMED TO HAVE BEEN WRONGLY MADE AND THE ITO ACTING UNDER S. 155(5) WILL BE ENTITLED TO WITHDRAW SUCH ALLOWANCE. FURTHER, S. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 121 2(47) GIVES AN ARTIFICIAL EXTENDED MEANING TO THE E XPRESSION ' TRANSFER', FOR, IT NOT MERELY INCLUDES TRANSACTIONS OF ' SALE ' AND ' EXCHANGE ' WHICH, IN ORDINARY PARLANCE, WOULD MEAN TRANSFERS BUT ALSO ' RELINQUISHMENT ' OR ' EXTINGUI SHMENT OF RIGHTS ' WHICH ARE ORDINARILY NOT INCLUDED IN THAT CONCEPT. THE QUESTION IS WHETHER THE DISTRIBUTION, DIVISION OR A LLOTMENT OF ASSETS OF A FIRM CONSEQUENT ON ITS DISSOLUTION AMOU NTS TO A TRANSFER OF ASSETS WITHIN THE MEANING OF THE WORDS ' OTHERWISE TRANSFERRED ' OCCURRING IN S. 34(3)(B) OF THE ACT, REGARD BEING HAD TO THE DEFINITION OF ' TRANSFER ' CONTAINED IN S. 2(47)? TO PUT IT PITHILY, THE QUESTION IS WHETHER THE DISSOLU TION OF A FIRM EXTINGUISHES THE FIRM'S RIGHTS IN THE ASSETS OF THE PARTNERSHIP SO AS TO CONSTITUTE A TRANSFER OF ASSETS UNDER S. 2 (47) ? IN THE DEWAS CINE CORPORATION'S CASE [1968] 68 ITR 240 (SC), THE CONCEPT OF DISTRIBUTION OF ASSETS CONSEQUENT UP ON THE DISSOLUTION OF THE FIRM WAS CONSIDERED IN THE CONTE XT OF THE BALANCING CHARGE ARISING UNDER THE SECOND PROVISO T O S. 10(2)(VII) OF THE 1922 ACT. IN THAT CASE TWO INDIVI DUALS, EACH OF WHOM OWNED A CINEMA THEATRE, FORMED A PARTNERSHI P TO CARRY ON BUSINESS OF EXHIBITION OF CINEMATOGRAPH FI LMS, BRINGING THE THEATRES INTO THE BOOKS OF THE FIRM AS ITS ASSETS. FOR THE ASSESSMENT YEARS 1950-51 TO 1952-53, THE IT O ALLOWED DEPRECIATION AGGREGATING TO RS. 44,380 IN T HE ASSESSMENT OF THE FIRM IN RESPECT OF THE TWO THEATR ES. ON THE DISSOLUTION OF THE FIRM ON SEPTEMBER 30, 1951, THE THEATRES WERE RETURNED TO THEIR ORIGINAL OWNERS. IN THE BOOK S OF THE FIRM THE ASSETS WERE SHOWN AS TAKEN OVER AT THE ORIGINAL PRICE LESS THE DEPRECIATION ALLOWED, THE DEPRECIATION BEING EQ UALLY DIVIDED BETWEEN THE TWO ERSTWHILE PARTNERS. THE TRI BUNAL TOOK THE VIEW THAT BY RESTORING THE THEATRES TO THE ORIG INAL OWNERS THERE WAS A TRANSFER BY THE PARTNERSHIP AND THE ENT RIES ADJUSTING DEPRECIATION AND WRITING OFF THE ASSETS A T THE ORIGINAL VALUE AMOUNTED TO TOTAL RECOUPMENT OF THE ENTIRE DE PRECIATION BY THE PARTNERSHIP AND ON THAT ACCOUNT THE BALANCIN G CHARGE ARISE UNDER THE SECOND PROVISO TO S. 10(2)(VII) OF THE ACT. THIS COURT HELD THAT ON THE DISSOLUTION OF THE PARTNERSH IP, EACH THEATRE HAD TO BE DEEMED TO BE RETURNED TO THE ORIG INAL OWNER IN SATISFACTION PARTIALLY OR WHOLLY OF HIS CLAIM TO A SHARE IN THE RESIDUE OF THE ASSETS AFTER DISCHARGING THE DEBTS A ND OTHER OBLIGATIONS. BUT THEREBY THE THEATRES WERE NOT IN L AW SOLD BY THE PARTNERSHIP TO THE INDIVIDUAL PARTNERS IN CONSI DERATION OF THEIR RESPECTIVE SHARES IN THE RESIDUE, AND, THEREF ORE, THE AMOUNT OF RS. 44,380 COULD NOT BE INCLUDED IN THE T OTAL INCOME SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 122 OF THE PARTNERSHIP AS A BALANCING CHARGE ARISING UN DER THE SECOND PROVISO TO S. 10(2)(VII). IT IS TRUE THAT THIS COURT WAS CONCERNED WITH INTER PRETING THE EXPRESSION ' SOLD ' USED IN S.10(2)(VII) AND THE SE COND PROVISO THERETO, WHEN THE EXPRESSIONS ' SALE OR SOLD ' HAD NOWHERE BEEN DEFINED IN THE ACT, AND, THEREFORE, THIS COURT HELD THAT THOSE EXPRESSIONS WHEN USED IN S. 10(2)(VII) AND TH E SECOND PROVISO THERETO MUST BE UNDERSTOOD IN THEIR ORDINAR Y MEANING AND THAT ' SALE ' ACCORDING TO ITS ORDINARY MEANING MEANT A TRANSFER OF PROPERTY FOR A PRICE. THIS COURT FURTHE R ENUNCIATED THE PROPOSITION THAT THE DISTRIBUTION OF SURPLUS UP ON DISSOLUTION OF A PARTNERSHIP AFTER DISCHARGING ITS DEBTS AND OB LIGATIONS WAS ALWAYS BY WAY OF ADJUSTMENT OF RIGHTS OF PARTNERS I N THE ASSETS OF THE PARTNERSHIP AND DID NOT AMOUNT TO A TRANSFER MUCH LESS FOR A PRICE. IT IS SIGNIFICANT TO NOTE THAT THE QUE STION OF RAISING A BALANCING CHARGE AGAINST THE DISSOLVED FIRM, A SE PARATE TAXABLE ENTITY WHICH HAD BEEN ALLOWED DEPRECIATION IN THE EARLIER YEARS, WAS CONSIDERED BY THIS COURT AND THI S COURT TOOK THE VIEW THAT NO BALANCING CHARGE AROSE AGAINST THE FIRM INASMUCH AS NO SALE OR TRANSFER WAS INVOLVED IN THE TRANSACTION OF DISTRIBUTION OF THE ASSETS TO ERSTWH ILE PARTNERS OF THE FIRM CONSEQUENT UPON ITS DISSOLUTION. IN BANKEY LAL VAIDYA'S CASE [1971] 79 ITR 594 (SC), THE CONCEPT OF DISTRIBUTION OF ASSETS TO THE PARTNERS O F A FIRM CONSEQUENT UPON ITS DISSOLUTION WAS CONSIDERED IN T HE CONTEXT OF THE CHARGE ON CAPITAL GAINS ARISING UNDER S. 12B (1) OF THE 1922 ACT. IN THAT CASE, THE RESPONDENT-ASSESSEE, TH E KARTA OF A HUF, ENTERED INTO A PARTNERSHIP WITH D TO CARRY O N BUSINESS OF MANUFACTURING AND SELLING PHARMACEUTICAL PRODUCT S AND LITERATURE RELATING THERETO. ON THE DISSOLUTION OF THE PARTNERSHIP, ITS ASSETS, WHICH INCLUDED GOODWILL, M ACHINERY, FURNITURE, MEDICINES, LIBRARY AND COPYRIGHT IN RESP ECT OF CERTAIN PUBLICATIONS, WERE VALUED AT RS. 2,50,000. SINCE A LARGE MAJORITY OF ASSETS WAS INCAPABLE OF PHYSICAL DIVISI ON, IT WAS AGREED THAT THE ASSETS BE TAKEN OVER BY D AND THE RESPONDENT-ASSESSEE BE PAID HIS SHARE OF THE VALUE OF THE ASSETS IN MONEY AND ACCORDINGLY HE WAS PAID RS. 1,2 5,000. THE QUESTION WAS WHETHER THE SUM OF RS. 65,000, BEI NG PART OF THE AMOUNT RECEIVED BY THE RESPONDENT-ASSESSEE C OULD BE BROUGHT TO TAX AS CAPITAL GAINS UNDER S. 12B(1) OF THE ACT ? THIS COURT HELD THAT THE ARRANGEMENT BETWEEN THE PA RTNERS OF THE FIRM AMOUNTED TO A DISTRIBUTION OF THE ASSETS O F THE FIRM ON SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 123 DISSOLUTION, THAT THERE WAS NO SALE OR EXCHANGE OF THE RESPONDENT'S SHARE IN THE CAPITAL ASSETS TO D, NOR DID HE TRANSFER HIS SHARE IN THE CAPITAL ASSETS AND, THERE FORE, THE SUM OF RS. 65,000 COULD NOT BE TAXED AS CAPITAL GAINS. THE COURT OBSERVED THAT THE RIGHTS OF THE PARTIES WERE ADJUST ED BY HANDING OVER TO ONE OF THE PARTNERS THE ENTIRE ASSE TS AND TO THE OTHER PARTNER THE MONEY VALUE OF HIS SHARE AND SUCH A TRANSACTION WAS NEITHER A SALE NOR EXCHANGE NOR TRA NSFER OF ASSETS OF THE FIRM. IT CANNOT, HOWEVER, BE DISPUTED THAT BOTH THESE DEC ISIONS WERE RENDERED UNDER THE 1922 ACT WHICH DID NOT DEFINE EX PRESSIONS LIKE ' SALE ' OR TRANSFER ' AND THE QUESTION IS WHE THER ANY DIFFERENCE IS MADE IN THE LEGAL POSITION UNDER THE 1961 ACT BY REASON OF THE ENACTMENT OF THE DEFINITION OF THE EX PRESSION ' TRANSFER ' IN S. 2(47), WHICH INCLUDES WITHIN ITS S COPE A TRANSACTION BY WAY OF ' EXTINGUISHMENT OF ANY RIGHT S IN A CAPITAL ASSET ' ? THE PRECISE ARGUMENT WHICH HAS BE EN ADVANCED BY THE COUNSEL FOR THE REVENUE BEFORE US, AND WHICH FOUND FAVOUR WITH THE HIGH COURT IS THAT DURING THE CONTINUANCE OF THE PARTNERSHIP THE MACHINERY BELONG ED TO THE FIRM, THAT THE FIRM AS A TAXABLE ENTITY RECEIVED TH E BENEFIT OF DEVELOPMENT REBATE IN RESPECT THEREOF UNDER S. 33 O F THE ACT AND THAT UPON DISSOLUTION THE FIRM'S RIGHTS IN THE MACHINERY GOT EXTINGUISHED AND BECAME VESTED IN THE PARTNER O R PARTNERS TO WHOM IT WAS ALLOTTED IN THE DISTRIBUTION OF ASSE TS, AND, THEREFORE, THE TRANSACTION SO FAR AS THE FIRM IS CO NCERNED AMOUNTS TO A TRANSFER OF ASSETS UNDER S. 2(47). THE QUESTION IS HOW FAR IS IT CORRECT TO SAY THAT IN LAW THE FIRM A S SUCH HAS RIGHTS IN THE PARTNERSHIP ASSETS LIABLE TO EXTINGUI SHMENT UPON DISSOLUTION? IT IS WELL KNOWN THAT COMMERCIAL MEN AND ACCOUNTANT S ON THE ONE HAND AND LAWYERS ON THE OTHER HAVE DIFFERENT NO TIONS RESPECTING THE NATURE OF THE FIRM AND THIS DIFFEREN CE BETWEEN THE MERCANTILE VIEW AND THE LEGAL VIEW HAS BEEN EXP LAINED IN LINDLEY ON PARTNERSHIP, 12TH EDN., AT PAGES 27 AND 28,THUS : ' PARTNERS ARE CALLED COLLECTIVELY A FIRM. MERCHANT S AND LAWYERS HAVE DIFFERENT NOTIONS RESPECTING THE NATURE OF A F IRM. COMMERCIAL MEN AND ACCOUNTANTS ARE APT TO LOOK UPON A FIRM IN THE LIGHT IN WHICH LAWYERS LOOK UPON A CORPORATI ON, I. E., AS A BODY DISTINCT FROM THE MEMBERS COMPOSING IT, AND HA VING RIGHTS AND OBLIGATIONS DISTINCT FROM THOSE OF ITS M EMBERS. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 124 HENCE, IN KEEPING PARTNERSHIP ACCOUNTS, THE FIRM IS MADE DEBTOR TO EACH PARTNER FOR WHAT HE BRINGS INTO THE COMMON STOCK, AND EACH PARTNER IS MADE DEBTOR TO THE FIRM FOR ALL THAT HE TAKES OUT OF THAT STOCK. IN THE MERCANTILE VIEW, PARTNERS ARE NEVER INDEBTED TO EACH OTHER IN RESPECT OF PARTNERS HIP TRANSACTIONS; BUT ARE ALWAYS EITHER DEBTORS TO OR C REDITORS OF THE FIRM. OWING TO THIS IMPERSONIFICATION OF THE FIRM, THERE IS A TENDENCY TO REGARD ITS RIGHTS AND OBLIGATIONS AS UNAFFECTED BY THE INTRODUCTION OF A NEW PARTNER, OR BY THE DEATH OR R ETIREMENT OF AN OLD ONE. NOTWITHSTANDING SUCH CHANGES AMONG ITS MEMBERS, THE FIRM IS CONSIDERED AS CONTINUING THE S AME; AND THE RIGHTS AND OBLIGATIONS OF THE OLD FIRM ARE REGA RDED AS CONTINUING IN FAVOUR OF OR AGAINST THE NEW FIRM AS IF NO CHANGES HAD OCCURRED. THE PARTNERS ARE THE AGENTS A ND SURETIES OF THE FIRM; ITS AGENT FOR THE TRANSACTION OF ITS BUSINESS; ITS SURETIES FOR THE LIQUIDATION OF ITS L IABILITIES SO FAR AS THE ASSETS OF THE FIRM ARE INSUFFICIENT TO MEET THEM. THE LIABILITIES OF THE FIRM ARE REGARDED AS THE LIABILI TIES OF THE PARTNERS ONLY IN CASE THEY CANNOT BE MET BY THE FIR M AND DISCHARGED OUT OF ITS ASSETS. BUT THIS IS NOT THE LEGAL NOTION OF A FIRM. THE FIR M IS NOT RECOGNISED BY ENGLISH LAWYERS AS DISTINCT FROM THE MEMBERS COMPOSING IT. IN TAKING PARTNERSHIP ACCOUNTS AND IN ADMINISTERING PARTNERSHIP ASSETS, COURTS HAVE TO SO ME EXTENT ADOPTED THE MERCANTILE VIEW, AND ACTIONS MAY NOW, S PEAKING GENERALLY, BE BROUGHT BY OR AGAINST PARTNERS IN THE NAME OF THEIR FIRM; BUT, SPEAKING GENERALLY, THE FIRM AS SU CH HAS NO LEGAL RECOGNITION. THE LAW, IGNORING THE FIRM, LOOK S TO THE PARTNERS COMPOSING IT; ANY CHANGE AMONGST THEM DEST ROYS THE IDENTITY OF THE FIRM; WHAT IS CALLED THE PROPERTY O F THE FIRM IS THEIR PROPERTY, AND WHAT ARE CALLED THE DEBTS AND L IABILITIES OF THE FIRM ARE THEIR DEBTS AND THEIR LIABILITIES. IN POINT OF LAW, A PARTNER MAY BE THE DEBTOR OR THE CREDITOR OF HIS CO -PARTNERS, BUT HE CANNOT BE EITHER DEBTOR OR CREDITOR OF THE F IRM OF WHICH HE IS HIMSELF A MEMBER, NOR CAN HE BE EMPLOYED BY H IS FIRM, FOR A MAN CANNOT BE HIS OWN EMPLOYER. ' (EMPHASIS* SUPPLIED). UNLIKE THE SCOTTISH SYSTEM OF LAW WHERE THE FIRM IS A LEGAL PERSON DISTINCT FROM THE PARTNERS COMPOSING IT, THE ENGLISH PARTNERSHIP ACT, 1890, AVOIDS MAKING A FIRM A DISTI NCT LEGAL SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 125 ENTITY. IN ENGLISH JURISPRUDENCE A FIRM IS ONLY A C OMPENDIOUS NAME FOR CERTAIN PERSONS WHO CARRY ON BUSINESS, OR HAVE AUTHORISED ONE OR MORE OF THEIR NUMBER TO CARRY IT ON, IN SUCH A WAY THAT THEY ARE JOINTLY ENTITLED TO THE PROFITS AND JOINTLY LIABLE FOR THE DEBTS AND LOSSES OF THE BUSINESS. FU RTHER, IT IS TRUE THAT PARTNERSHIP PROPERTY IS REGARDED AS BELON GING TO THE FIRM, BUT THAT IS ONLY FOR THE PURPOSE OF DISTINGUI SHING THE SAME FROM THE SEPARATE PROPERTY OF THE PARTNERS. BU T, IN LAW THE PARTNERSHIP PROPERTY IS JOINTLY OWNED BY ALL TH E PARTNERS COMPOSING THE FIRM. IN LINDLEY ON PARTNERSHIP, AT P AGE 359, THE FOLLOWING STATEMENT OF LAW OCCURS : ' THE EXPRESSIONS PARTNERSHIP PROPERTY, PARTNERSHIP STOCK, PARTNERSHIP ASSETS, JOINT STOCK, AND JOINT ESTATE, ARE USED INDISCRIMINATELY TO DENOTE EVERYTHING TO WHICH THE FIRM, OR IN OTHER WORDS ALL THE PARTNERS COMPOSING IT, CAN BE C ONSIDERED TO BE ENTITLED AS SUCH.' AGAIN AT PAGE 375, THE FOLLOWING STATEMENT OF LAW O CCURS : ' IN THE ABSENCE OF A SPECIAL AGREEMENT TO THAT EFF ECT, ALL THE MEMBERS OF AN ORDINARY PARTNERSHIP ARE INTERESTED I N THE WHOLE OF THE PARTNERSHIP PROPERTY, BUT IT IS NOT QU ITE CLEAR WHETHER THEY ARE INTERESTED THEREIN AS TENANTS IN C OMMON, OR AS JOINT TENANTS WITHOUT BENEFIT OF SURVIVORSHIP, I F INDEED THERE IS ANY DIFFERENCE BETWEEN THE TWO. IT FOLLOWS FROM THIS COMMUNITY OF INTEREST THAT NO PARTNER HAS A RIGHT T O TAKE ANY PORTION OF THE PARTNERSHIP PROPERTY AND TO SAY THAT IT IS HIS EXCLUSIVELY. NO PARTNER HAS ANY SUCH RIGHT, EITHER DURING THE EXISTENCE OF THE PARTNERSHIP OR AFTER IT HAS BEEN D ISSOLVED. ' AS REGARDS THE NATURE OF A SHARE OF A PARTNER IN A FIRM THE FOLLOWING PASSAGE IN LINDLEY ON PARTNERSHIP, AT PAG E 375, BRINGS OUT THE LEGAL POSITION VERY CLEARLY : ' WHAT IS MEANT BY THE SHARE OF A PARTNER IS HIS PR OPORTION OF THE PARTNERSHIP ASSETS AFTER THEY HAVE BEEN ALL REA LISED AND CONVERTED INTO MONEY,AND ALL THE PARTNERSHIP DEBTS AND LIABILITIES HAVE BEEN PAID AND DISCHARGED. THIS IT IS, AND THIS ONLY, WHICH ON THE DEATH OF A PARTNER PASSES TO HIS REPRESENTATIVES, OR TO A LEGATEE OF HIS SHARE; .... ........... AND WHICH ON HIS BANKRUPTCY PASSES TO HIS TRUSTEE. ' SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 126 THE POSITION AS REGARDS THE NATURE OF A FIRM AND IT S PROPERTY IN INDIAN LAW UNDER THE INDIAN PARTNERSHIP ACT, 1932, IS ALMOST THE SAME AS IN ENGLISH LAW. HERE ALSO A PARTNERSHIP FIRM IS NOT A DISTINCT LEGAL ENTITY AND THE PARTNERSHIP PROPERT Y IN LAW BELONGS TO ALL THE PARTNERS CONSTITUTING THE FIRM. IN BHAGWANJI MORARJI GOCULDAS V. ALEMBIC CHEMICAL WORKS CO. LTD. , AIR 1948 PC 100; 18 COMP CAS 205, THE PRIVY COUNCIL IN PARA. 10 OF THE JUDGMENT OBSERVED THUS (SEE ALSO [1948] 18 C OMP CAS 209) : ' BEFORE THE BOARD IT WAS ARGUED THAT UNDER THE IND IAN PARTNERSHIP ACT, 1932, A FIRM IS RECOGNISED AS AN E NTITY APART FROM THE PERSONS CONSTITUTING IT, AND THAT THE ENTI TY CONTINUES SO LONG AS THE FIRM EXISTS AND CONTINUES TO CARRY O N ITS BUSINESS. IT IS TRUE THAT THE INDIAN PARTNERSHIP AC T GOES FURTHER THAN THE ENGLISH PARTNERSHIP ACT, 1890, IN RECOGNIS ING THAT A FIRM MAY POSSESS A PERSONALITY DISTINCT FROM THE PE RSONS CONSTITUTING IT, THE LAW IN INDIA IN THAT RESPECT B EING MORE IN ACCORDANCE WITH THE LAW OF SCOTLAND, THAN WITH THAT OF ENGLAND. BUT THE FACT THAT A FIRM POSSESSES A DISTI NCT PERSONALITY DOES NOT INVOLVE THAT THE PERSONALITY C ONTINUES UNCHANGED SO LONG AS THE BUSINESS OF THE FIRM CONTI NUES. THE INDIAN ACT, LIKE THE ENGLISH ACT, AVOIDS MAKING A F IRM A CORPORATE BODY ENJOYING THE RIGHTS OF PERPETUAL SUC CESSIONS. ' (EMPHASIS* SUPPLIED) IT IS TRUE THAT UNDER THE CIVIL PROCEDURE CODE, O. XXX, AS UNDER THE ENGLISH RULES OF COURT, ACTIONS MAY BE BR OUGHT BY OR AGAINST PARTNERS IN THE NAME OF THE FIRM AND EVE N BETWEEN FIRMS AND THEIR MEMBERS BUT THAT IS ONLY A MATTER O F PROCEDURE. IT IS ALSO TRUE THAT THE FIRM'S PROPERTY IS RECOGNISED IN MORE THAN ONE WAY (SS. 14 AND 15 OF THE PARTNERS HIP ACT) BUT ONLY AS THAT WHICH IS ' JOINT ESTATE ' OF ALL T HE PARTNERS AS DISTINGUISHED FROM THE ' SEPARATE ESTATE ' OF ANY O F THEM, AND NOT AS BELONGING TO A BODY DISTINCT IN LAW FROM ITS MEMBERS. IN ADDANKI NARAYANAPPA V. BHASKARA KRISHNAPPA [1966] 3 SCR 400; AIR 1966 SC 1300, THIS COURT, AFTER QUOTING WI TH APPROVAL THE AFOREMENTIONED PASSAGES OCCURRING IN L INDLEY ON PARTNERSHIP, 12TH EDN., MADE THE FOLLOWING OBSERVAT IONS IN THE CONTEXT OF PARTNERS' RIGHTS DURING THE SUBSISTENCE AS WELL AS UPON THE DISSOLUTION OF A FIRM (P. 1303) : ' NO DOUBT SINCE A FIRM HAS NO LEGAL EXISTENCE, THE PARTNERSHIP PROPERTY WILL VEST IN ALL THE PARTNERS AND IN THAT SENSE EVERY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 127 PARTNER HAS AN INTEREST IN THE PROPERTY OF THE PART NERSHIP. DURING THE SUBSISTENCE OF THE PARTNERSHIP, HOWEVER, NO PARTNER CAN DEAL WITH ANY PORTION OF THE PROPERTY AS HIS OW N. NOR CAN HE ASSIGN HIS INTEREST IN A SPECIFIC ITEM OF THE PA RTNERSHIP PROPERTY TO ANY ONE. HIS RIGHT IS TO OBTAIN SUCH PR OFITS, IF ANY, AS FALL TO HIS SHARE FROM TIME TO TIME AND UPON THE DISSOLUTION OF THE FIRM TO A SHARE IN THE ASSETS OF THE FIRM WH ICH REMAIN AFTER SATISFYING THE LIABILITIES SET OUT IN CL. (A) AND SUB-CLS. (I), (II) AND (III) OF CL. (B) OF S. 48. ' HAVING REGARD TO THE ABOVE DISCUSSION, IT SEEMS TO US CLEAR THAT A PARTNERSHIP FIRM UNDER THE INDIAN PARTNERSHI P ACT, 1932, IS NOT A DISTINCT LEGAL ENTITY APART FROM THE PARTN ERS CONSTITUTING IT AND EQUALLY IN LAW THE FIRM AS SUCH HAS NO SEPARATE RIGHTS OF ITS OWN IN THE PARTNERSHIP ASSET S AND WHEN ONE TALKS OF THE FIRM'S PROPERTY OR FIRM'S ASSETS A LL THAT IS MEANT IS PROPERTY OR ASSETS IN WHICH ALL PARTNERS H AVE A JOINT OR COMMON INTEREST. IF THAT BE THE POSITION, IT IS DIFFICULT TO ACCEPT THE CONTENTION THAT UPON DISSOLUTION THE FIR M'S RIGHTS IN THE PARTNERSHIP ASSETS ARE EXTINGUISHED. THE FIRM A S SUCH HAS NO SEPARATE RIGHTS OF ITS OWN IN THE PARTNERSHIP AS SETS BUT IT IS THE PARTNERS WHO OWN JOINTLY OR IN COMMON THE ASSET S OF THE PARTNERSHIP AND, THEREFORE, THE CONSEQUENCE OF THE DISTRIBUTION, DIVISION OR ALLOTMENT OF ASSETS TO TH E PARTNERS WHICH FLOWS UPON DISSOLUTION AFTER DISCHARGE OF LIA BILITIES IS NOTHING BUT A MUTUAL ADJUSTMENT OF RIGHTS BETWEEN T HE PARTNERS AND THERE IS NO QUESTION OF ANY EXTINGUISH MENT OF THE FIRM'S RIGHTS IN THE PARTNERSHIP ASSETS AMOUNTING T O A TRANSFER OF ASSETS WITHIN THE MEANING OF S. 2(47) OF THE ACT . IN OUR VIEW, THEREFORE, THERE IS NO TRANSFER OF ASSETS INV OLVED EVEN IN THE SENSE OF ANY EXTINGUISHMENT OF THE FIRM'S RIGHT S IN THE PARTNERSHIP ASSETS WHEN DISTRIBUTION TAKES PLACE UP ON DISSOLUTION. COUNSEL FOR THE REVENUE REFERRED US TO A DECISION O F THE KARNATAKA HIGH COURT IN ADDL. CIT V. M. A. J. VASAN AIK [1979] 116 ITR 110 (KAR), WHERE THAT COURT HAS TAKEN THE VIEW THAT WHEN INDIVIDUAL ASSETS ARE BROUGHT INTO A PARTNERSH IP FIRM SO AS TO CONSTITUTE THE PARTNERSHIP PROPERTY, THERE IS A TRANSFER OF INTEREST OF THE INDIVIDUAL TO THE PARTNERSHIP AND S S. 34(3)(B) AND 155(5) OF 1961 ACT ARE ATTRACTED. IN THE FIRST INSTANCE, THAT DECISION DEALT WITH THE CONVERSE CASE AND IT D OES NOT NECESSARILY FOLLOW ON A PARITY OF REASONING THAT TH E DISTRIBUTION, DIVISION OR ALLOTMENT OF PARTNERSHIP ASSETS TO THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 128 PARTNERS OF A FIRM UPON ITS DISSOLUTION WOULD AMOUN T TO A TRANSFER OF ASSETS AS WAS SOUGHT TO BE CONTENDED BY THE COUNSEL FOR THE REVENUE. SECONDLY, IT IS UNNECESSAR Y FOR US TO EXPRESS ANY OPINION ON THE CORRECTNESS OR OTHERWISE OF THE VIEW TAKEN BY THE KARNATAKA HIGH COURT IN THAT CASE . THERE IS YET ANOTHER REASON FOR REJECTING THE CONTE NTION OF THE COUNSEL FOR THE REVENUE AND THAT IS THAT THE SECOND CONDITION REQUIRED TO BE SATISFIED FOR ATTRACTING S. 34(3)(B) CANNOT BE SAID TO HAVE BEEN SATISFIED IN THE CASE. IT IS NECE SSARY THAT THE SALE OR TRANSFER OF ASSETS MUST BE BY THE ASSESSEE TO A PERSON. NOW EVERY DISSOLUTION MUST IN POINT OF TIME BE ANTE RIOR TO THE ACTUAL DISTRIBUTION, DIVISION OR ALLOTMENT OF THE A SSETS THAT TAKES PLACE AFTER MAKING UP ACCOUNTS AND DISCHARGIN G THE DEBTS AND LIABILITIES DUE BY THE FIRM. UPON DISSOLU TION THE FIRM CEASES TO EXIST, THEN FOLLOWS THE MAKING UP OF ACCO UNTS, THEN THE DISCHARGE OF DEBTS AND LIABILITIES AND THEREUPO N DISTRIBUTION, DIVISION OR ALLOTMENT OF ASSETS TAKES PLACE INTER SE BETWEEN THE ERSTWHILE PARTNERS BY WAY OF MUTUAL ADJ USTMENT OF RIGHTS BETWEEN THEM. THE DISTRIBUTION, DIVISION OR ALLOTMENT OF ASSETS TO THE ERSTWHILE PARTNERS, IS NOT DONE BY THE DISSOLVED FIRM. IN THIS SENSE THERE IS NO TRANSFER OF ASSETS BY THE ASSESSEE (DISSOLVED FIRM) TO ANY PERSON. IT IS NOT POSSIBLE TO ACCEPT THE VIEW OF THE HIGH COURT THAT THE DISTR IBUTION OF ASSETS EFFECTED BY A DEED TAKES PLACE EO INSTANTI W ITH THE DISSOLUTION OR THAT IT IS EFFECTED BY THE DISSOLVED FIRM. IN THE RESULT, WE ARE CLEARLY OF THE VIEW THAT S. 3 4(3)(B) OF THE ACT WAS NOT APPLICABLE TO THE CASE AND WE UPHOLD TH E VIEW OF THE TRIBUNAL. THE APPEALS ARE, THEREFORE, ALLOWED A ND THE REVENUE WILL PAY THE COSTS OF THE APPEALS TO THE AP PELLANT. 5.3. SIMILAR VIEWS WERE EXPRESSED BY HON'BLE APEX COURT IN CIT VS GEORGE HENDERSON & COMPANY LTD. (1967) 67 ITR 622 AND CIT VS GILLANDERS ARBUTHNOT & COMPANY (1973 ) 87 ITR 407. THE RELEVANT PORTION FROM THE ABOVE (87 IT R 407) IS REPRODUCED HEREUNDER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 129 THESE ARE CROSS-APPEALS BY CERTIFICATE. THEY ARISE FROM THE DECISION OF THE CALCUTTA HIGH COURT IN A REFERENCE UNDER SECTION 66(1) OF THE INDIAN INCOME-TAX ACT, 1922 (TO BE HER EINAFTER REFERRED TO AS ' THE ACT '). AT THE INSTANCE OF THE ASSESSEE AS WELL AS THE COMMISSIONER, THE INCOME-TAX TRIBUNAL, ' B ' BENCH, CALCUTTA, STATED A CASE AND SUBMITTED AS MANY AS FI VE QUESTIONS TO THE HIGH COURT FOR OBTAINING ITS OPINION. SOME OF T HE QUESTIONS REFERRED TO THE HIGH COURT HAVE NOT BEEN PRESSED BE FORE THIS COURT. THEREFORE, WE SHALL NOT REFER TO THEM. THE QUESTION S THAT WERE PRESSED BEFORE US ARE : ' (1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PROCEEDI NGS UNDER SECTION 34(1)(A) HAVE BEEN VALIDLY INITIATED ? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ANY CAPITAL GAINS WITHIN THE MEANING OF SECTION 12B COULD BE SAID TO ARISE BY THE TRANSACTION INVOLVING TRANSFER OF T HE INVESTMENTS HELD BY THE ASSESSEE TO THE COMPANY, ADMISSION OF T HE COMPANY AS A PARTNER IN THE ASSESSEE-FIRM AND ISSUE OF SHARES OF THE COMPANY TO THE PUBLIC ? AND (3) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN COMPUTING THE CAPI TAL GAINS AT RS. 46,76,784 ? ' THE HIGH COURT ANSWERED THE FIRST QUESTION IN THE A FFIRMATIVE AND IN FAVOUR OF THE REVENUE. SO FAR AS THE SECOND QUES TION IS CONCERNED, IT SPLIT THE SAME INTO TWO QUESTIONS, VI Z., WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ANY CAPITAL GAINS WITHIN THE MEANING OF SECTION 12B COULD BE SAID TO ARISE BY THE TRANSACTION INVOLVING TRANSFER OF INVESTMENTS HELD BY THE ASSESSEE TO THE COMPANY AND WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ANY CAPITAL GAINS WITHIN THE MEANING O F SECTION 12B COULD BE SAID TO ARISE BY THE ADMISSION OF THE COMP ANY AS A PARTNER IN THE ASSESSEE-FIRM AND ISSUE OF SHARES OF THE COMPANY TO THE PUBLIC ? IT ANSWERED THE FIRST PART OF THE QUES TION IN THE AFFIRMATIVE AND IN FAVOUR OF THE REVENUE AND THE SE COND PART IN THE NEGATIVE AND AGAINST THE REVENUE. AS REGARDS THE TH IRD QUESTION, THE HIGH COURT OPINED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CAPITAL GAINS SHOULD HAVE BEEN COMPUT ED AT RS. 27,04,772. AGGRIEVED BY THIS DECISION THE COMMISSIO NER OF THE INCOME-TAX HAS BROUGHT CIVIL APPEAL NO. 1452 OF 196 9 AND THE ASSESSEE HAS BROUGHT CIVIL APPEAL NO. 1502 OF 1969. THE ONLY CONTENTIONS URGED IN THE ASSESSEE'S APPEAL WERE THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, PRO CEEDINGS UNDER SECTION 34(1)(A) HAVE NOT BEEN VALIDLY INITIATED AN D TO THE FACTS OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 130 THIS CASE SECTION 12B IS NOT ATTRACTED. IN THE APPE AL BY THE COMMISSIONER, THE QUESTION FOR DECISION IS WHAT IS THE CORRECT AMOUNT THAT HAS TO BE BROUGHT TO TAX UNDER SECTION 12B AS CAPITAL GAINS. THE COUNSEL FOR THE REVENUE DID NOT CONTEST THE CONCLUSION OF THE HIGH COURT THAT, ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE, NO CAPITAL GAINS WITHIN THE MEANING OF SECTIO N 12B COULD BE SAID TO HAVE ARISEN BY THE ADMISSION OF THE COMPANY AS A PARTNER OF THE ASSESSEE-COMPANY AND ISSUE OF SHARES OF THE COMPANY TO THE PUBLIC. HENCE, ALL THAT WE HAVE TO DECIDE IN TH ESE CASES IS : (1) WHETHER THE PROCEEDINGS INITIATED UNDER SECTION 34( 1)(A) ARE VALID, (2) WHETHER SECTION 12B IS ATTRACTED TO THE FACTS O F THE CASE, AND (3) IF SECTION 12B IS ATTRACTED, WHAT IS THE AMOUNT OF THE CAPITAL GAINS MADE ? FOR PRONOUNCING ON THE QUESTIONS ABOVE FORMULATED, IT IS NECESSARY TO SET OUT THE MATERIAL FACTS. THE ASSESSEE IS A RE GISTERED FIRM WHICH WAS CARRYING ON BUSINESS MOSTLY AS MANAGING A GENTS OF A NUMBER OF COMPANIES. TILL THE END OF FEBRUARY, 1947 , THE FIRM CONSISTED OF FOUR PARTNERS, NAMELY, (1) A. C. GLADS TONE ; (2) S. D. GLADSTONE ; (3) T. S. GLADSTONE AND (4) GLENDYE LIM ITED, EACH OF THEM HAVING 30%, 39%, 30% AND 1% SHARES RESPECTIVEL Y IN THE PROFITS OF THE FIRM. WE ARE CONCERNED WITH THE ASSE SSMENT OF THE ASSESSEE FIRM FOR THE ASSESSMENT YEAR 1947-48 FOR W HICH THE PREVIOUS YEAR WAS THE FINANCIAL YEAR ENDED ON MARCH 31, 1947. ON FEBRUARY 28, 1947, THE ASSESSEE-FIRM, THROUGH IT S PARTNERS, ENTERED INTO AN ' AGREEMENT FOR SALE ' OF SOME OF T HE SHARES AND SECURITIES HELD BY IT IN FAVOUR OF GILLANDERS ARBUT HNOT & CO. (TO BE HEREINAFTER REFERRED TO AS ' THE COMPANY ') FOR A S UM OF RS. 75 LAKHS. THE SHARES AND SECURITIES SOLD UNDER THE DOC UMENT ARE ENUMERATED AT THE FOOT OF THE DOCUMENT. CLAUSE (2) OF THAT AGREEMENT PROVIDES : ' IN CONSIDERATION OF THE SUM OF RUPEES FOURTEEN LA KHS AND NINETY THOUSAND THE EXISTING PARTNERS SHALL ADMIT THE COMP ANY AS A PARTNER IN THE FIRM UPON AND SUBJECT TO THE PARTNER SHIP DEED (A DRAFT WHEREOF HAS BEEN ALREADY APPROVED BY THE EXIS TING PARTNERS AND THE COMPANY), THE SHARE OF THE COMPANY IN THE G OODWILL AND IN THE PROFITS OF THE FIRM BEING NINETY-NINE PER CENT. THEREOF. THE ONLY OTHER CLAUSE WHICH IS RELEVANT FOR OUR PRE SENT PURPOSE IS CLAUSE (3), WHICH READS : ' THE SAID TWO SUMS OF RUPEES SEVENTY-FIVE LAKHS AN D RUPEES FOURTEEN LAKHS AND NINETY THOUSAND PAYABLE IN ACCOR DANCE WITH CLAUSES 1 AND 2 HEREOF SHALL BE PAID AND SATISFIED AS FOLLOWS : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 131 (A) AS TO THE SUM OF RUPEES SIXTY-FOUR LAKHS AND NI NETY THOUSAND BY AN ALLOTMENT TO THE EXISTING PARTNERS OR THEIR N OMINEES OF SIXTY- FOUR THOUSAND AND NINE HUNDRED ORDINARY SHARES OF R UPEES ONE HUNDRED EACH CREDITED FOR ALL PURPOSES AS FULLY PAI D UP. (B) AS TO THE SUM OF RUPEES TWENTY-FIVE LAKHS BY AN ALLOTMENT TO THE EXISTING PARTNERS OR THEIR NOMINEES OF TWENTY-F IVE THOUSAND REDEEMABLE CUMULATIVE PREFERENCE SHARES OF RUPEES O NE HUNDRED EACH CREDITED FOR ALL PURPOSES AS FULLY PAID UP. ' ONE OTHER DOCUMENT THAT CAME INTO EXISTENCE ON THE SAME DAY, VIZ., FEBRUARY 28, 1947, IS THE DEED OF PARTNERSHIP . THAT DAY THE ASSESSEE-FIRM WAS RECONSTITUTED AND A NEW PARTNERSH IP CAME INTO EXISTENCE. THE NEW PARTNERSHIP CONSISTED OF FIVE PA RTNERS, VIZ., (1) THE ' COMPANY ' ; (2) A. C. GLADSTONE ; (3) S. D. G LADSTONE ; (4) T. S. GLADSTONE AND (5) GLENDYE LIMITED. IN THIS NE W PARTNERSHIP THE ' COMPANY ' HAD 99 PER CENT. SHARE IN ITS PROFI TS. THE REMAINING FOUR PARTNERS HAD ONLY 1/4TH PER CENT. SH ARE EACH IN THE PROFITS OF THE NEW PARTNERSHIP. BEFORE PROCEEDING FURTHER, IT IS NECESSARY TO MENTI ON THAT THE COMPANY ' WAS PREVIOUSLY A PRIVATE LIMITED COMPANY. IN 1946, THE ' COMPANY ' APPLIED TO THE EXAMINER OF CAPITAL ISSU ES FOR PERMISSION TO CONVERT ITSELF INTO A PUBLIC LIMITED COMPANY AND SELL ITS SHARES AT A PREMIUM. ORIGINALLY, THE PROPOSAL O F THE ' COMPANY ' WAS TO SELL ITS SHARES OF THE FACE VALUE OF RS. 1 00 TO THE PUBLIC AT A PREMIUM OF RS. 145 TO RS. 175 AND ITS PREFERENTIA L SHARES OF THE FACE VALUE OF RS. 100 AT A PREMIUM OF RS. 1 TO 5. T HE EXAMINER OF CAPITAL ISSUES DID NOT AGREE TO THAT PROPOSAL. LATE R ON, AFTER FURTHER CORRESPONDENCE, THE EXAMINER OF CAPITAL ISS UES PERMITTED THE ' COMPANY ' TO CONVERT ITSELF INTO A PUBLIC COM PANY AND OFFER ITS ORDINARY SHARES OF THE FACE VALUE OF RS. 100 TO THE PUBLIC AT A PREMIUM NOT EXCEEDING RS. 125 PER SHARE AND 25,000 REDEEMABLE CUMULATIVE PREFERENCE SHARES OF THE FACE VALUE OF R S. 100 EACH AT A PREMIUM NOT EXCEEDING RS. 5 PER SHARE. WE HAVE EARLIER NOTICED THAT A SUBSTANTIAL NUMBER O F ORDINARY AS WELL AS THE PREFERENCE SHARES WERE TRANSFERRED TO T HE ASSESSEE-FIRM AT ITS FACE VALUE. THE ORIGINAL ASSESSMENT OF THE ASSESSEE-FIRM FOR TH E ASSESSMENT YEAR 1947-48 WAS MADE ON AUGUST 28, 1948, ON A TOTA L INCOME OF RS. 12,90,829. THEREAFTER, THE INCOME-TAX OFFICER I NITIATED PROCEEDINGS UNDER SECTION 34(1)(A) ON MAY 2, 1949, AND COMPLETED THE FRESH ASSESSMENT ON JANUARY 16, 1956, BRINGING TO CHARGE CAPITAL GAINS DETERMINED AT RS. 1,03,16,786. THE ASSESSEE APPEALED TO THE APPELLATE ASSISTANT COMMISSIONER. I T RAISED VARIOUS CONTENTIONS BEFORE THE APPELLATE ASSISTANT COMMISSIONER. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 132 IT IS NOT NECESSARY TO REFER TO THOSE CONTENTIONS. SUFFICE IT TO SAY FOR OUR PRESENT PURPOSE THAT IT CHALLENGED THE VALI DITY OF THE INITIATION OF THE PROCEEDINGS UNDER SECTION 34(1)(A ) AND FURTHER IT CONTENDED THAT THERE WAS NO CAPITAL GAIN AT ALL. ON THE OTHER HAND, IT CLAIMED THAT IT INCURRED CERTAIN CAPITAL LOSS. T HE APPELLATE ASSISTANT COMMISSIONER REJECTED THE CONTENTION OF T HE ASSESSEE THAT THE PROCEEDINGS UNDER SECTION 34(1)(A) WERE NO T VALIDLY INITIATED. HE CAME TO THE CONCLUSION THAT THERE WER E CAPITAL GAINS BUT HE COMPUTED THE SAME AT RS. 70,09,124. ON FURTH ER APPEAL BY THE ASSESSEE THE TRIBUNAL CAME TO THE CONCLUSION TH AT THE CAPITAL GAINS MADE BY THE ASSESSEE WERE ONLY RS. 46,76,784. IN THE REFERENCE, AS MENTIONED EARLIER, THE HIGH COURT CAM E TO THE CONCLUSION THAT THE CAPITAL GAINS MADE BY THE ASSES SEE WERE RS. 27,04,772. THE FIRST QUESTION THAT ARISES FOR DECISION IS WHET HER SECTION 34(1)(A) PROCEEDINGS WERE VALIDLY INITIATED BY THE INCOME-TAX OFFICER. THAT PROVISION SAYS : ' IF THE INCOME-TAX OFFICER HAS REASON TO BELIEVE T HAT BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN OF HIS INCOME UNDER SECTION 22 FOR ANY YEAR OR TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT YEAR, INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX H AVE ESCAPED ASSESSMENT FOR THAT YEAR, OR HAVE BEEN UNDER-ASSESS ED, OR ASSESSED AT TOO LOW A RATE, OR HAVE BEEN MADE THE S UBJECT OF EXCESSIVE RELIEF UNDER THE ACT, OR EXCESSIVE LOSS O R DEPRECIATION ALLOWANCE HAS BEEN COMPUTED . . . . . . ' IN THE PRESENT CASE ALL THAT WE HAVE TO SEE IS WHET HER THE INCOME- TAX OFFICER HAD REASON TO BELIEVE THAT THE ASSESSEE HAD NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NE CESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR IN QUESTION. THE SCOPE OF THE EXPRESSION ' FAILURE ON THE PART OF THE ASSESSEE . . . . . . TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT . . . . . . ' HAS BEEN EXAMINED BY THIS COURT IN SEVERAL DE CISIONS. THE LEADING CASE ON THE SUBJECT IS CALCUTTA DISCOUN T CO. LTD. V. INCOME- TAX OFFICER, COMPANIES DISTRICT-I, CALCUTTA *. THEREIN THIS COURT BY MAJORITY HELD THAT TO CONFER JURISDICTION UNDER SECTION 34 TO ISSUE NOTICE IN RESPECT OF AN ASSESSMENT BEYOND A PERIOD OF FOUR YEARS, BUT WITHIN A PERIOD OF EIGHT YEARS, FROM THE END OF THE RELEVANT YEAR, TWO CONDITIONS HAVE TO BE SATISFIED. THE FIRST IS THAT THE INCOME-TAX OFFICER MUST HAVE REASON TO BELIEVE THAT THE INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX H AD BEEN UNDER- ASSESSED ; THE SECOND IS THAT HE MUST HAVE REASON T O BELIEVE THAT SUCH ' UNDER-ASSESSMENT ' HAD OCCURRED BY REASON OF EITHER (1) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 133 HIS INCOME UNDER SECTION 22 OR (2) OMISSION OR FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. BOTH TH ESE CONDITIONS ARE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE INCOME-TAX OFFICER GETS JURISDICTION TO ISSUE A NOTICE FOR THE ASSESSMENT OR REASSESSMENT BEYOND A PERIOD OF FOUR YEARS BUT WITH IN A PERIOD OF EIGHT YEARS FROM THE END OF THE YEAR IN QUESTION. T HIS COURT FURTHER RULED THEREIN THAT THE WORDS ' OMISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT YEAR ' USED IN SECTION 34 POSTULATE A DUTY ON EVERY ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSARY F OR ASSESSMENT DIFFER FROM CASE TO CASE. IN EVERY ASSESSMENT PROCE EDING, THE ASSESSING AUTHORITY WOULD FOR THE PURPOSE OF COMPUT ING AND DETERMINING PROPER TAX DUE FROM AN ASSESSEE, REQUIR E TO KNOW ALL THE FACTS WHICH HELP HIM IN COMING TO THE CORRECT C ONCLUSION. FROM THE PRIMARY FACTS IN HIS POSSESSION, WHETHER ON DIS CLOSURE BY THE ASSESSEE OR DISCOVERED BY HIM ON THE BASIS OF THE F ACTS DISCLOSED OR OTHERWISE, THE ASSESSING AUTHORITY HAS TO DRAW I NFERENCES AS REGARDS CERTAIN OTHER FACTS ; AND ULTIMATELY FROM T HE PRIMARY FACTS AND FURTHER FACTS INFERRED FROM THEM, THE AUTHORITY HAS TO DRAW THE PROPER LEGAL INFERENCES AND ASCERTAIN, ON A CORRECT INTERPRETATION OF THE TAXING ENACTMENT, THE PROPER TAX LEVIABLE. SO F AR AS THE PRIMARY FACTS ARE CONCERNED, IT IS THE ASSESSEE'S D UTY TO DISCLOSE ALL OF THEM INCLUDING PARTICULAR ENTRIES IN THE ACCOUNT -BOOKS, PARTICULAR PORTIONS OF DOCUMENTS AND DOCUMENTS AND OTHER EVIDE NCE WHICH COULD HAVE BEEN DISCOVERED BY THE ASSESSING AUTHORI TY FROM THE DOCUMENTS AND OTHER EVIDENCE DISCLOSED. THE DUTY, H OWEVER, DOES NOT EXTEND BEYOND THE FULL AND TRUTHFUL DISCLOSURE OF ALL PRIMARY FACTS. ONCE ALL THE PRIMARY FACTS ARE BEFORE THE AS SESSING AUTHORITY, IT IS FOR HIM TO DECIDE WHAT INFERENCES OF FACTS CO ULD BE REASONABLY DRAWN AND WHAT LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN. IT WAS NOT FOR ANYBODY ELSE-FAR LESS THE ASSESSEE-TO T ELL THE ASSESSING AUTHORITY WHAT INFERENCES WHETHER OF FACTS OR OF LA W SHOULD BE DRAWN. IF THERE ARE IN FACT SOME REASONABLE GROUNDS FOR THE INCOME- TAX OFFICER TO BELIEVE THAT THERE HAD BEEN ANY NON- DISCLOSURE AS REGARDS THE PRIMARY FACTS WHICH COULD HAVE A MATERIAL BEARING ON THE QUESTION OF UNDER-ASSESSMENT, THAT W OULD BE SUFFICIENT TO GIVE JURISDICTION TO THE INCOME-TAX O FFICER TO ISSUE THE NOTICE UNDER SECTION 34. WHETHER THOSE GROUNDS WERE ADEQUATE OR NOT FOR ARRIVING AT THE CONCLUSION THAT THERE WAS A NON-DISCLOSURE OF MATERIAL FACTS IS NOT OPEN TO THE COURT'S INVESTIGA TION. IN OTHER WORDS, ALL THAT IS NECESSARY TO GIVE JURISDICTION I S THAT THE INCOME- TAX OFFICER HAD WHEN HE ASSUMED JURISDICTION SOME P RIMA FACIE GROUNDS FOR THINKING THAT THERE HAD BEEN SOME NON-D ISCLOSURE OF MATERIAL FACTS. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 134 THE RULE LAID DOWN IN CALCUTTA DISCOUNT CO.'S CASE * WAS REITERATED BY THIS COURT IN COMMISSIONER OF INCOME-TAX V. HEMC HAND KAR **. THE SAME VIEW WAS AGAIN EXPRESSED BY THIS COURT IN COMMISSIONER OF INCOME-TAX V. BHANJI LAVJI *** AS WELL AS IN COM MISSIONER OF INCOME-TAX V. BURLOP DEALERS LTD. # BEARING IN MIND THE RULE LAID DOWN IN THESE DECISIO NS, NOW LET US PROCEED TO EXAMINE THE FACTS OF THIS CASE TO FIND O UT WHETHER THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR HIS ASSESSMENT FOR THE ASSESSMENT YEAR IN QUESTION. IN THIS CASE WE ARE DEALING WITH CAPITAL GAINS. HENCE THE MATERI AL FACTS THAT HAD TO BE DISCLOSED WERE THOSE BEARING ON CAPITAL GAINS . THOUGH AT THE TIME OF THE ORIGINAL ASSESSMENT OF THE ASSESSEE, TH E PARTNERSHIP DEED ENTERED INTO BY THE FIVE PARTNERS WAS BEFORE T HE INCOME-TAX OFFICER, THE SALE DEED EXECUTED BY THE PARTNERS OF THE ASSESSEE- FIRM IN FAVOUR OF THE ' COMPANY ' ON FEBRUARY 28, 1 947, HAD NOT BEEN PLACED BEFORE HIM. THERE WAS NO MATERIAL BEFOR E THE INCOME- TAX OFFICER ON THE BASIS OF WHICH HE COULD HAVE CON CLUDED THAT THE ASSESSEE FIRM HAD SOLD ANY SHARES AND SECURITIES TO THE ' COMPANY ' ; NOR WAS THERE ANY MATERIAL BEFORE THE INCOME-TA X OFFICER AS TO THE VALUE OF THOSE SHARES AND SECURITIES ON JANUARY 1, 1939. FURTHER, NO MATERIAL WAS PLACED BEFORE HIM TO SHOW THAT THOSE SHARES AND SECURITIES HAD BEEN SOLD TO THE ' COMPAN Y ' FOR A SUM OF RUPEES 75 LAKHS. IN FACT THE ASSESSEE SUBMITTED ITS RETURN FOR THE ASSESSMENT YEAR IN QUESTION IN AN OLD FORM WHIC H DID NOT CONTAIN PART VII WHICH DEALT WITH PARTICULARS OF IN COME FROM CAPITAL GAINS. THE STATEMENT ENCLOSED ALSO DID NOT CONTAIN SPECIFIC PARTICULARS ABOUT CONSIDERATION FOR THE SALE OF GOO DWILL OR FOR THE SALE OF SHARES OF THE ' COMPANY '. IT IS NOT WITHOU T SIGNIFICANCE THAT THE ASSESSEE DID NOT CHALLENGE THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 34(1)(A) BEFORE THE INCOME-TAX OFFICE R. EVEN BEFORE THE APPELLATE ASSISTANT COMMISSIONER, THE ONLY POIN T THAT APPEARS TO HAVE BEEN URGED WAS THAT SINCE THE FIRM WAS RECO NSTITUTED AND THE RECONSTITUTED FIRM WAS GRANTED REGISTRATION UND ER SECTION 26A IN THE ASSESSMENT YEAR 1947-48, IT SHOULD BE PRESUM ED THAT THE INCOME-TAX OFFICER WHILE MAKING THE ORIGINAL ASSESS MENT WAS AWARE OF ALL THE MATERIAL FACTS. WE AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT THERE IS HARDLY ANY DOUBT THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS FOR THE PURPOSE OF ASCERTAINING WHETHER IT HAD MADE ANY CAPITAL GAINS OR NOT. THIS TAKES US TO THE QUESTION WHETHER THE ASSESSEE HAD MADE ANY CAPITAL GAINS IN THE RELEVANT ACCOUNTING YEAR, IF S O, WHAT IS THE EXTENT OF ITS CAPITAL GAINS. THE PROVISION RELATING TO CAPITAL GAINS IS FOUND IN SECTION 12B. WE SHALL NOW READ THE RELEVAN T PORTION OF THAT PROVISION : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 135 ' 12B. (1) THE TAX SHALL BE PAYABLE BY AN ASSESSEE UNDER THE HEAD ' CAPITAL GAINS ' IN RESPECT OF ANY PROFITS OR GAIN S ARISING FROM THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER OF A CAP ITAL ASSET EFFECTED AFTER THE 31ST DAY OF MARCH, 1956, AND SUC H PROFITS AND GAINS SHALL BE DEEMED TO BE INCOME OF THE PREVIOUS YEAR IN WHICH THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER TOOK PLACE. ' [THE PROVISOS TO SUB-SECTION (1) ARE NOT RELEVANT F OR OUR PRESENT PURPOSE]. SUB-SECTION (2) OF SECTION 12B SAYS : ' THE AMOUNT OF A CAPITAL GAINS SHALL BE COMPUTED A FTER MAKING THE FOLLOWING DEDUCTIONS FROM THE FULL VALUE OF THE CON SIDERATION FOR WHICH THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFE R OF THE CAPITAL ASSET IS MADE, NAMELY : (I) EXPENDITURE INCURRED SOLELY IN CONNECTION WITH SUCH SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER ; (II) THE ACTUAL COST TO THE ASSESSEE OF THE CAPITAL ASSET, INCLUDING ANY EXPENDITURE OF A CAPITAL NATURE INCURRED AND BO RNE BY HIM IN MAKING ANY ADDITION OR ALTERATIONS THERETO, BUT EXC LUDING ANY EXPENDITURE IN RESPECT OF WHICH ANY ALLOWANCE IS AD MISSIBLE UNDER ANY PROVISION OF SECTIONS 8, 9, 10 AND 12 : PROVIDED THAT WHERE A PERSON WHO ACQUIRES A CAPITAL ASSET FROM THE ASSESSEE, WHETHER BY SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER, IS A PERSON WITH WHOM THE ASSESSEE IS DIRECTLY OR INDI RECTLY CONNECTED, AND THE INCOME- TAX OFFICER HAS REASON T O BELIEVE THAT THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER WAS EFFECTED WITH THE OBJECT OF AVOIDANCE OR REDUCTION OF THE LIABILI TY OF THE ASSESSEE UNDER THIS SECTION, THE FULL VALUE OF THE CONSIDERA TION FOR WHICH THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER IS MADE SHALL, WITH THE PRIOR APPROVAL OF THE INSPECTING ASSISTANT COMMISSI ONER OF INCOME- TAX, BE TAKEN TO BE THE FAIR MARKET VALUE OF THE CA PITAL ASSET ON THE DATE ON WHICH THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER TOOK PLACE. ' [THE REMAINING PORTION OF SECTION 12B IS NOT RELEVA NT FOR OUR PRESENT PURPOSE]. THE INCOME-TAX OFFICER OPINED THAT THE MARKET VALUE OF THE SHARES AND SECURITIES SOLD WAS MUCH MORE THAN RS. 75 LAKHS . ADMITTEDLY, THEIR ORIGINAL COST ON JANUARY 1, 1939, WAS RS. 47, 95,728. HENCE, ACCORDING TO HIM, THE ' COMPANY ' SECURED THOSE SHA RES AND SECURITIES AT BELOW MARKET VALUE. THE INCOME-TAX OF FICER FURTHER OBSERVED THAT THE PARTNERS OF THE ASSESSEE- FIRM WE RE THE SOLE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 136 PARTNERS OF THE ' COMPANY ' AND FURTHER HELD THAT T HE SALE HAD BEEN EFFECTED AT A LOWER PRICE WITH THE OBJECT OF R EDUCING THE LIABILITY TO CAPITAL GAINS TAX. ON THE BASIS OF THE INCOME-TAX OFFICER'S COMPUTATION, THE CAPITAL GAINS ON THE SAL E OF THE INVESTMENTS WERE RS. 75,86,960. AS REGARDS THE GOOD WILL, THE INCOME-TAX OFFICER VALUED THE SAME AS ON JANUARY 1, 1939, AT RS. 87,56,200 AND 99 PER CENT. THEREOF WOULD WORK OUT T O BE RS. 86,67,648. THE ASSESSEE RECEIVED FOR GOODWILL THE S UM OF RS. 14,90,000. THE COMPANY TOOK OVER 99 PER CENT. OF TH E CAPITAL DEFICIENCY OF THE PARTNERS AMOUNTING TO RS. 19,98,8 49 AND 99 PER CENT. THEREOF CAME TO RS. 19,78,861. THE INCOME-TAX OFFICER ESTIMATED THE VALUE OF 99 PER CENT. OF THE GOODWILL AT RS. 1,13,97,474 INVOLVING CAPITAL GAIN OF RS. 27,29,826 . THUS, ACCORDING TO THE INCOME-TAX OFFICER, THE TOTAL CAPI TAL GAINS ON ACCOUNT OF TRANSFER OF SHARES AND SECURITIES AND GO ODWILL AMOUNTED TO RS. 13,16,786. AS SEEN EARLIER THIS AMOUNT WAS S UBSTANTIALLY REDUCED BY THE APPELLATE ASSISTANT COMMISSIONER AND AGAIN BY THE TRIBUNAL AS WELL AS BY THE HIGH COURT. THE FIRST QUESTION FOR DECISION IS WHETHER THE FIRS T PROVISO TO SECTION 12B IS ATTRACTED TO THE FACTS OF THE PRESENT CASE. THE SALE WITH WHICH WE ARE CONCERNED IN THIS CASE TOOK PLACE ON F EBRUARY 28, 1947. SECTION 12B WAS INCORPORATED INTO THE ACT WIT H EFFECT FROM APRIL 1, 1947. THAT BEING SO AT THE TIME THE SALE T RANSACTION TOOK PLACE SECTION 12B WAS NOT A PART OF THE ACT. HENCE, THERE IS NO BASIS FOR SAYING THAT THE ' TRANSFER WAS EFFECTED W ITH THE OBJECT OF AVOIDANCE OR REDUCTION OF THE LIABILITY OF THE ASSE SSEE ', SEE COMMISSIONER OF INCOME-TAX V. GEORGE HENDERSON AND CO. LTD. * HENCE, THE QUESTION FOR DECISION IS WHETHER THE FAC TS OF THIS CASE FALL WITHIN THE SCOPE OF SECTION 12B(1) READ WITH S UB-SECTION (2) OF THAT SECTION. WE HAVE EARLIER SEEN THAT THE INCOME-TAX OFFICER IN COMPUTING THE TOTAL CAPITAL GAINS HAD TAKEN INTO CONSIDERATION TH E CAPITAL GAINS SAID TO HAVE BEEN EARNED AS A RESULT OF THE SALE OF THE SHARES AND SECURITIES AS WELL AS THE GOODWILL. THE APPELLATE A SSISTANT COMMISSIONER IN HIS ORDER DID NOT SAY ANYTHING SPEC IFIC ABOUT ANY CAPITAL GAINS EARNED AS A RESULT OF THE SALE OF THE GOODWILL. THE TRIBUNAL REJECTED THE CASE OF THE DEPARTMENT THAT T HERE WERE ANY CAPITAL GAINS MADE AS A RESULT OF THE SALE OF GOODW ILL. IT ALSO REJECTED THE CLAIM OF THE ASSESSEE THAT THERE WAS S OME CAPITAL LOSS AS A RESULT OF THE SALE OF GOODWILL. ON THIS POINT THE HIGH COURT AGREED WITH THE CONCLUSIONS REACHED BY THE TRIBUNAL . THE CONCLUSION OF THE HIGH COURT ON THIS POINT WAS NOT CHALLENGED BEFORE US EITHER BY THE REVENUE OR BY THE ASSESSEE. THEREFORE, THERE IS NO NEED TO GO INTO THE SAME. HENCE, THE ON LY QUESTION REMAINING TO BE CONSIDERED IS WHETHER THERE WERE AN Y CAPITAL GAINS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 137 MADE AS A RESULT OF THE TRANSFER OF THE SHARES AND SECURITIES BY THE ASSESSEE TO THE COMPANY. IF SO WHAT IS THAT AMOUNT ? THE FIRST QUESTION THAT WE HAVE TO DECIDE IN THIS C ONNECTION IS WHETHER THE TRANSACTION ENTERED INTO UNDER THE AGRE EMENT FOR SALE DATED FEBRUARY 28, 1947, IS A SALE OR EXCHANGE OR M ERELY A READJUSTMENT. IT WAS CONTENDED ON BEHALF OF THE REV ENUE THAT IT WAS IN EFFECT AN EXCHANGE THOUGH IN FORM IT WAS A S ALE. ACCORDING TO THE ASSESSEE, IT WAS A MERE READJUSTMENT. THE RE VENUE DID NOT CONTEND BEFORE THE APPELLATE ASSISTANT COMMISSIONER OR THE TRIBUNAL OR EVEN THE HIGH COURT THAT THE SAID TRANS ACTION WAS NOT A SALE. IT WAS FOR THE FIRST TIME BEFORE THIS COURT T HE CONTENTION WAS TAKEN THAT IT WAS NOT A SALE. THE CONTENTION OF THE ASSESSEE THAT IT WAS MERELY A READJUSTMENT HAD BEEN REJECTED BY THE AUTHORITIES UNDER THE ACT AS WELL AS BY THE HIGH COURT. PROPERLY UNDERSTOOD, THE EFFECT OF THE CONTENTION O F THE REVENUE AS WELL AS OF THE ASSESSEE IS THAT IN FINDING OUT THE TRUE NATURE OF A TRANSACTION, THE COURT MUST TAKE INTO CONSIDERATION THE SUBSTANCE OF THE TRANSACTION AND NOT THE LEGAL EFFECT OF THE AGREEMENT ENTERED INTO-A PROPOSITION WHICH RECEIVES SOME SUPP ORT FROM SOME OF THE DECIDED CASES. IN SIR KIKABHAI PREMCHAND V. COMMISSIONER OF INCOME-TAX ** THIS COURT OBSERVED THAT ' IT IS W ELL RECOGNISED THAT IN REVENUE CASES REGARD MUST BE HAD TO THE SUB STANCE OF THE TRANSACTION RATHER THAN TO ITS MERE FORM. ' THE OBSERVATIONS OF THIS COURT IN SIR KIKABHAI PREM CHAND'S CASE ** WERE MADE THE BASIS OF THE DECISION OF THE BOMBAY H IGH COURT IN COMMISSIONER OF INCOME-TAX V. SIR HOMI MEHTA'S EXEC UTORS ***. IN ROGERS & CO. V. COMMISSIONER OF INCOME-TAX * THE HIGH COURT OF BOMBAY RULED THAT THE TRANSFER OF THE ASSETS OF THE FIRM TO THE COMPANY WAS SUBSTANTIALLY AND REALLY MERELY A READJ USTMENT MADE BY THE MEMBERS TO ENABLE THEM TO CARRY ON THEIR BUS INESS AS A COMPANY RATHER THAN AS A FIRM AND NO PROFITS IN THE COMMERCIAL SENSE WERE MADE THEREBY ; THE TRANSFER OF THE ASSET S OF THE FIRM TO THE COMPANY WAS, THEREFORE, NOT A SALE. THE SAME VIEW WAS TAKEN BY THE CALCUTTA HIGH COURT IN COMMISSIONER OF INCOME-TAX V. MUGNEERAM BANGUR AND CO. ** THIS COURT IN COMMISSIONER OF INCOME-TAX V. B. M. K HARWAR *** HELD THAT THE OBSERVATIONS IN SIR KIKABHAI PREMCHAN D'S CASE # TO THE EFFECT THAT IN REVENUE CASES REGARD MUST BE HAD TO THE SUBSTANCE OF THE TRANSACTION RATHER THAN ITS MERE F ORM CANNOT BE READ AS THROWING ANY DOUBT ON THE PRINCIPLE THAT TH E TRUE LEGAL RELATION ARISING FROM A TRANSACTION ALONE DETERMINE S THE TAXABILITY OF A RECEIPT ARISING FROM THE TRANSACTION. THE OBSE RVATION IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 138 QUESTION WAS CONSIDERED AS CASUAL AND THAT THE SAME WAS NOT NECESSARY FOR THE PURPOSE OF THE CASE. IN KHARWAR'S CASE ***, THIS COURT ALSO DISAPPROVED THE DECISIONS IN SIR HOMI ME HTA'S EXECUTORS' CASE ##, ROGERS & CO'S CASE * AND MUGNEERAM BANGUR & CO'S CASE **. THEREIN, THIS COURT RULED THAT IT IS NOW WELL S ETTLED THAT THE TAXING AUTHORITIES ARE NOT ENTITLED, IN DETERMINING WHETHER A RECEIPT IS LIABLE TO BE TAXED, TO IGNORE THE LEGAL CHARACTE R OF THE TRANSACTION WHICH IS THE SOURCE OF THE RECEIPT AND TO PROCEED O N WHAT THEY REGARD AS ' THE SUBSTANCE OF THE MATTER '. THE TAXI NG AUTHORITY IS ENTITLED AND IS INDEED BOUND TO DETERMINE THE TRUE LEGAL RELATION RESULTING FROM A TRANSACTION. IF THE PARTIES HAVE C HOSEN TO CONCEAL BY A DEVICE THE LEGAL RELATION, IT IS OPEN TO THE T AXING AUTHORITY TO UNRAVEL THE DEVICE AND TO DETERMINE THE TRUE CHARAC TER OF THE RELATIONSHIP. BUT, THE LEGAL EFFECT OF A TRANSACTIO N CANNOT BE DISPLACED BY PROBING INTO THE ' SUBSTANCE OF THE TR ANSACTION '. THIS PRINCIPLE APPLIES ALIKE TO CASES IN WHICH THE LEGAL RELATION IS RECORDED IN A FORMAL DOCUMENT AND TO CASES WHERE IT HAS TO BE GATHERED FROM EVIDENCE-ORAL AND DOCUMENTARY-AND CON DUCT OF THE PARTIES TO THE TRANSACTION. IN THE INSTANT CASE, THE TRIBUNAL HAS HELD THAT THE ' AGREEMENT FOR SALE ' ENTERED INTO BETWEEN THE ASSESSEE-FIRM AND T HE ' COMPANY ' IS A GENUINE TRANSACTION AND THE SAME EVIDENCES A S ALE. THIS IS ESSENTIALLY A FINDING OF FACT. THE HIGH COURT HAS A FFIRMED THAT FINDING. IN THAT VIEW, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE TRANSACTION IN QUESTION WAS AN EXC HANGE AND NOT A SALE. WE ARE EQUALLY UNABLE TO ACCEPT THE CONTENT ION OF THE ASSESSEE THAT IT WAS MERELY A READJUSTMENT. CLAUSE (1) OF THE AGREEMENT IN SPECIFIC TERMS SAYS THAT ' THE EXISTING PARTNER SHALL SELL AND THE COMPANY SHALL P URCHASE THE SHARES AND SECURITIES FOR A SUM OF RUPEES SEVENTY-F IVE LAKHS '. CLAUSE (3) OF THAT AGREEMENT MERELY PROVIDES A MODE OF SATISFACTION OF THE SALE PRICE. THE SALE PRICE FIXE D BY THE PARTIES FOR THE SHARES AND THE SECURITIES SOLD IS RS. 75 LAKHS AND NOTHING MORE. IT MAY BE THAT BECAUSE OF THE ALLOTMENT OF TH E SHARES OF THE COMPANY IN SATISFACTION OF THE SALE PRICE, THE ASSE SSEE-FIRM GOT CERTAIN BENEFITS BUT THAT DOES NOT CONVERT THE SALE INTO AN EXCHANGE. IN COMMISSIONER OF INCOME-TAX V. R. R. RAMAKRISHNA PILLAI * THIS COURT, DISTINGUISHING AN EXCHANGE FROM A SALE OBSER VED THAT WHERE THE PERSON CARRYING ON THE BUSINESS TRANSFERS THE A SSETS TO A COMPANY IN CONSIDERATION OF ALLOTMENT OF SHARES, IT WOULD BE A CASE OF EXCHANGE AND NOT OF SALE AND THE TRUE NATURE OF THE TRANSACTION WILL NOT BE ALTERED BECAUSE FOR THE PURPOSE OF STAM P DUTY OR OTHER REASONS THE VALUE OF THE ASSETS TRANSFERRED IS SHOW N AS EQUIVALENT TO THE FACE VALUE OF THE SHARES ALLOTTED. ON THE OT HER HAND, A SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 139 PERSON CARRYING ON BUSINESS MAY AGREE WITH A COMPAN Y FLOATED BY HIM THAT THE ASSETS BELONGING TO HIM SHALL BE TRANS FERRED TO THE COMPANY FOR A CERTAIN MONEY CONSIDERATION AND THAT IN SATISFACTION OF THE LIABILITY TO PAY THE MONEY CONSIDERATION SHA RES OF CERTAIN FACE VALUE SHALL BE ALLOTTED TO THE TRANSFEROR. IN SUCH A CASE, THERE ARE IN TRUTH TWO TRANSACTIONS, ONE TRANSACTION OF S ALE AND THE OTHER A CONTRACT UNDER WHICH THE SHARES ARE ACCEPTED IN S ATISFACTION OF THE LIABILITY TO PAY THE PRICE. THE FACT THAT AS A RESULT OF THE TRANSFER OF THE SHARES OF THE ' COMPANY ' TO THE AS SESSEE FIRM, THE LATTER OBTAINED CONSIDERABLE PROFITS, WILL NOT ALTE R THE TRUE NATURE OF THE TRANSACTION-SEE THE DECISION OF THIS COURT IN C HITTOOR MOTOR TRANSPORT CO. (P.) LTD. V. INCOME-TAX OFFICER, CHIT TOOR **. FOR THE REASONS ABOVE STATED, WE HAVE NO HESITATION IN COMING TO THE CONCLUSION THAT THE TRANSACTION EVIDENCED BY TH E ' AGREEMENT FOR SALE ' BETWEEN THE COMPANY AND THE ASSESSEE WAS A SALE. NOW LET US SEE WHAT IS THE IMPACT OF SECTION 12B(2) ON THAT TRANSACTION ? UNDER THAT PROVISION, THE AMOUNT OF C APITAL GAINS HAS TO BE COMPUTED AFTER MAKING CERTAIN DEDUCTIONS FROM THE FULL VALUE OF THE CONSIDERATION FOR WHICH THE SALE IS MADE. WH AT EXACTLY IS THE MEANING OF THE EXPRESSION ' FULL VALUE OF THE CONSI DERATION FOR WHICH SALE IS MADE ' ? IS IT THE CONSIDERATION AGRE ED TO BE PAID OR IS IT THE MARKET VALUE OF THE CONSIDERATION ? IN TH E CASE OF SALE FOR A PRICE, THERE IS NO QUESTION OF ANY MARKET VALUE U NLIKE IN THE CASE OF AN EXCHANGE. THEREFORE, IN CASES OF SALES TO WHI CH THE FIRST PROVISO TO SUB-SECTION (2) OF SECTION 12B IS NOT AT TRACTED, ALL THAT WE HAVE TO SEE IS WHAT IS THE CONSIDERATION BARGAIN ED FOR. AS MENTIONED EARLIER, TO THE FACTS OF THE PRESENT CASE , THE FIRST PROVISO IS NOT ATTRACTED. AS SEEN EARLIER, THE PRICE BARGAI NED FOR THE SALE OF THE SHARES AND SECURITIES WAS ONLY RUPEES SEVENTY-F IVE LAKHS. THE FACTS OF THIS CASE SQUARELY FALL WITHIN THE RULE LA ID DOWN BY THIS COURT IN COMMISSIONER OF INCOME-TAX V. GEORGE HENDE RSON & CO. LTD. * THEREIN THIS COURT OBSERVED : ' IN CASE OF A SALE, THE FULL VALUE OF THE CONSIDER ATION IS THE FULL SALE PRICE ACTUALLY PAID. THE LEGISLATURE HAD TO USE THE WORDS ' FULL VALUE OF THE CONSIDERATION ' BECAUSE IT WAS DEALING NOT M ERELY WITH SALE BUT WITH OTHER TYPES OF TRANSFER, SUCH AS EXCHANGE, WHERE THE CONSIDERATION WOULD BE OTHER THAN MONEY. IF IT IS T HEREFORE HELD IN THE PRESENT CASE THAT THE ACTUAL PRICE RECEIVED BY THE RESPONDENT WAS AT THE RATE OF RS. 136 PER SHARE, THE FULL VALU E OF THE CONSIDERATION MUST BE TAKEN AT THE RATE OF RS. 136 PER SHARE. THE VIEW THAT WE HAVE EXPRESSED AS TO THE INTERPRETATIO N OF THE MAIN PART OF SECTION 12B(2) IS BORNE OUT BY THE FACT THA T IN THE FIRST PROVISO TO SECTION 12B(2), THE EXPRESSION ' FULL VA LUE OF THE CONSIDERATION ' IS USED IN CONTRADISTINCTION WITH ' FAIR MARKET VALUE OF THE CAPITAL ASSET ' AND THERE IS AN EXPRESS POWE R GRANTED TO THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 140 INCOME-TAX OFFICER TO ' TAKE THE FAIR MARKET VALUE OF THE CAPITAL ASSET TRANSFERRED ' AS ' THE FULL VALUE OF THE CONS IDERATION ' IN SPECIFIED CIRCUMSTANCES. IT IS EVIDENT THAT THE LEG ISLATURE ITSELF HAS MADE A DISTINCTION BETWEEN THE TWO EXPRESSIONS ' FU LL VALUE OF THE CONSIDERATION ' AND ' FAIR MARKET VALUE OF THE CAPI TAL ASSET TRANSFERRED ' AND IT IS PROVIDED THAT IF CERTAIN CO NDITIONS ARE SATISFIED AS MENTIONED IN THE FIRST PROVISO TO SECT ION 12B(2), THE MARKET VALUE OF THE ASSET TRANSFERRED, THOUGH NOT E QUIVALENT TO THE FULL VALUE OF THE CONSIDERATION FOR THE TRANSFER, M AY BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION. TO GIVE RIS E TO THIS FICTION THE TWO CONDITIONS OF THE FIRST PROVISO ARE : (1) THAT THE TRANSFEROR WAS DIRECTLY OR INDIRECTLY CONNECTED WITH THE TRANSFERE E, AND (2) THAT THE TRANSFER WAS EFFECTED WITH THE OBJECT OF AVOIDA NCE OR REDUCTION OF THE LIABILITY OF THE ASSESSEE UNDER SECTION 12B. IF THE CONDITIONS OF THIS PROVISO ARE NOT SATISFIED THE MAIN PART OF SECTION 12B(2) APPLIES AND THE INCOME-TAX OFFICER MUST TAKE INTO A CCOUNT THE FULL VALUE OF THE CONSIDERATION FOR THE TRANSFER. ' IT MAY BE NOTED THAT IN THAT CASE THE MARKET VALUE OF THE SHARES WHICH WERE ALLOTTED AT RS. 136 PER SHARE WAS RS. 62 0 PER SHARE. APPLYING THE PRICIPLES ENUNCIATED IN THAT DECISION WE THINK THAT THE FULL VALUE OF THE SALE PRICE RECEIVED BY THE ASSESS EE WAS ONLY RUPEES SEVENTYFIVE LAKHS. THAT BEING SO, THE CAPITA L GAINS MADE BY THE COMPANY WERE RS. 27,04,772 AS HELD BY THE HIGH COURT. IN THE RESULT BOTH THESE APPEALS FAIL AND THEY ARE DISMISSED WITH COSTS. 5.4. IN ANOTHER CASE, IN SUNIL SIDDARTHBHAI VS CIT (1985) 156 ITR 509, THE HON'BLE APEX COURT OBSERVED HELD A S UNDER:- THIS AND THE CONNECTED APPEAL, FILED BY CERTIFICAT E GRANTED BY THE HIGH COURT, RAISE THE INTERESTING QUESTION WHETHER THE CAPITAL CONTRIBUTION BY A PARTNER TO THE ASSETS OF A PARTNE RSHIP FIRM AT AN APPRECIATED VALUE CAN BE SAID TO GIVE RISE TO A CAP ITAL GAIN IN HIS HANDS LIABLE TO INCOME-TAX. IN CIVIL APPEAL NO. 1841 OF 1981, THE FACTS ARE AS FOLLOWS. THE APPELLANT, WHO IS THE ASSESSEE, WAS A PARTNER IN ME SSRS. SUVAS TRADING COMPANY, A PARTNERSHIP FIRM CONSTITUTED UND ER A DEED OF PARTNERSHIP DATED SEPTEMBER 27, 1973. AS HIS CONTRI BUTION TO THE CAPITAL OF THE PARTNERSHIP FIRM, THE ASSESSEE MADE OVER CERTAIN SHARES OF LIMITED COMPANIES WHICH WERE HELD BY HIM AS HIS CAPITAL ASSETS. THE BOOK VALUE OF THOSE SHARES IN HIS ACCOU NT BOOKS WAS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 141 SHOWN AS RS. 1,49,819, BUT ON THE DATE WHEN HE CONT RIBUTED THOSE SHARES TO THE PARTNERSHIP FIRM, HE REVALUED THE SHA RES AT THE MARKET VALUE OF RS. 1,60,279 AND CREDITED THE RESULTING DI FFERENCE OF RS. 10,460 TO HIS CAPITAL ACCOUNT. THE INCOME-TAX OFFICER, WHEN DRAWING UP THE ASSESSM ENT ORDER FOR THE ASSESSMENT YEAR 1974-75 IN RESPECT OF THE ASSES SEE DID NOT INCLUDE THE DIFFERENCE IN THE ASSESSABLE INCOME. TH E COMMISSIONER OF INCOME-TAX, HOWEVER, BEING OF OPINION THAT THE D IFFERENCE BETWEEN THE MARKET VALUE OF THE SHARES AND THE COST OF ACQUISITION OF THE SHARES TO THE ASSESSEE SHOULD HAVE BEEN BROU GHT TO TAX AS CAPITAL GAINS IN VIEW OF SECTION 45 OF THE INCOME-T AX ACT, 1961, EXERCISED HIS REVISIONAL JURISDICTION AND REOPENING THE ASSESSMENT, HE REMANDED THE CASE TO THE INCOME-TAX OFFICER DIRE CTING HIM TO REVISE THE ASSESSMENT AFTER COMPUTING THE CAPITAL G AINS ARISING OUT OF THE TRANSFER. THE ASSESSEE APPEALED TO THE INCOM E-TAX APPELLATE TRIBUNAL AND THE APPELLATE TRIBUNAL HELD THAT WHILE THE TRANSACTION DID AMOUNT TO A TRANSFER WITHIN THE MEANING OF CLAU SE (47) OF SECTION 2 OF THE INCOME-TAX ACT, IT DID NOT RESULT IN CAPITAL GAINS LIABLE TO TAX. THE APPELLATE TRIBUNAL ALLOWED THE A PPEAL AND SET ASIDE THE ORDER OF THE INCOME-TAX OFFICER. SUBSEQUENTLY, THE APPELLATE TRIBUNAL REFERRED THE CASE TO THE HIGH COURT OF GUJ ARAT FOR ITS OPINION ON THE FOLLOWING QUESTIONS OF LAW: ' (1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN H OLDING THAT NO CAPITAL GAINS RESULTED FROM THE TRANSFER OF THE SHA RES HELD BY THE ASSESSEE TO THE PARTNERSHIP FIRM AS HIS CAPITAL CON TRIBUTION, THE COST OF ACQUISITION OF THE SHARES TO THE ASSESSEE BEING RS. 1,49,819 AND THE MARKET VALUE OF THE SHARES BEING RS. 1,60,279 ? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THERE WAS A TRANSFER WITHIN THE MEANING OF CLAUSE (47) OF SECTION 2 OF THE INCO ME-TAX ACT, 1961, OF THE SHARES CONTRIBUTED BY THE ASSESSEE AS CAPITAL TO THE PARTNERSHIP FIRM IN WHICH HE WAS A PARTNER ?' IN CIVIL APPEAL NO. 1777 OF 1981, THE APPELLANT WAS A PARTNER IN A REGISTERED PARTNERSHIP FIRM, MESSRS. RAJKA, OF WHIC H THE OTHER PARTNER WAS HIS WIFE. THE PARTNERSHIP WAS CONSTITUT ED UNDER AN AGREEMENT DATED FEBRUARY 25, 1973. THE PARTNERSHIP DEED RECITED THAT THE PARTNERSHIP BUSINESS HAD COMMENCED ON JANU ARY 1, 1973, THAT IT WAS A PARTNERSHIP AT WILL AND FURTHER PROVI DED THAT THE ASSESSEE WOULD INITIALLY CONTRIBUTE RS. 9,000 IN CA SH TO THE SHARE CAPITAL OF THE FIRM AND HIS WIFE WOULD CONTRIBUTE R S. 1,000 IN CASH. IT WAS PROVIDED THAT WHEN ANY ADDITION TO THE CAPITAL WAS REQUIRED FOR THE PURPOSES OF THE PARTNERSHIP, THE PARTNERS WOULD CONTRIBUTE SUCH ADDITIONAL CAPITAL FROM TIME TO TIME. IT WAS FURTHE R PROVIDED THAT IF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 142 ANY ASSET WAS BROUGHT IN BY A PARTNER AS CAPITAL CO NTRIBUTION, THE ACCOUNT OF SUCH PARTNER WOULD BE CREDITED WITH THE FAIR MARKET VALUE ON THE DATE THE ASSET WAS BROUGHT IN. THE ASSESSEE HAD IN HIS POSSESSION 580 ORDINARY SHARES OF THE AHMEDABAD MAN UFACTURING AND CALICO PRINTING CO. LTD. WHICH HAD BEEN PURCHAS ED AT RS. 1,55,440. HE HAD ALSO 82 ORDINARY SHARES OF KARAMCH AND PREMCHAND P. LTD. PURCHASED AT RS. 25,666. THE TOTA L COST WAS RS. 1,81,106. ON MARCH 22, 1973, THE MARKET VALUE OF A SHARE OF T HE AHMEDABAD MANUFACTURING AND CALICO PRINTING CO. LTD. WAS RS. 442 AND THAT OF A SHARE OF KARAMCHAND PREMCHAND P. LTD. WAS RS. 2,668 . ON THAT DAY, THE ASSESSEE INTRODUCED THE TWO SHAREHOLDINGS IN THE PARTNERSHIP FIRM AS HIS CAPITAL CONTRIBUTION AND TH E FIRM CREDITED HIS ACCOUNT WITH THE MARKET VALUE OF THE SHARES, NAMELY , RS. 4,75,136. IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YE AR 1973-74, THE INCOME-TAX OFFICER TOOK THE VIEW THAT THE CONTR IBUTION BY THE ASSESSEE OF THE SHARES TO THE ASSET OF THE PARTNERS HIP FIRM CONSTITUTED A TRANSFER WITHIN THE MEANING OF CLAUSE (47) OF SECTION 2 OF THE INCOME-TAX ACT, 1961, AND THAT THE ASSESSEE WAS LIABLE TO INCOME-TAX ON A CAPITAL GAIN OF RS. 2,94,030, BEING THE DIFFERENCE BETWEEN THE MARKET PRICE AT WHICH THE SHARES WERE E NTERED IN THE BOOKS OF THE PARTNERSHIP FIRM AND THE COST OF THE S HARES TO THE ASSESSEE. THE ASSESSEE APPEALED TO THE APPELLATE AS SISTANT COMMISSIONER OF INCOME-TAX, BUT THE APPEAL WAS DISM ISSED. IN SECOND APPEAL, HOWEVER, THE INCOME-TAX APPELLATE TR IBUNAL TOOK THE VIEW THAT THERE WAS NO TRANSFER OF A CAPITAL ASSET WITHIN THE MEANING OF SECTION 45 READ WITH CLAUSE (47) OF SECTION 2 OF THE INCOME-TAX ACT, 1961, AND, CONSEQUENTLY, LIE DELETED THE ITEM FROM THE ASSESSMENT. IN THE CIRCUMSTANCES, THE APPELLATE TRI BUNAL DID NOT GO INTO THE QUESTION WHETHER THE TRANSFER WAS WITHOUT CONSIDERATION. THE COMMISSIONER OF INCOME-TAX OBTAINED A REFERENCE TO THE HIGH COURT OF GUJARAT OIL THE FOLLOWING QUESTIONS OF LAW : ' (1) WHETHER, OIL THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE CONTRIBUTION IN THE FORM OF SHARES OF THE VALUE OF RS. 4,75,136 BY THE ASSESSEE TO THE PARTNERSHIP FIRM OF MESSRS. RAJKA DID NOT AMOUN T TO A TRANSFER WITHIN THE MEANING OF CLAUSE (47) OF SECTION 2 OF T HE ACT, RESULTING IN CAPITAL GAINS CHARGEABLE TO TAX ? (2) IF THE, REPLY TO QUESTION NO. (1) IS IN FAVOUR OF THE REVENUE, WHETHER THE TRIBUNAL ERRED IN NOT CONSIDERING WHETH ER THE TRANSFER IS WITH OR WITHOUT CONSIDERATION ? ' SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 143 BY A COMMON JUDGMENT DATED APRIL 30, 1981/MAY 1, AN D 4, 1981, THE HIGH COURT ANSWERED THE QUESTIONS IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. SECTION 45 OF THE INCOME-TAX ACT, 1961, PROVIDES: ' 45. (1) ANY PROFITS OR GAINS ARISING FROM THE TRA NSFER OF I CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERWISE PROVIDED IN SECTIONS 53, 54, 54B, 54C AND 54D, BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'CAPITAL GAINS', AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER T OOK PLACE.' SECTION 48 OF THE ACT PROVIDES : 48. THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL G AINS' SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY :- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER ; (II) THE COST OF ACQUISITION OF THE CAPITAL ASSET A ND THE COST OF ANY IMPROVEMENT THERETO.' LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT IN O RDER TO ATTRACT TAX UNDER THE HEAD ' CAPITAL GAINS ', SECTION 45 MU ST BE READ WITH SECTION 48 AND, THEREFORE, THREE CUMULATIVE CONDITI ONS MUST BE FULFILLED 1. THERE MUST BE A ' TRANSFER ' OF A CAPITAL ASSET EITHER UNDER THE GENERAL LAW OR WITHIN THE DEFINITION IN CLAUSE (47) OF SECTION 2 OF THE INCOME-TAX ACT. 2. CONSIDERATION MUST BE RECEIVED OR MUST ACCRUE AS A RESULT OF THE TRANSFER AND THE CONSIDERATION MUST BE CAPABLE OF B EING DETERMINED IN MONETARY TERMS IN ORDER THAT THE COMPUTATION OF CAPITAL GAINS MAY BE MADE AS REQUIRED BY SECTION 48. 3. PROFITS OR GAINS MUST ARISE FROM THE TRANSFER AN D MUST BE EMBEDDED IN THE CONSIDERATION. IT IS URGED THAT IF ANY OF THE THREE CONDITIONS REM AINS UNFULFILLED, NO CHARGE CAN BE LEVIED UNDER THE HEAD ' CAPITAL GAINS '. IN SUPPORT OF THE SUBMISSION THAT THERE IS NO ' TRA NSFER ' IN THE GENERAL SENSE OF THAT TERM WHEN A PARTNER BRINGS HI S PERSONAL ASSETS INTO THE FIRM AS HIS CONTRIBUTION TOWARDS ITS CAPIT AL, LEARNED COUNSEL POINTS OUT THAT A PARTNERSHIP FIRM IS NOT A SEPARAT E LEGAL ENTITY AND SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 144 THAT THE ASSETS OWNED BY THE PARTNERSHIP ARE COLLEC TIVELY OWNED BY THE PARTNERS. WE HAVE NO HESITATION IN ACCEPTING TH AT PROPOSITION, FOR, IN MALABAR FISHERIES CO. V. CIT [1979] 120 ITR 49 (SC), THIS COURT OBSERVED (P. 59): '....... IT SEEMS TO US CLEAR THAT A PARTNERSHIP FI RM UNDER THE INDIAN PARTNERSHIP ACT, 1932, IS NOT A DISTINCT LEGAL ENTI TY APART FROM THE PARTNERS CONSTITUTING IT AND EQUALLY IN LAW THE FIR M AS SUCH HAS NO SEPARATE RIGHTS OF ITS OWN IN THE PARTNERSHIP ASSET S AND WHEN ONE TALKS OF THE FIRM'S PROPERTY OR FIRM'S ASSETS ALL T HAT IS MEANT IS PROPERTY OR ASSETS IN WHICH ALL PARTNERS HAVE A JOI NT OR COMMON INTEREST.' OUR ATTENTION HAS BEEN INVITED TO CIT V. HIND CONST RUCTION LTD. [1972] 83 ITR 211 (SC). IN THAT CASE, THE ASSESSEE ENTERED INTO A PARTNERSHIP AND AS ITS SHARE OF THE CAPITAL, IT TRA NSFERRED ITS STOCK OF MACHINERY TO THE PARTNERSHIP FIRM. THIS COURT HELD THAT WHEN THE ASSESSEE MADE OVER ITS MACHINERY TO THE PARTNERSHIP FIRM, THERE WAS NO SALE AND THE ASSESSEE DID NOT DERIVE ANY INCOME. IN CIT V. JANAB N. HYATH BATCHA SAHIB [1969] 72 ITR 528 (MAD), THE MADRAS HIGH COURT HELD THAT WHEN A PARTNER INTRODUCES HIS PROPE RTY INTO A PARTNERSHIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL , THE TRANSACTION DOES NOT INVOLVE A SALE OF THE PROPERTY. THE HIGH C OURT REFERRED TO SECTION 14 OF THE INDIAN PARTNERSHIP ACT, 1932, AND OBSERVED (P. 533): ' WHEN A PARTNERSHIP IS FORMED FOR THE FIRST TIME A ND ONE OF THE MEMBERS OF THE PARTNERSHIP BRINGS INTO THE FIRM ASS ETS, THEY BECOME THE PROPERTY OF THE FIRM, NOT BY ANY TRANSFE R, BUT BY THE VERY INTENTION OF THE PARTIES EVINCED IN THE AGREEM ENT BETWEEN THEM TO TREAT SUCH PROPERTY BELONGING TO ONE OR MOR E OF THE MEMBERS OF THE PARTNERSHIP IS THAT OF THE FIRM.' THE VIEW THAT WHEN A PARTNER HANDS OVER A BUSINESS ASSET TO A PARTNERSHIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL , HE CANNOT BE SAID TO HAVE EFFECTED A SALE WAS ALSO TAKEN BY THE ALLAH ABAD HIGH COURT IN DR. KACKKAR V. CIT [1973] 92 ITR 87 , THE KERALA HIGH COURT IN (CIT V. KUNHAMMED [1974] 94 ITR 179 AND BY THE MADRAS HIGH COURT IN CIT V. ABDUL KHADER MOTOR AND LORRY SERVICE [1978] 112 ITR 360 . WE FIND NO DIFFICULTY IN ACCEPTING THAT PROPOSITION. B UT WHILE THE TRANSACTION MAY NOT AMOUNT TO A SALE, CAN IT BE DES CRIBED AS A TRANSFER OF SOME OTHER KIND ? ILLUSTRATIONS OF OTHE R KINDS OF TRANSFER ARE, PROVIDED BY CLAUSE (47) OF SECTION 2 OF THE IN COME-TAX ACT, WHICH DEFINES THE EXPRESSION ' TRANSFER ' IN RELATI ON TO A CAPITAL ASSET AS INCLUDING ' THE SALE, EXCHANGE OR RELINQUI SHMENT OF THE ASSET OR THE EXTINGUISHMENT OF ANY RIGHTS THEREIN O R THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW'. THE DEFINITION IS INCLUSIVE MERELY AND DOES NOT EXHAUST OTHER KINDS OF TRANSFER. ITS I NCLUSIVE CHARACTER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 145 WAS OVERLOOKED BY THE MADRAS HIGH COURT IN CIT V. A BDUL KHADER MOTOR AND LORRY SERVICE [1978] 112 ITR 360 AND IN CIT V. RAJAN AND KANAN, [1984] 149 ITR 545 (MAD). IN BOTH CASES, THE HIGH COURT CONFINED ITSELF TO CONSIDERING WHETHER THE TRANSACT ION BEFORE IT WAS COVERED BY ANY OF THE EXPRESS TERMS USED IN THE DEF INITION, THAT IS TO SAY, SALE, EXCHANGE, RELINQUISHMENT OR EXTINGUISHME NT AND TAKING THE VIEW THAT IT DID NOT FALL UNDER ANY OF THEM, IT HELD THAT THERE WAS NO TRANSFER. IN ITS GENERAL SENSE, THE EXPRESSION ' TRANSFER OF PROPERTY ' CONNOTES, THE PASSING OF RIGHTS IN PROPERTY FROM ON E PERSON TO ANOTHER. IN ONE CASE, THERE MAY BE A PASSING OF THE ENTIRE BUNDLE OF RIGHTS FROM THE TRANSFEROR TO THE TRANSFEREE. IN AN OTHER CASE, THE TRANSFER MAY CONSIST OF ONE OF THE ESTATES ONLY OUT OF ALL THE ESTATES COMPRISING THE TOTALITY OF RIGHTS IN THE PROPERTY. IN A THIRD CASE, THERE MAY BE A REDUCTION OF THE EXCLUSIVE INTEREST IN THE TOTALITY OF RIGHTS OF THE ORIGINAL OWNER INTO A JOINT OR SHARED INTEREST WITH OTHER PERSONS. AN EXCLUSIVE INTEREST IN PROPERTY IS A LAR GER INTEREST THAN A SHARE IN THAT PROPERTY. TO THE EXTENT TO WHICH THE EXCLUSIVE INTEREST IS REDUCED TO A SHARED INTEREST, IT WOULD SEEM THAT THERE IS A TRANSFER OF INTEREST. THEREFORE, WHEN A PARTNER BRI NGS IN HIS PERSONAL ASSET INTO THE CAPITAL OF THE PARTNERSHIP FIRM AS H IS CONTRIBUTION TO ITS CAPITAL, HE REDUCES HIS EXCLUSIVE RIGHTS IN THE ASS ET TO SHARED RIGHTS IN IT WITH THE OTHER PARTNERS OF THE FIRM. WHILE HE DOES NOT LOSE HIS RIGHTS IN THE ASSET ALTOGETHER, WHAT HE ENJOYS NOW IS AN ABRIDGED RIGHT WHICH CANNOT BE IDENTIFIED WITH THE FULLNESS OF THE RIGHT WHICH HE ENJOYED IN THE ASSET BEFORE IT ENTERED THE PARTN ERSHIP CAPITAL. IN ADDANKI NARAYANAPPA V. BHASKARA KRISHNAPPA [1966] 3 SCR 400; AIR 1966 SC 1300, THIS COURT EXPLAINED (P. 1303 OF AIR): '................. WHATEVER MAY BE THE CHARACTER OF THE PROPERTY WHICH IS BROUGHT IN BY THE PARTNERS WHEN THE PARTNERSHIP IS FORMED OR WHICH MAY BE ACQUIRED IN THE COURSE OF THE BUSINESS OF THE PARTNERSHIP IT BECOMES THE PROPERTY OF THE FIRM AND WHAT A PARTNER IS ENTITLED TO IS HIS SHARE OF PROFITS, IF ANY, ACC RUING TO THE PARTNERSHIP FROM THE REALISATION OF THIS PROPERTY, AND UPON DISSOLUTION OF THE PARTNERSHIP TO A SHARE IN THE MO NEY REPRESENTING THE VALUE OF THE PROPERTY. NO DOUBT, SINCE A FIRM H AS NO LEGAL EXISTENCE., THE PARTNERSHIP PROPERTY WILL VEST IN A LL THE PARTNER, AND IN THAT SENSE EVERY PARTNER HAS AN INTEREST IN THE PROPERTY OF THE PARTNERSHIP. DURING THE SUBSISTENCE OF THE PARTNERS HIP, HOWEVER, NO PARTNER CAN DEAL WITH ANY PORTION OF THE PROPERTY A S HIS OWN, NOR CAN HE ASSIGN HIS INTEREST IN A SPECIFIC ITEM OF TH E PARTNERSHIP PROPERTY TO ANYONE. HIS RIGHT IS TO OBTAIN SUCH PRO FITS, IF ANY, AS FALL TO HIS SHARE FROM TIME TO TIME AND UPON THE DISSOLU TION OF THE FIRM TO L SHARE IN THE ASSETS OF THE FIRM WHICH REMAIN A FTER SATISFYING THE LIABILITIES SET OUT IN CLAUSE (A) AND SUB- CLAUSE ( I), (II) AND (III) OF CLAUSE (B) OF SECTION 48.' SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 146 THE POSITION WAS LATER IN THE SAME JUDGEMENT AS FOL LOWS 1304): ' THE WHOLE CONCEPT OF PARTNERSHIP IS TO ENTRY UPON A JOINT VENTURE AND FOR THAT PURPOSE TO BRING IN AS CAPITAL MONEY O R EVEN PROPERTY INCLUDING IMMOVABLE PROPERTY. ONCE THAT IS DONE WHA TEVER IS BROUGHT IN WOULD CEASE TO BE THE EXCLUSIVE PROPERTY OF THE PERSON WHO BROUGHT IT IN. IT WOULD BE THE TRADING ASSET OF THE PARTNERSHIP IN WHICH ALL THE PARTNERS WOULD HAVE INTEREST IN PROPO RTION TO THEIR SHARE IN THE JOINT VENTURE OF THE BUSINESS OF PARTN ERSHIP. THE PERSON WHO BROUGHT IT IN WOULD, THEREFORE, NOT BE ABLE TO CLAIM OR EXERCISE ANY EXCLUSIVE RIGHT OVER ANY PROPERTY WHICH HE HAS BROUGHT IN, MUCH LESS OVER ANY OTHER PARTNERSHIP PROPERTY. HE W OULD NOT BE ABLE TO EXERCISE HIS RIGHT EVEN TO THE EXTENT OF HI S SHARE IN THE BUSINESS OF THE PARTNERSHIP. AS ALREADY STATED, HIS RIGHT DURING THE SUBSISTENCE OF THE PARTNERSHIP IS TO GET HIS SHARE OF PROFITS FROM TIME TO TIME AS MAY BE AGREED UPON AMONG THE PARTNERS AN D AFTER THE DISSOLUTION OF THE PARTNERSHIP OR WITH HIS RETIREME NT FROM PARTNERSHIP OF THE, OF HIS SHARE IN THE NET PARTNER SHIP ASSETS AS ON THE DATE OF DISSOLUTION OR RETIREMENT AFTER A DEDUC TION OF LIABILITIES AND PRIOR CHARGES.' IT IS APPARENT, THEREFORE, THAT WHEN A PARTNER BRIN GS IN HIS PERSONAL ASSET INTO A PARTNERSHIP FIRM AS HIS CONTRIBUTION T O ITS CAPITAL, AN ASSET WHICH ORIGINALLY WAS SUBJECT TO THE ENTIRE OW NERSHIP OF THE PARTNER BECOMES NOW SUBJECT TO THE RIGHTS OF OTHER PARTNERS IN IT. IT IS NOT AN INTEREST WHICH CAN BE EVALUATED IMMEDIATE LY, IT IS AN INTEREST WHICH IS SUBJECT TO THE OPERATION OF FUTUR E TRANSACTIONS OF THE PARTNERSHIP, AND IT MAY DIMINISH IN VALUE DEPEN DING ON ACCUMULATING LIABILITIES AND LOSSES WITH A FALL IN THE PROSPERITY OF THE PARTNERSHIP FIRM. THE EVALUATION OF A PARTNER'S INT EREST TAKE, PLACE ONLY WHEN THERE IS A DISSOLUTION OF THE FIRM OR UPO N HIS RETIREMENT FROM IT. IT HAS SOMETIMES BEEN AND WE THINK ERRONEO USLY, THAT THE RIGHT OF A PARTNER TO A SHARE IN THE ASSETS OF THE, PARTNERSHIP FIRM ARISES UPON DISSOLUTION OF THE, FIRM OR UPON THE PA RTNER RETIRING FROM THE FIRM. WE THINK IT NECESSARY TO STATE THAT WHAT IS ENVISAGED HERE IS MERELY THE RIGHT TO REALISE THE INTEREST AND REC EIVE ITS VALUE. WHAT IS REALISED IS THE INTEREST WHICH THE PARTNER ENJOY S IN THE ASSETS DURING THE SUBSISTENCE OF THE PARTNERSHIP FIRM BY V IRTUE OF HIS STATUS AS A PARTNER AND IN ACCORDANCE WITH THE TERMS OF TH E PARTNERSHIP AGREEMENT. IT IS BECAUSE THAT INTEREST EXISTS ALREA DY BEFORE DISSOLUTION, AS WAS HELD BY THIS COURT IN MALABAR F ISHERIES CO. V. CIT [1979] 120 ITR 49 (SC), THAT THE DISTRIBUTION OF THE ASSETS ON DISSOLUTION DOES NOT AMOUNT TO A TRANSFER TO THE ER STWHILE PARTNERS. WHAT THE PARTNER GETS UPON DISSOLUTION OR UPON RETI REMENT IS THE REALISATION OF A PRE-EXISTING RIGHT OR INTEREST. IT IS NOTHING STRANGE IN THE LAW THAT A RIGHT OR INTEREST SHOULD EXIST IN PR AESENTI BUT ITS REALISATION OR EXERCISE SHOULD BE POSTPONED. THEREF ORE, WHAT WAS THE EXCLUSIVE INTEREST OF A PARTNER IN HIS PERSONAL ASSET IS, UPON ITS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 147 INTRODUCTION INTO THE PARTNERSHIP FIRM AS HIS SHARE TO THE PARTNERSHIP CAPITAL, TRANSFORMED INTO AN INTEREST SHARED WITH T HE, OTHER PARTNERS IN THAT ASSET. QUA THAT ASSET, THERE IS A SHARED IN TEREST. DURING THE SUBSISTENCE OF THE PARTNERSHIP, THE OF THE INTEREST OF EACH PARTNER QUA THAT ASSET CANNOT BE ISOLATED OR CARVED OUT FRO M THE VALUE OF THE PARTNER'S INTEREST IN THE TOTALITY OF THE PARTN ERSHIP ASSETS. AND IN REGARD TO THE LATTER, THE VALUE WILL BE REPRESENTED BY HIS SHARE IN THE NOT ASSETS ON THE DISSOLUTION OF THE FIRM OR UPON T HE PARTNER'S RETIREMENT. LEARNED COUNSEL FOR THE ASSESSEE HAS ATTEMPTED TO D RAW AN ANALOGY BETWEEN THE POSITION ARISING WHEN A PERSONAL ASSET IS BROUGHT BY A PARTNER INTO A PARTNERSHIP AS HIS CONTRIBUTION TO T HE PARTNERSHIP CAPITAL AND THAT WHICH ARISES WHEN, ON DISSOLUTION OF THE FIRM OR ON RETIREMENT, A SHARE IN THE PARTNERSHIP ASSETS PASSE S TO THE ERSTWHILE PARTNER. IT HAS BEEN HELD BY THIS COURT IN CIT V. D EWAS CINE CORPORATION [1968] 68 ITR 240 (SC), CIT V. BANKEY LAL VAIDYA [1971] 79 ITR 594 (SC) AND RECENTLY IN MALABAR FISHERIES CO. V. CIT [1979] 120 ITR 49 (SC) AS WELL AS BY THE PUNJAB AND HARYANA HIGH COU RT IN KAY ENGINEERING CO. V. CIT [1971] 82 ITR 950 , THE KERALA HIGH COURT IN CIT V. NATARAJ MOTOR SERVICE [1972] 86 ITR 109 AND THE GUJARAT HIGH COURT IN CIT V. MOHANBHAI PAMABHAI [1973] 91 ITR 393 , THAT WHEN A PARTNER RETIRES OR THE PARTNERSHIP IS DISSOL VED, WHAT THE PARTNER RECEIVES IS HIS SHARE IN THE PARTNERSHIP. W HAT IS CONTEMPLATED HERE IS A SHARE OF THE PARTNER QUA THE NET ASSETS OF THE PARTNERSHIP FIRM. ON EVALUATION, THAT SHARE IN A PARTICULAR CASE MAY BE REALISED BY THE RECEIPT OF ONLY ONE OF ALL T HE ASSETS. WHAT HAPPENS HERE IS THAT A SHARED INTEREST IN ALL THE A SSETS OF THE FIRM IS REPLACED BY AN EXCLUSIVE INTEREST IN AN ASSET OF EQ UAL VALUE. THAT IS WHY IT HAS BEEN HELD THAT THERE IS NO TRANSFER. IT IS THE REALISATION OF A PRE-EXISTING RIGHT. THE POSITION IS DIFFERENT, IT SEEMS TO US, WHEN A PARTNER BRINGS HIS PERSONAL ASSET INTO THE PARTNERS HIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL. AN INDIVIDUAL ASSET IS THE SOLE SUBJECT OF CONSIDERATION. AN EXCLUSIVE INTEREST IN IT BEFORE I T ENTERS THE PARTNERSHIP IS REDUCED ON SUCH ENTRY INTO A SHARED INTEREST. OUR ATTENTION HAS ALSO BEEN INVITED TO CLAUSE (B) O F SUB-SECTION (1) OF SECTION 17 OF THE REGISTRATION ACT, WHICH REQUIR ES THE REGISTRATION OF NONTESTAMENTARY INSTRUMENTS WHICH PURPORT OR OPE RATE ' TO CREATE, DECLARE, ASSIGN, LIMIT OR EXTINGUISH, WHETH ER IN PRESENT OR IN FUTURE, ANY RIGHT, TITLE OR INTEREST, WHETHER VESTE D OR CONTINGENT, OF THE VALUE OF ONE HUNDRED RUPEES AND UPWARDS, TO OR IN IMMOVABLE PROPERTY ', AND TO THE VIEW TAKEN BY THE COURTS IN THIS COUNTRY THAT WHEN A PERSON BRINGS IN EVEN HIS IMMOVABLE PROPERTY AS HIS CONTRIBUTION TO THE CAPITAL OF THE FIRM, NO WRITTEN DOCUMENT OR REGISTRATION IS REQUIRED UNDER THAT CLAUSE. THAT VI EW WAS EXPRESSED IN FIRM RAM SAHAY MALL RAMESHWAR DAYAL V. BISHWANAT H PRASAD, AIR 1963 PAT 221. THE LEARNED JUDGES RELIED ON THE ENGLISH LAW THAT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 148 THE PERSONAL ASSETS INTRODUCED BY A PARTNER INTO TH E FIRM AS HIS CONTRIBUTION TO ITS CAPITAL BECOME THE PROPERTY OF THE FIRM BY REASON OF THE INTENTION AND AGREEMENT OF THE PARTIES. THE VIEW DOES NOT SPRING FROM THE CONSIDERATION THAT THERE IS DO TRAN SFER, THE VIEW IS THAT NO DOCUMENT OF TRANSFER IS REQUIRED AND THAT, THEREFORE, REGISTRATION IS UNNECESSARY. THE PATNA HIGH COURT R EITERATED THAT VIEW IN SUDHANSU KANTA V. MANINDRA NATH, AIR 1965 P AT 144. ACCORDINGLY, WE HOLD THAT WHEN THE ASSESSEE BROUGHT THE SHARES OF THE LIMITED COMPANIES INTO THE PARTNERSHIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL, THERE WAS A TRANSFER OF A CAPITAL ASSE T WITHIN THE MEANING OF THE TERMS OF SECTION 45 OF THE INCOME-TAX ACT. I N THIS VIEW OF THE MATTER, WE AGREE WITH THE CONCLUSION REACHED BY THE KERALA HIGH COURT IN A. ABDUL RAHIM, TRAVANCORE CONFECTIONERY W ORKS V. CIT [1977] 110 ITR 595 [FB], THE KARNATAKA HIGH COURT IN ADDL. CIT V. M. A. J. VASANAIK [1979] 116 ITR 110 AND BY THE GUJARAT HIGH COURT IN THE JUDGMENT UNDER APPEAL. THE SECOND QUESTION IS, WHETHER THE ASSESSEE CAN BE SAID TO HAVE RECEIVED ANY CONSIDERATION AS THAT EXPRESSION IS UN DERSTOOD IN THE SCHEME OF CAPITAL GAINS UNDER THE INCOME-TAX ACT. I N CIT V. B. C. SRINIVASA SETTY [1981] 128 ITR 294 , THIS COURT OBSERVED THAT THE CHARGING SECTION AND THE COMPUTATION PROVISIONS UND ER EACH HEAD OF INCOME CONSTITUTE AN INTEGRATED CODE, AND WHEN THER E IS A CASE TO WHICH THE COMPUTATION PROVISIONS CANNOT APPLY AT AL L, IT IS EVIDENT THAT SUCH A CASE WAS NOT INTENDED TO FALL WITHIN TH E CHARGING SECTION. ON THE BASIS OF THAT PROPOSITION, LEARNED COUNSEL F OR THE ASSESSEE HAS URGED THAT SECTION 45 IS NOT ATTRACTED IN THE P RESENT CASE BECAUSE TO COMPUTE THE PROFITS OR GAINS UNDER SECTI ON 48, THE VALUE OF THE CONSIDERATION RECEIVED BY THE ASSESSEE OR AC CRUING TO HIM AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET MUST BE CAPABLE OF ASCERTAINMENT IN MONETARY TERMS. THE CONSIDERATION FOR THE TRANSFER OF THE PERSONAL ASSETS IS THE RIGHT WHICH ARISES OR ACCRUES TO THE PARTNER DURING THE SUBSISTENCE OF THE PARTNERSHIP T O GET HIS SHARE OF THE PROFITS FROM TIME TO TIME AND, AFTER THE DISSOL UTION OF THE PARTNERSHIP OR WITH HIS RETIREMENT FROM THE PARTNER SHIP, TO GET THE VALUE OF A SHARE IN THE NET PARTNERSHIP ASSETS AS O N THE DATE OF THE DISSOLUTION OR RETIREMENT AFTER DEDUCTION OF LIABIL ITIES AND PRIOR CHARGES. THE CREDIT ENTRY MADE IN THE PARTNER'S CAP ITAL ACCOUNT IN THE BOOKS OF THE PARTNERSHIP FIRM DOES NOT REPRESEN T THE TRUE VALUE OF THE CONSIDERATION. IT IS A NOTIONAL VALUE ONLY, INTENDED TO BE TAKEN INTO ACCOUNT AT THE TIME OF DETERMINING THE VALUE O F THE PARTNER'S SHARE IN THE NET PARTNERSHIP ASSETS ON THE DATE OF DISSOLUTION OR ON HIS RETIREMENT, A SHARE WHICH WILL DEPEND UPON DEDU CTION OF THE LIABILITIES AND PRIOR CHARGES EXISTING ON THE DATE OF DISSOLUTION OR RETIREMENT. IT IS NOT POSSIBLE TO PREDICATE BEFOREH AND WHAT WILL BE THE POSITION IN TERMS OF MONETARY VALUE OF A PARTNE RS' SHARE ON THAT DATE. AT THE TIME WHEN A PARTNER TRANSFERS HIS PERS ONAL ASSET TO THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 149 PARTNERSHIP FIRM, THERE CAN BE NO RECKONING OF THE LIABILITIES AND LOSSES WHICH THE FIRM MAY SUFFER IN THE YEARS TO CO ME. ALL THAT LIES WITHIN THE WOMB OF THE FUTURE. IT IS IMPOSSIBLE TO CONCEIVE OF EVALUATING THE CONSIDERATION ACQUIRED BY THE PARTNE R WHEN HE BRINGS HIS PERSONAL ASSET INTO THE PARTNERSHIP FIRM WHEN N EITHER THE DATE OF DISSOLUTION OR RETIREMENT CAN BE ENVISAGED NOR CAN THERE BE ANY ASCERTAINMENT OF LIABILITIES AND PRIOR CHARGES WHIC H MAY NOT HAVE EVEN ARISEN YET. IN THE CIRCUMSTANCES, WE ARE UNABL E TO HOLD THAT THE CONSIDERATION WHICH A PARTNER ACQUIRES ON MAKIN G OVER HIS PERSONAL ASSET TO THE PARTNERSHIP FIRM AS HIS CONTR IBUTION TO ITS CAPITAL CAN FALL WITHIN THE TERMS OF SECTION 48. AN D AS THAT PROVISION IS FUNDAMENTAL TO THE COMPUTATION MACHINERY INCORPO RATED IN THE SCHEME RELATING TO THE DETERMINATION OF THE CHARGE PROVIDED IN SECTION 45, SUCH A CASE MUST BE REGARDED AS FALLING OUTSIDE THE SCOPE OF CAPITAL GAINS TAXATION ALTOGETHER. THE THIRD CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT NO PROFIT OR GAIN CAN BE SAID TO ARISE TO A PARTNER WHEN HE BRINGS HIS PERSONAL ASSET INTO A PARTNERSHIP FIRM IS HIS CONTR IBUTION TO ITS CAPITAL. IT IS URGED THAT THE CAPITAL GAINS CHARGEA BLE UNDER SECTION 45 ARE REAL CAPITAL GAINS COMPUTED ON THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNTING AND THAT THE CAPITAL GAINS MU ST BE EMBEDDED IN THE CAPITAL ASSET. IN MISS DHUN DADABHO Y KAPADIA V. CIT [1967] 63 ITR 651 (SC), THE APPELLANT HELD BY WAY OF INVESTMENT SOME ORDINARY SHARES IN A LIMITED COMPANY. AN OFFER WAS MADE BY THE COMPANY TO HER BY WHICH SHE WAS ENTITLED TO APP LY FOR AN EQUAL NUMBER OF NEW ORDINARY SHARES AT A PREMIUM WITH AN OPTION OF EITHER TAKING THE SHARES OR RENOUNCING THEM IN FAVO UR OF OTHERS. THE APPELLANT RENOUNCED HER RIGHTS TO ALL THE SHARES AN D REALISED RS. 45,262.50. WHEN THIS AMOUNT WAS SOUGHT TO BE WHOLLY TAXED AS A CAPITAL GAIN, THE APPELLANT CLAIMED THAT ON THE ISS UE OF THE NEW SHARES, THE VALUE OF HER OLD SHARES DEPRECIATED AND THAT AS A RESULT OF THE DEPRECIATION, SHE SUFFERED A CAPITAL LOSS IN THE OLD SHARES WHICH SHE WAS ENTITLED TO SET OFF AGAINST THE CAPIT AL GAIN OF RS. 45,262.50. IN THE ALTERNATIVE, SHE CLAIMED THAT THE RIGHT TO RECEIVE THE NEW SHARES WAS A RIGHT WHICH WAS EMBEDDED IN HE R OLD SHARES AND, CONSEQUENTLY, WHEN SHE REALISED THE SUM OF RS. 45,262.50 BY SELLING HER RIGHT, THE CAPITAL GAIN SHOULD BE COMPU TED AFTER DEDUCTING FROM THAT AMOUNT, THE VALUE OF THE EMBEDD ED RIGHT WHICH BECAME LIQUIDATED. THIS COURT UPHELD THE CLAIM OF T HE APPELLANT THAT SHE WAS ENTITLED TO DEDUCT FROM THE SUM OF RS. 45,2 62.50, THE LOSS SUFFERED BY WAY OF DEPRECIATION IN THE OLD SHARES. THE COURT PROCEEDED ON THE BASIS THAT IN WORKING OUT CAPITAL GAIN OR LOSS, THE PRINCIPLES WHICH HAD TO BE APPLIED ARE THOSE WHICH ARE A PART OF COMMERCIAL PRACTICE OR WHICH AN ORDINARY MAN OF BUS INESS WOULD RESORT TO WHEN MAKING COMPUTATION FOR HIS BUSINESS PURPOSES. IT WILL BE NOTICED THAT THIS PRINCIPLE WAS APPLIED BY THE C OURT IN A CASE WHERE A CAPITAL GAIN WAS SOUGHT TO BE TAXED UNDER T HE INCOME-TAX SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 150 ACT. THAT PROFITS OR GAINS UNDER THE INCOME-TAX ACT MUST BE UNDERSTOOD IN THE SENSE OF REAL PROFITS OR GAINS, T HAT IS TO SAY, ON THE OF ORDINARY COMMERCIAL PRINCIPLES ON WHICH ACTU AL PROFITS ARE COMPUTED, A SENSE IN WHICH NO COMMERCIAL MAN WOULD MISUNDERSTAND, HAD BEEN REGARDED AS A PRINCIPLE OF GENERAL APPLICATION, AND THERE IS A CATENA OF CASES OF THIS COURT WHICH AFFIRMS THAT PRINCIPLE. REFERENCE MAY BE MADE TO CALCUTTA C O. LTD. V. CIT [1959] 37 ITR 1 (SC), CIT V. BAI SHIRINBAI K. KOOKA [1962] 46 ITR 86 (SC), POONA ELECTRIC SUPPLY CO. LTD. V. CIT [1965] 57 ITR 521 (SC), CIT V. BIRLA GWALIOR (P.) LTD. [1973] 89 ITR 266 (SC) AND BAFNA TEXTILES V. ITO [1975] 98 ITR 1 (KAR). WHAT IS THE PROFIT OR GAINS WHICH CAN BE SAID TO AC CRUE OR ARISE TO THE ASSESSEE WHEN LIE MAKES OVER HIS PERSONAL ASSET TO THE PARTNERSHIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL ? THE CONSIDERATION, AS WE HAVE OBSERVED, IS THE RIGHT OF A PARTNER DURING THE SUBSISTENCE OF THE PARTNERSHIP TO GET HIS SHARE OF PROFITS FROM TIME TO TIME AND AFTER THE DISSOLUTION OF THE PARTN ERSHIP OR WITH HIS RETIREMENT FROM THE PARTNERSHIP, TO RECEIVE THE VAL UE OF THE SHARE IN THE NET PARTNERSHIP ASSETS AS ON THE DATE OF DISSOL UTION OR RETIREMENT AFTER DEDUCTION OF LIABILITIES AND PRIOR CHARGES. WHEN HIS PERSONAL ASSET MERGES INTO THE CAPITAL OF THE PARTN ERSHIP FIRM, A CORRESPONDING CREDIT ENTRY IS MADE IN THE PARTNER'S CAPITAL ACCOUNT IN THE BOOKS OF THE PARTNERSHIP FIRM, BUT THAT ENTR Y IS MADE MERELY FOR THE PURPOSE OF ADJUSTING THE RIGHTS OF THE PART NERS INTER SE WHEN THE PARTNERSHIP IS DISSOLVED OR THE PARTNER RETIRES . IT EVIDENCES NO DEBT DUE BY THE FIRM TO THE PARTNER. INDEED, THE CA PITAL REPRESENTED BY THE NOTIONAL ENTRY TO THE CREDIT OF THE PARTNER' S ACCOUNT MAY BE COMPLETELY WIPED OUT BY LOSSES WHICH MAY BE SUBSEQU ENTLY INCURRED BY THE FIRM, EVEN IN THE VERY ACCOUNTING YEAR IN WH ICH THE CAPITAL ACCOUNT IS CREDITED. HAVING REGARD TO THE NATURE AN D QUALITY OF THE CONSIDERATION WHICH THE PARTNER MAY BE SAID TO ACQU IRE ON INTRODUCING HIS PERSONAL ASSET INTO THE PARTNERSHIP FIRM AS HIS CONTRIBUTION TO ITS CAPITAL, IT CANNOT BE SAID THAT ANY INCOME OR GAIN ARISES OR ACCRUES TO THE ASSESSEE IN THE TRUE COMME RCIAL SENSE WHICH A BUSINESSMAN WOULD UNDERSTAND AS REAL INCOME OR GAIN. AN OBJECTION HAS BEEN TAKEN BY THE LEARNED COUNSEL FOR THE RESPONDENT TO THIS SUBMISSION BEING, RAISED BEFORE US BECAUSE, IT IS SAID, THE QUESTION HAS NEITHER BEEN REFERRED TO THI S COURT NOR WAS IT EVER ARGUED IT ANY EARLIER STAGE. WE ARE NOT IMPRES SED BY THE OBJECTION BECAUSE WE THINK THAT IT CONSTITUTES ONE, ASPECT OF THE QUESTIONS WHICH HAVE BEEN REFERRED IN THESE CASES. THE POINT RESTS ON CONSIDERATIONS PURELY OF LAW AND IS FUNDAMENTAL TO THE QUESTION WHETHER CAPITAL GAIN ARISES TO AN UPON THE TRANSFER OF HIS SHARES TO THE PARTNERSHIP FIRM AS HIS CAPITAL CONTRIBUTION. T HE OBJECTION IS, THEREFORE, OVERRULED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 151 INASMUCH AS WE ARE OF OPINION THAT THE CONSIDERATIO N RECEIVED BY THE ASSESSEE ON THE TRANSFER OF HIS SHARES TO THE P ARTNERSHIP FIRM DOES NOT FALL WITHIN THE CONTEMPLATION OF SECTION 4 8 OF THE INCOME- TAX ACT AND FURTHER THAT NO PROFIT OR GAIN CAN BE A ID TO ARISE FOR THE PURPOSE OF THE INCOME- TAX ACT, WE HOLD THAT THESE CASES FALL OUTSIDE THE SCOPE OF SECTION 45 OF THE ACT ALTOGETH ER. WE HAVE DECIDED THESE APPEALS ON THE ASSUMPTION THA T THE PARTNERSHIP FIRM IN QUESTION IS A GENUINE FIRM AND NOT THE RESULT OF A SHAM OR UNREAL TRANSACTION AND THAT THE TRANSFER BY THE PARTNER OF HIS PERSONAL ASSET TO PARTNERSHIP FIRM REPRESENTS A GENUINE INTENTION TO CONTRIBUTE TO THE SHARE CAPITAL OF THE FIRM FOR THE PURPOSE OF CARRYING ON THE PARTNERSHIP BUSINESS. IF THE TRANSF ER OF THE PERSONAL ASSET BY THE, ASSESSEE TO A PARTNERSHIP IN WHICH HE IS OR BECOMES A PARTNER IS MERELY A DEVICE OR RUSE FOR CONVERTING T HE ASSET INTO MONEY WHICH WOULD SUBSTANTIALLY REMAIN AVAILABLE FO R HIS BENEFIT WITHOUT LIABILITY TO INCOME-TAX ON A CAPITAL GAIN, IT WILL BE OPEN TO THE INCOME-TAX AUTHORITIES TO GO BEHIND THE TRANSACTION AND EXAMINE WHETHER THE TRANSACTION OF CREATING THE PARTNERSHIP IS A GENUINE OR A SHAM TRANSACTION AND, EVEN WHERE THE PARTNERSHIP IS GENUINE, THE TRANSACTION OF TRANSFERRING THE PERSONAL ASSET TO T HE PARTNERSHIP FIRM REPRESENTS A REAL ATTEMPT TO CONTRIBUTE TO THE SHAR E CAPITAL OF THE PARTNERSHIP FIRM FOR THE PURPOSE OF CARRYING ON THE PARTNERSHIP BUSINESS OR IS NOTHING BUT A DEVICE OR RUSE TO CONV ERT THE PERSONAL ASSET INTO MONEY SUBSTANTIALLY FOR THE BENEFIT OF T HE ASSESSEE WHILE EVADING TAX ON A CAPITAL GAIN. THE, INCOME- TAX OFF ICER WILL BE ENTITLED TO CONSIDER ALL THE RELEVANT INDICIA IN TH IS REGARD, WHETHER THE PARTNERSHIP IS FORMED BETWEEN THE ASSESSEE AND HIS WIFE AND CHILDREN OR SUBSTANTIALLY LIMITED TO THEM, WHETHER THE PERSONAL ASSET IS SOLD BY THE PARTNERSHIP FIRM SOON AFTER IT IS TR ANSFERRED BY THE ASSESSEE TO IT, WHETHER THE PARTNERSHIP FIRM HAS NO SUBSTANTIAL OR REAL BUSINESS OR THE RECORD SHOWS THAT THERE WAS NO REAL NEED FOR THE PARTNERSHIP FIRM FOR SUCH CAPITAL CONTRIBUTION FROM THE ASSESSEE. ALL THESE AND OTHER PERTINENT CONSIDERATIONS MAY BE TAKEN INTO REGARD WHEN THE INCOME-TAX OFFICER ENTERS UPON A SC RUTINY OF THE TRANSACTION, FOR, IN THE TASK OF DETERMINING WHETHE R A TRANSACTION IS A SHAM OR ILLUSORY TRANSACTION OR A DEVICE OR RUSE, HE IS ENTITLED TO PENETRATE THE VEIL COVERING IT AND ASCERTAIN THE TR UTH. IN THE RESULT, THE QUESTIONS WHICH ARISE IN THESE A PPEALS ARE ANSWERED AS FOLLOWS : 1. THERE WAS A TRANSFER OF THE SHARES WHEN THE MADE THEM OVER TO THE PARTNERSHIP FIRM AS HIS CAPITAL CONTRIBUTION. 2. WHEN THE ASSESSEE TRANSFERRED HIS SHARES TO THE PARTNERSHIP FIRM, HE RECEIVED NO CONSIDERATION WITHIN THE MEANING OF SECTION 48 OF THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 152 INCOME-TAX ACT, 1961, NOR DID ANY PROFIT OR GAIN AC CRUE TO HIM FOR THE PURPOSE OF SECTION 45 OF THE INCOME-TAX ACT, 19 61. THESE ANSWERS ARE GIVEN BY US SUBJECT TO THE RESERV ATIONS MADE BY US IN THE PRECEDING PARAGRAPH. THE APPEALS ARE PARTLY ALLOWED AND THERE IS NO ORDE R AS TO COSTS . 5.5. IT IS NOTEWORTHY THAT WHILE COMING TO THE AFO RESAID CONCLUSION, THE HON'BLE APEX COURT ALSO CONSIDERED FOLLOWING JUDICIAL PRONOUNCEMENTS:- I. ABDUL RAHIM (A.), TRAVANCORE CONFECTIONERY WORKS V. CIT [1977] 110 ITR 595 (KER) [FB] II. ADDANKI NARAYANAPPA V. BHASKARA KRISHNAPPA [1966] AIR 1966 SC 1300 (SC) III. ADDANKI XARAYANAPPA BHASKARA KRISHNAPPA [1966] 3 SCR 400 IV. BAFNA TEXTILES V. ITO [1975] 98 ITR 1 (KAR) V. CALCUTTA CO. LTD. V. CIT [1959] 37 ITR 1 (SC) VI. CTT V-. BAI SHIRINBAI K. IVOOKA [1962] 46 ITR 86 (S C) VII. CIT V. BANKEY LAI VAIDYA [1971] 79 ITR 594 (SC) VIII. CIT VS. BIRLA GWALIOR P. LTD. [1973] 89 ITR 266 (SC) IX. CIT VS DEWAS CINE CORPORATION [1968] 68 ITR 240 (SC) X. CIT HIND CONSTRUCTION LTD. [1972] 83 ITR 211 (SC) XI. CIT JANAB X. HVATH BATCHA SAHIB [1969]72 1TR 528 (MAD) XII. CIT C. KUNHAMMED (C.M.) [1974] 94 ITR 179 (KER) XIII. CIT MOHANBHAI PAMABHAI [1973] 91 ITR 393 (GUJ) XIV. CIT V. NATARAJ MOTOR SERVICE [1972] 86 ITR 109 (KER) XV. CIT (ADDL.) V. VASANAIK (M.A.J.) [1979] 116 ITR 110 (KAR) XVI. DHUN DADABHOY KAPADIA (MISS) V. CIT [1967] 63 ITR 651 (SC) SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 153 XVII. FIRM RAM SAHAY MALL RAMESHWAR DAYAL V. BISHWANATH PRASAD [1963] AIR 1963 PAT 221 (PAT) XVIII. KACKKAR (M.C.) (DR.) V. CIT [1973] 92 ITR 87 (ALL) XIX. KAY ENGINEERING CO. V. CIT [1971] 82 ITR 950 (P&H) XX. MALABAR FISHERIES CO. V. CIT [1979] 120 ITR 49 (SC) XXI. POONA ELECTRIC SUPPLY CO. LTD. V. CIT [1965] 57 ITR 521 (SC) XXII. SUDHANSU KANTA V. MANINDRA NATH [1965] AIR PAT 144 (PAT) 5.6. THE STAND OF THE ASSESSEE IS FURTHER FORTIFIE D BY THE DECISION IN THE CASE OF VALI PATTABHIRAM RAO VS SHR I RAMANUJA GINNING & RICE FACTORY (PURCHASE) LTD. (1986) 60 CO MP CAS 568. HON'BLE ANDHRA PRADESH HIGH COURT HELD THAT T HERE IS NO TRANSFER UNDER GENERAL LAW, IF THE CONSTITUTION OF THE FIRM IS CHANGED TO THAT OF A COMPANY BY REGISTERING IT UNDE R THE PART-IX OF THE COMPANIES ACT AS THERE SHALL BE STATUTORY VE STING OF THE TITLE OF ALL THE PROPERTIES OF THE FIRM IN THE NEWL Y INCORPORATED COMPANY WITHOUT ANY NEED FOR SEPARATE CONVEYANCE. I DENTICAL RATIO WAS LAID DOWN IN THE CASE OF INCOME TAX OFFIC ER VS GULABDAS PRINTERS AND VISHAL CONTAINERS PVT. LTD. V S ACIT BY THE AHMEDABAD BENCH OF THE TRIBUNAL, WHICH HAS BEEN DEALT WITH BY THE LD. FAA IN PARA 31 AND 32 (PAGE-46 AND 47 ) OF THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 154 IMPUGNED ORDER. IDENTICALLY, THE DELHI BENCH OF THE TRIBUNAL IN KRISHNA ELECTRICAL INDUSTRIES VS DCIT (2004)82 TTJ 575 OBSERVED AS UNDER:- 3.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS RETURN ON 31ST OCT., 1993, DECLARING AN INCOME OF RS. 11.5 2 LAKHS. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF MANUFACTUR ING AND TRADING OF POWER CABLE. THE FIRM WAS ORIGINALLY CONSTITUTED IN 1968-69. THE CONSTITUTION OF THE FIRM WAS CHANGED FROM TIME TO T IME, AS SOME OF THE PARTNERS WERE RETIRED AND JOINED. DURING THE YE AR UNDER CONSIDERATION, THE FIRM GOT ITSELF CONVERTED INTO A COMPANY UNDER THE NAME AND STYLE OF KEI. INDUSTRIES LTD. THIS CONVERS ION WAS MADE AS LIMITED COMPANY UNDER CHAPTER IX OF THE COMPANIES A CT. AS A RESULT OF THE FORMULA OF THE AFORESAID COMPANY, THE BUSINE SS OF THE FIRM WITH ALL ITS ASSETS AND LIABILITIES GOT AUTOMATICALLY VE STED IN THE COMPANY. BEFORE CONVERSION INTO COMPANY, THE FIRM REVALUED I TS LAND AND FACTORY BUILDING, WHICH WAS ADOPTED AT RS. 80 LAKHS AND RS. 10 LAKHS, RESPECTIVELY, BASED UPON THE VALUATION REPORT OF TH E REGISTERED VALUER. HOWEVER, THE ASSESSEE-FIRM DID NOT CHARGE DEPRECIAT ION ON THE ENHANCED VALUE OF LAND AND FACTORY BUILDING, RESULT ING ON ACCOUNT OF REVALUATION. THE AO, IN VIEW OF THE FACT THAT ASSES SEE-FIRM GOT CONVERTED INTO A LIMITED COMPANY, WAS OF THE VIEW T HAT THERE WAS A TRANSFER WITHIN THE MEANING OF S. 2(47) OF THE IT A CT AND ACCORDINGLY DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY SHORT-TE RM CAPITAL GAIN BE NOT ASSESSED TO TAX, AS PROVIDED UNDER S. 50 OF THE ACT. IN REPLY, IT WAS STATED THAT AS CONVERSION OF PARTNERSHIP FIRM I NTO A LIMITED COMPANY, DOES NOT INVOLVE ANY TRANSFER AND AS SUCH NO CAPITAL GAIN IS LIABLE TO BE ASSESSED. IT WAS FURTHER SUBMITTED THA T THERE WAS NO TRANSFER, BUT ONLY A CONVERSION OF THE FIRM INTO A LIMITED COMPANY, AS ALL THE ASSETS AND LIABILITIES WERE MERGED WITH THE COMPANY. IN SUPPORT OF THIS CONTENTION, A DETAILED NOTE WAS FIL ED. THE PROVISIONS OF S. 575 OF THE COMPANIES ACT WERE ALSO RELIED UPON. THE RELIANCE WAS ALSO PLACED ON VARIOUS CASE LAW. IT WAS ALSO SUBMIT TED THAT ALL THE PARTNERS IN THE ERSTWHILE FIRM WERE OWNING THE ENTI RE EQUITY SHARE CAPITAL OF THE COMPANY. THEREFORE, THE COMPANY WAS FORMULATED FROM THE FIRM AS A GOING CONCERN. ACCORDINGLY, IT WAS SU BMITTED THAT WHEN AN UNDERTAKING AS A WHOLE IS TRANSFERRED AS A GOING CONCERN TOGETHER WITH ITS GOODWILL AND ALL OTHER ASSETS AND LIABILIT IES, THEREFORE, IT CANNOT BE SAID THAT THERE WAS ANY TRANSFER. ACCORDI NGLY, NO CAPITAL GAIN ARISES. HOWEVER, THE AO WAS NOT SATISFIED. IN HIS VIEW, THE FIRM HAS TRANSFERRED ITS ASSETS AND LIABILITIES TO THE C OMPANY, THEREFORE, PROVISIONS OF S. 45(4) OF THE ACT WERE APPLICABLE. WHILE HOLDING SO, THE AO PLACED RELIANCE ON VARIOUS DECISIONS, REPORT ED IN (1989) 177 SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 155 ITR 98 (SIC); CIT VS. R.R. RAMAKRISHNA PILLAI (1967) 66 ITR 725 (SC) AND ORISSA CEMENT LTD. VS. CIT (1971) 80 ITR 901 (DEL), AND THEREAFTER THE AO BROUGHT THE AMOUNT OF RS. 80 LAKHS TO TAXATION U NDER S. 112 OF THE IT ACT. 3.2 SAME ARGUMENTS WERE REITERATED BEFORE THE CIT(A ) AS WERE MADE BEFORE THE AO. THE RELIANCE WAS ALSO PLACED ON VARI OUS CASE LAW. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND PER USING OTHER MATERIAL ON RECORD, THE CIT(A) WAS OF THE VIEW THAT PROVISIONS OF S. 45(4) ARE NOT APPLICABLE ON THE FACTS OF THE PRESEN T CASE, AS THIS IS NOT A CASE OF TRANSFER BECAUSE THE FIRM AS A WHOLE WAS CONVERTED INTO A COMPANY. THE ISSUE WAS DISCUSSED BY THE CIT(A) AT GREAT LENGTH. EACH AND EVERY OBJECTION RAISED BY THE AO WAS CONSI DERED AND THEN THE CONCLUSION WAS ARRIVED AT THAT THIS IS NOT A CA SE OF TRANSFER. THE CIT(A) HAS CONSIDERED THAT WHETHER THE FIRM CAN BE REGISTERED AS A LIMITED COMPANY UNDER CHAPTER IX OF THE COMPANIES A CT, AND WHAT IS THE SCOPE OF MEANING OF S. 575 OF THE COMPANIES ACT AND WHAT IS THE MEANING OF THE WORD 'TRANSFER' UNDER THE PROVISIONS OF SS. 2(47) AND 54(5) (SIC) OF THE ACT, AND WHAT IS THE LEGAL POSIT ION BEFORE INSERTION OF S. 45(4) OF THE IT ACT AND WHETHER AUTOMATIC VES TING OF THE ASSETS AND LIABILITIES IN THE NEW COMPANY WILL AMOUNT TO T RANSFER OF ASSET, AND WHAT IS THE SCOPE OF S. 45(4) OF THE ACT THAT W HETHER DISTRIBUTION OF ASSETS IS A MUST. AFTER DISCUSSING ALL THESE PRO VISIONS OF LAW IN DETAIL AND PLACING RELIANCE ON VARIOUS CASE LAW, RE PORTED IN E.I.D. PARRY LTD. VS. CIT (1988) 98 CTR (MAD) 49 : (1988) 174 ITR 11 (MAD) AND IN THE CASE OF MAHARAJADHIRAJ SIR KAMESHWAR SINGH V S. CIT (1963) 48 ITR 483 (PAT), THE CIT(A) HELD THAT THERE IS NO TRANSFER OF CAPITAL ASSET FROM THE FIRM TO THE COMPANY AND, THEREFORE, THE PR OVISIONS OF R S. 112 OF THE IT ACT R/W S. 45(4) CANNOT BE APPLIED, A ND ACCORDINGLY IT WAS HELD THAT THE AO WRONGLY BROUGHT THE AMOUNT TO CAPITAL GAIN. THUS, THE ADDITION MADE BY THE AO WAS DELETED. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 3.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COU NSEL OF THE ASSESSEE FIRSTLY STRONGLY SUPPORTED THE ORDER OF TH E CIT(A) AND THEN IT WAS SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DEC IDED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TE XSPIN ENGINEERING & MANUFACTURING WORKS (2003) 180 CTR (BOM) 497 . IT WAS FURTHER STATED THAT THE PROVISIONS OF S. 45(4), ALO NG WITH S. 47, CL. (XIII), WHICH WAS AMENDED W.E.F. 1ST APRIL, 1999, W ERE CONSIDERED AND THEN THE DECISION OF THE BOMBAY BENCH OF THE TRIBUN AL REPORTED IN TEXSPIN ENGINEERING & MANUFACTURING WORKS VS. JT. C IT (2001) 70 TTJ (MUMBAI) 789 WAS CONFIRMED BY THE HON'BLE BOMBAY HIGH COURT. TH E ATTENTION OF THE BENCH WAS DRAWN ON THE COPY OF THE ORDERS PLACED ON RECORD. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 156 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THEM CAREFULLY. AFTER PERUSING THE RELEVANT MATERIAL, AL ONG WITH VARIOUS CASE LAW RELIED UPON BY BOTH THE PARTIES, WE FIND T HAT THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THERE WAS NO TRANSFER, HE NCE NO CAPITAL GAIN ARISES. WE NOTED THAT THE COMPANY WAS REGISTERED UN DER CHAPTER IX OF THE COMPANIES ACT, 1956, WHICH WAS CONVERTED FRO M A PARTNERSHIP FIRM. WE FURTHER NOTED THAT THE COMPANY WAS REGISTE RED UNDER CHAPTER IX OF THE COMPANIES ACT, IN VIEW OF THE PRO VISIONS OF S. 575, MEANS THEREBY THAT THERE WAS NO PHYSICAL TRANSFER O F ASSETS, BUT THERE WAS AN AUTOMATIC VESTING OF ALL THE ASSETS AN D LIABILITIES OF THE ERSTWHILE FIRM TO THE COMPANY. THERE IS NO TRANSFER FROM ONE HAND TO ANOTHER HAND, AS ALL THE PARTNERS IN THE FIRM BECAM E SHAREHOLDERS IN EQUAL PROPORTION OF THEIR CAPITAL WITH THE FIRM. NE ITHER ANY CONSIDERATION WAS RECEIVED BY THE FIRM OR THEIR PAR TNERS, NOR THERE WAS A RECEIVABLE BY THE FIRM OR THE PARTNERS FROM T HE COMPANY, THEREFORE, ATLEAST FIRM CANNOT BE BROUGHT TO TAX UN DER S. 112 OF THE IT ACT. IT IS STATED IN THE ORDER OF THE AO AND CIT(A) HIMSELF THAT THERE WAS NO TRANSFER OF ASSET BUT IT WAS A CONVERSION IN TO COMPANY BY THE FIRM AS A WHOLE. THEREFORE, IT CANNOT BE SAID THAT IT WAS A CASE OF EXCHANGE OF PROPERTY OR TRANSFER OF PROPERTY FROM O NE PERSON TO ANOTHER PERSON. 3.5 IN THE CASE OF SUNIL SIDDARTHBHAI VS. CIT (1985 ) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC), THE HON'BLE SUPREME COURT HAS DISCUSSED THE ISSUE IN REGARD TO TRANSFER OF PROPERTY AND ONE OF THE FINDINGS OF THE HON'BLE APEX COURT IS THAT IF THERE WAS A TRANSFER OF SHARES BUT THE PERSON HAS GOT NO CONSIDERATION WITHIN THE MEANING OF S. 48, THEN IN THAT CASE NO PROFIT OR GAIN ACCRUED TO HIM FOR THE PURPOSE OF S. 45 OF THE ACT. IT WAS FURTHER OBSERVED BY THE HON'BLE COU RT THAT WHERE THE ENTIRE BUNDLE OF RIGHTS FROM THE TRANSFEROR HAS BEE N MADE AND RIGHTS OF THE TRANSFEROR HAVE NOT REDUCED, THEN IN THAT CA SE ALSO PROVISIONS OF S. 45 ARE NOT APPLICABLE. HOWEVER, IT HAS BEEN O BSERVED BY THE APEX COURT THAT IF THE RIGHTS OF THE PERSON ARE RED UCED IN TRANSFERRING THE ASSETS TO ANOTHER PERSON, THEN OF COURSE IT TAN TAMOUNTS TO TRANSFER OF INTEREST. 3.6 IN THE PRESENT CASE, UNDISPUTEDLY THE ASSETS AN D LIABILITIES OF THE ERSTWHILE FIRM WERE CONVERTED INTO COMPANY AS A WHO LE AND ALL THE PARTNERS OF THE FIRM WERE ALLOTTED SHARES OF THE CO MPANY IN EQUAL PROPORTION WHICH WAS IN THE FIRM. THEREFORE, THE IN TEREST OF THE PARTNERS WAS NOT REDUCED IN ANY WAY, NEITHER R ANY AMOUNT WAS PAID SEPARATELY TO THE FIRM OR THE PARTNERS ON ACCOUNT O F GOODWILL OR ON ACCOUNT OF REVALUATION OF ASSETS. THEREFORE, THE PR OVISIONS OF S. 45(4) OF THE IT ACT R/W S. 112 OF THE ACT ARE NOT APPLICA BLE ON THE FACTS OF THE PRESENT CASE. 3.7 ON SIMILAR FACTS, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TEXSPIN ENGINEERING & MANUFACTURING WORKS ( SUPRA) HELD THAT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 157 THE PROVISIONS OF S. 45(4) ARE NOT APPLICABLE WHERE THE FIRM AS A WHOLE WAS CONVERTED INTO A COMPANY. WHILE HOLDING S O, THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED THE ISSUE IN DETAIL . SOME OF THE OBSERVATIONS AND FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER : 'HELD : UNDER S. 45(4) TWO CONDITIONS ARE REQUIRED TO BE SATISFIED VIZ., TRANSFER BY WAY OF DISTRIBUTION OF CAPITAL ASSETS, AND SECONDLY, SUCH TRANSFER SHOULD BE ON DISSOLUTION OF THE FIRM OR OT HERWISE. ONCE THESE TWO CONDITIONS ARE SATISFIED THEN, IN THAT EVENT, F OR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS UNDER S. 48, THE MARKE T VALUE ON THE DATE OF THE TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER. IN THIS CASE, THE ERSTWHILE FIRM HAS BEEN TREATED AS A LIMI TED COMPANY BY VIRTUE OF S. 575 OF THE COMPANIES ACT. UNDER PART I X OF THE COMPANIES ACT, WHEN A PARTNERSHIP FIRM IS TREATED A S A LIMITED COMPANY, THE PROPERTIES OF THE ERSTWHILE FIRM VEST IN THE LIMITED COMPANY. THERE IS A DIFFERENCE BETWEEN VESTING OF T HE PROPERTY, IN THIS CASE, IN THE LIMITED COMPANY AND DISTRIBUTION OF THE PROPERTY. ON VESTING IN THE LIMITED COMPANY UNDER PART IX OF THE COMPANIES ACT, THE PROPERTIES VEST IN THE COMPANY AS THEY EXIST. O N THE OTHER HAND, DISTRIBUTION ON DISSOLUTION PRE-SUPPOSES DIVISION, REALIZATION, ENCASHMENT OF ASSETS AND APPROPRIATION OF THE REALI ZED AMOUNT AS PER THE PRIORITY LIKE PAYMENT OF TAXES TO THE GOVERNMEN T, BMC, ETC., PAYMENT TO UNSECURED CREDITORS, ETC. THIS DIFFERENC E IS VERY IMPORTANT. IN THE PRESENT CASE, THEREFORE, S. 45(4) IS NOT ATTRACTED AS THE VERY FIRST CONDITION OF TRANSFER BY WAY OF DIST RIBUTION OF CAPITAL ASSETS IS NOT SATISFIED. IN THE CIRCUMSTANCES, THE LATER PART OF S. 45(4), WHICH REFERS TO COMPUTATION OF CAPITAL GAINS UNDER S. 48 BY TREATING FAIR MARKET VALUE OF THE ASSET ON THE DATE OF TRANSFER, DOES NOT ARISE'MALABAR FISHERIES CO. VS. CIT (1979) 12 CTR (SC) 415 : (1979) 120 ITR 49 (SC) APPLIED. CLAUSE (XIII) OF S. 47 THOUGH NOT APPLICABLE HERE, IT PROVIDES A CLUE TO THE LEGISLATIVE INTENT. IT HAS BEEN INTRODUCED W.E. F. 1ST APRIL, 1999, IN ORDER TO ENCOURAGE MORE AND MORE FIRMS BECOMING LIM ITED COMPANIES. IT ALSO INDICATES THE DIFFERENCE BETWEEN TRANSFER AND TRANSMISSION. BASICALLY, WHEN A FIRM IS TREATED AS A COMPANY UNDER PART IX, IT IS A CASE SIMILAR TO TRANSMISSION. THIS IS AMPLY MADE CLEAR BY CL. (XIII) TO S. 47, WHICH STATES THAT WHERE A F IRM IS SUCCEEDED BY A COMPANY IN THE BUSINESS, THE TRANSACTION SHALL NOT BE TREATED AS A TRANSFER. THE EXPRESSION 'TRANSFER OF A CAPITAL ASS ET' IN S. 45(1) IS REQUIRED TO BE R/W S. 2(47)(II) WHICH STATES THAT T RANSFER IN RELATION TO A CAPITAL ASSET SHALL INCLUDE EXTINGUISHMENT OF ANY RIGHTS THEREIN. IN CERTAIN CASES OF RECONSTITUTION OF FIRMS AND INTROD UCTION OF NEW PARTNERS, THERE IS A RESULTANT EXTINGUISHMENT OF TH E RIGHTS IN THE CAPITAL ASSETS PROPORTIONATELY. IN ORDER TO GET OVE R THIS CONTROVERSY AND KEEPING IN MIND THE OBJECT OF ENCOURAGING FIRMS BEING TREATED AS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 158 COMPANIES, THE CONTROVERSY IS RESOLVED BY THE LEGIS LATURE BY INTRODUCING CL. (XIII) IN S. 47 W.E.F. 1ST APRIL, 1 999. WHEN A PARTNERSHIP FIRM IS TREATED AS A COMPANY UND ER THE STATUTORY PROVISIONS OF PART IX OF THE COMPANIES ACT, THE COM PANY SUCCEEDS THE FIRM. GENERALLY, IN THE CASE OF A TRANSFER OF A CAP ITAL ASSET, TWO IMPORTANT INGREDIENTS ARE : EXISTENCE OF A PARTY AN D A COUNTER-PARTY AND, SECONDLY, INCOMING CONSIDERING QUA THE TRANSFE ROR. WHEN A FIRM IS TREATED AS A COMPANY, THE SAID TWO CONSIDERATION S ARE NOT ATTRACTED. THERE IS NO CONVEYANCE OF THE PROPERTY E XECUTABLE IN FAVOUR OF THE LIMITED COMPANY. IT IS NO DOUBT TRUE THAT ALL PROPERTIES OF THE FIRM VEST IN THE LIMITED COMPANY ON THE FIRM BEING TREATED AS A COMPANY UNDER PART IX OF THE COMPANIES ACT, BUT THA T VESTING IS NOT CONSEQUENT OR INCIDENTAL TO A TRANSFER. IT IS A STA TUTORY VESTING OF PROPERTIES IN THE COMPANY AS THE FIRM IS TREATED AS A LIMITED COMPANY. ON VESTING OF ALL THE PROPERTIES STATUTORI LY IN THE COMPANY, THE CLOAK GIVEN TO THE FIRM IS REPLACED BY A DIFFER ENT CLOAK AND THE SAME FIRM IS NOW TREATED AS A COMPANY, AFTER A GIVE N DATE. IN THE CIRCUMSTANCES, THERE IS NO TRANSFER OF A CAPITAL AS SET AS CONTEMPLATED BY S. 45(1). EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THERE IS A TRANSFER OF A CAPITAL ASSET UNDER S. 45(1) BECAUSE OF THE DEFINITION OF THE WORD 'TRANSFER' IN S. 2(47)(III), EVEN THEN LIA BILITY TO PAY CAPITAL GAINS WOULD NOT ARISE BECAUSE S. 45(1) IS REQUIRED TO BE READ WITH S. 48, WHICH PROVIDES FOR MODE OF COMPUTATION. THESE T WO SECTIONS ARE REQUIRED TO BE READ TOGETHER AS THE CHARGING SECTIO N AND THE COMPUTATION SECTION CONSTITUTE ONE PACKAGE. NOW, UN DER S. 48 IT IS LAID DOWN, INTER ALIA, THAT THE INCOME CHARGEABLE U NDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT O F THE TRANSFER, THE COST OF ACQUISITION OF THE ASSET AND THE EXPENDITUR E INCURRED IN CONNECTION WITH THE TRANSFER. SEC. 45(4) IS MUTUALL Y EXCLUSIVE TO S. 45(1). ON HAS TO READ THE EXPRESSION 'FULL VALUE OF THE CONSIDERATION RECEIVED/ACCRUING' UNDER S. 48 DE HORS S. 45(4) AND IF ONE READS S. 48 WITH S. 45(1) DE HORS S. 45(4) THEN THE EXPRESSION 'FULL VALUE OF CONSIDERATION' IN S. 48 CANNOT BE THE MARKET VALUE OF THE CAPITAL ASSET ON THE DATE OF TRANSFER. IN THE CIRCUMSTANCES , EVEN IF ONE WERE TO PROCEED ON THE BASIS THAT VESTING IN THE COMPANY UNDER PART IX CONSTITUTED TRANSFER UNDER S. 45(1), STILL THE ASSE SSEE OUGHT TO SUCCEED BECAUSE THE FIRM CAN BE ASSESSED ONLY IF TH E FULL VALUE OF THE CONSIDERATION IS RECEIVED BY THE FIRM OR IF IT ACCR UES TO THE FIRM. IN THE PRESENT CASE, THE COMPANY HAD ALLOTTED SHARES TO TH E PARTNERS OF THE ERSTWHILE FIRM, BUT THAT WAS IN PROPORTION TO THE C APITAL OF THE PARTNERS IN THE ERSTWHILE FIRM. THAT ALLOTMENT OF S HARES HAD NO CORRELATION WITH THE VESTING OF THE PROPERTIES IN T HE LIMITED COMPANY UNDER PART IX OF THE ACT. IF ONE READS S. 45(1) WIT H S. 48, IT IS CLEAR THAT THE FORMER IS A CHARGING SECTION AND IF THAT S ECTION IS APPLICABLE, THE COMPUTATION HAS TO BE DONE UNDER S. 48, WHICH O NLY REFERS TO DEDUCTIONS FROM FULL VALUE OF CONSIDERATION RECEIVE D OR ACCRUING. SEC. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 159 48 DOES NOT EMPOWER THE AO TO TAKE MARKET VALUE AS FULL VALUE OF CONSIDERATION AS IN THE CASE OF S. 45(4). IN THE CI RCUMSTANCES, EVEN IF ONE WERE TO HOLD THAT VESTING AMOUNTS TO TRANSFER, THE COMPUTATION IS NOT POSSIBLE BECAUSE FULL CONSIDERATION CANNOT BE C ONSTRUED TO MEAN MARKET VALUE OF THE ASSET TRANSFERRED. THE LEGISLAT URE, IN ITS WISDOM, HAS AMENDED ONLY S. 45(4) BY WHICH THE MARKET VALUE OF THE ASSET ON THE DATE OF THE TRANSFER IS DEEMED TO BE THE FULL V ALUE OF CONSIDERATION. HOWEVER, SUCH AMENDMENT IS NOT THERE IN S. 45(1). IN THE CIRCUMSTANCES, NEITHER S. 45(1) NOR S. 45(4) ST ANDS ATTRACTED. CIT & ANR. VS. GEORGE HENDERSON & CO. LTD. (1967) 66 ITR 622 (SC) AND CIT VS. GILLANDERS ARBUTHNOT & CO. 1973 CTR (SC) 136 : (1973) 87 ITR 407 (SC) RELIED ON. CONCLUSION : CONVERSION OF PARTNERSHIP FIRM INTO CO MPANY UNDER PART IX OF THE COMPANIES ACT DID NOT ATTRACT THE PROVISI ONS OF S. 45(4) AS THERE WAS NO DISTRIBUTION OF CAPITAL ASSETS ON DISS OLUTION; PROVISIONS OF S. 45(1) ALSO COULD NOT BE APPLIED AS THE VESTIN G OF THE PROPERTIES OF THE FIRM IN THE COMPANY WAS NOT CONSEQUENT OR IN CIDENTAL TO A TRANSFER AS CONTEMPLATED BY S. 45(1).' 3.8 THE FACT OF THE CASE BEFORE THE BOMBAY HIGH COU RT AND THE FACTS INVOLVED IN THE PRESENT CASE, AS STATED ABOVE, ARE SIMILAR. THEREFORE, IN VIEW OF THE REASONING GIVEN BY THE CIT(A) AND TH E REASONING OF OURS AND IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT (SUPRA), WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 4. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED . 5.7. IN THE LIGHT OF THE FOREGOING DISCUSSION, ON CONSIDERATION OF FACTS NARRATED BEFORE US AND FOLLO WING THE DECISION FROM HON'BLE APEX COURT, HON'BLE HIGH COUR T AND THE DECISION FROM THE CO-ORDINATE BENCHES OF THE TRIBUN AL, CONVERSION OF PARTNERSHIP FIRM INTO A COMPANY UNDER CHAPTER IX OF THE COMPANIES ACT, 1956, WE ARE OF THE CONSID ERED OPINION THAT PROVISIONS OF SECTIONS 45 R.W.S 112 OF THE ACT IS NOT ATTRACTED AS THE ASSET AND LIABILITY OF THE ERS TWHILE FIRM SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 160 VESTED IN THE COMPANY AS A WHOLE AND THE INTEREST O F THE PARTNERS WAS NOT REDUCED IN ANY WAY NOR ANY AMOUNT WAS PAID SEPARATELY TO THE FIRM OR TO THE PARTNERS ON ACCOUN T OF GOODWILL OR ON ACCOUNT OF REVALUATION OF ASSETS. OUR VIEW F IND CLEAR SUPPORT FROM THE DECISION FROM HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS TEXSPIN ENGINEERING WOR KS ((SUPRA)) AND ALSO VARIOUS DECISIONS RELIED UPON FR OM HON'BLE APEX COURT AND ALSO FROM THE COORDINATE BENCHES OF THE TRIBUNAL. WE AFFIRM THE STAND OF THE LD. COMMISSION ER OF INCOME TAX (APPEAL), RESULTING INTO DISMISSAL OF AP PEALS OF THE REVENUE. 6. NOW, WE SHALL TAKE UP THE CROSS OBJECTION (C.O. 58/MUM/2016) ARISING OUT OF ITA NO.6479/MUM/2014, WHEREIN, CONFIRMATION OF ACTION WITH RESPECT OF ISS UANCE OF VALIDITY OF NOTICE U/S 153C OF THE ACT HAS BEEN CHA LLENGED. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WI TH THE JURISDICTIONAL ISSUE RAISED BY THE ASSESSEE, THEREF ORE, THIS CROSS OBJECTION HAS REMAINED FOR ACADEMIC INTEREST ONLY AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 161 7. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE IN THE CASE OF SMT. HEMLATA S. SHETTY (ITA NOS.2908, 2 909, 215, 2910 AND 2911/MUM/2015) AND CROSS OBJECTIONS FILED BY THE ASSESSEE (C.O. NOS. 210 TO 213/MUM/2016 AND C.O. 269/MUM2016). 7.1. DURING HEARING, THE LD. CIT-DR CONTENDED THAT THE APPEAL OF THE REVENUE IN ITA NO.2908 TO 2911/MUM/20 15 ARE BARRED BY LIMITATION BY 38 DAYS, THEREFORE, THE DEL AY MAY BE CONDONED. THE LD. COUNSEL FOR THE ASSESSEE, OPPOSED CONDONATION OF DELAY BY CONTENDING THAT THE REVENUE IS EXPECTED TO EXPLAIN THE DELAY OF EACH DAY. 7.2. SO FAR AS, CONDONATION OF DELAY IS CONCERNED, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ASSERT IONS MADE BY THE LD. RESPECTIVE COUNSEL, SO FAR AS, CONDONATION OF DELAY IS CONCERNED NO DOUBT FILING OF AN APPEAL IS A RIGHT G RANTED UNDER THE STATUTE TO THE ASSESSEE AND IS NOT AN AUTOMATIC PRIVILEGE, THEREFORE, THE ASSESSEE IS EXPECTED TO BE VIGILANT IN ADHERING TO THE MANNER AND MODE IN WHICH THE APPEALS ARE TO BE FILED IN SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 162 TERMS OF THE RELEVANT PROVISIONS OF THE ACT. NEVERT HELESS, A LIBERAL APPROACH HAS TO BE ADOPTED BY THE APPELLATE AUTHORITIES, WHERE DELAY HAS OCCURRED FOR BONA-FIDE REASONS ON THE PART OF THE ASSESSEE OR THE REVENUE IN FILING T HE APPEALS. IN MATTERS CONCERNING THE FILING OF APPEALS, IN EXE RCISE OF THE STATUTORY RIGHT, A REFUSAL TO CONDONED THE DELAY CA N RESULT IN A MERITORIOUS MATTER BEING THROWN OUT AT THE THRESHOL D, WHICH MAY LEAD TO MISCARRIAGE OF JUSTICE. THE JUDICIARY I S RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALIZE IN JUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUS TICE AND IS EXPECTED TO DO SO. 7.3. THE HONBLE APEX COURT IN A CELEBRATED DECIS ION IN COLLECTOR, LAND ACQUISITION VS MST. KATIJI & ORS. 1 67 ITR 471 OPINED THAT WHEN TECHNICAL CONSIDERATION AND SUBSTA NTIAL JUSTICE ARE PITTED AGAINST EACH OTHER, THE COURTS ARE EXPEC TED TO FURTHER THE CAUSE OF SUBSTANTIAL JUSTICE. THIS IS FOR THE REASON THAT AN OPPOSING PARTY, IN A DISPUTE, CANNOT HAVE A VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON- DELIBERATE D ELAY. THEREFORE, IT FOLLOWS THAT WHILE CONSIDERING MATTER S RELATING TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 163 THE CONDONATION OF DELAY, JUDICIOUS AND LIBERAL APP ROACH IS TO BE ADOPTED. IF SUFFICIENT CAUSE IS FOUND TO EXIST, WH ICH IS BONA-FIDE ONE, AND NOT DUE TO NEGLIGENCE OF THE ASSESSEE, THE DELAY NEEDS TO CONDONED IN SUCH CASES. THE EXPRESSION SUFFICI ENT CAUSE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY LA W IN A MEANINGFUL MANNER, WHICH SUB-SERVES THE END OF JUST ICE- THAT BEING THE LIFE PURPOSE OF THE EXISTENCE OF THE INST ITUTION OF THE COURTS. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CON SIDERATION ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTAN TIAL JUSTICE DESERVES TO BE PREFERRED. THE HONBLE APEX COURT IN VEDABHAI VS SANTARAM 253 ITR 798 OBSERVED THAT INORDINATE DELAY CALLS OF CAUTIOUS APPROACH. THIS MEANS THAT THERE SHOULD BE NO MALAFIDE OR DILATORY TACTICS. SUFFICIENT CAUSE SHO ULD RECEIVE LIBERAL CONSTRUCTION TO ADVANCE SUBSTANTIAL JUSTICE . THE HONBLE APEX COURT IN 167 ITR 471 OBSERVED AS UNDER:- 3. THE LEGISLATURE HAS CONFERRED THE POWER TO COND ONE DELAY BY ENACTING SECTION 51 OF THE LIMITATION ACT OF 1963 I N ORDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PARTIES BY DISPOSING OF MATTERS ON DE MERITS. THE EXPRESSION SUFFICIENT CAUSE EMP LOYED BY THE LEGISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COU RTS TO APPLY THE LAW IN A MEANINGFUL MANNER WHICH SUBSERVES THE ENDS OF JUSTICE THAT BEING THE LIFE-PURPOSE OF THE EXISTENCE OF THE INST ITUTION OF COURTS. IT IS COMMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFIABLY LIBERAL APPROACH IN MATTERS INSTITUTED IN THIS COUR T. BUT THE MESSAGE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 164 DOES NOT APPEAR TO HAVE PERCOLATED DOWN TO ALL THE OTHERS COURTS IN THE HIERARCHY. 7.4. FURTHERMORE, THE HON'BLE SUPREME COURT IN THE CASE OF VEDABAI ALIA VAIJAYANATABAI BABURAO PATIL VS. SH ANTARAM BABURAO PATIL 253 ITR 798 HELD THAT THE COURT HAS T O EXERCISE THE DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSTRUING THE EXPRESSION SUFFICIENT CAUSE, THE P RINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANC E. THE COURT HELD THAT THE EXPRESSION SUFFICIENT CAUSE SHOULD RECEIVE LIBERAL CONSTRUCTION. 7.5. THE DECISION OF THE TRIBUNAL IN PEOPLE INFOCO M PRIVATE LTD. V/S CIT (ITA NO.210/MUM/2013) ORDER DATED 19/0 5/2016, M/S NEUTRON SERVICES CENTRE PVT. LTD VS ITO (ITA NO.1180/MUM/2012) ORDER DATED 18/02/2016, SHRI SAIDATTA COOP-. CREDIT SOCIETY LTD. V/S ITO (ITA NO.2379/MUM/2015) ORDER DATED 15/01/2016 AND MR. NIKUNJ BAROT (PROP. ENIGMA) VS ITO (ITA NO.4887/MUM/2015) ORDER DATED 06/01/2016, WHER EIN, SUBSTANTIAL DELAY WAS CONDONED, SUPPORTS THE CASE O F THE PRESENT ASSESSEE. HAVING MADE THE AFORESAID OBSERVA TION AND VARIOUS DECISIONS DISCUSSED HEREINABOVE, INCLUDING FROM HONBLE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 165 APEX COURT, THE CIRCUMSTANCES NARRATED BY THE ASSES SEE, WHEREIN, HE HAS STATED THE REASONS WHICH CAUSED THE DELAY, THEREFORE, THE DELAY IS CONDONED. 8. SO FAR AS, MERITS OF THE APPEAL IS CONCERNED ON LEGAL ISSUE, GROUND RAISED PERTAINS TO ASSUMING JURISDICT ION U/S 153C IS CONCERNED, WE HAVE PERUSED THE IMPUGNED ORDERS A ND FIND THAT THE ISSUE RAISED BEFORE THIS TRIBUNAL BY THE R EVENUE HAS BEEN DEALT WITH BY THE FIRST APPELLATE AUTHORITY. T HE DECISIONS FROM HON'BLE COURTS AND ALSO THE SPECIAL BENCH DECI SION FROM THE MUMBAI BENCH OF THE TRIBUNAL HAS BEEN DEALT WIT H. IN THE EARLIER PARAS OF THIS ORDER, WE HAVE DEALT WITH THI S ISSUE WHILE DELIBERATING UPON IDENTICAL ISSUE. IN PARA 24 OF T HE IMPUGNED ORDER, A FACTUAL FINDING HAS BEEN RECORDED THAT THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES HAS ALREADY BEEN MADE IN THE HANDS OF M/S SKYLARK BUILD, THEREFORE, NO ADDIT ION COULD BE MADE IN THE HANDS OF THE PRESENT ASSESSEE AS THE SA ME WOULD AMOUNT TO DOUBLE TAXATION, THEREFORE, ON LEGAL ISSU E AS WELL AS ON MERIT, THE ASSESSEE IS HAVING A GOOD CASE. RESULTAN TLY, THE APPEAL OF THE REVENUE NEEDS TO BE DISMISSED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 166 9. SO FAR AS, THE CROSS OBJECTIONS RAISED BY THE A SSESSEE, WHICH ARE ARISING OUT OF ABOVE APPEALS IS CONCERNED , THE ASSESSEE HAS CHALLENGED CONFIRMATION OF THE ACTION OF THE ASSESSING OFFICER FOR ISSUING OF NOTICE U/S 153C OF THE ACT. CONSIDERING THE TOTALITY OF FACTS AND THE DISCUSSIO N MADE IN THE EARLIER PARAS, THE CROSS OBJECTIONS OF THE ASSESSEE DESERVES TO BE ALLOWED AS THERE WERE NO PENDING ASSESSMENT OR REAS SESSMENT PROCEEDINGS FOR THE IMPUGNED YEAR, ACCORDINGLY, THE ASSESSMENT BEING UNABATED AND FURTHER THERE WAS NO INCRIMINATI NG MATERIAL DURING THE COURSE OF SUCH PROCEEDINGS, THEREFORE, T HE ADDITION COULD NOT HAVE BEEN MADE ON THE BASIS OF MATERIAL A VAILABLE. THUS, THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLO WED. 10. NOW, WE SHALL TAKE UP THE APPEAL OF THE REV ENUE IN THE CASE OF M/S OASIS REALITY IN ITA NO.4615/MUM/20 15 AND CROSS OBJECTION OF THE ASSESSEE (C.O. 244/MUM/2017) . IT IS NOTED THAT THE C.O. OF THE ASSESSEE IS BARRED BY TI ME FOR 210 DAYS. THE LD. CIT-DR CONTENDED THAT THE DELAY MAY N OT BE CONDONED. THE ASSESSEE HAS FILED A PETITION FOR CON DONATION OF DELAY AND STATING THE REASONS THEREIN. CONSIDERING THE TOTALITY OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 167 FACTS AND THE ASSERTIONS MADE BY THE LD. COUNSEL, O N THE BASIS OF REASONING CONTAINED IN THE EARLIER PARAS OF THIS OR DER, WHEREIN, THE DELAY IN THE APPEALS OF THE REVENUE WAS CONDONE D, THE DELAY IN THE PRESENT CROSS OBJECTION IS ALSO CONDONED. 10.1. SO FAR AS, THE MERITS OF THE APPEAL (ITA NO.4615/MUM/2015) IS CONCERNED, THE DIRECTION TO TH E ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES HAS BEEN CHALLENGED. DURING THE COURSE OF ARGUMENTS, THE LEARNED CIT-DR HAS RELIED UPON THE O RDER OF THE ASSESSING OFFICER WHEREAS THE AR HAS RELIED UPON TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). APART FRO M THIS, THE LEARNED CIT-DR ARGUED THAT AS THE MATTER IN EARLIER YEARS WAS REMITTED BACK TO THE FILE OF CIT(A) AS DECIDED BY T HE HONBLE INCOME TAX APPELLATE TRIBUNAL AND HENCE THIS MATTER MAY ALSO BE REMITTED BACK TO CIT(A). THE AR ON THE OTHER HAN D OBJECTED FOR REMITTING THE MATTER BACK TO CIT(A) ON THE PLEA THAT ON MERITS, THE CIT(A) HAS ALREADY DECIDED THE MATTER O N THE BASIS OF FACTS AND EVIDENCE ON RECORDS. IN THE PRESENT APPEA L, NO ADDITIONS HAVE BEEN MADE ON ACCOUNT OF HAWALA PURCH ASES SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 168 WHEREAS IN THOSE APPEALS ADDITIONS HAD BEEN MADE ON ACCOUNT OF HAWALA PURCHASES. SECONDLY, THE ISSUES INVOLVED IN THIS APPEAL ARE TOTALLY DIFFERENT AS COMPARED TO ISSUES INVOLVED IN APPEALS FOR EARLIER YEARS AND HENCE, HE PLEADED THA T THE ISSUE MAY BE DECIDED ON MERIT. 10.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSMENT ORDER IS A CYCLOSTYLED COPY OF ORDERS PA SSED IN EARLIER YEARS. SOME OF THE PARAS OF THE ORDER EVEN DEAL WIT H HAWALA PURCHASES WHEREAS IN THE PRESENT YEAR THERE IS NO H AWALA PURCHASES. WE ARE SUMMARIZING THE RELEVANT PARAS FO R THE ADDITION MADE IN THE ASSESSMENT ORDER AS UNDER:- GROUNDS OF APPEAL AS DEALT BY AO AS DEALT BY CIT(A) 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LT THE CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 4,45,98,554 ON ACCOUNT OF BOGUS PURCHASE WHICH REMAINED UNEXPLAINED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE REMAND PROCEEDINGS. PARA 10.2 TO 10.6 ON PAGE 8 TO 9 PARA 10.10 & 10.11 ON PAGE NO. 16 & 17 PARA 8 TO 14 ON PAGE 6 TO 12 2.WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LT THE CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 24,39,83,334 WHEREAS THE ADDITIONS WAS MADE ON THE BASIS OF STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS AND THE LETTER SUBMITTED BY THE ASSESSEE DURING POST SEARCH PARA 11 TO 11.8 ON PAGE NO. 18 TO 23 PARA NO. 15 TO 22 ON PAGE 12 TO 23 SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 169 PROCEEDINGS. 10.3. IT IS INTERESTING TO NOTE THAT THE LD. COUNS EL FOR THE ASSESSEE HAS ARGUED IN HIS CROSS OBJECTION, THAT TH E STATEMENT OF SHRI SUDHAKAR M. SHETTY WAS TENDERED IN HIS INDIVID UAL CAPACITY AND THEREAFTER, SAME WAS RETRACTED BY LETTER DATED 30 TH JANUARY, 2012. THE GROUND RAISED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WAS THAT THE LD. DCIT ERRED IN FRAMING THE ASSESSMENT U/S 143(3) R.W.S. 148 OF THE ACT WITHOUT SERVING NOTICE U/S 143(2) UPON THE ASSESSEE AND THUS THE CO NSEQUENT ASSESSMENT SO FRAMED IS NOT VALID. IT IS FURTHER NO TED THAT THE ASSESSEE FURNISHED ADDITIONAL EVIDENCE BEFORE THE L D. COMMISSIONER OF INCOME TAX (APPEAL) IN THE FORM OF BILLS FOR PURCHASES, LEDGER ACCOUNTS, BANK STATEMENTS, ETC CL AIMING THAT THE PURCHASES SO MADE FROM THE CONCERNED PARTIES WE RE GENUINE. THE ADDITIONAL EVIDENCE FILED BY THE ASSES SEE ALONG WITH DETAILS WAS FORWARDED TO THE ASSESSING OFFICER VIDE LETTER DATED 22/09/2014 (PARA-5 OF THE IMPUGNED ORDER) FOR EXAMI NATION OF FACTS. THE LD. ASSESSING OFFICER VIDE REPORT DATED 16/12/2014 FILED HIS COMMENTS. THE SUBMISSION OF THE ASSESSEE WITH RESPECT TO NON-ISSUANCE OF NOTICE U/S 143(2) AND THE SUBMIS SION DATED SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 170 10/06/2014 OF THE ASSESSEE HAS BEEN CONSIDERED BY T HE LD. COMMISSIONER OF INCOME TAX (APPEAL). 10.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE AD VERTING FURTHER, WE DEEM IT APPROPRIATE TO CONSIDER VARIOUS DECISIONS FROM HON'BLE HIGH COURTS / HON'BLE APEX COURT, SO T HAT WE CAN REACH TO A FAIR CONCLUSION. THE HON'BLE GUJARAT HI GH COURT IN SANJAY OILCAKES INDUSTRIES VS. CIT (2009) 316 ITR 2 74 (GUJ.) HELD AS UNDER:- 11. HAVING HEARD THE LEARNED ADVOCATES APPEARING F OR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO INTE RFERENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED APRIL 29, 1994, READ WITH THE ORDER DATED SEPTEMBER 29, 1994, MADE IN MISCELLANEOUS APPLICATION. IN THE PRI NCIPAL ORDER THE TRIBUNAL HAS RECORDED THE FOLLOWING FINDI NGS:- '8.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. IN OUR OPINION, THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING 25 PER CENT. OF THE AMOUNTS CLAIMED IS FAIR AND REASONABLE AND NO INTERFERENCE IS CALLED FOR. THE COMMIS SIONER OF INCOME-TAX (APPEALS) HAS GONE THROUGH THE PURCHASE PRICES OF THE RAW MATERIAL PREVALENT AT THE TIME AND RIGHTLY CAME TO THE CON CLUSION THAT THE DISALLOWANCE TO THE EXTENT OF 25 PER CENT. WAS CALLED FOR. IT IS ESTABLISHED THAT THE PARTIES WERE NOT TRACEABLE ; THEY OPENED THE BANK ACCOUNTS IN WHICH THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 171 CHEQUES WERE CREDITED BUT SOON THEREAFTER THE AMOUNTS WERE WITHDRAWN BY BEARER CHEQUES. THAT FAIRLY LEADS TO THE CONCLUSION THAT THESE PARTIES WERE PERHAPS CREATION OF THE ASSESSEE ITSELF FOR THE PURPOSE OF BANKING PURCHASES INTO BOOKS OF ACCOUNT BECAUSE THE PURCHASES WITH BILLS WERE NOT FEASIBLE. THUS, THE ABOVENOTED PARTIES BECOME CONDUIT PIPES BETWEEN THE ASSESSEE-FIRM AND THE SELLERS OF THE RAW MATERIALS. UNDER THE CIRCUMSTANCES, IT WAS NOT IMPOSSIBLE FOR THE ASSESSEE TO INFLATE THE PRICES OF RAW MATERIALS. ACCORDINGLY, AN ADDITION AT THE RATE OF 25 PER CENT . FOR EXTRA PRICE PAID BY THE ASSESSEE THAN OVER AND ABOVE THE PREVALENT PRICE IS FAIR AND REASONABLE AND WE ACCORDINGLY CONFIRM THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS).' 12. THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPTED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN BANK ACCOUNTS OSTENSIBLY IN TH E NAME OF THE APPARENT SELLERS, THEREAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN BY BEARER CHEQUES AND THERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMOUNT FROM THE BANK ACCOUNTS. IN THE LIGHT OF THE AFORESAID NATURE OF EVIDENCE IT IS NOT POSSIBLE TO RE CORD A DIFFERENT CONCLUSION, DIFFERENT FROM THE ONE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL CONCURRENTLY HOLDING THAT THE APPARENT SELLERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSESS EE- FIRM AND THE ACTUAL SELLERS OF THE RAW MATERIALS. BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, THEREF ORE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 172 COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE PURCHASE PRICE BEING INFLATED CANN OT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDING. THE ISSUE IS NOT WHETHER THE PURCHASE PRICE REFLECTED IN THE BOOKS OF ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PERSONS. THE IS SUE IS WHETHER THE PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS. THE ASSESSEE HAS, BY SET OF EVIDENCE AVAILABLE ON RECORD, MADE IT POSSI BLE FOR THE RECIPIENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RECEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMATE MADE BY THE TWO APPELLATE AUTHORITIES DOES NOT WARRANT INTERFERENCE. EVEN OTHERWISE, WHETHER THE ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM, CAN NEVER BE AN ISSUE OF L AW. IN THE AFORESAID CASE, THE HON'BLE HIGH COURT ACCEP TED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILLS WER E NOT TRACEABLE AND THE GOODS RECEIVED FROM PARTIES OTHER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOODS. THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENTS, THROUGH BANKI NG CHANNEL AND THUS THE APPARENT SELLERS WERE NOT GENU INE OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE AND THE ACTU AL SELLER. IN SUCH A SITUATION, THE CONCLUSION DRAWN BY THE LD. C OMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS BY THE TRIBUNAL W AS AFFIRMED. HON'BLE APEX COURT IN KACHWALA GEMS VS JCIT (2007) 158 SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 173 TAXMAN 71 OBSERVED THAT AN ELEMENT OF GUESSWORK IS INEVITABLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. 10.5 THE HON'BLE GUJARAT HIGH COURT IN CIT VS BHOLA NATH POLY FAB. PVT. LTD. (2013) 355 ITR 290 (GUJ.) HELD/OBSER VED AS UNDER:- 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, TH E PURCHASES THEMSELVES WERE NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD AND CAME T O THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOC K, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY THE ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1,02,514 MET RES OF CLOTH WERE SOLD DURING THE YEAR UNDER CONSIDERATION . THE TRIBUNAL, THEREFORE, ACCEPTED THE ASSESSEE'S CONTEN TION THAT THE FINISHED GOODS WERE PURCHASED BY THE ASSES SEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURCES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OPINION THAT NOT THE ENTIRE AMO UNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EAR LIER DECISION IN THE CASE OF SANKET STEEL TRADERS AND AL SO MADE REFERENCE TO THE TRIBUNAL'S DECISION IN THE CA SE OF VIJAY PROTEINS LTD. V. ASST. CIT [1996] 58 ITD 428 (AHD). 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 174 ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE E NTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. T HIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OI LCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 16, 2011, IN TAX APPEAL NO. 679 OF 2010 IN T HE CASE OF CIT V. KISHOR AMRUTLAL PATEL. IN THE RESULT , TAX APPEAL IS DISMISSED. 10.6. LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN CIT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 49 8 (GUJ.) HELD/OBSERVED AS UNDER:- 6. AS IS APPARENT FROM THE FACTS NOTED HEREINABOVE , THE COMMISSIONER (APPEALS) AFTER APPRECIATING THE EVIDE NCE ON RECORD HAS FOUND THAT THE ASSESSEE HAD IN FACT M ADE THE PURCHASES AND, HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. HE, HOW EVER, WAS OF THE VIEW THAT THE ASSESSEE HAD INFLATED THE PURCHASES AND, ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF VIJAY PROTE INS (SUPRA) RESTRICTED THE DISALLOWANCE TO 20 PER CENT. THE TRIBUNAL IN THE IMPUGNED ORDER HAS FOLLOWED ITS EAR LIER ORDER IN THE CASE OF VIJAY PROTEINS TO THE LETTER A ND ENHANCED THE DISALLOWANCE TO 25 PER CENT. THUS, IN BOTH CASES, THE DECISION OF THE COMMISSIONER (APPEALS) A S WELL AS THAT OF THE TRIBUNAL IS BASED ON ESTIMATE. THIS HIGH COURT IN THE CASE OF SANJAY OIL CAKE [2009] 31 6 ITR 274 (GUJ) HAS HELD THAT WHETHER AN ESTIMATE SHOULD BE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 175 AT A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NEVER BE A QUESTION OF LAW. 7. THE APEX COURT IN THE CASE OF KACHWALA GEMS [200 7] 288 ITR 10 (SC) HAS HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUES S WORK. NO DOUBT, THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BE ST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT. 8. EXAMINING THE FACTS OF THE PRESENT CASE IN THE L IGHT OF THE AFORESAID DECISIONS, THE DECISION OF THE TRIBUN AL, BEING BASED ON AN ESTIMATE, DOES NOT GIVE RISE TO A NY QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. 9. IN SO FAR AS THE PROPOSED QUESTIONS (C), (D) AND (E) ARE CONCERNED, THE SAME ARE SIMILAR TO THE PROPOSED QUE STION (A) WHEREIN THE TRIBUNAL HAS RESTRICTED THE ADDITIO N TO 25 PER CENT. ON SIMILAR FACTS. IN THE CIRCUMSTANCES, F OR THE REASONS STATED HEREINABOVE, THE SAID GROUNDS OF APP EAL DO NOT GIVE RISE TO ANY QUESTION OF LAW. 10. AS REGARDS THE PROPOSED QUESTION (B) WHICH PERT AINS TO THE DELETION OF ADDITION OF RS. 7,88,590 MADE ON ACCOUNT OF INFLATION OF EXPENSES PAID TO METAL AND MACHINE TRADING CO. (MMTC), THE ASSESSING OFFICER H AS FOUND THAT MMTC WAS A PARTNERSHIP FIRM OF SHRI NITI N GAJJAR ALONG WITH HIS FATHER AND BROTHER OPERATING FROM BHAVNAGAR. A PERUSAL OF THEIR TRANSACTIONS WITH THE ASSESSEE INDICATED THAT THERE IS SOME INFLATION OF EXPENSES AS DETAILED IN PARAGRAPH 6.1 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE EVIDENCE ON RECORD, THE ASSESSING OFFICER DISALLOWED THE AMOUNT RS. 7,88,590 ON ACCOUNT OF PAYMENT MADE TO MMTC. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER (APPEALS), WHO UPON APPRECIATION OF TH E EVIDENCE ON RECORD FOUND THAT THE ASSESSING OFFICER HAD SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 176 NOT REJECTED THE GENUINENESS OF THE PURCHASES MADE FROM MMTC WHILE MAKING THE DISALLOWANCE. HIS OBSERVATIONS WERE BASED ON INFLATION OF RATES WHICH WERE BEING CHARGED FROM THE ASSESSEE. ACCORDING TO THE COMMISSIONER (APPEALS), THOUGH MMTC IN SOME RESPECT COULD BE ATTRIBUTED TO BE ASSOCIATED WITH THE ASSES SEE- COMPANY, STILL IT COULD NOT BE EXPECTED THAT MMTC W AS CARRYING OUT ITS BUSINESS WITHOUT ANY MOTIVE OR PRO FIT. ACCORDING TO THE COMMISSIONER (APPEALS), IT WAS PRO VED BY THE ASSESSEE THAT THE RATES CHARGED BY MMTC WERE COMPARABLE WITH THE PREVAILING MARKET RATES, NO SUC H ADDITION CAN STAND. THE COMMISSIONER (APPEALS) TOOK NOTE OF THE FACT THAT IT WAS NOT THE CASE OF THE AS SESSING OFFICER THAT THE PURCHASES HAD BEEN DIRECTLY EFFECT ED FROM THIRD PARTIES AND NOT DIRECTLY FROM MMTC ; THE DIFFERENCE COULD NOT BE THE NET PROFIT IN THE HANDS OF MMTC ; AND THAT WHILE CONDUCTING THE ENTIRE EXERCIS E MMTC WOULD HAVE TO INCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIONS AND WAS ACCORDINGLY OF THE VIEW TH AT THERE WAS NO CASE OF ACTUAL INFLATION OF RATES AND DELETED THE ADDITION. 12. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS CONCUR RED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM MMTC AT THE PREVAILING MARKET RATES AND THAT MMTC HAD INCURRED CERTAIN EXPENDITURE IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIO NS AND WOULD MAKE SOME INCOME FROM THE ENTIRE EXERCISE . IN THE CIRCUMSTANCES, THE PURCHASES MADE BY THE ASSESSEE FROM MMTC WOULD NOT BE HIT BY THE PROVISIO NS OF SECTION 40A(2) OF THE ACT. 13. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY TH E COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT THE TRIBUNAL HAS TAKEN INTO ACCOUNT ANY IRRELEVANT MATERIAL OR THAT ANY RELEVAN T SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 177 MATERIAL HAS NOT BEEN TAKEN INTO CONSIDERATION. IN THE ABSENCE OF ANY MATERIAL TO THE CONTRARY BEING POINT ED OUT ON BEHALF OF THE REVENUE, THE IMPUGNED ORDER BE ING BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY TH E TRIBUNAL UPON APPRECIATION OF THE EVIDENCE ON RECOR D, DOES NOT GIVE RISE TO ANY QUESTION OF LAW IN SO FAR AS THE PRESENT GROUND OF APPEAL IS CONCERNED. 14. IN RELATION TO THE PROPOSED QUESTION (F) WHICH RELATES TO THE DELETION OF ADDITION OF RS. 44,54,426 MADE O N ACCOUNT OF PURCHASE OF CRANE AND ALLOWING DEPRECIAT ION ON THE SAME, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAD PURCHASED A CRAWLER CRANE FOR AN AMOUN T OF RS. 24,61,000 EXCLUDING THE COST OF SPARE PARTS OF RS. 14,98,490. THE ASSESSING OFFICER AFTER EXAMINING TH E EVIDENCE ON RECORD AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, MADE ADDITION OF RS. 44,54,4 26, RS. 39,59,490 BEING THE PURCHASE PRICE OF THE CRANE ALONG WITH ITS SPARE PARTS AND RS. 4,94,936 BEING DEPRECIATION CLAIMED BY THE ASSESSEE. THE COMMISSIO NER (APPEALS), UPON APPRECIATION OF EVIDENCE ON RECORD, WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY AND HAD MADE DISALLOWANCE WHICH WAS NOT PERMITTED BY THE INCOME- TAX ACT. IT WAS HELD THAT DISALLOWANCE COULD ONLY HAVE BEEN MADE IN RESPECT OF EXPENSES DEBITED TO THE PROFIT A ND LOSS ACCOUNT WHEREAS IN THE PRESENT CASE THE PURCHA SE OF CRANE AND SPARE PARTS OF THE CRANE AND OTHER MACHINERIES WERE IN THE NATURE OF ACQUISITION OF CA PITAL ASSET. ACCORDING TO THE COMMISSIONER (APPEALS), THE DISALLOWANCE COULD HAVE BEEN MADE ON DEPRECIATION ONLY IF AT ALL THE ASSESSING OFFICER CONCLUSIVELY P ROVED THAT THE PURCHASES OF CRANE AND OTHER PARTS ARE BOG US. UPON APPRECIATION OF THE MATERIAL ON RECORD THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSING OFF ICER HAS SIMPLY BRUSHED ASIDE ALL THE EVIDENCE ON ACCOUN T OF TECHNICAL INFIRMITIES AND THAT THE EVIDENCE SUCH AS OCTROI RECEIPT ; HYPOTHECATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WITH THE ASSE SSEE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 178 CONCLUSIVELY PROVED THAT THE CRANE WAS PURCHASED AN D IT WAS IN USE EVEN AS ON DATE WITH THE ASSESSEE. THE COMMISSIONER (APPEALS) ACCORDINGLY FOUND THAT THERE WAS NO SCOPE FOR ANY DISALLOWANCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF PURCHAS E OF CRANE AND ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. 15. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS NOTED THAT THE COST OF CRANE WAS NEVER CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. BEFORE THE TRIBUNAL, THE ASSE SSEE PRODUCED THE EVIDENCE THAT THE CRANE IN QUESTION WA S REGISTERED WITH THE RTO AND THE SAME WAS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSES OF ITS BUSINESS. THE TRIBUNAL, THEREFORE, HELD THAT THE COMMISSIONER (APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELE TING THE DISALLOWANCE OF COST OF CRANE AS WELL AS DEPREC IATION THEREON. 16. FROM THE FACTS EMERGING FROM THE RECORD, IT IS APPARENT THAT THE ASSESSEE HAD NEVER CLAIMED THE CO ST OF THE CRANE IN THE RETURN NOR HAD IT DEBITED THE E XPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUCH THE QUE STION OF DISALLOWING THE SAME AND ADDING THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN THE ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHASE WAS BOGUS OR THAT THE CRANE IN FACT DID NOT EXIST, THE QUESTION OF DISALLOWING THE DEPRECATION IN RESPECT OF THE SAME ALSO WOULD NOT ARISE. WHEN THE ASSESSEE HAD CONCLUSIVELY PROVED THE PURCHASE AND EXISTENCE OF THE CRANE, AND HAD NOT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACC OUNT, NO ADDITION COULD HAVE BEEN MADE IN RESPECT OF THE PURCHASE PRICE NOR COULD HAVE DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION AS WE LL AS DISALLOWANCE OF DEPRECIATION. 17. IN THE LIGHT OF THE AFORESAID DISCUSSION, IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 179 IMPUGNED ORDER MADE BY THE TRIBUNAL SO AS TO WARRAN T INTERFERENCE. IN THE ABSENCE OF ANY QUESTION OF LAW , MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, THE APPEAL IS DISMISSED. 10.7. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/2009) ORDER DATED 22/02/2011, OBSERVED/HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRE CTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT TH E ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNE D DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE ABOVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUGHT REMAND REPORT AND EVEN AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROS S EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING BASED ON THE FAC T, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 180 10.8 THE HON'BLE GUJARAT HIGH COURT IN CIT VS M.K. BROTHERS (163 ITR 249) HELD/OBSERVED AS UNDER:- BEING AGGRIEVED BY THE AFORESAID ORDER, THE ASSESS EE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS U RGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN QUE STION WERE NORMAL BUSINESS TRANSACTIONS AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES. THE PARTIES DID NOT COME FORWARD AND IF THEY DID NOT COME, THE ASSESSEE SHOU LD NOT SUFFER. HOWEVER, ON BEHALF OF THE REVENUE, IT WAS U RGED THAT DETAILED INQUIRIES WERE MADE AND THEREAFTER TH E CONCLUSION WAS REACHED. THE TRIBUNAL FOUND THAT THE RE WAS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE. NO DOUBT, THERE WER E CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIES WERE BOGUS. THE TRIB UNAL ACCORDINGLY, DID NOT SUSTAIN THE ADDITION RETAINED BY THE APPELLATE ASSISTANT COMMISSIONER. HENCE, AT THE INS TANCE OF THE REVENUE, THE AFORESAID QUESTION HAS BEEN REF ERRED TO THIS COURT FOR OPINION. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NO T WAS A QUESTION OF FACT. THE TRIBUNAL HAS ALSO POINTED O UT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE F UND GIVEN BY THE ASSESSEE TO THESE PARTIES CAME BACK TO THE ASSESSEE IN ANY FORM. IT IS FURTHER OBSERVED BY THE TRIBUNAL THAT THERE IS NO EVIDENCE ANYWHERE THAT TH ESE CONCERNS GAVE VOUCHERS TO THE ASSESSEE. EVEN THE TW O STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH T HE ASSESSEE IN ANY WAY. WITH THESE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CER TAIN DOUBTFUL FEATURES, BUT THE EVIDENCE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FR OM THESE PARTIES WERE BOGUS. IT MAY BE STATED THAT THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 181 ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHORT DU RATION AND THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT I S SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASE S OF THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRI ES. WE, THEREFORE, DO NOT FIND THAT THE CONCLUSION ARRI VED AT BY THE TRIBUNAL IS AGAINST THE WEIGHT OF EVIDENCE. IN THAT VIEW OF THE MATTER, WE ANSWER THE QUESTION IN THE AFFIRM ATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS TO COSTS. 10.9. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RAJEEV G. KALATHIL (2015) 67 SOT 52 (MUM. T RIB.)(URO), IDENTICALLY, HELD AS UNDER:- 2.2.AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PRE FERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) .BEFORE HIM IT WAS ARGUED THAT ASSESSEE HAD FILED COPIES OF BILLS OF PURCHASE FROM DKE AND NBE, THAT BOTH THE SUPPLIERS WERE REGISTERED DEALERS AND WERE CARRYING PROPER VAT AND REGISTRATION NO.S, THAT LEDGER ACCOUNTS OF THE PART IES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THAT PAYMENT WAS MADE BY CHEQUES, THAT A CERTIFICATE FRO M THE BANKER GIVING DETAILS OF CHEQUE PAYMENT TO THE SAID PARTIES WAS ALSO FURNISHED. COPIES OF THE CONSIGNME NT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS SHOWING THAT MATERIAL PURCHASED WAS ACT UALLY DELIVERED AT THE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THAT SOME OF THE MATERIAL PURCHASED FRO M THE SAID PARTIES WERE LYING PART OF CLOSING STOCK AS ON 31.03.2009 AS PER THE STATEMENT SUBMITTED ON RECORD . AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE, FAA HELD THAT THE TRANSACTIONS WERE SUPPORTED BY PROPER DOCUMENTARY EVIDENCES, THAT THE PAYMENTS MADE TO THE PARTIES BY THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 182 ASSESSEE WERE IN CONFIRMATION WITH BANK CERTIFICATE ,T HAT THE SUPPLIERS WAS SHOWN AS DEFAULT UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIENT EVIDENC ES TO HOLD THAT THE PURCHASES WERE NON-GENUINE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVIDEN CES AGAINST THE ASSESSEE TO PROVE THE NON-GENUINENESS O F THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CAS H RECEIVED BACK FROM THE SUPPLIERS. FINALLY, HE DELET ED THE ADDITION MADE BY THE AO . 2.3.BEFORE US, DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE THE AO BY THE ASSESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDER OF THE G BENCH OF MUMBAI TRIBUNAL DELIVERED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/MUM/2010-DATED 13.11.2013). AUTHRORISED REPRESENTATIVE (AR) CONTEN DED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED B Y THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSESSEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK ,THAT THE TRANSPORTER HAD ADMITTED THE TRANSPORTATION OF GOODS TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORAN A (282 ITR251), NIKUNJ EXIMP ENTERPRISES (P) LTD. (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWA LA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATIO N AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INI TIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLA CE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF T HE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER TH ERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUN T. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTAT ION SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 183 OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR T O BE CONSIDERED FOR RESOLVING THE ISSUE. THE FAA HAS GIV EN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CON CERNED, WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THER E IS NOTHING, IN THE ORDER OF THE AO, ABOUT THE CASH TRI AL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUB T. THEREFORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF T HE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER F ROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDEN CE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 10.10. THE HON'BLE JURISDICTIONAL HIGH COURT IN CI T VS NIKUNJ EXIMP ENTERPRISES PVT. LTD. (2015) 372 ITR 6 19 (BOM.) HELD/OBSERVED AS UNDER:- 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DA TED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELET ED THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., RECONCILIATION STAT EMENT BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL R ECORDS THAT THE BOOKS OF ACCOUNT OF THE RESPONDENT-ASSESSE E HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE N OT BEEN DOUBTED AND IT IS AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT, I.E., DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, C OPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURC HASES SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 184 WERE IN FACT MADE. IN OUR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OF FICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS), ONE CA NNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCO UNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAU SE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED ORDER TAKING INTO ACCOU NT ALL THE FACTS BEFORE CONCLUDING THAT THE PURCHASES OF R S. 1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUND WI TH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNAL. 10.11. IN THE AFORESAID CASE, THE HON'BLE JURISDIC TIONAL HIGH COURT HAS MADE AN ELABORATE DISCUSSION AND AFF IRMED THE FINDING OF THE TRIBUNAL, WHEREIN, THE ADDITION WAS DELETED. THE FACTUAL FINDING RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) (PARA-22), PAGE-22 IS REPRODUCED HEREUNDER :- 22. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSIONS AND CONTENTIONS OF APPELLANT, AS ALSO THE ORDER OF THE' AO. IT APPEARS THAT THE ADDITION OF RS.2439,83,334/- HAS BEEN MADE BY THE AO, ONLY ON THE BASIS OF STATEMENT SHRI SUDHAKAR SHETTY DATED 23/9/2011, WHEREIN HE HAD ADMITTED AN COME OF RS.50 CRORES IN HIS OWN HANDS, AS ALSO IN SAHANA GROUP OF COMPAN IES, FOR F.Y. 201L-12, AND HIS LETTER DATED 30/1/2012, FILED SUBS EQUENTLY. THERE IS NO FURTHER MATERIAL, EITHER FOUND OR SEIZE D DURING THE COURSE OF SEARCH, OR BROUGHT ON RECORD DURING THE A SSESSMENT PROCEEDINGS, TO INDICATE THAT THERE WAS UNDISCLOSED INCOME TO THE TUNE OF RS.24,39,83,334/- IN .THE HANDS OF M/5. 0ASIS REALTY. IN FACT, THE AO HAS ADDED THE BALANCE' AMOUNT OF RS.24,39,83,334/- (RS.50,00,00,000 - RS.25,60,16,66 6) ' IN THE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 185 HANDS A OF M/S OASIS REALTY,' AFTER CONSIDERING VAR IOUS ADDITIONS ON ACCOUNT OF BOGUS PURCHASES IN HANDS OF M/S. SKYL ARK BUILD AND M/S. OASIS REALTY FOR DIFFERENT YEARS AND NO SO UND REASONING HAS BEEN GIVEN IN THIS REGARD. IT IS RELE VANT TO MENTION OVER HERE THAT OASIS REALTY IS AN AOP CONSI STING OF TWO FIRMS' OF SHRI SUDHAKAR SHETTY GROUP, NAMELY M/S. SKYLARK BUILD' AND M/D; SHREE VRUNDA ENTERPRISES, AND ANOTH ER TWO COMPANIES OF OBEROI GROUP; NAMELY OBEROI CONSTRUCTI ON LTD., AND ASTIR REALTY LLP, AS MEMBERS, FROM CAREFUL PERU SAL OF THE STATEMENT OF SHRI SUDHAKAR SHETTY GIVEN U/S.131, I T APPEARS THAT NOWHERE THE NAME OF OASIS REALTY IS STATED. HE IS ONLY TALKING ABOUT HIMSELF AND SAHANA GROUP COMPANIES. F URTHER, FROM THE PERUSAL OF LETTER DATED 30/1/2012, IT IS Q UITE CLEAR THAT IT IS A KIND OF RETRACTION OF THE EARLIER STATEMENT AND THROUGH THIS LETTER; THE ASSESSEE HAS ONLY STATED THAT THEY HAD INITIATED THE PROCESS OF IN-DEPTH VERIFICATION OF ENTIRE RECORDS/DOCUMENTS AND AFTER VERIFICATION, IF THEY F IND THAT THERE IS ANY EXPENDITURE DEBITED UNDER THE HEAD 'WORK-IN- PROGRESS', WHICH THEY MIGHT NOT BE ABLE CORROBORATE TO THE ENT IRE SATISFACTION OF THE DEPARTMENT, THEY WOULD REDUCE T HE SAME FROM THE VALUE OF WORK-IN-PROGRESS AS ON 31/3/2'12. THEREFORE, NOWHERE .DID THE ASSESSEE OFFER ADDITIONAL INCOME O F RS.24.39 .CRORES IN THE HANDS OF M/S. OASIS REALTY. DURING T HE COURSE OF APPELLATE PROCEEDINGS, THIS ISSUE WAS SPECIFICALLY RAISED, DURING THE COURSE OF MEETING ON 6/5/2015 AND 7/5/2015, WIT H THE AO AND AS ON 1/5/2015 WITH THE ADDL. CIT. THEREAFTER, A LETTER DATED 8/5/2015 WAS SENT, TO THE AO, SEEKING CLARIFI CATION, BUT NO COMMENTS IN THIS REGARD WERE FURNISHED. IT WILL NOT BE OUT OF PLACE TO MENTION OVER HERE THAT THERE IS NO MATERIA L, OTHER THAN THE' ABOVE-MENTIONED STATEMENT AND LETTER OF THE AS SESSEE, TO CORROBORATE THE ADDITION OF RS.24.39 CRORES. IN FAC T, TIME AND AGAIN, THE COURTS HAVE EMPHASIZED THAT THE ADDITION S BE MADE ON THE BASIS OF MATERIAL AVAILABLE ON' RECORD AND N OT SIMPLY ON THE BASIS OF A STATEMENT GIVEN BY THE ASSESSEE. THI S ISSUE HAS' ALSO BEEN EMPHASIZED BY THE CBDT VIDE INSTRUCTION D ATED 10/3/2003, REPRODUCED HEREINABOVE, AS ALSO IN SUBSE QUENT CLARIFICATIONS ISSUED LATER, THAT ADDITIONS IN SEAR CH/ SURVEY CASES SHOULD BE BASED ON EVIDENCE GATHERED DURING THE COU RSE OF SUCH ACTIONS. FURTHER, VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 186 NAMELY PAUL MATHEWS & SON.S, VS. CIT 263 ITR 101 (K ER.), CIT VS. S. KHADER KHAN SON (2008) 214 CTR 589 (MAD.), D CIT VS. PREMSONS (2010) 130 TTJ 159 (MUMBAI); CIT VS. DHING RA METAL WORKS {2010) 236 CTR 621 (DEL.) AND OTHERS SUPPORT THE CONTENTION OF THE ASSESSEE THAT SUCH ADDITION COULD NOT BE MADE WITHOUT' SUFFICIENT EVIDENCE AGAINST THE ASSESSEE. 'IN THE CIRCUMSTANCES, I HOLD THAT THE ABOVE ADDITION HAS B EEN MADE BY THE AO WITHOUT SUFFICIENT BASIS AND IS, THEREFORE, NOT SUSTAINABLE IN LAW. THE SAME IS, THEREFORE, DIRECTED TO BE DELE TED. THE AO IS, HOWEVER, FREE TO CONSIDER THIS AMOUNT OF RS.24,39,8 3,334/- INAPPROPRIATE HANDS, IN ACCORDANCE WITH LAW, IF HE FEELS THAT THERE IS SUFFICIENT; BASIS FOR DOING SO. THIS GROUN D IS, ACCORDINGLY, ALLOWED IN FAVOUR OF THE ASSESSEE. 10.12. IN THE AFORESAID, THE FIRST APPELLATE AUTHO RITY FOUND THAT THE ADDITION WAS MADE BY THE ASSESSING O FFICER MERELY ON THE BASIS OF STATEMENT DATED 23/09/2011, ALLEGEDLY TENDERED BY SHRI SUDHAKAR SHETTY AND THERE WAS NO F URTHER MATERIAL EITHER FOUND OR SEIZED DURING THE COURSE O F SEARCH OR BROUGHT ON RECORD BY THE LD. ASSESSING OFFICER DURI NG THE ASSESSMENT PROCEEDINGS INDICATING THAT THERE WAS UN DISCLOSED INCOME TO THE TUNE OF RS.24,39,80,334/- IN THE HAND S OF THE PRESENT ASSESSEE. IN FACT, THE LD. ASSESSING OFFICE R ADDED THE AMOUNT IN THE HANDS OF M/S OASIS REALITY AFTER CONS IDERING VARIOUS ADDITIONS ON ACCOUNT OF BOGUS PURCHASES IN THE HANDS OF THE M/S SKYLARK BUILD AND M/S OASIS REALITY FOR DIF FERENT REASONS AND NO SOUND REASONING WAS GIVEN. IT IS FUR THER NOTED BY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 187 THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS BY THIS TRIBUNAL THAT THE STATEMENT TENDERED SHRI SUDHAKAR SHETTY, HE HAS NOWHERE MENTIONED THE NAME OF THE OASIS REALITY AND FURTHER ON PERUSAL OF LETTER DATED 30/01/2012, IT I S QUITE CLEAR THAT IT IS A RETRACTION OF EARLIER STATEMENT AND TH E ASSESSEE HAS ONLY STATED THAT THEY HAD INITIATED THE PROCESS OF IN-DEPTH VERIFICATION OF ENTIRE RECORD/DOCUMENT AND ONLY AFT ER SUCH VERIFICATION, IF IT IS FOUND THAT ANY EXPENDITURE H AD BEEN DEBITED UNDER THE HEAD WORK IN PROGRESS, WHICH THEY MIGHT N OT BE ABLE TO CORROBORATE TO THE ENTIRE SATISFACTION OF THE DE PARTMENT, THEY WOULD REDUCED THE SAME FROM THE VALUE OF WORK IN PR OGRESS AS ON 31/03/2012. IT IS CLEAR THAT THE ASSESSEE NOWHER E OFFERED ADDITION INCOME IN THE HANDS OF THE M/S OASIS REALI TY. THERE IS FURTHER FINDING IN THE IMPUGNED ORDER (PAGE-23) THA T DURING APPELLATE PROCEEDINGS, THIS ISSUE WAS SPECIFICALLY RAISED ON 06/05/2015 AND 7/05/2015 WITH THE LD. ASSESSING OFF ICER AND AS ON 01/05/2015 WITH THE ADDL. CIT. THEREAFTER, A LETTER DATED 08/05/2015 WAS SENT TO THE ASSESSING OFFICER SEEKIN G CLARIFICATION TO WHICH NO COMMENTS WERE FURNISHED. THE LD. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 188 COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS THIS TRIBUNAL DID NOT FIND ANY OTHER MATERIAL EXCEPT THE STATEMEN T AND THE LETTER OF THE ASSESSEE TO CORROBORATE THE ADDITION. IT IS AN ESTABLISHED POSITION OF LAW THAT NO ADDITION CAN BE MADE SIMPLY ON THE BASIS OF STATEMENT AND IT HAS TO BE CORROBOR ATED WITH MATERIAL AVAILABLE ON RECORD. THIS ISSUE HAS BEEN E MPHASIZED BY CBDT INSTRUCTION DATED 10/03/2003 MENTIONED IN THE IMPUGNED ORDER AND SUBSEQUENT CLARIFICATION ISSUED FROM TIME TO TIME THAT THE ADDITION IN SEARCH AND SURVEY CASES S HOULD BE BASED ON EVIDENCES GATHERED DURING SUCH ACTIONS. TH IS VIEW FIND SUPPORT FROM THE DECISION IN THE CASE OF PAUL MATHE WS & SONS VS CIT (263 ITR 101) (KER.), CIT S. KADAR KHAN SONS (2 008) 214 CTR 589 (MAD.), DCIT VS PREM SONS (2010) 130 TTJ 15 9 (MUM) AND CIT VS DHINGRA METAL WORK (2010) 236 CTR 621 (D EL.). THE HON'BLE KERALA HIGH COURT IN THE CASE OF PAUL MATHE WS & SONS VS CIT ((SUPRA)) HELD AS UNDER:- 2. THE ASSESSEE IS A CONTRACTOR. THE ASSESSMENT WA S COMPLETED UNDER SECTION 143(3) OF THE IT ACT FOR THE ASST. YR . 1998-99 ON 7TH FEB.. 2001 FIXING THE INCOME AT RS. 10,08,090. FOR THE AS ST. YR. 1999-2000 THE ASSESSMENT WAS COMPLETED ON 8TH PARCH, 2001, FIXING THE INCOME AT RS. 13,81,760, AND FOR THE ASST. YR. 2000-2001 THE ASSE SSMENT WAS COMPLETED ON 8TH MARCH, 2001, FIXING THE INCOME AT RS. 13,18, 660. THERE WAS A SURVEY OPERATION UNDER SECTION 133A OF THE IT ACT O N 23RD JAN., 2001, AND SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 189 A STATEMENT WAS ALSO RECORDED FROM THE MANAGING PAR TNER ROY MATHEW. IT WAS ADMITTED THAT THERE WAS SOME IRREGULARITIES AND DISCREPANCIES IN THE BOOKS OF ACCOUNTS, IN THAT THERE WAS EXCESS PAYMENT OF CASH OVER WHAT IS AVAILABLE AS PER CASH BOOK AND ALSO UNACCOUNTED INV ESTMENT IN PROPERTIES AND SUPPRESSION OF RECEIPT AND INFLATION OF EXPENSE S. IN THE COURSE OF SUCH STATEMENT GIVEN BY THE MANAGING PARTNER HE OFFERED AN AMOUNT OF RS. 43 LAKHS AS ADDITIONAL INCOME FOR THE THREE YEARS I.E. , FOR 1998-99 AT RS. 13 LAKHS, FOR 1999-2000 AT RS. 10 LAKHS AND FOR 2000-2 001 AT RS. 20 LAKHS. THE AO DETERMINED THE BUSINESS INCOME FOR THE ASST. YR. 1998-99 AT RS. 8,26,550, TAKING THE NET PROFIT AT 8 PER CENT OF TH E TOTAL RECEIPT OF RS. 1,22,92,150. FOR THE ASST. YR. 1999-00 THE BUSINESS INCOME WAS DETERMINED AT RS. 7,72,960, TAKING THE NET PROFIT AT 8 PER CEN T OF THE TOTAL RECEIPTS OF RS. 1,14,41,748, AND FOR THE ASST. YR. 2000-01 AT R S. 8,18,255, AT THE SAME RATE OF NET PROFIT FROM THE TOTAL RECEIPT OF RS. 1, 22,46,673. BUT ACCORDING TO THE CIT THIS WAS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE. HE ALSO NOTED CERTAIN RECEIPTS OTHER THAN TRANSPORT RE CEIPTS SUCH AS DISCOUNT, INTEREST, COMPENSATION, ETC., SHOWN BY THE ASSESSEE IN THE P&L A/C AND CONSIDERED BY IT FOR THE COMPUTATION HAD HOWEVER, N OT BEEN CONSIDERED BY THE AO. HENCE, HE ISSUED NOTICE UNDER SECTION 263 O F THE IT ACT ON 12TH DEC., 2001, REQUIRING THE ASSESSEE TO EXPLAIN WHY T HE ASSESSMENT ORDERS SHOULD NOT BE MODIFIED SUITABLY. THE ASSESSEE SUBMI TTED THAT DURING THE SURVEY UNDER SECTION 133A THE MANAGING PARTNER STAT ED THAT THEIR INCOME FOR THE THREE YEARS IS AROUND RS. 43 LAKHS AND THE TOTAL INCOME FIXED AS PER THE ASSESSMENT PROCEEDINGS FOR THE ABOVE THREE YEAR S ALSO COMES TO RS. 43,42,881. IT WAS ALSO CONTENDED THAT FOR THE ASST. YR. 1998-1999 AN ADVANCE OF RS. 19 LAKHS WAS RECEIVED BY THE PARTNER S. THE AO ACCEPTED THE EXPLANATION FOR RS. 13 LAKHS AND THE BALANCE RS . 6 LAKHS WAS ALLOWED TO BE TELESCOPED. IN ADDITION, THE ASSESSEE HAD EST IMATED AN INCOME OF RS. 12 LAKHS BEFORE PAYMENT OF SALARY TO THE PARTNERS F OR THE ASST. YR. 2000- 2001 AND REMITTED THE ADVANCE TAX ALSO. IT WAS SUBM ITTED THAT THE ASSESSEE HAD CO-OPERATED WITH THE DEPARTMENT IN THE SURVEY P ROCEEDINGS AND FOR COMPLETION OF ASSESSMENT PROCEEDINGS, THERE WAS NO DIFFERENCE BETWEEN THE INCOME OFFERED FOR ASSESSMENT AND INCOME FINALL Y ASSESSED. 3. HOWEVER, THE CIT REJECTED THE ABOVE CONTENTION A S ACCORDING TO HIM, THESE ARE FACTUALLY INCORRECT. ACCORDING TO HIM, TH E INCOME DECLARED AT THE TIME OF SURVEY AMOUNTING TO RS. 43 LAKHS WAS IN ADD ITION TO THE INCOME ALREADY ASSESSED FOR THE THREE YEARS UNDER CONSIDER ATION. ACCORDING TO THE CIT, THIS WAS OFFERED AS ADDITIONAL INCOME ON INVES TMENT AND EXPENDITURE AND CREDITS WHICH WERE NOT REFLECTED IN THE BOOKS O F ACCOUNT AND WAS OUT OF THE BUSINESS ACTIVITY OF THE ASSESSEE. ACCORDING TO HIM, IT CANNOT BE CLUBBED WITH THE CAPITAL GAIN WHICH IS NOT OUT OF B USINESS ACTIVITY OF THE ASSESSEE. HENCE, EXCLUDING THE CAPITAL GAINS FOR TH E THREE YEARS THE INCOME ASSESSED UNDER THE HEAD 'BUSINESS OR PROFESSION' CA ME TO RS. 24,17,774, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 190 ONLY AS AGAINST THE DISCLOSED INCOME OF RS. 43 LAKH S. HENCE, ACCORDING TO THE CIT, THE ADDITIONAL INCOME DISCLOSED FOR EACH Y EAR SHOULD HAVE BEEN TAKEN INTO ACCOUNT SEPARATELY WHILE MAKING THE ASSE SSMENT. HENCE, HE SET ASIDE THE ASSESSMENT AND DIRECTED THE AO TO REFRAME THE ASSESSMENT AFRESH TAKING INTO CONSIDERATION THE OMISSIONS/MISTAKES PO INTED OUT. THE ASSESSEE, AGGRIEVED THEREBY, APPEALED TO THE TRIBUN AL. 4. THE ASSESSEE CONTENDED BEFORE THE TRIBUNAL, THAT THERE IS NO ERROR IN LAW IN THE ORDER OF THE AO AND, THEREFORE, THE ACTION O F THE CIT AMOUNTS TO ILLEGAL EXERCISE OF JURISDICTION VESTED IN HIM UNDE R SECTION 263 OF THE ACT AND THAT THE AO HAS CORRECTLY EXERCISED THE JUDICIA L DISCRETION VESTED IN HIM WHILE ESTIMATING THE INCOME OF THE APPELLANT AN D HENCE INTERFERENCE WITH SUCH JUDICIAL EXERCISE OF POWERS OF THE AO UND ER SECTION 263 OF THE ACT AMOUNTED TO UNLAWFUL EXERCISE OF THE JURISDICTI ON CONFERRED ON THE CIT, AS THE ORDER OF THE AO IS NEITHER ERRONEOUS NO R PREJUDICIAL TO THE REVENUE. THE CONDITIONS, THEREFORE, FOR INVOKING SE CTION 263, ACCORDING TO THE ASSESSEE, IS NOT SATISFIED IN THE CASE AND ACCO RDINGLY, THE ORDER IN REVISION OF THE CIT HAS TO BE HELD NOT SUSTAINABLE IN LAW. 5. THE TRIBUNAL POINTED OUT THAT THE CIT HAS ENTIRE LY RELIED ON THE DEPOSITIONS MADE DURING THE COURSE, OF SURVEY UNDER SECTION 133A ON 23RD JAN., 2001, AND VIRTUALLY BRUSHED ASIDE EVERYTHING WHICH THE AO CONSIDERED SUBSEQUENT THERETO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE DECLARATION WITH REGARD TO THE SUM OF RS. 13 LA KHS MADE IN THE SECTION 133A STATEMENT WAS ON MISTAKEN UNDERSTANDING OF FAC TS AND THE REAL FACT STOOD PROVED MUCH BEFORE THE SURVEY AS THE DEPARTME NT HAD ALREADY HELD THE PAYMENT OF RS. 19 LAKHS AS GENUINE IN THE HANDS OF THE CREDITOR (M.O. DEVASSY ALIAS PAPPU). 6. THE TRIBUNAL AFTER CONSIDERATION OF THE SUBMISSI ONS ON BOTH SIDES HOWEVER HELD THAT THE ORDER OF THE CIT IS IN THE RI GHT DIRECTION AND HAS TO BE UPHELD. ACCORDING TO THE TRIBUNAL, THE SUBMISSIO N REPRODUCED IN THE STATEMENT OF THE ASSESSEE SHOWED THAT WHAT THE ASSE SSEE OFFERED WAS IN ADDITION TO THE RETURNED INCOME. EVEN OTHERWISE, AC CORDING TO THE TRIBUNAL, THE CIT WAS RIGHT IN HOLDING THAT THE AO HAS TAKEN CAPITAL GAINS TO REACH THE ASSESSED FIGURES. IT WAS ALSO HELD THA T THE AO DID NOT GO INTO THE IMPLICATION OF THE ANSWER TO QUESTION NO. 13. A CCORDING TO THE TRIBUNAL, THE FAILURE OF THE AO TO MAKE PROPER ENQU IRY ITSELF GIVES JURISDICTION TO THE CIT TO INVOKE THE PROVISIONS OF SECTION 263. ACCORDINGLY, THE APPEALS WERE DISMISSED. 7. CHALLENGING THE SAID ORDER PASSED BY THE TRIBUNA L, CONFIRMING THE VIEW OF THE CIT, THE ASSESSEE HAS FILED THE ABOVE APPEAL S INTER ALIA, CONTENDING THAT THE CIT HAS NO JURISDICTION UNDER SECTION 263 OF THE IT ACT IN THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 191 FACTS AND CIRCUMSTANCES AS ACCORDING TO THE ASSESSE E, THE TWIN CONDITIONS REQUIRED FOR INVOKING THE SAID PROVISION HAS NOT BE EN SATISFIED IN THIS CASE. IT IS ALSO CONTENDED THAT THE ITO HAS APPLIED HIS M IND AND THAT ONLY AFTER DISCUSSIONS WITH THE ASSESSEE AND HIS REPRESENTATIV ES AND AFTER SATISFYING THAT WHAT IS OFFERED IS REASONABLE INCOME THAT THE AO ACCEPTED THE OFFER MADE BY THE ASSESSEE WHILE MAKING THE ADDITIONS AND COMPLETING THE ASSESSMENTS. IT IS ALSO CONTENDED THAT THE ITO HAS NO JURISDICTION TO TAKE ANY SWORN STATEMENT IN THE COURSE OF THE SURVEY UND ER SECTION 133A OF THE IT ACT AND AS SUCH ANY STATEMENT SO TAKEN HAS NO EV IDENTIARY VALUE AND IS NON EST AND IS NOT BINDING ON THE APPELLANT. 8. ACCORDING TO THE LEARNED COUNSEL P.G.K. WARRIYAR , APPEARING ON BEHALF OF THE APPELLANT, EVEN THE BOARD CANNOT ISSUE SPECI FIC DIRECTIONS TO DISPOSE OF A CASE IN A PARTICULAR MANNER EVEN UNDER SECTION 119 OF THE IT ACT WHEREAS IN THE PRESENT CASE, THE CIT WHILE INVOKING SECTION 263 OF THE IT ACT ON COMPLETION OF THE INCOME-TAX ASSESSMENT HAS EXCEEDED HIS JURISDICTION VIRTUALLY DIRECTING THE AO TO REFRAME THE ASSESSMENT IN A PARTICULAR MANNER. HE ALSO DREW A DISTINCTION BETWE EN THE PROVISIONS FOR SEARCH UNDER SECTION 132(4) OF THE IT ACT AND SURVE Y UNDER SECTION 133A OF THE SAID ACT. ACCORDING TO HIM, UNDER SECTI ON 133A OF THE IT ACT, THERE IS NO PROVISION TO ADMINISTER OATH OR TO TAKE ANY SWORN IN STATEMENT. HE ALSO CONTENDED THAT A MERE ADMISSION OR AN ACQUIESCENCE CANNOT BE A FOUNDATION FOR AN ASSESSMENT AND THAT A NY STATEMENT GIVEN DURING A SURVEY HAS NO EFFECT AS AN 'ADMISSION' NOR CAN IT BE A STATEMENT ON OATH. ACCORDING TO HIM, THE ASSESSEE'S STATEMENT DU RING THE SURVEY WITH REFERENCE TO ANY BOOKS OF ACCOUNTS CAN HARDLY BE TH E BASIS FOR ANY ASSESSMENT. ACCORDING TO HIM, AFTER THE PERUSAL OF THE ACCOUNTS, THE ASSESSEE HIMSELF HAS VOLUNTEERED TO MAKE A DISCLOSU RE AS PER ANNEXURE-D, LETTER DT. 6TH FEB., 2001, ADDRESSED TO THE ADDL. C IT AND THE ITO WAS PERFECTLY JUSTIFIED IN CONSIDERING THE DISCLOSURE S O MADE. ACCORDING TO HIM, THE ENTIRE ACCOUNT BOOKS WERE SEIZED AND WERE BEFORE THE ITO AND IT WAS AFTER SEVERAL DISCUSSIONS HELD WITH THE ITO THA T THE ASSESSMENTS WERE FINALLY COMPLETED. THE EXERCISE OF THE JUDICIAL DIS CRETION MADE BY THE ITO IS, THEREFORE, NOT LIABLE TO BE INTERFERED WITH UND ER SECTION 263 OF THE IT ACT BY THE CIT. HE THUS, JUSTIFIED THE ORDER OF ASS ESSMENT AND CONTENDED THAT THE ORDER PASSED BY THE CIT AND THE TRIBUNAL C ONFIRMING THE SAME ARE UNSUSTAINABLE IN LAW. 9. ON THE OTHER HAND, THE LEARNED SENIOR COUNSEL P. K. RAVEENDRANATHA MENON, APPEARING FOR THE REVENUE, SUPPORTED THE ORD ER OF THE TRIBUNAL AND JUSTIFIED THE INTERFERENCE MADE BY THE CIT. ACC ORDING TO HIM, THE CIT WAS JUSTIFIED IN INTERFERING UNDER SECTION 263 OF T HE IT ACT, INSOFAR AS THE ORDER PASSED BY THE ITO IS ERRONEOUS IN LAW, ADVERS ELY AFFECTING THE INTEREST OF THE REVENUE AND THUS SATISFIED THE TWIN CONDITIONS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 192 UNDER SECTION 263. HE ALSO CONTENDED THAT THE STATE MENT MADE DURING THE COURSE OF THE SURVEY ARE VOLUNTARILY MADE AND ANY I NFORMATION SO GATHERED HAVE, THEREFORE, EVIDENTIARY VALUE AND NOTHING PREV ENTS THE IT DEPARTMENT IN RELYING ON THOSE STATEMENTS. HE ALSO CONTENDED T HAT AT ANY RATE, THE CIT ONLY DIRECTED THE ITO TO REFRAME THE ASSESSMENT ORD ER AFRESH AFTER TAKING INTO CONSIDERATION THE OMISSIONS/MISTAKES POINTED O UT IN THE ORDER OF THE CIT. 10. IN THIS CASE, WHAT IS RELIED ON BY THE CIT TO H OLD THAT THE ORDER OF THE ITO IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE IS AN ALLEGED ADMISSION IN A STATEMENT OBTAINED FROM THE MANAGING PARTNER OF T HE ASSESSEE-FIRM DURING THE COURSE OF SURVEY BY THE ITO UNDER SECTIO N 133A OF THE IT ACT. SECTION 133A OF THE IT ACT, DEALS WITH THE POW ER OF SURVEY WHICH READS AS FOLLOWS : '133A POWER OF SURVEY--(1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, AN, IT AUTHORITY MAY E NTER : (A) ANY PLACE WITHIN THE LIMITS OF THE AREA ASSIGNE D TO HIM, OR (B) ANY PLACE OCCUPIED BY ANY PERSON IN RESPECT OF WHOM HE EXERCISES JURISDICTION, OR (C) ANY PLACE IN RESPECT OF WHICH HE IS AUTHORISED FOR THE PURPOSES OF THIS SECTION BY SUCH IT AUTHORITY, WHO IS ASSIGNED THE A REA WITHIN WHICH SUCH PLACE IS SITUATED OR WHO EXERCISES JURISDICTION IN RESPECT OF ANY PERSON OCCUPYING SUCH PLACE, AT WHICH A BUSINESS OR PROFES SION IS CARRIED ON, WHETHER SUCH PLACE BE THE PRINCIPAL PLACE OR NOT OF SUCH BUSINESS OR PROFESSION, AND REQUIRE ANY PROPRIETOR, EMPLOYEE OR ANY OTHER PERSON WHO MAY AT THAT TIME AND PLACE BE ATTENDING IN ANY MANN ER TO, OR HELPING IN, THE CARRYING ON OF SUCH BUSINESS OR PROFESSION-- (I) TO AFFORD HIM THE NECESSARY FACILITY TO INSPECT SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS AS HE MAY REQUIRE AND WHICH MAY BE AVAILABLE AT SUCH PLACE (II) TO AFFORD HIM THE NECESSARY FACILITY TO CHECK OR VERIFY THE CASH, STOCK OR OTHER VALUABLE ARTICLE OR THING WHICH MAY BE FOUND THEREIN, AND (III) TO FURNISH SUCH INFORMATION AS HE MAY REQUIRE AS TO ANY MATTER WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING U NDER THIS ACT.' 11. THE PROVISION ALSO ENABLES THE IT AUTHORITY TO IMPOUND AND RETAIN IN HIS CUSTODY FOR SUCH PERIOD AS HE THINKS OF ANY BOO KS OF ACCOUNT OR OTHER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 193 DOCUMENTS INSPECTED BY HIM, PROVIDED THE AUTHORITY RECORDS HIS REASONS FOR DOING SO AND ALSO SHALL NOT RETAIN THE BOOKS OF ACCOUNT FOR A PERIOD NOT EXCEEDING 15 DAYS. SECTION 133A(3)(III) ENABLES THE AUTHORITY TO RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THE ACT. SECTION 133A HOWEVER, ENA BLES THE IT AUTHORITY ONLY TO RECORD ANY STATEMENT OF ANY PERSON WHICH MA Y BE USEFUL, BUT DOES NOT AUTHORIZE FOR TAKING ANY SWORN IN STATEMENT. ON THE OTHER HAND, WE FIND THAT SUCH A POWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUTHORISED OFFICER ONLY UNDER SECT ION 132(4) OF THE IT ACT IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE I T ACT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUCH POWER TO E XAMINE A PERSON ON OATH, THE SAME HAS BEEN EXPRESSLY PROVIDED WHEREAS SECTION 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH. THUS, IN CONTRA- DISTINCTION TO THE POWER UNDER SECTION 133A, SECTIO N 132(4) OF THE IT ACT ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATI ON CAN ALSO BE USED IN EVIDENCE UNDER THE IT ACT. ON THE OTHER HAND, WH ATEVER STATEMENT RECORDED UNDER SECTION 133A OF THE IT ACT IS NOT GI VEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN IN STATEMENT WHICH ALONE HAS THE EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW. THEREF ORE, THERE IS MUCH FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR TH E APPELLANT THAT THE STATEMENT, ELICITED DURING THE SURVEY OPERATION HAS NO EVIDENTIARY VALUE AND THE ITO WAS WELL AWARE OF THIS. 12. AT THE SAME TIME, THE ASSESSEE HAVING FOUND THA T THERE ARE SOME OMISSIONS ON HIS PART, OFFERED CERTAIN AMOUNTS AS A DDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAVE A WRITTEN OFFER TO THE A DDL. CIT AS EVIDENCED BY ANNEXURE-D. IT WAS AFTER VERIFYING THE ACCOUNT B OOKS AND VARIOUS MATERIALS GATHERED IN THE SURVEY AND AFTER CONSIDER ING THE OFFER MADE BY THE ASSESSEE THAT THE ITO HAS EXERCISED A JUDICIAL DISCRETION IN THE MATTER WHILE COMPLETING THE ASSESSMENT. ACCORDING TO THE L EARNED COUNSEL FOR THE ASSESSEE SECTION 263 OF THE IT ACT ENABLES THE CIT TO CALL FOR AND EXAMINE THE RECORDS ONLY WHEN HE CONSIDERS THAT ANY ORDER P ASSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER EST OF THE REVENUE. ACCORDING TO HIM, THE ORDER PASSED BY THE AO IS NOT ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE TWIN CONDITIONS FOR INVOKING THE POWER UNDER SECTION 263 IS NOT SATISFI ED. 13. WE HAVE PERUSED THE STATEMENT MADE BY THE MANAG ING PARTNER OF THE ASSESSEE DURING THE COURSE OF THE SURVEY. ACCORDING TO THE CIT, THE ASSESSEE HAS STATED DURING THE COURSE OF SURVEY TO QUESTION NO. 13 THAT THERE WERE UNACCOUNTED INVESTMENTS IN PROPERTIES AN D SUPPRESSION OF RECEIPTS AND INFLATION OF EXPENSES AND HAS OFFERED AN ADDITIONAL INCOME OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 194 RS. 43 LAKHS (RS. 13 LAKHS FOR THE ASST. YR. 1998-9 9. RS. 10 LAKHS FOR THE YEAR 1999-2000 AND RS. 20 LAKHS FOR 2000-2001). WHI LE COMPLETING THE ASSESSMENT, THE AO DID NOT TAKE THIS ASPECT INTO CO NSIDERATION AND DETERMINED THE BUSINESS INCOME AT RS. 8,26,550 FOR THE ASST. YR. 1998-99, TAKING THE NET PROFIT AT 8 PER CENT OF THE TOTAL RE CEIPT OF RS. 1,22,92,150, AT RS. 7,72,960 TAKING THE NET PROFIT AT 8 PER. CENT O F THE TOTAL RECEIPTS OF RS. 1,14,41,748 FOR THE ASST. YR. 1999-2000 AND FOR THE ASST. YR. 2000-2001 AT RS. 8,18,255 AT THE SAME RATE OF NET PROFIT FROM TH E TOTAL RECEIPT OF RS. 1,22,46,673. ACCORDING TO HIM, THIS IS A MISTAKE OR OMISSION IN THE ASSESSMENT ORDER AND HENCE HE HAS CONSIDERED THIS O RDER TO BE ERRONEOUS INSOFAR IT IS PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THE ASSESSEE SPECIFICALLY RAISED A CONTENTION BEFORE THE CIT THA T THE MANAGING PARTNER, DURING THE SURVEY UNDER SECTION 133A, HAS STATED TH AT THEIR INCOME FOR THE THREE YEARS I.E., 1998-99, 1999-2000 AND 2000-2001 IS AROUND RS. 43 LAKHS AND AS PER THE ASSESSMENT PROCEEDINGS FOR THE ABOVE THREE YEARS ALSO, THE TOTAL INCOME DETERMINED IS 43,42,881 AS WORKED OUT BELOW : RS. ASSESSMENT YEAR 1998-99 : NET PROFIT BEFORE SALARY TO PARTNERS 9,83,870 CAPITAL GAIN 1,81,536 11,64,906 ASSESSMENT YEAR 1999- 2000 : NET INCOME BEFORE SALARY TO PARTNERS 9,15,430 ADD : INTEREST ON CAPITAL DEBITED IN THE ACCOUNT 1,73,615 CAPITAL GAIN 6,08,800 16,97,845 ASSESSMENT YEAR 2000-01 : NET INCOME BEFORE SALARY TO PARTNERS 9,79,730 CAPITAL GAIN 5,00,400 14,80,130 14. ACCORDING TO THE ASSESSEE, FOR THE ASST. YR. 19 98-99 OUT OF AN AMOUNT OF RS. 19 LAKHS RECEIVED BY THE PARTNERS, THE ASSESSIN G AUTHORITY HAD ACCEPTED THE EXPLANATION FOR RS. 13 LAKHS AND BALANCE SIX LA KHS WAS TELESCOPED AND THEY HAVE ESTIMATED AN INCOME OF RS. 12 LAKHS BEFOR E PAYMENT OF SALARY TO PARTNERS FOR THE ASST. YR. 2001-02 AND REMITTED THE ADVANCE TAX ALSO. THUS, THEY HAVE COOPERATED WITH THE DEPARTMENT. ACCORDING TO THE ASSESSEE, THERE IS NO DIFFERENCE BETWEEN THE INCOME OFFERED F OR ASSESSMENT AND INCOME FINALLY ASSESSED. THE CIT, HOWEVER, DID NOT ACCEPT THE ABOVE CONTENTION. ACCORDING TO HIM, THE INCOME DECLARED A T THE TIME OF SURVEY AMOUNTING TO RS. 43 LAKHS IS THE ADDITIONAL INCOME I.E., IN EXCESS OF THE INCOME ALREADY DECLARED FOR THE THREE YEARS. HE HAS REFERRED TO THE ANSWER TO QUESTION NO. 13 OF THE STATEMENT DT. 23RD JAN., 2001, FOR THIS PURPOSE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 195 ACCORDING TO HIM, IF THE CAPITAL GAIN FOR ALL THE T HREE YEARS ARE TAKEN OUT, THE INCOME ASSESSED UNDER THE HEAD 'BUSINESS' OR 'P ROFESSION' COMES TO RS. 24,17,774 AS AGAINST THE DISCLOSED INCOME OF RS. 43 LAKHS. THIS IS THE BASIS ON WHICH HE HAS INVOKED HIS POWERS UNDER SECTION 26 3 OF THE IT ACT. 15. QUESTION NO. 13 REFERRED TO ABOVE AND THE ANSWE R THERETO ARE EXTRACTED HEREUNDER: ON. NO. 13 : AS PER THE MATERIAL FOUND AT YOUR PREM ISES AND THE ADMISSIONS MADE IN THIS SWORN STATEMENTS THERE ARE VARIOUS OMISSIONS AND SHORTCOMINGS ON YOUR PART. WITH ALL THESE INFIRMITI ES HOW DO YOU PROPOSE TO SETTLE YOUR TAX MATTERS ? ANS : I DO ADMIT THAT WE HAVE NOT DISCLOSED OUR TRU E INCOME IN THE RETURNS FILED FOR THE ASST. YRS. 1998-99, 1999-2000 AND 200 0-2001. IN THIS CONNECTION I WOULD LIKE TO STATE THAT WE HAD INTROD UCED RS. 19,00,000 TOWARDS ADVANCE FOR SALE OF AND THROUGH THE CAPITAL /CURRENT ACCOUNT OF ALL THE THREE PARTNERS DURING THE PREVIOUS YEAR RELEVAN T TO THE ASST. YR. 1998- 99. HOWEVER, WE UNDERSTAND THAT THE AMOUNT ADVANCED BY THE PARTIES NAMELY, M.A. PAPPU AND ESTAPPAN, WERE SINCE CONFIRM ED ONLY RS. 6,00,000. IN ORDER TO PURCHASE PEACE AND WITH A VIE W TO CO-OPERATE WITH THE DEPARTMENT, WE OFFER THE BALANCE AMOUNT OF RS. 13,00,000 FOR ASST. YR. 1998-99. SIMILARLY, TO COVER UP ALL THE SHORTCOMING S AND POSSIBLE OMISSIONS, WE OFFER AN ADDITIONAL INCOME OF RS. 10, 00,000 FOR ASST. YR. 1999-2000 AND RS. 20,00,000 FOR ASST. YR. 2000-2001 . THE ABOVESAID AMOUNT OF RS. 43,00,000/(13+10+20+) IS IN ADDITION TO THE INCOME ALREADY DECLARED FOR ASSESSMENT FOR THE RESPECTIVE YEARS. W E EXPRESS OUR WILLINGNESS TO MAKE ADDITION OF RS. 13,00,000 AS OF FERED ABOVE IN THE ASSESSMENT FOR THE ASST. YR. 1998-99 WHICH IS PENDI NG NOW. THE REVISED RETURN OF INCOME FOR ASST. YRS. 1999-2000 AND 2000- 2001 SHALL BE FILED BY 20TH MARCH, 2001 AFTER PAYING TAX UNDER SECTION 140 A........'. 16. IT CAN BE SEEN THAT THE 13 LAKHS OFFERED FOR TH E ASST. YR. 1998-99 IS CREDIT FROM M.A. PAPPU AND ESTHAPPAN (FROM OUT OF T HE ADVANCE OF RS. 19 LAKHS RECEIVED) AND THIS SUBMISSION WAS MADE ACCORD ING TO THE APPELLANT, AS THE DEPONENT WAS MADE TO BELIEVE THAT ONLY 6 LAK HS HAS BEEN ACCOUNTED BY CREDITORS BUT IT WAS FOUND THAT ANOTHER SUM OF R S. 7 LAKHS WAS FOUND TO BE GENUINE BY THE AO. ACCORDING TO HIM, IT IS PERTI NENT TO NOTE THAT THE ENTIRE SUM OF RS. 19 LAKHS WAS CONSIDERED IN THE BL OCK ASSESSMENT COMPLETED AS EARLY AS ON 28TH OCT., 1999, IN THE CA SE OF M.O. DEVASSY ALIAS PAPPU MUCH BEFORE THE SURVEY ON 23RD JAN., 20 01, AND SUCH BLOCK ASSESSMENT ORDERS WERE ALSO PRODUCED BEFORE THE TRI BUNAL. THUS, ACCORDING TO HIM, THESE FACTS CLEARLY PROVE THAT TH E PURPORTED OFFER OF THE APPELLANT 'FOR THE ASST. YR. 1998-99 OF A SUM OF RS . 13 LAKHS IS ONE IMPOSED SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 196 UPON HIM AND ONE MADE BY THE APPELLANT ON THE MISTA KEN UNDERSTANDING OF FACTS. SIMILARLY, THE PURPORTED OFFER FOR RS. 10 LA KHS AND RS. 20 LAKHS FOR THE ASST. YRS. 1999-2000 AND 2000-2001 ARE ALSO NOT BASED ON ANY MATERIAL AND DOES NOT REPRESENT THE TRUE INCOME OF THE APPEL LANT. THEREFORE, SUBSEQUENT TO THE SURVEY, THE CASE WAS POSTED SEVER AL TIMES AND THE AO HAD DISCUSSIONS WITH THE APPELLANT AND ITS REPRESEN TATIVES. FINALLY, SINCE THE AO COULD NOT DETERMINE THE TRUE AND CORRECT PRO FITS OF THE APPELLANT ON THE BASIS OF THE BOOKS OF ACCOUNTS AND OTHER MATERI ALS WHICH CAME TO HIS NOTICE DURING THE COURSE OF THE SURVEY, THE AO, DUR ING THE ASSESSMENT PROCEEDINGS, AGREED FOR ADOPTING THE INCOME AT 8 PE R CENT OF THE TOTAL CONTRACT RECEIPTS AND THE APPELLANT HAD ALSO AGREED VIDE THEIR LETTER DT. 6TH FEB., 2001, ADDRESSED TO THE AO FOR THE SAME. ACCOR DING TO HIM, THE APPELLANT IS HAVING 20 LORRIES AND THE ESTIMATED IN COME THEREON IS WORKED OUT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44 AE EVEN IF SECTION 44A IS NOT APPLICABLE TO THE APPELLANT, THE TOTAL I NCOME THAT COULD BE ESTIMATED WILL BE RS. 4,80,000 PER YEAR AND THE EST IMATE AGREED AT 8 PER CENT OF THE TURNOVER FOR ALL THE YEARS IS ALMOST DO UBLE THIS AMOUNT. THUS, THE ESTIMATE AT 8 PER CENT IS REASONABLE AND THE AO HAS EXERCISED HIS POWERS VESTED IN HIM IN A JUDICIOUS MANNER WHILE CO MPLETING THE ASSESSMENT. THUS, ACCORDING TO HIM, SECTION 263 WAS NOT AVAILABLE TO HIM TO BE INVOKED IN THIS CASE SINCE THERE IS A PROVISI ON WHICH COULD BE INVOKED ONLY AS AN EXCEPTION TO THE GENERAL RULE TH AT A SUPERIOR AUTHORITY CANNOT UNLESS IN AN APPEAL OR REVISION REQUIRE THE ITO TO MAKE A REASSESSMENT IN A PARTICULAR MANNER. 17. THE ITO HAS REFERRED TO THE FACT THAT CONSEQUEN T UPON THE SURVEY, THE ASSESSEE HAS FILED A REVISED RETURN OFFERING 8 PER CENT OF THE CONTRACT RECEIPT AS NET PROFIT BEFORE ALLOWING DEDUCTION OF SALARY PAYMENT MADE TO PARTNERS AT RS. 1,60,050. IT WAS ALSO FOUND THAT TH E 8 PER CENT PROFIT DISCLOSED IS DEEMED TO HAVE BEEN ARRIVED AFTER ALLO WING DEPRECIATION AND INTEREST ON CAPITAL PAID TO THE PARTNERS. IT WAS FO UND THAT RS. 4,798 TOWARDS PF AND RS. 454 TOWARDS ESI WERE THE AMOUNTS FOR WHI CH THE DISALLOWANCE WAS MADE. UNDER SECTION 43B, THE AMOUNT COVERED BY SECTION 43B(B) SHALL BE ALLOWED AS DEDUCTION WHILE COMPUTIN G THE INCOME ONLY IN THE YEAR IN WHICH SUCH SUM IS ACTUALLY PAID, PROVID ED, IT IS PAID ON DUE DATE. IT WAS FURTHER FOUND THAT THE ASSESSEE HAS NO T PAID THE AMOUNT OF ESI ON DUE DATE AND ACCORDINGLY, THAT AMOUNT AND THE AM OUNT OF PF WERE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. HOWEVER, THE AMOUNT OF PF WAS ALLOWED AS DEDUCTION IN THE ASST. YR. 2001-2002. 18. IT CAN THUS BE SEEN THAT THE ITO HAS NOT ACCEPT ED THE INCOME DECLARED BY THE ASSESSEE IN A MECHANICAL WAY, BUT APPLIED HI S MIND TO THE VARIOUS ASPECTS OF THE MATTER BEFORE COMPLETING THE ASSESSM ENT. THE ITO ALSO FOUND THAT DURING THE COURSE OF HEARING, CERTAIN DE TAILS FILED SHOWED THAT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 197 THE ASSESSEE HAD RECEIVED AN ADVANCE OF RS. 19 LAKH S (FROM M.O. PAPPU, RS. 10 LAKHS AND FROM M.D. ESTHAPPAN RS. 9 LAKHS) A ND THE ADVANCES RECEIVED FROM PAPPU OF RS. 10 LAKHS HAS BEEN EXPLAI NED. REGARDING THE ADVANCE OF RS. 9 LAKHS RECEIVED FROM M.D. ESTHAPPAN ONLY THREE LAKHS IS FOUND TO BE GENUINE. HENCE, THE BALANCE OF RS. 6 LA KHS IS TO BE EXPLAINED WHICH IS TELESCOPED IN THE INCOME ALREADY DISCLOSED AT RS. 8,26,550. IT WAS IN SUCH CIRCUMSTANCES THAT NO SEPARATE ADDITION WAS MADE TO THE ACCOUNT. IT WAS ALSO FOUND BY THE ITO THAT ACCORDINGLY ON DISCU SSION, THE TOTAL INCOME OF THE ASSESSEE FOR THE ASST. YR. 1998-99 IS DETERM INED AT RS. 8,26,550. THUS, THE ITO CONSIDERED THE FACTUAL ASPECTS OF THE MATTER REGARDING THE ADVANCE CLAIMED TO HAVE BEEN RECEIVED FROM M.O. PAP PU AND M.D. ESTHAPPAN AND THE BALANCE OF RS. 6 LAKHS OUT OF THE 19 LAKHS WAS ALSO TELESCOPED IN THE INCOME ALREADY DISCLOSED. IN THE STATEMENT IN THE COURSE OF SURVEY, THE MANAGING PARTNER ONLY STATED THAT AN AMOUNT OF RS. 19 LAKHS WAS INTRODUCED TOWARDS ADVANCE FOR SALE OF LAND TO PAPPU AND ESTHAPPAN CONFIRMED ONLY SIX LAKHS. IT WAS ON THIS BASIS THAT THE BALANCE OF RE. 13 LAKHS WERE OFFERED FOR THE ASST. YR. 1998-99. THAT WAS CONFIRMED BY PAPPU AND ESTHAPPAN AS RS. 6 LAKHS WAS FOUND TO BE A MIST AKE AND THE ASSESSMENT ORDERS IN THEIR CASE WERE ALSO PRODUCED. THE ITO ALSO VERIFIED THE ABOVE ASPECTS. THEREFORE, THE ASSUMPTION THAT W HAT WAS OFFERED IN THE STATEMENT OF 43 LAKHS IS IN ADDITION TO WHAT HAS BE EN ASSESSED AND ON THE BASIS THAT THE STATEMENT HAS GOT EVIDENTIARY VALUE IS ERRONEOUS. THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY HAS BEEN BORNE IN MIND BY THE AO WHO WAS WELL AWARE OF THE EVIDENTIARY VALUE OF THE STATEMENT. AT THE SAME TIME, SUCH SURVEY CONDUCTED UNEARTHED CERT AIN INCOME AND THE ITO RIGHTLY, ON THE BASIS OF THE ACCOUNTS AND OFFER MADE AND THE ADMISSIONS MADE BEFORE HIM, CAME TO THE CONCLUSION THAT WHAT WAS OFFERED IN THE WRITTEN OFFER MADE BY THE ASSESSEE IS REASON ABLE. ACCORDING TO US THE ALLEGED ADMISSION CONTAINED IN THE ANSWER TO QUESTI ON NO. 13 IN THE STATEMENT OF THE MANAGING PARTNER OF THE ASSESSEE O BTAINED UNDER SECTION 133 A IS ONLY A QUALIFIED ONE AND THE ASSESSEE HAD CLEARLY EXPLAINED THE SAME BEFORE THE AO BY COGENT MATERIALS AND THE SAME WAS ACCEPTED BY THE SAID OFFICER. IN SUCH CIRCUMSTANCES, THE QUESTION A S TO WHETHER THE CIT COULD HAVE INVOKED HIS POWER UNDER SECTION 263 OF T HE ACT TO HOLD THAT THE ORDER OF THE ITO IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE IS JUSTIFIABLE IN LAW ARISES FOR CONSIDERATION. 19. IN MALABAR INDUSTRIAL CO. LTD. V. CIT (2001) 24 3 ITR 83 (SC) THE APEX COURT CONSIDERED THE MEANING OF 'PREJUDICIAL TO REV ENUE' AND IT WAS HELD THUS THAT THE WORD 'PREJUDICIAL TO REVENUE' MUST BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER. DEALING WITH THE MATTER, T HE APEX COURT HELD THAT : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 198 'A BARE READING OF SECTION 263 OF THE IT ACT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY TH E CIT SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS I T IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT HAS TO BE SATISFIE D OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISE D IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. I F ONE OF THEM IS ABSENT--IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUD ICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVEN UE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE AO, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SA ME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEF INED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IM PORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AN D COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, T HE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE 'PREJUDICIAL T O THE INTEREST OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRO NEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF A N ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE WHEN AN ITO ADOPTED ONE OF THE COURSES PERM ISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE I N LAW.' 20. IN THE DECISION SMT. TARA DEVI AGGARWAL V. CIT (1973) 88 ITR 323 (SC) THE APEX COURT CONSIDERED THE MEANING OF THE W ORD 'PREJUDICIAL TO THE INTEREST OF THE REVENUE'. IT WAS HELD THAT : 'WHERE AN ASSESSEE IS ASSESSED ON AN INCOME VOLUNTA RILY RETURNED, IT IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY IF IT IS FOUND THAT THE ASSESSMENT WAS MADE ON THE BASIS THAT THE INCOME HA D BEEN EARNED BY THE ASSESSEE WHICH WAS ASSESSABLE. WHERE AN INCOME HAS NOT BEEN EARNED AND IS NOT ASSESSABLE, MERELY BECAUSE THE ASSESSEE WANT S IT TO BE ASSESSED IN HIS OR HER HANDS IN ORDER TO ASSIST SOME ONE ELSE WHO W OULD HAVE BEEN ASSESSED TO A LARGER AMOUNT, AN ASSESSMENT SO MADE WILL BE ERRONEOUS AND PREJUDICIAL TO THE REVENUE AND THE CIT HAS JURISDIC TION UNDER SECTION 33B OF THE INDIAN IT ACT, 1922, TO CANCEL THE ASSES SMENT AND PROCEEDINGS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 199 FOR ASSESSMENT MAY BE INITIATED UNDER THE PROVISION S OF THE ACT AGAINST SOME OTHER ASSESSEE WHO ACCORDING TO THE IT AUTHORI TIES WOULD BE LIABLE FOR THE INCOME THEREOF.' APPLYING THE ABOVE PRINCIPLES, WE FIND ON A READING OF THE ITO'S ORDER THAT THE VIEW TAKEN BY THE ITO CANNOT BE SAID TO BE UNSU STAINABLE IN LAW SO AS TO CALL IT AN ORDER PASSED ERRONEOUSLY. THE ITO HAS SEIZED BOOKS OF ACCOUNTS AND ELICITED CERTAIN ANSWERS WHICH HAS NO EVIDENTIARY VALUE. HOWEVER, MAKING ALSO THESE FIGURES AND FINDING THAT THERE WAS CERTAIN OMISSIONS AND REMISSIONS ON THE PART OF THE ASSESSE E, THE ASSESSEE HAS VOLUNTARILY OFFERED CERTAIN AMOUNTS TO BE TREATED A S ADDITIONAL INCOME FOR THE ASSESSMENT YEARS IN QUESTION AND CERTAIN STATEM ENTS MADE DURING THE COURSE OF SUCH SURVEY ESPECIALLY REGARDING THE ADVA NCE RECEIVED FROM M.O. PAPPU AND ESTHAPPAN. BUT THE SAME HAS BEEN EXP LAINED BY THE ASSESSEE, WHICH EXPLANATION WAS ACCEPTED AFTER REFE RRING TO THE RECORDS AND THE ASSESSMENT ORDERS PASSED IN THEIR CASE. THE ITO WAS SATISFIED ABOUT THE ACTUAL AMOUNT RECEIVED TOWARDS ADVANCE AND ONLY AN AMOUNT OF RS. 6 LAKHS OUT OF THE BALANCE WAS TO BE FURTHER EXPLAINE D AND THEY WERE TELESCOPED. THE ENTIRE SUM OF RS. 19 LAKHS WAS CONS IDERED FOR THE BLOCK ASSESSMENT COMPLETED AS EARLY AS ON 28TH OCT., 1999 , IN THE CASE OF M.O. DEVASSY ALIAS PAPPU MUCH BEFORE THE SURVEY. IN THES E CIRCUMSTANCES, THE STATEMENT OF THE ASSESSEE THAT THE AMOUNT OF RS. 13 LAKHS OFFERED BY HIM IN THE STATEMENT DURING THE COURSE OF SURVEY IS ONLY A MISTAKE OF FACT CANNOT BE BRUSHED ASIDE. FURTHER, IN THE LIGHT OF THE VOLU NTARY DISCLOSURE IN THE LETTER GIVEN IN WRITING BY THE ASSESSEE THE FACTS G IVEN BY HIM HAS BEEN VERIFIED WITH THE BOOKS OF ACCOUNTS AND IT WAS ONLY AFTER CONSIDERATION OF THE VARIOUS ASPECTS OF THE MATTER AND RELATED FACTS THAT THE AO ACCEPTED THE OFFER MADE BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE VIEW TAKEN BY THE ITO CANNOT BE SAID TO BE PREJUDICIAL TO THE REVENUE NOR CAN IT BE SAID TO BE ERRONEOUS. WE FIND NOTHING IN THE ORDER OF THE ITO TO WARRANT A FINDING THAT IT IS UNSUSTAINABLE IN LAW. FOR THE ABOVE REAS ONS, WE HOLD THAT THE CIT WAS NOT JUSTIFIED IN LAW IN INVOKING THE POWERS UND ER SECTION 263 OF THE IT ACT AS THE TWIN CONDITIONS PRECEDENT TO EXERCISE TH E POWER HAS NOT BEEN SATISFIED IN THIS CASE. BESIDES THE DECISION IS ALS O ERRONEOUS. HENCE, WE SET ASIDE THE ORDER OF THE TRIBUNAL AND THE CIT AND CON FIRM THE ORDER OF THE ITO. WE ANSWER THE QUESTION IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 200 10.13. LIKEWISE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS DHINGRA METAL WORK (2010) 236 CTR 621 (DEL.) HEL D AS UNDER:- 2. BRIEFLY STATED THE RELEVANT FACTS OF THE PRESENT CASE ARE THAT ON 14TH SEPT., 2004, A SURVEY UNDER S. 133A OF THE ACT WAS CONDUCTED ON THE RESPONDENT-ASSESSEE'S BUSINESS PREMISES. DURING THE COURSE OF SURVEY, THE TAX OFFICIALS NOTICED SOME DISCREPANCIES IN STO CK AND CASH IN HAND. DURING THE SAID SURVEY, RESPONDENT-ASSESSEE SURREND ERED AN AMOUNT OF RS. 99,50,000 AND OFFERED THE SAME FOR THE PURPOSES OF TAXATION. THE ADDITIONAL INCOME OFFERED INCLUDED A SUM OF RS. 45, 00,000 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND OFFERED BY ONE OF THE PARTNERS OF THE RESPONDENT-ASSESSEE AS ADDITIONAL I NCOME. 3. THE ANSWER BY ONE OF THE PARTNERS OF THE RESPOND ENT-ASSESSEE TO QUESTION NO. 13 DURING THE SURVEY PROCEEDINGS IS RE LEVANT AND THE SAME IS REPRODUCED HEREINBELOW : 'QUESTION NO. 13 : DO YOU HAVE ANY OTHER BUSINESS C ONCERNS BEING RUN FROM THIS PREMISES, I.E., B-70/3, WAZIRPUR INDUSTRI AL AREA ? ANSWER : YES, THE COMPANY KNOWN AS M/S D.M.W. (P) ( LTD.) IS ALSO IN OPERATION FROM THIS PREMISES. THIS COMPANY WAS INCO RPORATED IN MAY, 2000.' 4. IT IS PERTINENT TO MENTION THAT IN REPLY TO QUES TION NO. 36, WHICH PERTAINED TO DIFFERENCE IN STOCK, THE PARTNER OF TH E RESPONDENT-ASSESSEE HAD STATED 'I CANNOT EXPLAIN THIS DIFFERENCE NOW. T HEREFORE, TO BUY PEACE OF MIND I AM OFFERING ADDITIONAL INCOME OF RS. 43 L AKHS FOR THE CURRENT FINANCIAL YEAR, I.E., THE ASST. YR. 2005-06'. 5. HOWEVER, SUBSEQUENTLY, THE RESPONDENT-ASSESSEE V IDE ITS LETTER DT. 29TH NOV., 2004, CONTENDED THAT THE STATEMENT ABOUT STOCK WAS INCORRECT AND THAT THE IMPUGNED DISCREPANCY HAD BEEN RECONCIL ED AS IT WAS ONLY A MISTAKE. CONSEQUENTLY, THE RESPONDENT-ASSESSEE WITH DREW THE OFFER OF ADDITIONAL INCOME FOR TAXATION ON ACCOUNT OF EXCESS STOCK. 6. ON 31ST DEC., 2007, THE AO PASSED THE ASSESSMENT ORDER WHEREIN HE DID NOT ACCEPT THE PLEA OF THE RESPONDENT-ASSESSEE THAT EXCESS STOCK DURING THE COURSE OF SURVEY HAD BEEN RECONCILED. TH E AO RELIED UPON THE STATEMENT OF ONE OF THE PARTNERS OF THE RESPONDENT- ASSESSEE GIVEN DURING THE COURSE OF SURVEY UNDER S. 133A OF THE ACT AND C ONCLUDED THAT THE EXPLANATION/RETRACTION BY THE RESPONDENT-ASSESSEE W AS AN AFTERTHOUGHT AND HAD NO ELEMENT OF TRUTH. 7. UPON AN APPEAL BEING FILED BY THE RESPONDENT-ASS ESSEE, THE COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT 'CI T(A)'] DELETED THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 201 SAID ADDITION HOLDING THAT AO DID NOT MAKE ANY INDE PENDENT ENQUIRY AND FURTHER THAT AO HAD NOT MADE OUT A CASE THAT THE AM OUNT SURRENDERED DURING THE SURVEY OPERATION HAD NOT BEEN INCLUDED I N THE FINAL BOOKS OF ACCOUNT. 8. THE REVENUE'S APPEAL BEFORE THE TRIBUNAL WAS ALS O DISMISSED VIDE ORDER DT. 4TH JAN., 2010. THE RELEVANT PORTION OF T HE IMPUGNED ORDER READS AS UNDER : '5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER INDICATES THAT THE SOLE BASIS OF MAKING THE ADDITION IS THE ASSESSEE'S STATEMENT DUR ING THE COURSE OF SURVEY RECORDED UNDER S. 133A(III) STATING TO SURRE NDER AS IMMEDIATELY EXPLANATION COULD NOT BE GIVEN. VIDE LETTER DT. 29T H NOV., 2004, THE RECONCILIATION OF STOCK OF THE ASSESSEE AND ITS ASS OCIATED CONCERN M/S DMW WAS GIVEN WHICH HAS NOT BEEN CONTROVERTED BY AO . THEREAFTER, THE ISSUE REMAINED SILENT AND ONLY DURING THE COURSE OF ASSESSMENT, AO TOOK UP THE SAME. THE ASSESSEE'S STATEMENT DURING THE CO URSE OF SURVEY IS NOT BINDING AS EVIDENCE MORE SO WHEN IT IS GIVEN IN THE EVENTUALITY OF NON- AVAILABILITY OF READY EXPLANATION. IT HAS NOT BEEN HELD THE ASSESSEE HAD NO EXPLANATION TO OFFER; ADDITION HAS BEEN MADE ONLY O N SURVEY STATEMENT. FROM THE RECORD, IT CLEARLY EMERGES THAT BOTH THE C ONCERNS ARE INDEPENDENT ENTITIES SEPARATELY ASSESSED UNDER INCO ME-TAX AND VARIOUS OTHER DEPARTMENTS. BOTH ARE REGISTERED UNDER VARIOU S LAWS INCLUDING EXCISE AND MAINTAIN STATUTORY RECORD OF EXCISE, STO CK REGISTERS BOOKS OF ACCOUNT ARE DULY AUDITED. WITH ALL THESE FACTS PRES ENT ON RECORD, ADDITION CANNOT BE MADE IGNORING THE RECONCILIATION AND EVID ENCE FILED BY ASSESSEE AND RELYING ONLY ON A STATEMENT WHICH WAS GIVEN DUE TO NON-AVAILABILITY OF READY EXPLANATION. THE ASSESSEE IMMEDIATELY THER EAFTER FURNISHED CORRECT STOCK STATEMENT WHICH HAVE NOT BEEN CONTROV ERTED BY THE AO. IN VIEW THEREOF, WE ARE INCLINED TO UPHOLD THE ORDER O F CIT(A) DELETING ADDITION.' 9. MS. SURUCHII AGGARWAL, LEARNED COUNSEL FOR REVEN UE SUBMITTED THAT THE STATEMENT OF ONE OF THE PARTNERS OF RESPONDENT-ASSE SSEE RECORDED DURING THE SURVEY UNDER S. 133A OF THE ACT HAD EVIDENTIARY VALUE AND THE SAID STATEMENT COULD NOT BE RETRACTED/EXPLAINED AFTER A LAPSE OF CONSIDERABLE TIME. 10. BEFORE WE DEAL WITH THE CONTROVERSY AT HAND, WE WOULD LIKE TO REPRODUCE S. 133A OF THE ACT, WHICH READS AS UNDER : '133A. POWER OF SURVEY.'(1) NOTWITHSTANDING ANYTHIN G CONTAINED IN ANY OTHER PROVISION OF THIS ACT, AN IT AUTHORITY MAY EN TER' (A) ANY PLACE WITHIN THE LIMITS OF THE AREA ASSIGNE D TO HIM, OR (B) ANY PLACE OCCUPIED BY ANY PERSON IN RESPECT OF WHOM HE EXERCISES JURISDICTION, OR (C) ANY PLACE IN RESPECT OF WHICH HE IS AUTHORISED FOR THE PURPOSES OF THIS SECTION BY SUCH IT AUTHORITY, WHO IS ASSIGNED THE A REA WITHIN WHICH SUCH SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 202 PLACE IS SITUATED OR WHO EXERCISES JURISDICTION IN RESPECT OF ANY PERSON OCCUPYING SUCH PLACE AT WHICH A BUSINESS OR PROFESSION IS CARRIED ON, WH ETHER SUCH PLACE BE THE PRINCIPAL PLACE OR NOT OF SUCH BUSINESS OR PROFESSI ON, AND REQUIRE ANY PROPRIETOR, EMPLOYEE OR ANY OTHER PERSON WHO MAY AT THAT TIME AND PLACE BE ATTENDING IN ANY MANNER TO, OR HELPING IN, THE C ARRYING ON OF SUCH BUSINESS OR PROFESSION' (I) TO AFFORD HIM THE NECESSARY FACILITY TO INSPECT SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS AS HE MAY REQUIRE AND WHICH MAY BE AVAILABLE AT SUCH PLACE, (II) TO AFFORD HIM THE NECESSARY FACILITY TO CHECK OR VERIFY THE CASH, STOCK OR OTHER VALUABLE ARTICLE OR THING WHICH MAY BE FOU ND THEREIN, AND (III) TO FURNISH SUCH INFORMATION AS HE MAY REQUIRE AS TO ANY R MATTER WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEE DING UNDER THIS ACT. EXPLANATION.'FOR THE PURPOSES OF THIS SUB-SECTION, A PLACE WHERE A BUSINESS OR PROFESSION IS CARRIED ON SHALL ALSO INC LUDE ANY OTHER PLACE, WHETHER ANY BUSINESS OR PROFESSION IS CARRIED ON TH EREIN OR NOT, IN WHICH THE PERSON CARRYING ON THE BUSINESS OR PROFESSION S TATES THAT ANY OF HIS BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY PART OF HIS CASH OR STOCK OR OTHER VALUABLE ARTICLE OR THING RELATING TO HIS BUS INESS OR PROFESSION ARE OR IS KEPT. (2) AN IT AUTHORITY MAY ENTER ANY PLACE OF BUSINESS OR PROFESSION REFERRED TO IN SUB-S. (1) ONLY DURING THE HOURS AT WHICH SUC H PLACE IS OPEN FOR THE CONDUCT OF BUSINESS OR PROFESSION AND, IN THE CASE OF ANY OTHER PLACE, ONLY AFTER SUNRISE AND BEFORE SUNSET. (3) AN IT AUTHORITY ACTING UNDER THIS SECTION MAY,' (I) IF HE SO DEEMS NECESSARY, PLACE MARKS OF IDENTI FICATION ON THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS INSPECTED BY HIM AND MAK E OR CAUSE TO BE MADE EXTRACTS OR COPIES THEREFROM, (IA) IMPOUND AND RETAIN IN HIS CUSTODY FOR SUCH PER IOD AS HE THINKS FIT ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS INSPECTED BY HI M : PROVIDED THAT SUCH IT AUTHORITY SHALL NOT' (A) IMPOUND ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS EXCEPT AFTER RECORDING HIS REASONS FOR SO DOING; OR (B) RETAIN IN HIS CUSTODY ANY SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS FOR A PERIOD EXCEEDING TEN DAYS (EXCLUSIVE OF HOLID AYS) WITHOUT OBTAINING THE APPROVAL OF THE CHIEF CIT OR DIRECTOR GENERAL T HEREFOR, AS THE CASE MAY BE, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 203 (II) MAKE AN INVENTORY OF ANY CASH, STOCK OR OTHER VALUABLE ARTICLE OR THING CHECKED OR VERIFIED BY HIM, (III) RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THIS ACT. (4) AN IT AUTHORITY ACTING UNDER THIS SECTION SHALL , ON NO ACCOUNT, REMOVE OR CAUSE TO BE REMOVED FROM THE PLACE WHEREIN HE HA S ENTERED, ANY CASH, STOCK OR OTHER VALUABLE ARTICLE OR THING. (5) WHERE, HAVING REGARD TO THE NATURE AND SCALE OF EXPENDITURE INCURRED BY AN ASSESSEE, IN CONNECTION WITH ANY FUNCTION, CE REMONY OR EVENT, THE IT AUTHORITY IS OF THE OPINION THAT IT IS NECESSARY OR EXPEDIENT SO TO DO, HE MAY, AT ANY TIME AFTER SUCH FUNCTION, CEREMONY OR E VENT, REQUIRE THE ASSESSEE BY WHOM SUCH EXPENDITURE HAS BEEN INCURRED OR ANY PERSON WHO, IN THE OPINION OF THE IT AUTHORITY, IS LIKELY TO POSSESS INFORMATION AS RESPECTS THE EXPENDITURE INCURRED, TO FURNISH SUCH INFORMATION AS HE MAY REQUIRE AS TO ANY MATTER WHICH MAY BE USEFUL FOR, O R RELEVANT TO, ANY PROCEEDING UNDER THIS ACT AND MAY HAVE THE STATEMEN TS OF THE ASSESSEE OR ANY OTHER PERSON RECORDED AND ANY STATEMENT SO R ECORDED MAY THEREAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UN DER THIS ACT. (6) IF A PERSON UNDER THIS SECTION IS REQUIRED TO A FFORD FACILITY TO THE IT AUTHORITY TO INSPECT BOOKS OF ACCOUNT OR OTHER DOCU MENTS OR TO CHECK OR VERIFY ANY CASH, STOCK OR OTHER VALUABLE ARTICLE OR THING OR TO FURNISH ANY INFORMATION OR TO HAVE HIS STATEMENT RECORDED, EITH ER REFUSES OR EVADES TO DO SO, THE IT AUTHORITY SHALL HAVE ALL THE POWERS U NDER [SUB-S. (1) OF S. 131] FOR ENFORCING COMPLIANCE WITH THE REQUIREMENT MADE : PROVIDED THAT NO ACTION UNDER SUB-S. (1) SHALL BE T AKEN BY AN ASSTT. DIRECTOR OR A DY. DIRECTOR OR AN AO OR A TRO OR AN INSPECTOR OF IT WITHOUT OBTAINING THE APPROVAL OF THE JT. DIRECTOR OR THE J T. CIT, AS THE CASE MAY BE. EXPLANATION.'IN THIS SECTION,' (A) 'IT AUTHORITY' MEANS CIT, JT. CIT, A DIRECTOR, A JT. DIRECTOR, OR AN ASSTT. DIRECTOR OR DY. DIRECTOR OR AN AO AND FOR TH E PURPOSES OF CL. (I) R OF SUB-S. (1), CL. (I) OF SUB-S. (3) AND SUB-S. (5), I NCLUDES AN INSPECTOR R OF IT; (B) 'PROCEEDING' MEANS ANY PROCEEDING UNDER THIS AC T IN RESPECT OF ANY YEAR WHICH MAY BE PENDING ON THE DATE ON WHICH THE POWERS UNDER THIS SECTION ARE EXERCISED OR WHICH MAY HAVE BEEN COMPLE TED ON OR BEFORE SUCH DATE AND INCLUDES ALSO ALL PROCEEDINGS UNDER T HIS ACT WHICH MAY BE COMMENCED AFTER SUCH DATE IN RESPECT OF ANY YEAR.' 11. FROM A READING OF AFORESAID SECTION, IT IS APPA RENT THAT IT DOES NOT MANDATE THAT ANY STATEMENT RECORDED UNDER S. 133A O F THE ACT WOULD HAVE EVIDENTIARY VALUE. IN OUR VIEW, FOR A STATEMEN T TO HAVE EVIDENTIARY VALUE, THE SURVEY OFFICER SHOULD HAVE BEEN AUTHORIS ED TO ADMINISTER, OATH SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 204 AND TO RECORD SWORN STATEMENT. THIS WOULD ALSO BE A PPARENT FROM S. 132(4) OF THE ACT. THE SAID SECTION IS REPRODUCED H EREINBELOW : '132. SEARCH AND SEIZURE.'. . . (4) THE AUTHORISED OFFICER MAY, DURING THE COURSE O F THE SEARCH OR SEIZURE, EXAMINE ON OATH ANY PERSON WHO IS FOUND TO BE IN PO SSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT, DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THEREAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE INDIAN IT ACT, 1922 (11 OF 1922) OR UNDER THIS ACT. EXPLANATION.'FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT THE EXAMINATION OF ANY PERSON UNDER THIS SUB-SECTION MA Y BE NOT MERELY IN RESPECT OF ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS FOUND AS A RESULT OF THE SEARCH, BUT ALSO IN RESPECT OF ALL MA TTERS RELEVANT FOR THE PURPOSES OF ANY INVESTIGATION CONNECTED WITH ANY PR OCEEDING UNDER THE INDIAN IT ACT, 1922 (11 OF 1922), OR UNDER THIS ACT .' (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED) 12. FROM THE AFORESAID, IT IS APPARENT THAT WHILE S . 132(4) OF THE ACT SPECIFICALLY AUTHORIZES AN OFFICER TO EXAMINE A PER SON ON OATH, S. 133A DOES NOT PERMIT THE SAME. 13. THE KERALA HIGH COURT IN PAUL MATHEWS & SONS VS . CIT (2003) 181 CTR (KER) 207 : (2003) 263 ITR 101 (KER) AND THE MADRAS HIGH COURT IN CIT VS. S. KHADER KHAN SON (2008) 214 CTR (MAD) 589 : (2008) 300 ITR 157 (MAD) HAVE ALSO TAKEN A SIMILAR VIEW. THE RELEVANT PORTION OF THE KERALA HIGH COURT JUDGMENT IN THE CASE OF PAUL MATH EWS & SONS (SUPRA) IS REPRODUCED HEREINBELOW : 'THE PROVISION ALSO ENABLES THE IT AUTHORITY TO IMP OUND AND RETAIN IN HIS CUSTODY FOR SUCH PERIOD AS HE THINKS FIT ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS INSPECTED BY HIM, PROVIDED THE AUTHORITY RECORDS HIS REASONS FOR DOING SO AND ALSO SHALL NOT RETAIN THE BOOKS OF ACCOUNT FOR A PERIOD NOT EXCEEDING 15 DAYS. SEC. 133A(3)(III) ENABLES THE AU THORITY TO RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THE ACT. SEC. 133A, HOWEVER, ENABL ES THE IT AUTHORITY ONLY TO RECORD ANY STATEMENT OF ANY PERSON WHICH MA Y BE USEFUL, BUT DOES NOT AUTHORIZE TAKING ANY SWORN STATEMENT. ON T HE OTHER HAND, WE FIND THAT SUCH A POWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUTHORISED OFFICER ONLY UNDER S. 1 32(4) OF THE IT ACT IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE IT A CT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUCH POWER TO EXAMINE A PERSON ON OATH, THE SAME HAS BEEN EXPRESSLY PROVIDED WHEREAS S. 133A DO ES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH. THUS, IN CON TRADISTINCTION TO THE POWER UNDER S. 133A, S. 132(4) OF THE IT ACT ENABLE S THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEME NT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE IT ACT. ON THE OTHER HAND, WHATEVER STATEMENT IS RE CORDED UNDER S. 133A OF THE IT ACT IT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 205 THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OA TH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONT EMPLATED UNDER LAW. THEREFORE, THERE IS MUCH FORCE IN THE ARGUMENT OF L EARNED COUNSEL FOR THE APPELLANT THAT THE STATEMENT ELICITED DURING THE SU RVEY OPERATION HAS NO EVIDENTIARY VALUE AND THE ITO WAS WELL AWARE OF THI S.' 14. MOREOVER, THE WORD 'MAY' USED IN S. 133A(3)(III ) OF THE ACT CLARIFIES BEYOND DOUBT THAT THE MATERIAL COLLECTED AND THE ST ATEMENT RECORDED DURING THE SURVEY IS NOT A CONCLUSIVE PIECE OF EVID ENCE BY ITSELF. 15. IN ANY EVENT, IT IS SETTLED LAW THAT THOUGH AN ADMISSION IS EXTREMELY IMPORTANT PIECE OF EVIDENCE, IT CANNOT BE SAID TO B E CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO HAS MADE THE ADMISSION TO SH OW THAT IT IS INCORRECT. 16. SINCE IN THE PRESENT CASE, THE RESPONDENT-ASSES SEE HAS BEEN ABLE TO EXPLAIN THE DISCREPANCY IN THE STOCK FOUND DURING T HE COURSE OF SURVEY BY PRODUCTION OF RELEVANT RECORD INCLUDING THE EXCISE REGISTER OF ITS ASSOCIATE COMPANY, NAMELY, M/S D.M.W (P) LTD., WE ARE OF THE OPINION THAT THE AO COULD NOT HAVE MADE THE AFORESAID ADDITION SOLELY O N THE BASIS OF THE STATEMENT MADE ON BEHALF OF THE RESPONDENT-ASSESSEE DURING THE COURSE OF SURVEY. 17. IN VIEW OF THE AFORESAID, PRESENT APPEAL BEING BEREFT OF MERIT, IS DISMISSED. 10.14. HON'BLE KERALA HIGH COURT IN PAUL MATHEWS & SONS VS CIT ((SUPRA)), CONSIDERING THE DECISION FRO M HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL COMPAN Y LTD. VS CIT (2000) 243 ITR 83 AND SMT. TARADEVI AGARWAL VS CIT (1973) 88 ITR 323 (SUPREME COURT) HELD THAT THE STATEMENT ELICITED DURING THE SURVEY OPERATION HAD NO EVIDENTIARY VALU E. LIKEWISE, THE HON'BLE DELHI HIGH COURT IN DHINGRA METAL WORKS ((SUPRA)) CONSIDERING THE DECISION FROM KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SONS ((SUPRA)), HON'BLE MADRAS HIGH COURT IN CIT VS S KHADER KHAN SONS ((SUPRA)) HAVE TAKEN A SI MILAR VIEW. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 206 THUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IN HOLDING THAT THE IMPUGNED ADDITION WAS MADE BY THE LD. ASSESSING OFF ICER WITHOUT SUFFICIENT BASIS AND HENCE NOT SUSTAINABLE IN LAW. 10.15. NOW, WE SHALL TAKE UP THE CROSS OBJECTION (C .O. 244/MUM/2017) PREFERRED BY THE ASSESSEE CHALLENGING THE VALIDITY OF NOTICE U/S 148 OF THE ACT AND FURTHER H OLDING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 IS A VALID ASSESSMENT. IT IS NOTED THAT THIS CROSS OBJECTION I S BARRED BY LIMITATION BY 210 DAYS. CONSIDERING THE STAND TAKEN BY US ON CONDONATION OF DELAY IN EARLIER PARAS OF THIS ORDER , ON THE SAME REASONING, THE DELAY IS CONDONED. SO FAR AS, THE ME RITS OF THE CROSS OBJECTION IS CONCERNED, SINCE, WE HAVE AFFIRM ED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THEREF ORE, THIS CROSS OBJECTION HAS REMAINED FOR ACADEMIC INTEREST ONLY. 11. NOW, WE SHALL TAKE THE APPEALS OF THE REVENUE IN THE CASE OF SHRI SUDHAKAR M. SHETTY (ITA NO.2904 TO 2906/MUM/2015 AND ITA NO.3148/MUM/2015 ALONG WITH T HE CROSS OBJECTIONS FILED BY THE ASSESSEE (C.O. NO.207 TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 207 209/MUM/2016). IN THE APPEALS OF THE REVENUE, THE ISSUE HAS TO BE EXAMINED ON LEGAL AS WELL AS ON MERITS. THE F OLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE:- FOR ASSESSMENT YEAR 2008-09 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 1,30,75,921/- MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE IN THE HAND OF PART NERSHIP FIRM. 2. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR ASSESSMENT YEAR 2009-10 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 77,23,137/- MADE ON ACCOUNT OF CASH SIPHONED OFF FR OM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE IN THE HAND OF PART NERSHIP FIRM. 2. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR ASSESSMENT YEAR 2010-11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 28,65,044/- MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE IN THE HAND OF FIRM. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 4,72,21,107/ - MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE WHEREIN M/S. SKYLARK BUILD IS A MEMBER ALONG WITH O BEROI GROUP AND ASSESSEE IS PARTNER IN M/S. SKYLARK BUILD. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 1,21,60,00,0 00/- MADE BY AO U/S. 28(V) SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 208 OF THE IT ACT ON ACCOUNT THAT M/S. SKYLARK BUILD CR EATED A GOODWILL WITHOUT ANY GROUND AND CREDITED THE SAME AMONG THE CAPITAL OF THE PARTNERS ON THE LIABILITY SIDE ACCORDING TO THEIR SHARE RATIO WHICH WAS RS. 1,21,60,00,000/- IN ASSESSEES CASE 4. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR THE ASSESSMENT YEAR 2011-12 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 1,54,79,088/- MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE AOP M/S. OASIS REALTY BY BOOKING BOGUS PURCHASE IN THE HAND OF AOP. 2. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR THE ASSESSMENT YEAR 2012-13 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 1,82,18,509/- MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE AOP M/S. OASIS REALTY BY BOOKING BOGUS PURCHASE IN THE HAND OF AOP. 2. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 11.1. IT IS NOTED THAT THE APPEALS OF THE REVENUE ARE BARRED BY LIMITATION BY THE 38 DAYS IN FILING THE A PPEAL BEFORE THIS TRIBUNAL. THE LD. CIT-DR CONTENDED THAT DELAY MAY BE CONDONED, WHEREAS, THE LD. COUNSEL FOR THE ASSESSEE , CONTENDED THAT THE DEPARTMENT IS EXPECTED TO EXPLAI N THE DELAY OF EACH DAY, THEREFORE, DELAY MAY NOT BE COND ONED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 209 CONSIDERING THE IDENTICAL ISSUE IN EARLIER PARAS OF THIS ORDER, WHILE DEALING WITH THE ISSUE OF DELAY, IN THE APPEA LS OF THE ASSESSEE AS WELL AS OF THE REVENUE, ON THE SAME REA SONING, THE DELAY IS CONDONED. 12. THE CRUX OF ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE AS WELL AS THE REVENUE IS IDENTICAL. WE HA VE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. THE GROUND RAISED HAS ALREADY BEEN MENTIONED ABOVE. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS THE CHAIRMAN AND KEY PERSON OF SAHANA GROUP, WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. A SEARCH AND SEIZURE ACTION HAD TAKEN PLACE AT THE RESIDENTI AL PREMISES OF SHRI SUDHAKAR M. SHETTY, ON 22ND SEPTEMBER, 201 1. SIMULTANEOUSLY, SURVEY U/S 133A OF THE ACT WAS CARR IED OUT AND THE PREMISES OF THE GROUP CONCERN AT DIFFERENT PLACES. DURING THE COURSE OF SEARCH/SURVEY, CERTAIN INCRIMI NATING DOCUMENT WERE FOUND AND SEIZED/IMPOUNDED. DURING TH E COURSE OF SURVEY PROCEEDINGS IN THE CASE OF M/S SKY LARK BUILDCON PVT. LTD, THE ASSESSEE OFFERED ADDITIONAL INCOME OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 210 RS.50 CRORES DURING TENDERING HIS STATEMENT RECORDE D U/S 132(4)/131 OF THE ACT ON 22 AND 23 RD SEPTEMBER, 2011 ON ACCOUNT/ VARIOUS OMISSIONS AND COMMISSIONS. THE ASS ESSEE LATER ON CHANGE HIS STAND AND VIDE LETTER DATED 30/ 01/2012 STATED THAT THE DISCLOSURE MADE OF RS.50 CRORES MAY BE CONSIDERED IN THE HANDS OF M/S OASIS REALITY (AOP), WHICH IS A JOINT VENTURE OF SAHANA GROUP AND OBERAI GROUP. SUBSEQUENT TO SEARCH, THE LD. ASSESSING OFFICER ISS UED NOTICE ON 10/09/2012, U/S 153A OF THE ACT, AND IN RESPONSE THERETO, THE ASSESSEE DECLARED INCOME OF RS.85,51,860/- IN I TS RETURN FILED ON 20/03/2013. THE LD. ASSESSING OFFICER, WHI LE COMPLETING THE ASSESSMENT, ASSESSED AT AN AMOUNT OF RS.1,30,75,921/- AS INCOME FROM OTHER SOURCES IN TH E HANDS OF THE ASSESSEE ON THE GROUND THAT CASH HAS BEEN GE NERATED OUT OF BOGUS BILLS BOOKED BY THE FIRM M/S SKYLARK B UILD, WHERE THE ASSESSEE IS A PARTNER AND THAT SUCH CASH HAD COME AND WAS MISAPPROPRIATED BY THE PARTNERS. FINALLY, T HE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 24/03/201 4 AT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 211 AN INCOME OF RS.2,19,27,700/- BY PASSING AN ORDER U /S 143(3) R.W.S. 153A OF THE ACT. 12.1. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE CHALLENGED THE A DDITION AND CONSEQUENT PASSING OF ORDER U/S 153A OF THE ACT WITHOUT FINDING ANY INCRIMINATING DOCUMENTS. PLEA WAS ALSO RAISED THAT NO PENDING ASSESSMENT OR REASSESSMENT PROCEEDI NGS WERE THERE, THEREFORE, THE ASSESSMENT HAD NOT ABATE D AND FURTHER NO INCRIMINATING MATERIAL WAS FOUND DURING SEARCH PROCEEDINGS AT THE PREMISES OF THE ASSESSEE AND SIN CE, THE ASSESSMENT OR REASSESSMENT HAD NOT ABATED, NO ADDIT ION COULD HAVE BEEN MADE ON THE BASIS OF AVAILABLE MATE RIAL. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE PROVISIONS OF SECTION 153A, DECISION OF ANIL KUMAR BHATIA FROM HON'BLE DELHI HIGH COURT, CANARA HOUSING DEVEL OPMENT CO. VS DCIT, ORDER DATED 27/05/2014, THE DECISION F ROM HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS MURLI A GRO PRODUCTS, ORDER DATED 29/10/2010, THE PROCEEDINGS U NDER SECTION 153A OF THE ACT WERE HELD TO BE VALIDLY INI TIATED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 212 HOWEVER, ON MERITS OF THE ADDITION, AS INCOME FROM OTHER SOURCES, THE ASSESSEE CLAIMED THAT THE ADDITION IN THE HANDS OF THE PARTNERSHIP FIRM WERE MADE ON THE BASIS OF R OVING ENQUIRY MADE BY THE LD. ASSESSING OFFICER AND CONSE QUENT ORDER PASSED U/S 143(3) R.W.S. 153C WITHOUT FINDING ANY INCRIMINATING DOCUMENTS. THE LD. COMMISSIONER OF IN COME TAX (APPEALS) CONSIDERED THE CIRCULAR NO.8/2014, DA TED 30/03/2014, SUBMISSIONS OF THE ASSESSEE MADE VIDE L ETTER DATED 09/07/2014 (PAGE-14 ONWARDS OF THE IMPUGNED O RDER) AND FURTHER SUBMISSIONS DATED 17/09/2014 (PAGE-16 O NWARDS OF THE IMPUGNED ORDER) AND CONSIDERING THE DECISION IN THE CASE OF UMACHARAN SHAW & BROTHERS VS CIT 37 ITR 271 (SUPREME COURT), CIT VS K. MAHIM UDMA 22 ITR 133(KE RALA), DHANKESHWARI COTTON MILLS LTD. 26 ITR 775 (SUPREME COURT), CIT VS ANUMPAM KAPOOR (2008) 299 ITR 179 (P & H), A CIT VS METRO CONSTRUCTION CO. (2013) 36 CCH 249 (MUM.), SU NITA DHADDA VS DCIT (2012) 148 TTJ 719 (JP) FOUND THAT T HE ALLEGED BOGUS PURCHASES TRANSACTIONS AND THE CONSEQ UENT ADDITION WAS MADE IN THE HANDS OF THE FIRM I.E. M/S SKYLARK SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 213 BUILD. THUS, NO SEPARATE ADDITION WAS REQUIRED TO B E MADE ON THE SAME TRANSACTIONS IN THE HANDS OF THE ASSESSEE AS IT WILL AMOUNT TO DOUBLE TAXATION ON THE SAME INCOME. IT WA S OBSERVED THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE LD. ASSESSING OFFICER THAT ANY CASH HAD EXCHANGE HANDS IN THE TRANSACTIONS OF ALLEGED BOGUS PURCHASE AND MISAPPRO PRIATED BY THE PARTNERS. BEFORE THIS TRIBUNAL, NO CONTRARY MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE CONTRADICTING THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPE ALS), THUS, THE STAND TAKEN BY THE LD. FIRST APPELLATE AU THORITY IS AFFIRMED, RESULTING INTO DISMISSAL OF APPEAL FILED BY THE REVENUE. 12.2. NOW, WE SHALL TAKE UP THE CROSS OBJECTION 20 7 TO 209/MUM/2016, WHEREIN, FOLLOWING GROUNDS HAVE BEEN RAISED. A) THERE WERE NO PENDING ASSESSMENT OR REASSESSMENT PROCEEDINGS FOR THE IMPUGNED YEAR AND ACCORDINGLY THE ASSESSMENT HA D ABATED B) THERE WAS NO INCRIMINATING MATERIAL WHICH WAS FO UND DURING THE COURSE OF SEARCH PROCEEDINGS C) SINCE THE ASSESSMENT OR REASSESSMENT HAD NOT ABA TED, THE ASSESSING OFFICER COULD HAVE MADE ADDITIONS ONLY ON THE BASIS OF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 214 THE MATERIAL AVAILABLE AND NOT ON THE BASIS OF PRES UMPTION, INFERENCES AND ALLEGED PRACTICE. 12.3. THE CRUX OF THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE AS MENTIONED IN HIS WRITTEN SUBMISSIONS. T HE LD. CIT- DR DEFENDED THE ADDITION MADE BY THE LD. ASSESSING OFFICER. 12.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT A SEARCH ACTION WAS CARRIED OUT BY THE REVENUE AT THE RESIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHETTY, ON 22ND SEPTEMBER, 2011. AS THE SEARCH HAD TAKEN PLACE, THE CASE WAS SELECTED FOR SCRUTINY AS REQUIRED UNDER THE PROVISI ONS OF SECTION 153A OF THE ACT. THE ASSESSING OFFICER PASSED THE A SSESSMENT ORDER ON 24TH MARCH, 2014. WHILE FRAMING THE ASSESS MENT ORDER IN RESPECT OF THESE YEARS, THE ASSESSING OFFICER AS SESSED CERTAIN AMOUNT IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCE AND ADDED ON THE GROUND THAT CASH WAS GENERA TED OUT OF BOGUS PURCHASES BOOKED BY THE PARTNERSHIP FIRM M/S. SKYLARK BUILD AND/OR AOP FIRM M/S. OASIS REALTY, WHEREIN AC CORDING TO ASSESSING OFFICER, THE ASSESSEE IS A MEMBER HAVING 43% SHARE. THE STAND OF THE ASSESSEE BEFORE THIS TRIBUNAL WAS THAT THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 215 PRESENT ASSESSEE IS NOT A MEMBER OF AOP FIRM M/S. O ASIS REALTY AS ALLEGED BY THE ASSESSING OFFICER. THE SAID AOP C AME INTO EXISTENCE IN 2009 BY ENTERING A JV AGREEMENT IN WHI CH TWO PARTNERSHIP FIRMS NAMELY M/S. SKYLARK BUILD AND M /S. SHREE VRUNDA ENTERPRISE ON ONE PART AND TWO CONCERNS OF O BEROI GROUP ON OTHER PART BECAME MEMBERS OF THE SAID AOP. LATER ON, M/S.SKYLARK BUILD WAS CONVERTED INTO A PVT. LIMITED COMPANY UNDER CHAPTER IX OF THE COMPANIES ACT, 1956. THE NA ME OF THE SAID COMPANY WAS SKYLARK BUILDCON PRIVATE LIMITED. BY VIRTUE OF CHANGE OF STATUS, THE SAID M/S. SKYLARK BUILDCON PR IVATE LIMITED BECAME MEMBER OF THE SAID AOP. IT WAS ALSO PLEADED THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES, N O INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF TH E ASSESSEE, EXCEPT CASH AND JEWELLERY. IN RESPECT OF CASH AND J EWELLERY, APPEAL WAS FILED IN RESPECT OF ASSESSMENT YEAR 2012 -13. AS REGARDS OTHER ADDITIONS MADE IN ASSESSMENT YEARS UN DER APPEALS, NO INCRIMINATING DOCUMENTS WERE FOUND. IT IS NOTED THAT THE FIRST APPELLATE AUTHORITY HAS DELETED THOSE ADD ITIONS ON MERITS IN THE APPEAL PREFERRED BEFORE HIM IN RESPEC T OF THOSE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 216 ADDITIONS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT DECIDED THE ISSUE THAT IN THE ABSENCE OF INCRIMINAT ING DOCUMENTS, NO ADDITIONS CAN BE MADE. THE CASE OF T HE ASSESSEE IS COVERED BY THE DECISION IN THE CASE OF CIT VS. S INHGAD TECHNICAL EDUCATION SOCIETY CIVIL APPEAL NO. 11081 TO 11083 OF 2017 ORDER DATED 29 TH AUGUST, 2017, WHEREIN, THE HON'BLE APEX COURT HELD AS UNDER:- 18. THE TRIBUNAL PERMITTED THIS ADDITIONAL GROUND B Y GIVING A REASON THAT IT WAS A JURISDICTIONAL ISSUE TAKEN UP ON THE BASIS OF FACTS ALREADY ON THE RECORD AND, THEREFORE, COULD B E RAISED. IN THIS BEHALF, IT WAS NOTED BY THE TRIBUNAL THAT AS PER TH E PROVISIONS OF S. 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS S EIZED HAD TO PERTAIN TO THE ASSESSMENT YEARS IN QUESTION AND IT IS AN UNDISPUTED FACT THAT THE DOCUMENTS WHICH WERE SEIZED DID NOT E STABLISH ANY CO- RELATION, DOCUMENT-WISE, WITH THESE FOUR ASSESSMENT YEARS. SINCE THIS REQUIREMENT UNDER S. 153C OF THE ACT IS ESSENT IAL FOR ASSESSMENT UNDER THAT PROVISION, IT BECOMES A JURIS DICTIONAL FACT. WE FIND THIS REASONING TO BE LOGICAL AND VALID, HAV ING REGARD TO THE PROVISIONS OF S. 153C OF THE ACT. PARA 9 OF THE ORD ER OF THE TRIBUNAL REVEALS THAT THE TRIBUNAL HAD SCANNED THROUGH THE S ATISFACTION NOTE AND THE MATERIAL WHICH WAS DISCLOSED THEREIN WAS CU LLED OUT AND IT SHOWED THAT THE SAME BELONGS TO ASST. YR. 2004-05 O R THEREAFTER. AFTER TAKING NOTE OF THE MATERIAL IN PARA 9 OF THE ORDER, THE POSITION THAT EMERGES THEREFROM IS DISCUSSED IN PARA 10. IT WAS SPECIFICALLY RECORDED THAT THE COUNSEL FOR THE DEPARTMENT COULD NOT POINT OUT TO THE CONTRARY. IT IS FOR THIS REASON THE HIGH COURT HAS ALSO GIVEN ITS IMPRIMATUR TO THE AFORESAID APPROACH OF THE TRIBUNA L. THAT APART, LEARNED SENIOR COUNSEL APPEARING FOR THE RESPONDENT , ARGUED THAT NOTICE IN RESPECT OF ASST. YRS. 2000-01 AND 2001-02 WAS EVEN TIME- BARRED. 12.5. IN ANOTHER CASE OF M/S IDEAL APPLIANCES CO P VT LTD VS. DCIT, ITA NO. 173 TO 177/M/2015, ORDER DATE D 31 ST DECEMBER, 2015(MUM) IT WAS HELD AS UNDER : SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 217 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED DECISION O F THE TRIBUNAL IN THE CASE OF SHRI GOVIND AGARWAL V. ACIT BEING ITA NO: 3389/ M UM / 2011 DATED 10.01.2014 (SUPRA); ALL CARGO GLOBAL LOGISTICS V . ADDL . CIT (SUPRA); SKS ISPAT AND POWER LIMITED VS. DCIT CC 45 (ITA 8746/M/12 AND ITA 8747/M/12) (SUPRA) AS WELL AS THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF CIT V. ALL CARGO GLOBAL LOGISTIC (374 ITR 645) (SUPRA), COPIES OF WHICH ARE PLACED ON RECORD. ON PERUSAL OF THE SAID DECISIONS, WE FIND THEY ARE RELEVANT FOR THE PROPOSITION THAT WHEN NO ASSESSMENT HAS ABATED, THE QUESTION OF MAKING ANY A DDITION OR MAKING DISALLOWANCE WHICH ARE NOT BASED ON ONLY MAT ERIAL FOUND DURING THE SEARCH IS BAD IN LAW. IN THIS REGARD, W E FIND IT RELEVANT TO EXTRACT THE RELEVANT PARAS FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI GOVIND AGARWAL (SUPRA) AND THE SAME IS AS FOLLOWS : 12. WE HAVE HEARD THE PARTIES AND THEIR DIVERGENT STANDS ON THE LEGAL ISSUE AND THE VALIDITY OF THE INSTANT ASSESSMENT/REASSESSMENT WITH THE ROUTINE ADDITIONS U/S 68 AND SECTION 14A OF THE ACT BASED ON THE ACCOUNTED TRANS ACTIONS. THE INSTANT CASE FOR THE AY 2002-03 DEALS WITH THE CASE OF DISTURBING THE COMPLETED ASSESSMENT. EARLIER THE ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT. COMPLETENESS OF TH E SUMMARY ASSESSMENT IS CONSIDERED AND HELD IN FAVOUR OF THE ASSESSEE VIDE MANY JUDGMENTS CITED ABOVE. IN THE ASSESSMENT U/S 1 53A, THE AO MADE (I) ADDITION U/S 68 ON ACCOUNT OF ARTIFICIALLY INFLATED INVESTMENT IN HOUSE DULY DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE RS.31,33,070/-; AND (II) DISALLOWANCE U/S 14A: RS. 23,31,469/-. ADMITTEDLY, THERE IS NO INCRIMINATING MATERIAL BEFORE THE AO TO SUPPORT THE ABOVE ADDITIONS. THE VALUATIO N REPORT, WHICH IS GARNERED BY THE AUTHORITIES CONSTITUTES MERE EST IMATES AND THE PROVISION OF SECTION 132 IS NOT REQUIRED TO OBTAIN SUCH REPORT FROM THE DVO. AS SUCH, FOR MAKING AFORESAID ADDITIONS OF RS 31,33,070/-, AO HAS NOT USED EVEN THE SAID VALUATIO N REPORT AND THE AO DISALLOWED WHAT IS REPORTED IN THE BOOKS. SI MILAR IS THE CASE WITH THE ADDITIONS U/S 14A OF THE ACT. THEREFO RE, UNDISPUTEDLY, THE IMPUGNED QUANTUM ADDITIONS ARE MA DE MERELY BASED ON THE ENTRIES IN THE ACCOUNTED BOOKS AND CER TAINLY NOT BASED ON EITHER THE UNACCOUNTED BOOKS OF ACCOUNTS O F THE ASSESSEE OR BOOKS NOT PRODUCED TO THE AO EARLIER OR THE INCRIMINATING MATERIAL GATHERED BY THE INVESTIGATIO N WING OF THE REVENUE. CONSIDERING THE LEGAL PROPOSITIONS PLACE BEFORE US BY THE ASSESSEES COUNSEL, WE ARE OF THE OPINION, SUCH ASSESSMENTS OR ADDITIONS ARE UNSUSTAINABLE IN LAW. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 218 9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE IS SUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADDITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAIN ABLE IN LAW, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITIONS MADE IN THE INSTANT CASE ARE NOT SUSTAINABLE AND ACCORDINGLY, W E DELETE THE SAME. CONSIDERING OUR DECISION ON THE LEGAL ISSUE I N FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS DEMAND NO SPECIFIC ADJU DICATION. THUS, ON THE LEGAL GROUND, THE ASSESSEE SUCCEEDS AN D REST OF THE GROUNDS ARE DISMISSED AS ACADEMIC. FOLLOWING THE AFORESAID DECISION AND THE RATIO LAID DOWN THEREIN, WE ARE OF THE VIEW THAT IT IS A SETTLED PR OPOSITION OF LAW THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL F OUND DURING THE SEARCH, NO ADDITION CAN BE SUSTAINED. THUS, THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. 13. SINCE, WE HAVE ALLOWED THE CROSS OBJECTIONS OF THE ASSESSEE AND THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) HAS DELETED THE ADDITION IN ITA NO.2904/MUM/2015, WHICH HAS BEEN AFFIRMED BY US, THEREFORE, THE APPEAL OF THE REVENU E IS ALSO DISMISSED. THIS WILL COVER ITA NO.2905, 2906 AND 2907/MUM/2015, ITA NO.3148/MUM/2016 AND CROSS APPE AL OF THE ASSESSEE IN ITA NO.2450/MUM/2015 ON LEGAL GR OUND AS WELL AS ON MERIT. THUS, ON IDENTICAL REASONING THE APPEALS OF THE REVENUE ARE DISMISSED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 219 14. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENU E IN THE CASE OF M/S SAHANA BUILDERS & DEVELOPERS PVT. L TD. (ITA NO.2900, 5275 & 2902/MUM/2015) FOR ASSESSMENT YEARS 2008- 09, 2010-11 AND 2011-12 AND CROSS OBJECTIONS OF THE ASSESSEE (C.O. 205 & 206/MUM/2016 AND C.O. 176/MUM/2017). IN THE APPEALS OF THE REVENUE, FOLLOWING GROUNDS HAVE BEEN RAISED. FOR ASSESSMENT YEAR 2008-09 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 45,61,368/- MADE ON ACCOUNT OF CASH SIPHONED OFF F ROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE IN THE HAND OF PART NERSHIP FIRM. 4. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR ASSESSMENT YEAR 2010-11 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 9,99,483/- MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE IN THE HAND OF FIRM. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 1,64,72,486/ - MADE ON ACCOUNT OF CASH SIPHONED OFF FROM THE M/S. SKYLARK BUILD BY BOOKING BOGUS PURCHASE WHEREIN M/S. SKYLARK BUILD IS A MEMBER ALONG WITH O BEROI GROUP AND ASSESSEE IS PARTNER IN M/S. SKYLARK BUILD. 7. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 42,30,00,000 /- MADE BY AO U/S. 28(V) OF THE IT ACT ON ACCOUNT THAT M/S. SKYLARK BUILD CREAT ED A GOODWILL WITHOUT ANY GROUND AND CREDITED THE SAME AMONG THE CAPITAL OF T HE PARTNERS ON THE LIABILITY SIDE ACCORDING TO THEIR SHARE RATIO WHICH WAS RS. 42,30,00,000/- IN ASSESSEES CASE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 220 8. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR THE ASSESSMENT YEAR 2011-12 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 53,99,682/- MADE ON ACCOUNT OF CASH SIPHONED OFF F ROM THE AOP M/S. OASIS REALTY BY BOOKING BOGUS PURCHASE IN THE HAND OF AOP . 4. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. FOR THE ASSESSMENT YEAR 2012-13 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITIONS OF RS. 63,55,294/- MADE ON ACCOUNT OF CASH SIPHONED OFF F ROM THE AOP M/S. OASIS REALTY BY BOOKING BOGUS PURCHASE IN THE HAND OF AOP . 4. THE APPELLANT CRAVE TO LEAVE, TO ADD, TO AMEND A ND / OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 14.1. THE ASSESSEE HAS ALSO FILED CROSS APPEAL FOR ASSESSMENT YEAR 2012-13 (ITA NO. 2451/MUM/2015). TH E ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(APPEALS)-52 HAS ERRED IN LA W AS WELL AS UNDER THE FACTS OF THE CASE IN HOLDING THAT THE NOTICE IS SUED UNDER SECTION 148 OF THE INCOME TAX ACT 1961 IS VALID IN LAW. 2. THAT THE LEARNED CIT(APPEALS)-52 HAS ERRED IN LA W AS WELL AS UNDER THE FACTS OF THE CASE IN REPLACING THE SECTION 143( 2) R.W.S. 147 OF THE INCOME TAX ACT, 1961 AS AGAINST SECTION 143(3) WRIT TEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 221 3. THAT THE LEARNED CIT(APPEAL)-52 HAS ERRED IN LAW AS WELL AS UNDER THE CIRCUMSTANCES OF THE CASE IN NOT DECLARING THE ASSE SSMEN ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 BY T HE ASSESSING OFFICER AS INVALID AB-INITIO. 4. THAT THE LEARNED CIT(APPEALS)-52 HAS ERRED IN LA W AS WELL AS UNDER THE CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ORD ER OF THE ASSESSING OFFICER IN RESPECT OF ADDITION OF RS. 2,3 6,00,000/- MADE AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE INCOME TAX ACT, 1961. 14.2. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROU ND, WHICH IS AS UNDER:- 5. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND THE PROVISIONS OF LAW, THE ASSESSMENT FRAMED BY THE LEARNED ASSESS ING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) IS AGAINST THE STATUTORY PROVISIONS OF THE ACT AND WITHOUT COM PLYING THE PROCEDURES PRESCRIBED U/S. 153C OF THE INCOME TAX A CT, 1961 AND AS SUCH THE ASSESSMENT BEING BAD IN LAW AND DESERVED T O BE QUASHED. 14.3. DURING HEARING, IN THE APPEALS OF THE REVENU E, THE LD. CIT-DR, DEFENDED THE ASSESSMENT ORDER AND CONSEQUEN T ADDITION MADE THEREIN, WHEREAS, THE LD. COUNSEL FOR THE ASSE SSEE DEFENDED THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEAL) ON MERIT BUT ON LEGAL ISSUE, THE LD. COUNS EL ADVANCED ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED AS ADDITIONAL GROUND. THE LD. COUNSEL RELIED UPON THE DECISION FR OM HON'BLE APEX COURT IN NTPC LTD. VS CIT (229 ITR 383) (SUPRE ME COURT) SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 222 AND ALSO THE DECISION FROM HON'BLE JURISDICTIONAL H IGH COURT IN DIT VS INGRAM MICRO INDIA EXPORTS PVT. LTD. (2015) 234 TAXMAN 464 (BOM.). 14.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SO FAR AS , ADMISSION OF LEGAL ISSUE IS CONCERNED, THE HON'BLE APEX COURT IN NTPC COMPANY LTD. VS CIT((SUPRA)) HELD AS UNDER:- 5. UNDER S. 254 OF THE IT ACT, THE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING H EARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE T RIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIB LE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TA XING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILIT Y OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT O F A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE T HE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISS IBLE DEDUCTION DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE S HOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRI BUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD I N RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO RESTRICT THE POWE R OF THE TRIBUNAL UNDER S. 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE CIT(A). BOTH THE ASSESSEE AS WELL AS THE DEP ARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS-OBJECTIONS BEFORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CO NSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 8. . THE REFRAMED QUESTION, THEREFORE, IS ANSWERED IN THE AFFIRMATIVE, I.E., THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QU ESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUND BY THE AUTHORITIES B ELOW AND HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESSEE. WE RE MAND THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 223 PROCEEDINGS TO THE TRIBUNAL FOR CONSIDERATION OF TH E NEW GROUNDS RAISED BY THE ASSESSEE ON THE MERITS. 14.5. LIKEWISE, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. INGRAM MICRO (INDIA) EXPORTS PVT. LTD. (2015) 234 TAXMAN 464 (BO M) HELD AS UNDER:- 4. AFTER HEARING BOTH SIDES AND PERUSING THE RELE VANT MATERIAL INCLUDING THE IMPUGNED ORDERS, WE ARE OF THE VIEW T HAT THERE IS MUCH SUBSTANCE IN THE CONTENTION OF MR. MISTRI. THE ADDI TIONAL GROUND WAS PERMITTED AND WITH REGARD TO THE VALIDITY OF THE PR OCEEDINGS UNDER S. 153C AS THE TRIBUNAL CONCLUDED THAT THIS ISSUE OR Q UESTION GOES TO THE ROOT OF THE CASE. IF IT IS ANSWERED EITHER WAY, THE MATTER WOULD COME TO AN END. THE TRIBUNAL HAS NOTED THAT THE ADD ITIONAL GROUND IS THE LEGAL GROUND GOING TO THE ROOT OF THE CASE. THE AO DID NOT ALLOW INSPECTION OF THE RECORD TO THE ASSESSEE OR ITS COU NSEL AND THAT IS WHY THEY HAVE RAISED ADDITIONAL GROUND ABOUT VALIDI TY OF THE PROCEEDINGS UNDER S. 153C. THAT IS ABOUT ABSENCE OF ANY SATISFACTION BEING RECORDED BY THE OFFICER WHO WAS ASSESSING THE SEARCH PARTY. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSE E WAS NOT SEARCHED AND THE SEARCH HAS BEEN CONDUCTED IN THE C ASE OF INGRAM MICRO (INDIA) EXPORTS PTE. LTD./TECH PACIFIC (INDIA ) LTD. AT THEIR BUSINESS PREMISES IN MUMBAI. THEREFORE, IN TERMS OF S. 153A AND 153C OF THE IT ACT, PROCEEDINGS CAN ONLY BE INITIAT ED AFTER THE AO ARRIVES AT A SATISFACTION THAT THE SEIZED MATERIAL PERTAINS TO OTHER PERSONS, NAMELY, PERSONS OTHER THAN THE SEARCHED PA RTY. IT IS ONLY THEN THE PERSONS OTHER THAN THE SEARCHED PARTIES CA N BE PROCEEDED AGAINST. THERE IS NOTHING IN THE ASSESSMENT ORDER W HICH WOULD INDICATE THAT THE ASSESSMENT OFFICER ARRIVED AT SUC H SATISFACTION. THE TRIBUNAL NOTED THAT IT HAS ALLOWED THIS ADDITIONAL GROUND TO BE RAISED AFTER HEARING THE DEPARTMENTAL REPRESENTATIVES' OBJ ECTION. TO DO COMPLETE JUSTICE AND TO BOTH SIDES THE TRIBUNAL GA VE ENOUGH OPPORTUNITY TO THE REVENUE TO PRODUCE THE FILES AND IF THE SAME CONTAIN THE SATISFACTION OF THE AO, THEN, TO RELY U PON IT BEFORE THE TRIBUNAL. THE TRIBUNAL NOTED THAT MORE THAN 20 MONT HS PASSED AFTER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 224 THE FIRST DIRECTION TO PRODUCE THE RECORD WAS ISSUE D. DESPITE REPEATED ADJOURNMENTS AND AS NOTED BY THE TRIBUNAL IN PARA 9 OF THE IMPUGNED ORDER, THE SATISFACTION REQUISITE FOR INITIATION OF THE PROCEEDINGS UNDER S. 153C WAS NOT AVAILABLE. THE RECORD IN THAT BEHAL F WAS NOT PRODUCED. IN THESE CIRCUMSTANCES, NOT ONLY DID THE TRIBUNAL FIND THAT IT WAS NECESSARY AND IN THE INTEREST OF JUSTICE TO PERMIT RAISING OF AN ADDITIONAL GROUND, BUT TO ANSWER IT. IT IS ONLY TO ENABLE IT TO ANSWER IT THAT IT RELIED ON THE SETTLED PRINCIPLES AND THE JU DGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI VS. ASSTT. CIT (2007) 208 CTR (SC) 97 : (2007) 289 ITR 341 (SC). I T IS ONLY TO ENABLE THE TRIBUNAL TO REFER TO THE SETTLED PRINCIP LES AND FOR RE- ENFORCING ITS CONCLUSION THAT THIS JUDGMENT IS REFE RRED. 14.6. LIKEWISE IN ITO VS. JASJIT SINGH CO-138 TO 142/DEL/2014 DECIDED ON 23RD SEPTEMBER, 2014. IT WA S HELD AS UNDER:- 6 HAVING GONE THROUGH THE ABOVE CITED DECISION, WE COME TO THE CONCLUSION THAT THE WHOLE PURPOSE OF PREFERRING THE APPEAL AND CROSS OBJECTIONS AND RAISING NEW GROUND FOR THE FIR ST TIME BEFORE THE APPELLATE AUTHORITY IS TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. WHEN WE CONSIDER THE PRESENT CASE UNDER T HE ABOVE BACK GROUND, WE FIND THAT THERE IS NO DISPUTE THAT FOR DECIDING THE ISSUE RAISED BEFORE THE ITAT IN THE CROSS OBJECTION S REGARDING VALIDITY OF THE ASSESSMENT ORDER ON THE BASIS THAT (I) THE ASSESSING OFFICER HAD NOT RECORDED SATISFACTION WHILE PROCEED ING FOR FRAMING ASSESSMENT UNDER SEC. 153-C OF THE ACT; (II) THE AS SESSING OFFICER HAD NOT SIGNED THE MANUSCRIPT OF THE ASSESSMENT ORD ER AS REQUIRED UNDER SEC. 282A OF THE ACT; (III) NO INCRIMINATING DOCUMENTS IN RESPECT OF THE ASSESSEE WAS FOUND FROM THE POSSESSI ON OF PERSONS COVERED UNDER SEC. 153A OF THE ACT, NO NEW FACTS OU TSIDE THE RECORD OF THE AUTHORITIES BELOW IS REQUIRED TO BE CONSIDER ED. IN OTHER WORDS, THE QUESTION OF LAW RAISED ABOVE IS ARISING FROM TH E FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS. WHEN THERE IS NO NEED TO CONSIDER THE NEW FACTS OUTSIDE THE RECORD FOR THE A DJUDICATION OF THE ABOVE ISSUE AND UNDISPUTEDLY WHEN THOSE ISSUES ARE NECESSARY TO CONSIDER TO CORRECTLY ASSESS THE TAX LIABILITY OF A N ASSESSEE, AS PER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 225 THE RATIOS HELD DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF NTPC, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED. 14.7. THE HON'BLE BOMBAY HIGH COURT IN CIT VS. PRU THVI BROKERS & SHAREHOLDER (P) LTD (2012) 349 ITR 336(BOM) HELD/OBSERVED AS UNDER:- 10. A LONG LINE OF AUTHORITIES ESTABLISH CLEARLY TH AT AN ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDITIONAL CLAIMS TO WIT CLAI MS NOT MADE IN THE RETURN FILED BY IT. IT IS NECESSARY FOR US TO REFER TO SOME OF THESE DECISIONS ONLY TO DEAL WITH TWO SUBMISSIONS ON BEHA LF OF THE DEPARTMENT. THE FIRST IS WITH RESPECT TO AN OBSERVA TION OF THE SUPREME COURT IN JUTE CORPORATION OF INDIA LTD. VS. CIT (1990) 88 CTR (SC) 66 : 1991 SUPP (2) SCC 744 : (1991) 187 IT R 688 (SC). THE SECOND SUBMISSION IS BASED ON A JUDGMENT OF THE SUPREME COURT IN GOETZE (INDIA) LTD. VS. CIT (2006) 204 CTR (SC) 182 : (2006) 157 TAXMAN 1 (SC). 11(A). IN JUTE CORPORATION OF INDIA LTD. VS. CI T (SUPRA) FOR THE ASST. YR. 1974-75 THE APPELLANT DID NOT CLAIM ANY DEDUCTI ON OF ITS LIABILITY TOWARDS PURCHASE TAX UNDER THE PROVISIONS OF THE BE NGAL RAW JUTE TAXATION ACT, 1941, AS IT ENTERTAINED A BELIEF THAT IT WAS NOT LIABLE TO PAY PURCHASE TAX UNDER THAT ACT. SUBSEQUENTLY, THE APPELLANT WAS ASSESSED TO PURCHASE TAX AND THE ORDER OF ASSESSMEN T WAS RECEIVED BY IT ON 23RD NOV., 1973. THE APPELLANT CHALLENGED THE SAME AND OBTAINED A STAY ORDER. THE APPELLANT ALSO FILED AN APPEAL FROM THE ASSESSMENT ORDER UNDER THE IT ACT. IT WAS ONLY DURI NG THE HEARING OF THE APPEAL THAT THE ASSESSEE CLAIMED AN ADDITIONAL DEDUCTION IN RESPECT OF ITS LIABILITY TO PURCHASE TAX. THE AAC P ERMITTED IT TO RAISE THE CLAIM AND ALLOWED THE DEDUCTION. THE TRIBUNAL H ELD THAT THE AAC HAD NO JURISDICTION TO ENTERTAIN THE ADDITIONAL GRO UND OR TO GRANT RELIEF ON A GROUND WHICH HAD NOT BEEN RAISED BEFORE THE IT O. THE TRIBUNAL ALSO REFUSED THE APPELLANT'S APPLICATION FOR MAKING A REFERENCE TO THE HIGH COURT. THE HIGH COURT UPHELD THE DECISION OF T HE TRIBUNAL AND SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 226 REFUSED TO CALL FOR A STATEMENT OF CASE. IT IS IN T HESE CIRCUMSTANCES THAT THE APPELLANT FILED THE APPEAL BEFORE THE SUPR EME COURT. THE SUPREME COURT HELD AS UNDER : '5. IN CIT VS. KANPUR COAL SYNDICATE (1964) 53 ITR 225 (SC), A THREE JUDGE BENCH OF THIS COURT DISCUSSED THE SCOPE OF S. 31(3)(A) OF THE IT ACT, 1922 WHICH IS ALMOST IDENTICAL TO S. 251(1) (A). THE COURT HELD AS UNDER : 'IF AN APPEAL LIES, S. 31 OF THE ACT DESCRIBES THE POWERS OF THE AAC IN SUCH AN APPEAL. UNDER S. 31(3)(A) IN DISPOSING OF S UCH AN APPEAL THE AAC MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CON FIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CL. (B) THER EOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE ITO TO MAKE A F RESH ASSESSMENT. THE AAC HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS CO-TERMINUS WI TH THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO.' 6. THE ABOVE OBSERVATIONS ARE SQUARELY APPLICA BLE TO THE INTERPRETATION OF S. 251(1)(A) OF THE ACT. THE DECL ARATION OF LAW IS CLEAR THAT THE POWER OF THE AAC IS CO-TERMINUS WITH THAT OF THE ITO, IF THAT BE SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE ITO. NO EXCEPT ION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RE STRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST TH E ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS IF ANY PRESCRIBED BY THE STATUTORY P ROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLATE A UTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE A UTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON A ND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWE R OF THE AAC IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASS ESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY T HE ITO.' (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED) SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 227 (B) IT IS CLEAR, THEREFORE, THAT AN ASSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPE LLATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEF ORE THEM. THE APPELLATE AUTHORITIES HAVE THE DISCRETION WHETHER O R NOT TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. IT CANNOT, HOW EVER, BE SAID THAT THEY HAVE NO JURISDICTION TO CONSIDER THE SAME. THE Y HAVE THE JURISDICTION TO ENTERTAIN THE NEW CLAIM. THAT THEY MAY CHOOSE NOT TO EXERCISE THEIR JURISDICTION IN A GIVEN CASE IS ANOT HER MATTER. THE EXERCISE OF DISCRETION IS ENTIRELY DIFFERENT FROM T HE EXISTENCE OF JURISDICTION. 14.8. IT IS ALSO NOTED THAT HON'BLE APEX COURT IN A LATER DECISION ON 29/08/2017 IN CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY CIVIL APPPEAL NO. 11081 TO 11083 OF 2017 HELD AS UNDER:- 18. THE TRIBUNAL PERMITTED THIS ADDITIONAL GROUND B Y GIVING A REASON THAT IT WAS A JURISDICTIONAL ISSUE TAKEN UP ON THE BASIS OF FACTS ALREADY ON THE RECORD AND, THEREFORE, COULD B E RAISED. IN THIS BEHALF, IT WAS NOTED BY THE TRIBUNAL THAT AS PER TH E PROVISIONS OF S. 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS S EIZED HAD TO PERTAIN TO THE ASSESSMENT YEARS IN QUESTION AND IT IS AN UNDISPUTED FACT THAT THE DOCUMENTS WHICH WERE SEIZE D DID NOT ESTABLISH ANY CO-RELATION, DOCUMENT-WISE, WITH THES E FOUR ASSESSMENT YEARS. SINCE THIS REQUIREMENT UNDER S. 1 53C OF THE ACT IS ESSENTIAL FOR ASSESSMENT UNDER THAT PROVISIO N, IT BECOMES A JURISDICTIONAL FACT. WE FIND THIS REASONING TO BE L OGICAL AND VALID, HAVING REGARD TO THE PROVISIONS OF S. 153C OF THE A CT. PARA 9 OF THE ORDER OF THE TRIBUNAL REVEALS THAT THE TRIBUNAL HAD SCANNED THROUGH THE SATISFACTION NOTE AND THE MATERIAL WHIC H WAS DISCLOSED THEREIN WAS CULLED OUT AND IT SHOWED THAT THE SAME BELONGS TO ASST. YR. 2004-05 OR THEREAFTER. AFTER T AKING NOTE OF THE MATERIAL IN PARA 9 OF THE ORDER, THE POSITION THAT EMERGES THEREFROM IS DISCUSSED IN PARA 10. IT WAS SPECIFICALLY RECORD ED THAT THE COUNSEL FOR THE DEPARTMENT COULD NOT POINT OUT TO T HE CONTRARY. IT IS FOR THIS REASON THE HIGH COURT HAS ALSO GIVEN ITS I MPRIMATUR TO THE AFORESAID APPROACH OF THE TRIBUNAL. THAT APART, LEA RNED SENIOR SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 228 COUNSEL APPEARING FOR THE RESPONDENT, ARGUED THAT N OTICE IN RESPECT OF ASST. YRS. 2000-01 AND 2001-02 WAS EVEN TIME-BARRED. 19. WE, THUS, FIND THAT THE TRIBUNAL RIGHTLY PE RMITTED THIS ADDITIONAL GROUND TO BE RAISED AND CORRECTLY DEALT WITH THE SA ME GROUND ON MERITS AS WELL. ORDER OF THE HIGH COURT AFFIRMING T HIS VIEW OF THE TRIBUNAL IS, THEREFORE, WITHOUT ANY BLEMISH. BEFORE US, IT WAS ARGUED BY THE RESPONDENT THAT NOTICE IN RESPECT OF THE ASST. YRS. 2000-01 AND 2001-02 WAS TIME-BARRED. HOWEVER, IN VI EW OF OUR AFOREMENTIONED FINDINGS, IT IS NOT NECESSARY TO ENT ER INTO THIS CONTROVERSY. CONSIDERING THE TOTALITY OF FACTS AND RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS FROM HON'BLE APEX COURT/HON'BLE JURISDICTIONAL HIGH COURT, THE ADDITIONAL GROUND RA ISED BY THE ASSESSEE IS ADMITTED. 15. BEFORE ADVERTING FURTHER, WE ARE REPRODUCING HEREUNDER THE RELEVANT PROVISION OF SECTION 153C OF THE ACT FOR READY REFERENCE AND ANALYSIS:- 153C. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY M ONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS 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 REQUISITIO NED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDI CTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCE ED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTIC E AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDAN CE WITH THE PROVISIONS OF SECTION 153A. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 229 IF THE AFORESAID PROVISION OF THE ACT IS ANALYZED, WE OBSERVED THAT AS PER SECTION 153C, WHERE THE ASSESS ING OFFICER IS SATISFIED THAT WHERE THE BOOKS OF ACCOUN T OR DOCUMENTS SEIZED BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCO UNT OR DOCUMENTS SHALL BE HANDED OVER TO THE ASSESSING OFF ICER HAVING JURISDICTION OF SUCH OTHER PERSON AND THAT A SSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSO N IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. SEC TION 153A READS AS UNDER :- 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE ASEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SH ALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 230 PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. 15.1. THUS, AS PER SECTION 153A(1)(B), THE ASSESSI NG OFFICER IS EMPOWERED TO ASSESS OR REASSESS THE TOTAL INCOME OF THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED. THUS, IN OTHER WORDS, HE HAS TO ASSESS THE YEAR UND ER SEARCH AND SIX PRECEDING YEARS. AS PER PROVISO TO SECTION 153C, FOR THE PURPOSE OF SECTION 153C, THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS SHALL BE CONSIDERED THE DATE O F SEARCH. THEREFORE, WITH THE COMBINED READING OF PROVISO TO SECTION 153C AND SECTION 153A(1)(B), IT IS CLEAR THAT IN THE CAS E OF THE PERSON IN WHOSE CASE ACTION IS REQUIRED UNDER SECTION 153C , THE ASSESSING OFFICER IS EMPOWERED TO TAKE ACTION UNDER SECTION 153C FOR THE YEAR IN WHICH THE SEIZED DOCUMENT IS R ECEIVED BY HIM AND THE PRECEDING SIX YEARS. IN THE CASE UNDER APPEAL BEFORE US, AS MENTIONED BY THE ASSESSING OFFICER IN PARAGR APH 2 OF HIS ORDER, THE SEIZED MATERIAL WAS RECEIVED ON 12TH MAR CH, 2009 FROM ACIT, CENTRAL CIRCLE-17. THUS, THE YEAR IN WHI CH SEIZED MATERIAL WAS SEIZED IS PREVIOUS YEAR 2008-09 RELEVA NT TO AY SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 231 2009-10. THE PRECEDING SIX YEARS WOULD BE AY 2008-0 9, 2007- 08, 2006-07, 2005-06, 2004-05 AND 2003-04. THEREFOR E, AFTER CONSIDERING THE FACTS OF THE ASSESSEES CASE AND CO MBINED READING OF SECTION 153C AS WELL AS SECTION 153A, IN OUR OPINION, THE ISSUE OF NOTICE UNDER SECTION 153C FOR AY 2001- 02 & 2002- 03 IS BARRED BY LIMITATION. ACCORDINGLY, WE QUASH T HE SAME AND CONSEQUENTIALLY, THE ASSESSMENT ORDER PASSED IN PUR SUANCE TO THE NOTICE ISSUED UNDER SECTION 153C IS ALSO QUASHE D. OUR VIEW FIND SUPPORT FROM THE DECISION IN M/S. R.L.ALLIED I NDUSTRIES VS. INCOME TAX OFFICER, ITA NO. 567/DEL/2011 DECIDE D ON 28TH NOVEMBER, 2014, WHEREIN, IT WAS OBSERVED/HELD AS UNDER:- THE FACTS OF THE CASE ARE THAT ASSESSMENT FOR AY 2001-02 AND 2002-03 HAS BEEN COMPLETED UNDER SECTION 143(3) READ WITH SECTION 15 3C OF THE INCOME TAX ACT, 1961. AS PER ASSESSMENT ORDER, THE SEARCH AND SEIZU RE ACTION UNDER SECTION 132 WAS CARRIED OUT ON R.L. GROUP ON 13TH DECEMBER, 200 5. DURING THE COURSE OF SUCH SEARCH, VARIOUS DOCUMENTS WERE FOUND AND SEIZED OUT OF WHICH CERTAIN DOCUMENTS ARE CLAIMED TO BE BELONGING TO M/S R.L.ALLIED INDUS TRIES I.E., THE ASSESSEE. AS PER PARAGRAPH 2 OF THE ASSESSMENT ORDER, THE SEIZED MAT ERIAL PERTAINING TO THE ASSESSEE WAS RECEIVED ON 12TH MARCH, 2009 FROM ACIT , CIRCLE-17, ACCORDINGLY, NOTICE UNDER SECTION 153C WAS ISSUED AND SERVED UPO N THE ASSESSEE ON 24 TH MARCH, 2009. THE LEARNED COUNSEL FOR THE ASSESSEE H AS CLAIMED THAT AS PER SECTION 153C PROVISO, THE DATE OF RECEIVING THE BOOKS OF AC COUNT OR DOCUMENTS IS DEEMED TO BE THE DATE OF SEARCH UNDER SECTION 153A. HE ALS O REFERRED TO SECTION 153A AND POINTED OUT THAT THE NOTICE CAN BE ISSUED UNDER SEC TION 153C FOR SIX YEARS PRECEDING THE YEAR OF SEARCH. HE, THEREFORE, SUBMIT TED THAT AS PER THE PROVISO TO SECTION 153C, THE DATE OF RECEIVING THE BOOKS OF AC COUNT WOULD BE THE DATE OF SEARCH AND, THEREFORE, THE NOTICE UNDER SECTION 153 C COULD NOT HAVE BEEN ISSUED FOR AY 2001-02 AND 2002-03. ACCORDINGLY, THE ISSUE OF NOTICE UNDER SECTION 153C SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 232 WAS BARRED BY LIMITATION AND CONSEQUENTLY, THE ASSE SSMENT FOR THESE TWO YEARS IS NON-EST AND VOID AB-INITIO. IT WAS HELD BY THE HON BLE INCOME TAX APPELLATE TRIBUNAL AS UNDER : 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND PERUSED RELEVANT MATERIAL PLACED BEFORE US. THE RELEVANT FA CTS AS MENTIONED BY THE ASSESSING OFFICER IN PARAGRAPH 1 AND 2 OF TH E ASSESSMENT ORDER READ AS UNDER :- SEARCH & SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT ON R.L. GROUP ON 13/12/2005. THIS OPERATION WAS CARRIED OUT AT PREMISES NO. B-265, DERAWALA NAGAR, DELHI. THIS PRE MISE BELONGS TO SH. RAM LAL BHATIA PARTNER OF M/S R.L. ALLIED IN DUSTRIES. AT THIS PREMISE, CERTAIN DOCUMENTS WERE FOUND AND SEIZED. O UT OF THIS, PAGES OF ANNEXURE A-1 TO A-3, A-7 TO A-9, A-15 TO A -18 AND A-21 TO A-24 BELONG TO M/S R L ALLIED INDUSTRIES. 2. IN THIS CASE THE SEIZED MATERIAL PERTAINING TO M /S R.L. ALLIED INDUSTRIES WAS RECEIVED ON 12/03/2009 FROM ACIT CEN TRAL CIRCLE-17. ACCORDINGLY NOTICE UNDER SECTION 153C WAS ISSUED AN D SERVED UPON ASSESSEE ON 24/03/2009, REQUESTING TO FILE RETURN W ITHIN 15 DAYS OF SERVICE OF NOTICE. IN RESPONSE TO THIS NOTICE A LET TER WAS FILED BY THE ADVOCATE OF THE ASSESSEE REQUESTING FOR THE INSPECT ION OF THE MATERIAL. ON 22/05/2009 SH TARUN ASWANI, ADVOCATE W AS ALLOWED THE INSPECTION OF THE FILE. 6. FROM THE ABOVE, IT IS EVIDENT THAT IN THE CASE O F THE ASSESSEE, ASSESSMENT HAS BEEN COMPLETED ON THE BASIS OF NOTIC E UNDER SECTION 153C WHICH WAS ISSUED ON 24TH MARCH, 2009 A ND THE SEIZED MATERIAL PERTAINING TO THE ASSESSEE WAS RECE IVED ON 12TH MARCH, 2009 FROM ACIT, CENTRAL CIRCLE-17. IN THE LI GHT OF THESE FACTS, LET US EXAMINE THE RELEVANT PROVISIONS OF TH E INCOME TAX ACT. SECTION 153C READS AS UNDER :- 153C. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY M ONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS 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 REQUISITIO NED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDI CTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCE ED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTIC E AND ASSESS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 233 OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDAN CE WITH THE PROVISIONS OF SECTION 153A. 7. AS PER SECTION 153C, WHERE THE ASSESSING OFFICER IS SATISFIED THAT WHERE THE BOOKS OF ACCOUNT OR DOCUMENTS SEIZED BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OF SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH O THER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. SEC TION 153A READS AS UNDER :- 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASS ETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (B) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SH ALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. 8. THUS, AS PER SECTION 153A(1)(B), THE ASSESSING O FFICER IS EMPOWERED TO ASSESS OR REASSESS THE TOTAL INCOME OF THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED. THUS, IN OTHER WORDS, HE HAS TO ASSESS THE SEARCH Y EAR AND SIX PRECEDING YEARS. AS PER PROVISO TO SECTION 153C, FO R THE PURPOSE OF SECTION 153C, THE DATE OF RECEIVING THE BOOKS OF AC COUNT OR DOCUMENTS SHALL BE CONSIDERED THE DATE OF SEARCH. T HEREFORE, WITH THE COMBINED READING OF PROVISO TO SECTION 153C AND SECTION 153A(1)(B), IT IS CLEAR THAT IN THE CASE OF THE PER SON IN WHOSE CASE ACTION IS REQUIRED UNDER SECTION 153C, THE ASSESSIN G OFFICER IS EMPOWERED TO TAKE ACTION UNDER SECTION 153C FOR THE YEAR IN WHICH SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 234 THE SEIZED DOCUMENT IS RECEIVED BY HIM AND THE PREC EDING SIX YEARS. IN THE CASE UNDER APPEAL BEFORE US, AS MENTI ONED BY THE ASSESSING OFFICER IN PARAGRAPH 2 OF HIS ORDER, THE SEIZED MATERIAL WAS RECEIVED ON 12TH MARCH, 2009 FROM ACIT, CENTRAL CIRCLE-17. THUS, THE YEAR IN WHICH SEIZED MATERIAL WAS SEIZED IS PREVIOUS YEAR 2008-09 RELEVANT TO AY 2009-10. THE PRECEDING SIX Y EARS WOULD BE AY 2008-09, 2007-08, 2006-07, 2005-06, 2004-05 AND 2003-04. THEREFORE, AFTER CONSIDERING THE FACTS OF THE ASSES SEES CASE AND COMBINED READING OF SECTION 153C AS WELL AS SECTION 153A, IN OUR OPINION, THE ISSUE OF NOTICE UNDER SECTION 153C FOR AY 2001-02 & 2002-03 IS BARRED BY LIMITATION. ACCORDINGLY, WE Q UASH THE SAME AND CONSEQUENTIALLY, THE ASSESSMENT ORDER PASSED IN PURSUANCE TO THE NOTICE ISSUED UNDER SECTION 153C IS ALSO QUASHE D. 15.2. WE ALSO FIND SUPPORT FROM THE DECISION IN JA SJIT SINGH VS. ACIT ITA NO. 1436/DEL/2012 ORDER DATED 5 TH NOVEMBER, 2014. IN THIS CASE, A SEARCH AND SEIZURE ACTION HAD TAKEN PLACE ON 19TH FEBRUARY, 2009. IT HAD BEEN AL LEGED THAT DOCUMENTS BELONGING TO ASSESSEE WERE FOUND IN SAID SEARCH. AS A RESULT, THE ASSESSMENT OF THE ASSESSEE WAS CENTRALI SED BY THE CIT ON 16TH JUNE, 2009 AND JURISDICTION OF ASSESSIN G OFFICER WAS TRANSFERRED TO THE ASSESSING OFFICER WHO HAD PASSED THE ORDER. AS THE DOCUMENTS PERTAINING TO THE ASSESSEE WERE HA NDED OVER TO THE ASSESSING OFFICER AFTER 16/06/2009 (THE DATE OF CENTRALIZATION OF THE CASE) AND AS PER THE PROVISIO NS OF SECTION 153C PROVISO 1, THE DATE OF SEARCH WOULD BE 16/06/2 009 WHICH FALLS UNDER ASSESSMENT YEAR 2010-11 AND THE SIX PRE VIOUS YEARS WOULD BE FROM ASSESSMENT YEAR 2004-05 TO 2009-10 AN D NOT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 235 FROM ASSESSMENT YEAR 2003-04 TO 2008-09 AS DONE BY THE ASSESSING OFFICER. 15.3. WE ALSO DRAW SUPPORT FROM THE DECISION IN AC IT VS. INLAY MARKETING (P) LTD (2015) 167 TTJ (DEL) 273. THE ISSUE INVOLVED IN THIS CASE WAS REGARDING WHEN THE LIMITA TION STARTS IN THE CASE OF OTHER PERSON, OTHER THAN SEARCHED PERSO N? IT WAS HELD THAT LIMITATION STARTS FROM THE DATE OF ISSUE OF SATISFACTION NOTE, SECTION 153C IS APPLICABLE SIX PRECEDING ASSE SSMENT YEARS FROM THE DATE OF ISSUE OF SATISFACTION NOTE. THE TR IBUNAL HELD AS UNDER:- 30. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE OBSERVED THAT IN THE RECENT DECISION OF TRIBUNAL E BENCH M UMBAI IN THE CASE OF SKS ISPAT & POWER LTD. VS. DY. CIT IN ITA N O. 8746/MUM/2010 AND OTHER APPEALS THE ORDER DT. 7TH M AY, 2014, WE OBSERVE THAT THE ISSUE OF LIMITATION PRESCRIBED UNDER S. 153(1) OF THE ACT HAS BEEN DECIDED BY FOLLOWING THE DECISI ON OF TRIBUNAL, DELHI H BENCH, IN THE CASE OF V.K. FISCAL SERVICE S (P) LTD. VS DY. CIT (SUPRA) IN FAVOUR OF THE ASSESSEE WITH FOLLOWIN G OBSERVATIONS AND CONCLUSIONS : '15. WE ALSO FIND THAT THE CIT(A) MADE A REFERENCE TO THE INCRIMINATING MATERIAL, WHICH YIELDED DISCLOSURE OF SOME UNDISCLOSED INCOME. BUT, ON PERUSAL OF THE DOCUMENT S, WE FIND THAT THE CIT(A) ENTERED INTO AN ERROR ZONE AND THE DISCLOSURE IS ONLY RS. 5 CRORES IN THIS CASE AND THE SAME RELATES TO THE LANDS DEALS. IN PRINCIPLE, THIS DISCLOSURE HAS NOTHING DO WITH THE IMPUGNED ADDITIONS UNDER S. 68 OR 14A OF THE ACT. I N THE INSTANT CASE, SPECIFIC TO THE ASSESSEE, NO INCRIMINATING MA TERIAL WITH THE DETAILS WAS REFERRED EITHER IN THE ASSESSMENT ORDER OR IN THE ORDER OF THE CIT(A) FOR MAKING THE IMPUGNED ADDITIONS. AS PER THE CITED JUDGMENT IN THE CASE OF JAI STEELS LTD. (SUPRA), TH E ASSESSMENT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 236 UNDER S. 153A IS ONLY FOR REITERATION RATHER THAN M AKING ANY ADDITIONS IN A ROUTINE MANNER WITHOUT THE STRENGTH OF THE INCRIMINATING MATERIALS SIMILAR VIEW WAS TAKEN UP B Y THE TRIBUNAL, DELHI H BENCH, IN THE CASE OF V.K. FISCAL SERVICE S (P) LTD. VS. DY. CIT VIDE ITA NOS. 5460 TO 5465/DEL/2012 (WWW.ITATON LINE.ORG). IN THIS REGARD, PARA 13 FROM THE SAID ORDER OF THE TRI BUNAL, DELHI BENCH (SUPRA), IS RELEVANT AND THE SAME READS AS UN DER : 13. APPLYING THE ABOVE CASE LAW TO THE FACTS OF TH E CASE, WE HAVE TO NECESSARILY QUASH THE ASSESSMENT PROCEEDINGS FOR ASST. YRS. 2004-05, 2005-06, 2007-08, 2008-09 ON THE FOLLOWING GROUNDS : (A) NO BOOKS OF ACCOUNT BELONGING TO THE ASSESSEE W ERE FOUND AND SEIZED IN THE PREMISES OF THE OTHER PERSON. WHAT WA S FOUND WAS IN THE HARD DISK WAS ONLY A CONFIRMATION OF ACCOUNT WI TH AN ATTACHED ANNEXURE. SUCH DOCUMENTS CANNOT BE SAID TO BE BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO THE ASSESSEE. (B) THE REVENUE HAS NOT PRODUCED THE RECORD OF THE SEARCHED PERSON TO DEMONSTRATE THAT SATISFACTION WAS RECORDE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S GLOBAL REALITY VENTURES (P) LTD. ON THE DATE OF RECORDING OF SATISFACTION, FIRST NOTICE UNDER S. 153(C) WAS ISSUED. THERE IS N O INDICATION WHATSOEVER, THAT THE ASSESSMENT PROCEEDINGS IN THE CASE OF GLOBAL REALITY VENTURES (P) LTD. WERE IN PROGRESS O R NOT, AT THE POINT OF TIME AND THAT THE AO DURING THE COURSE OF THAT PROCEEDINGS RECORDED THIS SATISFACTION. THE PROCEDURE CONTEMPLA TED UNDER THE ACT WAS NOT FOLLOWED. (C) THE SATISFACTION IS RECORDED ON 23RD JULY, 2010 . THE RELEVANT ASSESSMENT YEAR WOULD BE 2011-12. THE SIX PRECEDING ASSESSMENT YEARS RELEVANT TO THIS ASSESSMENT YEAR W OULD BE 2005-06/2006-07/2007-08/2008-09/2010-11. THUS, THE NOTICE ISSUED UNDER S. 153C FOR THE ASST. YR. 2004-05 IS C LEARLY BARRED BY LIMITATION. (D) EVEN OTHERWISE, AS THERE IS NO INCRIMINATING MA TERIAL FOUND DURING THE COURSE OF SEARCH, THE AO SHOULD HAVE DRO PPED THE PROCEEDINGS INITIATED UNDER S. 153C OF THE ACT. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 237 (E) AS THERE IS NO DISPUTE THAT NO ASSESSMENT OR RE ASSESSMENT HAS ABATED IN THIS CASE FOR THE REASON, THAT THE DA TE OF SEARCH, THE DATE OF SEARCH WHICH IN THE CASE ON HAND WOULD BE 2 5TH MARCH, 2010, BY VIRTUE OF FIRST PROVISO TO S. 153C, I.E., THE DATE OF PASSING AN ORDER UNDER S. 127 TRANSFERRING THE CASES OF THE ASSESSEE TO THE PRESENT AO, NO ASSESSMENT OR REASSESSMENT WAS PENDI NG. WHEN NO ASSESSMENT HAS ABATED, THE QUESTION OF MAKING AN Y ADDITION OR MAKING DISALLOWANCE WHICH IS NOT BASED ON ONLY MATE RIAL FOUND DURING THE SEARCH IS BAD IN LAW.' 31. IN VIEW OF ABOVE DECISION AND AS PER LETTER AND SPIRIT OF S. 153(1) OF THE ACT, WE ARE INCLINED TO HOLD THAT SINCE IN THIS CAS E SATISFACTION WAS RECORDED ON 5TH JULY, 2010 AND NOTICE UNDER S. 153C WAS ISSU ED ON 6TH JULY, 2010, THE ONLY CONCLUSION THAT CAN BE DRAWN IS THAT THE A O OF SUCH OTHER PERSON OTHER THAN SEARCHED HAS TAKEN OVER THE POSSESSION O F THE SEIZED DOCUMENT ON 5TH JULY, 2010. ACCORDINGLY, AS PER S. 153A(1) O F THE ACT, THE AO CAN ISSUE A NOTICE UNDER S. 153A OF THE ACT FOR THE PRE VIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED AND FOR THE PURPOSE OF S. 153C OF THE ACT ON THE DATE ON WHICH THE DOCUMENT IS HANDED OVER TO THE AO OF THE PERSON OTHER THAN THE SEARCHED PERSON FOR SIX ASSESSMENT YEARS IMMEDIATEL Y PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SUCH SEARCH IS CONDUCTED OR REQUISITION OR HANDING OVER OF DOCUMEN T OR MATERIAL IS MADE. IN THE CASE IN HAND, THE RELEVANT DATE OF HANDING OVER MAY EASILY BE INFERRED FROM SATISFACTION NOTE I.E. 5TH JULY, 2010 AND, THU S, RELEVANT PREVIOUS YEAR IS 2010-11 AND OBVIOUSLY THE ASST. YR. WOULD BE ASST. YR. 2011-12. SIX PRECEDING PREVIOUS YEARS AND RELEVANT ASSESSMENT YE AR WOULD BE AS UNDER : PREVIOUS YEAR ASST. YR. 1.4.2009 TO 31.3.2010 2010-11 1.4.2008 TO 31.3.2009 2009-10 1.4.2007 TO 31.3.2008 2008-09 1.4.2006 TO 31.3.2007 2007-08 1.4.2005 TO 31.3.2006 2006-07 1.4.2004 TO 31.3.2005 2005-06 32. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT THE AO HAS ISSUED NOTICE UNDER S. 153C OF THE ACT, DT. 5TH JULY, 2010 FOR AS ST. YRS. 2003-04 AND 2004- 05 ON 6TH JULY, 2010 WHICH IS CLEARLY BARRED BY LIM ITATION. THEREFORE, THE ISSUE OF NOTICE UNDER S. 153C OF THE ACT BY THE REV ENUE CANNOT BE SUSTAINED BECAUSE IT IS LEGALLY NOT VALID AS THE CONDITIONS L AID DOWN FOR VALID SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 238 ASSUMPTION OF JURISDICTION UNDER S. 153C OF THE ACT HAVE NOT BEEN FULFILLED AND THE SAME IS BARRED BY LIMITATION FOR ASST. YRS. 2003-04 AND 2004-05. IN VIEW OF ABOVE DISCUSSION, WE QUASH THE NOTICE ISSUE D UNDER S. 153C OF THE ACT AND CONSEQUENTLY, THE ASSESSMENTS COMPLETED IN PURSUANCE TO SUCH NOTICE ARE ALSO QUASHED FOR ASST. YRS. 2003-04 AND 2004-05 AS THE SAME ARE BARRED BY LIMITATION AND ALSO NOT INITIATED PROPERL Y WITHOUT HAVING VALID ASSUMPTION OF JURISDICTION AS REQUIRED UNDER S. 153 C OF THE ACT. 15.4. THE CASE OF THE ASSESSEE FURTHER FIND SUPPOR T FORM THE DECISION IN ARN INFRASTRUCTURE INDIA LTD VS. ACIT ( 2017) 1 NYPCTS 415(DEL). IN THIS CASE ALSO, THE DATE OF S ATISFACTION NOTE WAS 21ST JULY, 2014 AND THE NOTICE UNDER S. 15 3C WAS ISSUED ON 23RD JULY, 2014, PREVIOUS SIX ASSESSMENT YEAR WAS HELD FROM ASSESSMENT YEAR 2009-10 TO 2014-15. 15.5. WE MAY ALSO REFER THE DECISION IN CIT VS. RR J SECURITIES LTD (2016) 282 CTR (DEL). IN THIS CASE SEARCH AND SEIZURE OPERATIONS WERE UNDERTAKEN UNDER S. 132 OF THE ACT IN THE CASE OF SH. B.K. DHINGRA, SMT. POONAM DHINGR A AND M/S MADHUSUDAN BUILDCON (P) LTD. (HEREINAFTER CALLED AS 'SEARCHED PERSONS') ON 20TH OCT., 2008. CERTAIN DOCUMENTS BEL ONGING TO THE ASSESSEE COMPANY AND A COMPUTER HARD DISC CONTA INING SOFT COPIES OF WORKING PAPERS, BALANCE SHEETS AND DATA F OR INCOME- TAX FILINGS, WERE SEIZED DURING THE SEARCH. THE ASS ESSING OFFICER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 239 OF THE SEARCHED PERSONS RECORDED A 'SATISFACTION NO TE' ON 8TH SEPTEMBER, 2010 TO THE EFFECT THAT THE DOCUMENTS SE IZED AND THE DATA CONTAINED IN THE HARD DISC BELONGED TO THE ASS ESSEE AND, HENCE, S. 153C WAS INVOCABLE. ON THE AFORESAID BASI S, PROCEEDINGS WERE INITIATED UNDER S. 153C AND A NOTI CE DATED 8TH SEPTEMBER, 2010 FOR THE ASSESSMENT YEARS 2003-04 T O 2008-09 WAS ISSUED TO THE ASSESSEE. THE TRIBUNAL, AFTER CON SIDERING VARIOUS ISSUES AND JUDICIAL PRONOUNCEMENTS HELD AS UNDER:- 24. AS DISCUSSED HEREINBEFORE, IN TERMS OF PROVISO TO S. 153C OF THE ACT, A REFERENCE TO THE DATE OF THE SEARCH UNDER TH E SECOND PROVISO TO S. 153A OF THE ACT HAS TO BE CONSTRUED AS THE DA TE OF HANDING OVER OF ASSETS/DOCUMENTS BELONGING TO THE ASSESSEE (BEIN G THE PERSON OTHER THAN THE ONE SEARCHED) TO THE AO HAVING JURIS DICTION TO ASSESS THE SAID ASSESSEE. FURTHER PROCEEDINGS, BY VIRTUE O F S. 153C(1) OF THE ACT, WOULD HAVE TO BE IN ACCORDANCE WITH S. 153A OF THE ACT AND THE REFERENCE TO THE DATE OF SEARCH WOULD HAVE TO BE CO NSTRUED AS THE REFERENCE TO THE DATE OF RECORDING OF SATISFACTION. IT WOULD FOLLOW THAT THE SIX ASSESSMENT YEARS FOR WHICH ASSESSMENTS/REAS SESSMENTS COULD BE MADE UNDER S. 153C OF THE ACT WOULD ALSO H AVE TO BE CONSTRUED WITH REFERENCE TO THE DATE OF HANDING OVE R OF ASSETS/DOCUMENTS TO THE AO OF THE ASSESSEE. IN THIS CASE, IT WOULD BE THE DATE OF THE RECORDING OF SATISFACTION UNDER S. 153C OF THE ACT, I.E., 8TH SEPT., 2010. IN THIS VIEW, THE ASSESSMENT S MADE IN RESPECT OF ASST. YRS. 2003-04 AND 2004-05 WOULD BE BEYOND T HE PERIOD OF SIX ASSESSMENT YEARS AS RECKONED WITH REFERENCE TO THE DATE OF RECORDING OF SATISFACTION BY THE AO OF THE SEARCHED PERSON. IT IS CONTENDED BY THE REVENUE THAT THE RELEVANT SIX ASSE SSMENT YEARS WOULD BE THE ASSESSMENT YEARS PRIOR TO THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH W AS CONDUCTED. IF SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 240 THIS INTERPRETATION AS CANVASSED BY THE REVENUE IS ACCEPTED, IT WOULD MEAN THAT WHEREAS IN CASE OF A PERSON SEARCHED, ASS ESSMENTS IN RELATION TO SIX PREVIOUS YEARS PRECEDING THE YEAR I N WHICH THE SEARCH TAKES PLACE CAN BE REOPENED BUT IN CASE OF ANY OTHE R PERSON, WHO IS NOT SEARCHED BUT HIS ASSETS ARE SEIZED FROM THE SEA RCHED PERSON, THE PERIOD FOR WHICH THE ASSESSMENTS COULD BE REOPENED WOULD BE MUCH BEYOND THE PERIOD OF SIX YEARS. THIS IS SO BECAUSE THE DATE OF HANDING OVER OF ASSETS/DOCUMENTS OF A PERSON, OTHER THAN THE SEARCHED PERSON, TO THE AO WOULD BE SUBSEQUENT TO T HE DATE OF THE SEARCH. THIS, IN OUR VIEW, WOULD BE CONTRARY TO THE SCHEME OF S. 153C(1) OF THE ACT, WHICH CONSTRUES THE DATE OF REC EIPT OF ASSETS AND DOCUMENTS BY THE AO OF THE ASSESSEE (OTHER THAN ONE SEARCHED) AS THE DATE OF THE SEARCH ON THE ASSESSEE. THE RATIONA LE APPEARS TO BE THAT WHEREAS IN THE CASE OF A SEARCHED PERSON, THE AO OF THE SEARCHED PERSON ASSUMES POSSESSION OF SEIZED ASSE TS / DOCUMENTS ON SEARCH OF THE ASSESSEE; THE SEI ZED ASSETS/ DOCUMENTS BELONGING TO A PERSON OTHER THAN A SEARCH ED PERSON COME INTO POSSESSION OF THE AO OF THAT PERSON ONLY AFTER THE AO OF THE SEARCHED PERSON IS SATISFIED THAT THE ASSETS/DO CUMENTS DO NOT BELONG TO THE SEARCHED PERSON. THUS, THE DATE ON WH ICH THE AO OF THE PERSON OTHER THAN THE ONE SEARCHED ASSUMES THE POSSESSION OF THE SEIZED ASSETS WOULD BE THE RELEVANT DATE FOR AP PLYING THE PROVISIONS OF S. 153A OF THE ACT. WE, THEREFORE, AC CEPT THE CONTENTION THAT IN ANY VIEW OF THE MATTER, ASSESSMENTS FOR ASS T. YR. 2003-04 AND ASST. YR. 2004-05 WERE OUTSIDE THE SCOPE OF S. 153C OF THE ACT AND THE AO HAD NO JURISDICTION TO MAKE AN ASSESSMENT OF THE ASSESSEE'S INCOME FOR THAT YEAR. 15.6. IN THE LIGHT OF THE RATIO LAID DOWN IN THE A FORESAID CASES, IN THE CASE OF THE ASSESSEE SIX ASSESSMENT YEARS WOULD BE PRECEDING TO ASSESSMENT YEAR 2014-15 (I.E THE PREVI OUS YEAR IN WHICH JURISDICTION WAS TRANSFERRED TO THE ASSESSING OFFICER I.E. ON 5 TH MARCH, 2014 AND THE SATISFACTION NOTE WAS ALSO REC ORDED ON 13 TH MARCH, 2014 (WHETHER VALID OR NOT). HENCE, SIX PRE CEDING SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 241 ASSESSMENT YEARS WILL BE 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 & 2013-14. AS THE PRESENT ASSESSMENT YEAR U NDER APPEAL IS FALLING WITHIN SIX ASSESSMENT YEARS, THE ASSESSMENT SHOULD HAVE PASSED U/S. 153C OF THE ACT AND NOT U/S . 147 OF THE ACT. THIS MAKE THE NOTICE ISSUED U/S. 148 AND THE A SSESSMENT ORDER PASSED ON THAT BASIS AS BAD AB-INITO. OUR VIE W FIND SUPPORT FROM THE RATIO LAID DOWN IN ITO VS. ARUN KU MAR KAPOOR (2011) 140 TTJ 249(AMRITSAR). IN THIS CASE, THE FACTS OF THE CASE IS THAT OF ONE M/S. TODAY HOMES & INFRA STRUCTURE (P.) LTD. A SEARCH ACTION HAD TAKEN PLACE ON 28TH MARCH , 2006 DURING THE COURSE OF WHICH CERTAIN INCRIMINATING DO CUMENTS WERE ALLEGEDLY SEIZED. THE DY. CIT, CENTRAL CIRCLE- 22, NEW DELHI INTIMATED THE ASSESSING OFFICER OF THE ASSESSEE ABO UT SEIZURE OF CERTAIN DOCUMENTS PERTAINING TO THE ASSESSEE DURING SEARCH AND ENCLOSED COPY OF THOSE DOCUMENTS REQUESTING HIM TO TAKE APPROPRIATE ACTION UNDER S. 153C/148 OF THE ACT. TH E ASSESSING OFFICER ISSUED NOTICE U/S. 148. DURING THE COURSE O F APPELLATE PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME TAX(A PPEALS), THE ASSESSEE TOOK AN ADDITIONAL GROUND OF APPEAL TO THE EFFECT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 242 THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER UNDER S. 148 ARE ILLEGAL AND VOID AB-INITIO . HENCE, NOTICE ISSUED UNDER S. 148 OF THE ACT AND PROCEEDINGS UNDE R S. 147 OF THE ACT BY THE ASSESSING OFFICER ARE ILLEGAL AND VO ID AB INITIO. IN VIEW OF THE PROVISIONS OF S. 153C OF THE ACT, S. 14 7/148 STANDS OUSTED. IN THE INSTANT CASE, THE PROCEDURE LAID DOW N UNDER S. 153C HAS ALSO NOT BEEN FOLLOWED BY THE ASSESSING OF FICER AND, THEREFORE, ASSESSMENT WAS HELD INVALID BY THE COMM ISSIONER OF INCOME TAX (APPEALS). THE MATTER THEN CARRIED TO BE FORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL. THE TRIBUNAL IN THE AFORESAID CASE HELD/CONCLUDED AS UNDER:- WHILE DECIDING THE MATTER, THE HONBLE INCOME TAX APPELLATE TRIBUNAL HAS HELD AS UNDER : 7.2. THE UNDISPUTED FACTS ARE THAT A SEARCH WAS CO NDUCTED UNDER S. 132 OF THE ACT IN THE CASE OF M/S. TODAY HOMES & IN FRASTRUCTURE (P.) LTD. ON 28TH MARCH, 2006, DURING THE COURSE OF WHIC H CERTAIN INCRIMINATING DOCUMENTS WERE ALLEGEDLY SEIZED. IT I S ALSO A MATTER OF RECORD THAT THE DY. CIT, CENTRAL CIRCLE-22, NEW DEL HI INTIMATED THE ASSESSING OFFICER OF THE ASSESSEE ABOUT SEIZURE OF CERTAIN DOCUMENTS PERTAINING TO THE ASSESSEE DURING SEARCH AND ENCLOS ED COPY OF THOSE DOCUMENTS REQUESTING HIM TO TAKE APPROPRIATE ACTION UNDER S. 153C/148 OF THE ACT. IT IS AFTER THAT THAT DURING T HE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A) THE ASSESSEE TOOK AN ADDITIONAL GROUND OF APPEAL TO THE EFFECT THAT THE REASSESSMENT PROCE EDINGS INITIATED BY THE ASSESSING OFFICER UNDER S. 148 ARE ILLEGAL AND VOID AB INITIO. IN THE INSTANT CASE, THE LEARNED CIT(A) HAS CORRECTLY OBSE RVED THAT THE ASSESSING OFFICER SHOULD HAVE ISSUED NOTICE UNDER S . 153C OF THE ACT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 243 AND SHOULD HAVE FRAMED THE ASSESSMENT UNDER S. 153C R/W S. 153A OF THE ACT. SEC. 153C OF THE ACT READS AS UNDER : '153C. NOTWITHSTANDING ANYTHING CONTAINED IN S. 139 , S. 147, S. 148, S. 149, S. 151 AND S. 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION OR OTHER VALUABLE ARTICLE OR THI NG OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONG S OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN S. 153A , THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIO NED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDI CTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCE ED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTIC E AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF S. 153A.' 8. ON A PERUSAL OF THE ABOVE PROVISIONS, IT WOULD B E CLEAR THAT THE PROVISIONS OF S. 153C OF THE ACT WERE APPLICABLE, W HICH SUPERSEDES THE APPLICABILITY OF PROVISIONS OF SS. 147 AND 148 OF T HE ACT. AS WE HAVE ALREADY NOTED HEREINABOVE THAT THE DOCUMENTS WERE S EIZED DURING THE SEARCH UNDER S. 132 OF THE ACT AND THE SAME WERE SE NT TO THE ASSESSEE'S ASSESSING OFFICER AT AMRITSAR BY THE OFF ICER AT DELHI IN OUR VIEW, THE LEARNED CIT(A) HAS CORRECTLY OBSERVED THA T ONLY THE PROVISION IN WHICH ANY ASSESSMENT COULD BE MADE AGAINST THE A SSESSEE IN THE IT ACT WAS S. 153C R/W S. 153A OF THE ACT. IT IS AL SO APPARENT FROM THE RECORD THAT THE OFFICER AT DELHI HAS MENTIONED IN H IS LETTER THAT THE NECESSARY ACTION MAY BE TAKEN AS PER LAW UNDER S. 1 53C/148 OF THE ACT. HENCE, NOTICE ISSUED UNDER S. 148 OF THE ACT A ND PROCEEDINGS UNDER S. 147 OF THE ACT BY THE ASSESSING OFFICER AR E ILLEGAL AND VOID AB INITIO. IN VIEW OF THE PROVISIONS OF S. 153C OF THE ACT, S. 147/148 STANDS OUSTED. IN THE INSTANT CASE, THE PROCEDURE LAID DOW N UNDER S. 153C HAS NOT BEEN FOLLOWED BY THE ASSESSING OFFICER AND, THEREFORE, ASSESSMENT HAS BECOME INVALID. WE ALSO OBSERVE THAT THE CIT(A) WAS JUSTIFIED IN FOLLOWING THE RATIO LAID DOWN BY THE H ON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI VS. ASSTT. CIT & A NR. (2007) 208 CTR (SC) 97 : (2007) 289 ITR 341 (SC) WHEREIN IT HA S BEEN HELD THAT IF THE PROCEDURE LAID DOWN IN S. 158BD IS NOT FOLLO WED, BLOCK ASSESSMENT PROCEEDINGS WOULD BE ILLEGAL. THE CIT(A) HAS CORRECTLY OBSERVED THAT THE PROVISIONS OF S. 153C ARE EXACTLY SIMILAR TO THE PROVISIONS OF S. 158BD OF THE ACT IN BLOCK ASSESSME NT PROCEEDINGS. THUS, CONSIDERING THE ENTIRE FACTS AND THE CIRCUMST ANCES OF THE PRESENT CASE, WE HOLD THAT THE CIT(A) WAS FULL Y JUSTIFIED IN QUASHING THE REASSESSMENT ORDER. WE ALSO DO NOT FIND ANY MER IT IN THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTAT IVE THAT DURING THE COURSE OF SEARCH, IT WAS FOUND AT PREMISES OF M /S. TODAY HOMES & INFRASTRUCTURE (P.) LTD. PERTAINING TO M/S. P.R. IN FRASTRUCTURE LTD. AND NOT THE ASSESSEE. IN THIS REGARD, WE MAY POINT OUT THAT THE CONTENTION SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 244 RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE I S FACTUALLY INCORRECT AND CONTRARY TO THE AVAILABLE RECORDS OF SEIZED DOCUMENTS SPECIFICALLY MENTIONED IN THE ASSESSMENT ORDER DT. 30TH DEC, 2008. IN VIEW OF THE ABOVE FACTUAL DISCUSSION, WE DO NOT FIN D ANY MERIT AND SUBSTANCE IN THE CONTENTION OF THE LEARNED DEPARTME NTAL REPRESENTATIVE. THEREFORE, WE UPHOLD THE ORDER OF T HE CIT(A) AND DISMISS THE GROUND NOS. 1 TO 4 OF THE APPEAL. 15.7. WE MAY ALSO MENTION THE DECISION FROM THE DEL HI BENCH OF THE TRIBUNAL DECIDED ON 20/05/2016 IN THE CASE OF R AJAT SUBHRA CHATTERJI VS ACIT ITA NO. 2430/DEL/2015. IN THIS CASE, THE ASSESSING OFFICER ON THE BASIS OF INFORMA TION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT INITI ATED REOPENING PROCEEDINGS UNDER SEC. 147 OF THE ACT AFT ER RECORDING REASONS TO BELIEF THAT THERE WAS ESCAPEMENT OF ASSE SSMENT OF TAXABLE INCOME. THE ASSESSING OFFICER HAD RECEIVED INFORMATION THAT A SEARCH & SEIZURE OPERATION UNDER SEC. 132 OF THE ACT WAS CARRIED OUT BY THE DIRECTOR OF INCOME-TAX (INV.) ON 06.09.2011 ON THE ROCKLAND GROUP OF CASES. AFTER GOING THROUGH TH E INFORMATION RECEIVED AS WELL AS THE DOCUMENTS AVAIL ABLE IN THE OFFICE OF THE ASSESSING OFFICER, THE ASSESSING OFFI CER FOUND THAT ROCKLAND HOSPITAL LTD. HAD ISSUED SWEAT EQUITY SHAR ES WITHOUT ANY AMOUNT BEING PAID AS CONSIDERATION TO THE DIRECTORS/EMPLOYEES/PROFESSIONALS. IN THIS CHAIN, T HE ASSESSEE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 245 HAD ALSO RECEIVED SWEAT EQUITY SHARES WITHOUT ANY C ONSIDERATION. THE ASSESSING OFFICER INITIATED THE REASSESSMENT PR OCEEDINGS ON 8.7.2013 AND IN RESPONSE TO THE NOTICE ISSUED UNDER SEC. 148, THE ASSESSEE FILED HIS REPLY ON 11.3.2013. THEREAFT ER, THE ASSESSMENT WAS FRAMED UNDER SEC. 147/143(3) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ORD ER OF THE ASSESSING OFFICER. THEN MATTER WAS CARRIED TO HONB LE INCOME TAX APPELLATE TRIBUNAL, WHEREIN, IT WAS HELD AS UNDER:- 7. ON HAVING GONE THROUGH THE DECISIONS CITED ABOV E ESPECIALLY THE DECISION OF AMRITSAR BENCH IN THE CASE OF ITO VS. A RUN KUMAR KAPOOR (SUPRA), WE FIND THAT IN THAT CASE AS IN THE PRESENT CASE BEFORE US, REASSESSMENT WAS INITIATED ON THE BASIS OF INCRIMINATING MATERIAL FOUND IN SEARCH OF THIRD PARTY AND THE VAL IDITY OF THE SAME WAS CHALLENGED BY THE ASSESSEE BEFORE THE LEARNED C IT(APPEALS) AND THE LEARNED CIT(APPEALS) VITIATED THE PROCEEDIN GS. THE SAME WAS QUESTIONED BY THE REVENUE BEFORE THE ITAT AND T HE ITAT AFTER DISCUSSING THE CASES OF THE PARTIES AND THE RELEVAN T PROVISIONS IN DETAILS HAS COME TO THE CONCLUSION THAT IN THE ABOV E SITUATION, PROVISIONS OF SEC. 153C WERE APPLICABLE WHICH EXCLU DES THE APPLICATION OF SECTIONS 147 AND 148 OF THE ACT. THE ITAT HELD THE NOTICE ISSUED UNDER SEC. 148 AND PROCEEDINGS UNDER SEC. 147 AS ILLEGAL AND VOID AB-INITIO. IT WAS HELD THAT ASSESS ING OFFICER HAVING NOT FOLLOWED PROCEDURE UNDER SEC. 153C, REASSESSMENT O RDER WAS RIGHTLY QUASHED BY THE LEARNED CIT(APPEALS). IN THE PRESENT CASE BEFORE US, IT IS AN ADMITTED FACT, AS ALSO EVIDENT FROM THE REASONS RECORDED AND THE ASSESSMENT ORDER THAT THE INITIATI ON OF REOPENING PROCEEDINGS WAS MADE BY THE ASSESSING OFFICER ON TH E BASIS OF INFORMATION RECEIVED FROM THE DIRECTORATE OF INCOME -TAX (INV.) ON THE BASIS OF SEARCH & SEIZURE OPERATION CONDUCTED AT TH E PREMISES OF ROCK LAND GROUP OF CASES AND THE DOCUMENTS RELATED TO THE ASSESSEE FOUND DURING THE COURSE OF SEARCH WERE MAD E AVAILABLE TO THE ASSESSING OFFICER OF THE PRESENT ASSESSEE. WE T HUS, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF ACIT VS. ARUN KAPUR 140 TTJ 249 (AMRITSAR), HOLD THAT PROVISIONS SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 246 OF SEC. 153C OF THE ACT WERE APPLICABLE IN THE PRES ENT CASE FOR FRAMING THE ASSESSMENT, IF ANY, WHICH EXCLUDES THE APPLICATION OF SEC. 147 OF THE ACT, HENCE, NOTICE ISSUED UNDER SEC . 148 OF THE ACT AND ASSESSMENT FRAMED IN FURTHERANCE THERETO UNDER SEC. 147 READ WITH SECTION 143(3) OF THE ACT ARE VOID AB INITIO. THE REASSESSMENT IN QUESTION IS ACCORDINGLY QUASHED. 16. DURING HEARING, THE LD. COUNSEL FOR THE ASSESS EE ALSO ASSERTED THAT THE ASSESSING OFFICER PROVIDED THE RE ASONS FOR ISSUING NOTICE U/S. 148 AT 6.15 P.M. ON 24 TH MARCH, 2014 AND PASSED THE ORDER ON THE VERY SAME DAY AND HENCE, DE PRIVED YOUR APPELLANT OF A REASONABLE OPPORTUNITY OF BEING HEAR D TO RAISE OBJECTIONS AGAINST THE ISSUE OF NOTICE U/S. 148 AND THUS VIOLATED THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF GKN DRIVESHAFTS (I) LTD VS. ITO & OTHERS ( 2003) 259 ITR 19 (SC). IN THE LIGHT OF THE FOREGOING DISCUSSION AND JUDICI AL PRONOUNCEMENTS DISCUSSED HEREINABOVE, IT CAN BE CON CLUDED THAT THE NOTICE ISSUED U/S. 148 AND ASSESSMENT ORDE R PASSED UNDER SECTION 143(3) R.W.S. 147 HAVE FAILED ALL LIT MUS TEST. AS THE NOTICE U/S. 148 ITSELF HAS NO LEG TO STAND, THUS, T HE ORDER PASSED BY THE ASSESSING OFFICER, ON THE BASIS OF SUCH NOTI CE, IS AB-INITIO BAD IN LAW. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 247 17. NOW, WE SHALL TAKE UP THE CROSS OBJECTIONS OF THE ASSESSEE (C.O. 205, 206/MUM/2016 AND C.O. 176/MUM/2 017), WHEREIN, FOLLOWING GROUNDS HAVE BEEN RAISED. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AS WELL AS UNDER THE CIRCUMSTANCES OF THE CASE IN NOT DECIDING THE ISSUE THAT THE ASSESSING OFFICER H AS ERRED IN MAKING THE ADDITIONS WITHOUT FINDING INDISCRIMINATI NG DOCUMENTS A) THERE WERE NO PENDING ASSESSMENT OR REASSESSMENT PROCEEDINGS FOR THE IMPUGNED YEAR AND ACCORDINGLY T HE ASSESSMENT HAD ABATED B) THERE WAS NO INCRIMINATING MATERIAL WHICH WAS FO UND DURING THE COURSE OF SEARCH PROCEEDINGS C) SINCE THE ASSESSMENT OR REASSESSMENT HAD NOT AB ATED, THE ASSESSING OFFICER COULD HAVE MADE ADDITIONS ONL Y ON THE BASIS OF THE MATERIAL AVAILABLE NOT ON THE BASIS OF PRESUMPTION, INFERENCES AND ALLEGED PRACTICE. 17.1. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROU NDS OF APPEAL, WHICH IS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND THE PROVISIONS OF LAW, THE ASSESSMENT FRAMED BY THE LEA RNED ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST THE STATUTORY PROVI SIONS OF THE ACT AND WITHOUT COMPLYING THE PROCEDURES PRESCRIBED U/S. 153C OF THE INCOME TAX ACT, 1961 AND AS SUCH THE ASSESSM ENT BEING BAD IN LAW AND DESERVED TO BE QUASHED. 17.2. SO FAR AS, ADMISSION OF ADDITIONAL GROUND IS CONCERNED, THE. LD. COUNSEL PLACED RELIANCE UPON TH E DECISION LIKE NTPC COMPANY LTD. VS CIT ((SUPRA)), DIT VS ING RAM MICRO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 248 (INDIA) EXPORTS PVT. LTD. (2015) 234 TAXMAN 464 (BO M.), INCOME TAX OFFICER VS JASJIT SINGH ((SUPRA)), CIT VS PRUTH VI BROKERS AND SHARE HOLDERS (P.) LTD. (2012) 349 ITR 336 (BOM.), LATER DECISION FROM HON'BLE APEX COURT IN CIT VS SINGHAD TECHNICAL EDUCATION SOCIETY ((SUPRA)). IT WAS CONTENDED THAT BEING A LE GAL GROUND, THE SAME HAS TO BE ADMITTED BY THE TRIBUNAL. THE LD. CI T-DR CONTENDED THAT SINCE THE LEGAL GROUND HAS BEEN RAIS ED FOR THE FIRST TIME BEFORE THIS TRIBUNAL, THEREFORE, MAY NOT BE ADMITTED. 17.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WITHOUT G OING INTO MUCH DELIBERATION, WE NOTE THAT CONSIDERING THE DEC ISION CITED BEFORE UNDER SECTION, WE HAVE DELIBERATED UPON THIS ISSUE IN EARLIER PARAS OF THIS ORDER. 17.4. SO FAR AS, THE MERITS OF THE ADDITIONAL GROU ND THAT THE ASSESSMENT ORDER AND CONFIRMATION OF THE SAME BY TH E LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AGAINST THE STATUTORY PROVISIONS OF THE ACT, WITHOUT APPLYING THE PROCEDU RE LAID DOWN U/S 153C OF THE ACT AND CONSEQUENT ASSESSMENT BEING BAD IN LAW/DESERVES TO BE QUASHED HAS BEEN DELIBERATED UPO N BY UNDER SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 249 SECTION IN EARLIER PARAS OF THIS ORDER. THE FACTS, IN BRIEF, ARE THAT A SEARCH ACTION WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHETTY, DIRECTOR OF THE COMPANY ON 22ND SEPTEMBER, 2011 AND SURVEY ACTION AT THE BUSINESS P REMISE OF THE ASSESSEE. CERTAIN DOCUMENTS, BUT NOT INCRIMINAT ING, BELONGING TO THE ASSESSEE WAS FOUND DURING THE COUR SE OF SEARCH AT THE RESIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHE TTY, DIRECTOR OF THE ASSESSEE COMPANY. THESE DOCUMENTS WERE SUBJE CT TO SCRUTINY IN EARLY ACTION WHICH HAD TAKEN PLACE ON 1 8TH JANUARY, 2007 AT THE PREMISES OF AFORESAID PERSON I.E. SHRI SUDHAKAR M. SHETTY, MARKED AS ANNEXURE-A THIS ANNEXURE A IS A L OOSE PAPER FILE, CONTAINING PAGE 1 TO 55. IN THIS FILE, PAGE N O. 27 TO 48, IS DEED OF PURCHASE DATED 28TH OCTOBER, 2004 ENTERED I NTO BETWEEN THE ASSESSEE AND ONE M/S. SURU CONSULTANTS PVT. LTD FOR A CONSIDERATION OF RS. 2,25,00,000/-. SIMILARLY, PAGE NO. 1 TO 16 OF THE ANNEXURE IS AN AGREEMENT FOR DEVELOPMENT DATED 15.10.2004 ENTERED INTO BETWEEN M/S. ANAND ASSOCIATES AND THE ASSESSEE FOR A CONSIDERATION OF RS. 5.21 CRORES. SIMILARLY, DURING THE COURSE OF SEARCH ON 18TH JANUARY, 2007 AT THE PREMI SES OF THE SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 250 ASSESSEE, LOOSE PAPERS OF ANNEXURE A-9 CONTAINING L EDGER ACCOUNT OF M/S. ANAND ASSOCIATES AS APPEARING IN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE WAS SEIZED. (REFER PAPER BOOK PAGE NUMBER 42 & 43). THE SAID TRANSACTIONS AS APPEARING IN THE SAID LEDGER SHOWS PAYMENT OF RS.5.21 CRORES TO M/S. ANAN D ASSOCIATES, BEING CONSIDERATION MENTIONED IN THE AG REEMENT FOUND AND SEIZED DURING THE CURRENT SEARCH AT THE P REMISES OF SHRI SUDHAKAR M. SHETTY. SIMILARLY, DURING THE COU RSE OF SEARCH ON 18TH JANUARY, 2007 AT THE PREMISES OF THE ASSESS EE, LOOSE PAPERS OF ANNEXURE A-9 CONTAINING LEDGER ACCOUNT OF M/S. SURU CONSULTANTS PVT. LTD AS APPEARING IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE WAS SEIZED. (REFER PAPER BOOK PAGE NUM BER 42 & 44). THE SAID TRANSACTIONS AS APPEARING IN THE SAID LEDGER SHOW PAYMENT OF RS.2.25 CRORES TO M/S. SURU CONSULTANTS PVT LTD. BEING CONSIDERATION MENTIONED IN THE AGREEMENT FOUN D AND SEIZED DURING THE CURRENT SEARCH AT THE PREMISES OF SHRI SUDHAKAR M. SHETTY. NO ADDITIONS HAVE BEEN MADE EI THER IN THE PROCEEDINGS WHICH HAVE TAKEN PLACE ON ACCOUNT OF DO CUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH ON 18T H JANUARY, SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 251 2007 OR ON THE BASIS OF THE ALLEGED DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF PRESENT SEARCH AS THE TRANSACT IONS ARE REFLECTED IN THE BOOKS OF ACCOUNTS. FURTHER, NOTHIN G WAS DISCUSSED ABOUT THE SEIZED DOCUMENTS IN ANY OF THE ASSESSMENT ORDERS PASSED ON THE BASIS OF NOTICE ISSUED U/S. 15 3C OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 TO 2011-12. EARLIER , CASE WAS WITH REGULAR ASSESSING OFFICER TO WHOM SEIZED DOCUM ENTS WERE NOT HANDED OVER. THE REGULAR ASSESSMENT PROCEEDINGS WERE GOING ON WITH THE SAID ASSESSING OFFICER. LATER ON, BY AN ORDER DATED 5TH MARCH, 2014 PASSED U/S. 127(2), THE PROCEEDING WAS TRANSFERRED TO THE DY. COMMISSIONER OF INCOME TAX C ENTRAL CIRCLE-29, MUMBAI. AFTER TRANSFER OF JURISDICTION OVER THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS ISSUED A NO TICE U/S. 153C OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2006- 07 TO 2011-12 AND A NOTICE U/S. 148 FOR THE ASSESSM ENT YEAR 2012-13. THE ASSESSING OFFICER, IN HIS CAPACITY AS A ASSESSING OFFICER OF THE SEARCHED PERSON I.E. SHRI SUDHAKAR M . SHETTY HAS NEITHER RECORDED ANY SATISFACTION NOTE NOR OFFICIAL LY HANDED OVER THE SEIZED MATERIAL TO THE ASSESSING OFFICER OF THE PRESENT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 252 ASSESSEE, WHICH IS PRECONDITION FOR ISSUING A NOTIC E U/S. 153C OF THE ACT. SO FAR AS, THE CASES RELIED UPON BY THE AS SESSEE ARE CONCERNED, WE HAVE ALREADY DELIBERATED UPON THEM IN EARLIER PARAS OF THIS ORDER, THEREFORE, IN VIEW OF THE AFOR EMENTIONED FACTS/JUDICIAL PRONOUNCEMENTS, THE ADDITIONAL GROUN D RAISED BY THE ASSESSEE IS ADMITTED AND HEARD. 17.5. THE SUBMISSIONS OF THE ASSESSEE ON THE LEGAL ISSUE INVOLVED IN THESE CROSS OBJECTIONS INCLUDING APPEAL S ARE THAT THE ASSESSING OFFICER ISSUED NOTICE U/S 153C OF THE ACT RIGHT FROM ASSESSMENT YEAR 2006-07 TO 2011-12. THE PROVISIONS OF SECTION 153A R.W.S 153C PRESCRIBES, THE FOLLOWING CONDITION S FOR ISSUANCE OF NOTICE U/S 153C BY THE ASSESSING OFFICE R OF THE OTHER PERSON, OTHER THAN THE SEARCH PERSON. I. THERE SHOULD BE A SEARCH ACTION; II. THE DOCUMENTS FOUND DURING THE COURSE OF SUCH SEAR CH ACTION BE INCRIMINATING ONE AND SHOULD BELONG TO OT HER PERSON; SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 253 III. THE ASSESSING OFFICER OF SEARCHED PERSON SHOULD HAV E RECORDED A SATISFACTION NOTE THAT INCRIMINATING DOC UMENTS BELONGING TO THIRD PERSON ARE FOUND; IV. THE ASSESSING OFFICER OF SEARCHED PERSON SHOULD HANDOVER THE SATISFACTION NOTE AND DOCUMENTS BELONG ING TO OTHER PERSON TO THE ASSESSING OFFICER OF THE OTHER PERSON; V. THE ASSESSING OFFICER OF THE OTHER PERSON CAN THEN ISSUE NOTICES U/S. 153C OF THE PRECEDING SIX ASSESSMENT YEARS FROM THE DATE ON WHICH SUCH DOCUMENTS ARE RECEIVED FROM THE ASSESSING OFFICER OF SEARCHED PERSON. 17.6. WE NOTE THAT IF ALL THE ABOVE CONDITIONS ARE FULFILLED THEN ONLY NOTICE ISSUED U/S 153C OF THE ACT WILL BE A VALID NOTICE. THERE IS NO DISPUTE THAT A SEARCH ACTION HA D TAKEN PLACE AT THE RESIDENTIAL PREMISES OF SHRI SUDHAKAR M. SHE TTY, WHO IS PARTNER OF ASSESSEE FIRM. HENCE CONDITIONS NO. (I) IS COMPLIED WITH. THE REAL PROBLEM STARTS WITH CONDITION NO. (II) (A) WHERE THERE IS A CONDITION THAT DOCUMENTS BELONGING TO OTHER PERSONS ARE FOUND (B) DOCUMENTS SO FOUND ARE INCRIMINATING IN NATURE GI VING RISE TO UNACCOUNTED INCOME OF OTHER PERSON AND IN WHO SE CASE THE NOTICES U/S. 153C OF THE INCOME TAX ACT, 1961 WERE ISSUED. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 254 AT PRESENT, IN THESE APPEALS, SUCH NOTICES U/S. 153 C WERE ISSUED ON THE BASIS OF PAPER FOUND, NOT INCRIMINATI NG IN NATURE, DURING THE COURSE OF SEARCH WHICH HAVE TAKEN PLACE AT THE RESIDENTIAL PREMISES OF ITS DIRECTOR SHRI SUDHAKAR M. SHETTY. THE SECOND PART OF THIS CONDITION NO. (II) IS THAT THE DOCUMENTS SHOULD BE INCRIMINATING IN NATURE GIVING RISE TO AN Y UNDISCLOSED INCOME OF OTHER PERSON . WE FIND THAT NO ADDITIONS HAVE BEEN MADE EITHER IN THE PROCEEDINGS WHICH HAVE TAKEN PLA CE ON ACCOUNT OF DOCUMENTS FOUND AND SEIZED DURING THE CO URSE OF SEARCH ON 18TH JANUARY, 2007 OR ON THE BASIS OF THE ALLEGED DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF PRE SENT SEARCH AS THE TRANSACTIONS ARE REFLECTED IN THE BOOKS OF A CCOUNTS. FURTHER, NOTHING WAS DISCUSSED ABOUT THE SEIZED DOC UMENTS IN ANY OF THE ASSESSMENT ORDERS PASSED ON THE BASIS O F NOTICE ISSUED U/S. 153C OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 TO 2011-12. IT IS FURTHER NOTED THAT IN THE PRESENT C ASES, NEITHER THE DOCUMENTS REVEAL ANY UNDISCLOSED INCOME OF THE ASSESSEE NOR EVEN REFERRED TO BY THE ASSESSING OFFICER IN TH E IMPUGNED ASSESSMENT ORDERS. HENCE, THE DOCUMENTS ARE NOT IN CRIMINATING SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 255 IN NATURE. IN THE ABSENCE OF INCRIMINATING DOCUMENT S, THE ASSESSMENT ORDER PASSED UNDER SECTION 153C WAS INVA LID. 18. NOW, WE SHALL DEAL WITH THE CASES RELIED UPON BY THE ASSESSEE IN ITS FAVOUR. THE FIRST CASE IS THAT OF C IT VS. REFAM MANAGMENT SERVICES (P) LTD (2016) 386 ITR 693 (DEL) . IN THE CATCH NOTE, THE HON'BLE COURT OBSERVED AS UNDER :- SEARCH AND SEIZUREASSESSMENT UNDER S. 153CVALIDIT Y NO INCRIMINATING MATERIAL FOR THE ASSESSMENT YEAR I N QUESTION HAVING BEEN RECOVERED DURING SEARCH, ASSES SMENT UNDER S. 153C WAS INVALIDTHE ONLY DOCUMENT SEIZED DURING THE SEARCH IN QUESTION WAS A CHEQUE BOOK PER TAINING TO THE ASSESSEE WHICH REFLECTED ISSUE OF CHEQUES DU RING THE PERIOD AUG., 2008 TO OCTOBER, 2008, RELEVANT TO THE ASST. YR. 2009-10CIT VS. RRJ SECURITIES LTD. (2016) 282 CTR (DEL) 321 : (2015) 128 DTR (DEL) 57 FOLLOWED FINALLY, THE HON'BLE COURT HELD THAT NO INCRIMINAT ING MATERIAL FOR THE ASSESSMENT YEAR IN QUESTION HAVING BEEN RECOVERED DURING SEARCH, ASSESSMENT UNDER S. 153C W AS INVALID. 18.1. THE NEXT DECISION RELIED UPON BY THE LD. COU NSEL FOR THE ASSESSEE IS DCIT VS. SATKAR ROADLINES PVT LTD ( 2016) 175 TTJ 198 (DEL), WHEREIN, IT WAS HELD/OBSERVED AS UNDER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 256 19. IN THE LIGHT OF THE CASE LAW CITED ABOVE AND ON A READING OF SS. 153A AND 153C THE EXERCISE THAT IS REQUIRED TO BE D ONE BY THE AO HAS BEEN SPELT OUT BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DSL PROPERTIES (P) LTD. VS. DY. CIT 33 TAXM AN.COM 420 VIDE PARA 15 HAS HELD THAT IF THE AO IS ASSESSING T HE PERSON SEARCHED AS WELL AS OTHER PERSON WHOSE ASSETS, BOOK S OF ACCOUNT OR DOCUMENTS WERE FOUND AT THE TIME OF SEARCH, THEN ALSO, FIRST WHILE MAKING THE ASSESSMENT IN THE CASE OF THE PERSON SEA RCHED, HE HAS TO RECORD THE SATISFACTION THAT THE MONEY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DO CUMENTS BELONGED TO THE PERSON OTHER THAN THE PERSON SEARCHED. THEN THE COPY OF THIS SATISFACTION NOTE IS TO BE PLACED IN THE FILE OF SU CH OTHER PERSON AND THE RELEVANT DOCUMENT SHOULD ALSO BE TRANSFERRED FR OM THE FILE OF THE PERSON SEARCHED TO THE FILE OF SUCH OTHER PERSON. T HEREAFTER, IN THE CAPACITY OF THE AO OF SUCH OTHER PERSON, HE HAS TO ISSUE THE NOTICE UNDER S. 153A R/W S. 153C. THE AO OF THE SEARCHED P ERSON AND SUCH OTHER PERSON MAY BE THE SAME BUT THESE ARE TWO DIFFERENT ASSESSEES AND THEREFORE THE AO HAS TO CARRY OUT THE DUAL EXERCISE FIRST AS THE AO OF THE PERSON SEARCHED IN WHICH HE HAS TO RECORD THE SATISFACTION, DURING THE COURSE OF ASSESSMENT PROCE EDINGS OF THE PERSON SEARCHED. WE CONCUR WITH THE SAID VIEW OF TH E CO-ORDINATE BENCH AND WOULD LIKE TO ADD THAT THIS SATISFACTION MUST BE AN OBJECTIVE SATISFACTION BASED ON AN ENQUIRY BY THE A O TO ESTABLISH THAT THE DOCUMENTS REFERRED TO IN S. 153C WHICH IS FOUND DURING THE SEARCH UNDER S. 132, WHICH ARE SEIZED OR REQUISIT IONED BELONG TO A PERSON OTHER THAN THE PERSON SEARCHED; AND THERE SH OULD BE A CLEAR FINDING TO THAT EFFECT BASED ON WHICH ONLY SATISFAC TION AS ENVISAGED UNDER S. 153C CAN BE INFERRED. SUCH A FINDING BY TH E AO IS REQUIRED FOR ATTAINING THE SAID SATISFACTION AND THEN IT SHO ULD BE RECORDED IN THE FILE OF THE ASSESSEE WHICH IS A SINE QUA NON TO TRIGGER THE JURISDICTION FOR THE AO TO PROCEED AGAINST SUCH OTH ER PERSON. IN THIS CASE THIS EXERCISE OF RECORDING THE SATISFACTION DU RING THE ASSESSMENT PROCEEDINGS OF THE PERSON SEARCHED HAS N OT BEEN CARRIED OUT AND THE SATISFACTION DOES NOT SATISFY T HE REQUIREMENT OF S. 153C. WE COULD NOT FIND ANY MENTION OF ANY SEIZE D MATERIALS LIKE VALUABLE ARTICLES OR THINGS OR ANY BOOKS OF ACCOUNT OR DOCUMENTS HAVE BEEN REFERRED EVEN IN THE IMPUGNED ASSESSMENT ORDERS. THE AO LACKS JURISDICTION TO INITIATE PROCEEDINGS UNDER S. 153C AGAINST THE ASSESSEE AND THEREFORE, THE ISSUANCE OF NOTICE ITSELF IS NULL AND VOID AND THEREFORE QUASHED. CONSEQUENTLY, THE IMPUG NED ASSESSMENT ORDER PASSED UNDER S. 153C IS ALSO A NUL LITY. 20 . SINCE WE HAVE QUASHED THE NOTICE UNDER S. 153C OF THE ACT ITSELF, THE OTHER GROUNDS ARE NOT ADJUDICATED BEING ACADEMIC. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 257 21 . AS THE FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE IN OTHER FIVE ASST. YRS. I.E. 2004-05 TO 2008-09 ARE S IMILAR TO ASST. YR. 2003-04, WE ORDER THAT THE IMPUGNED ASSESSMENT ORDE RS PASSED UNDER S. 153C IN ASST. YRS. 2004-05 TO 2008-09 ARE ALSO A NULLITY. 22 . BEFORE WE PART WITH THIS ORDER, WE WERE WONDERING W HETHER DURING SEARCH, REVENUE AUTHORITIES CAN RESORT TO CA RTE BLANCHE SEIZURE OF ANYTHING AND EVERYTHING FROM THE PREMISES OF THE RAIDED PARTY WITHOUT THE SAID DOCUMENTS HAVI NG ANY BEARING IN ASSESSMENT OF INCOME AS PER LAW. IT SHOU LD BE REMEMBERED THAT ANY EXERCISE OF POWER UNDER S. 153C HAS CATASTROPHIC EFFECT ON THE PARTY AGAINST WHOM PROCE EDINGS ARE REOPENED FOR SCRUTINY FOR SIX ASSESSMENT YEARS. SO THE RAIDING PARTY HAS TO APPLY ITS MIND AT LEAST TO PRIMA FACIE SATISFY ITSELF THAT THE DOCUMENTS SEIZED HAVE A NEXUS WITH INCOME. ANY ARBITRARY EXERCISE OF POWER WHICH IS UNBRIDLED IS A SWORN ENEMY OF THE ART. 14 OF THE CONSTITUTION AND SUCH E XERCISE OF POWER WOULD OFFEND THE RIGHT TO PRIVACY AND RULE OF LAW WHICH IS A BASIC FEATURE OF THE CONSTITUTION. THEREFORE, THE OFFICERS CONDUCTING THE SEARCH WHILE SEIZING THE DOCUMENTS H AS TO EXERCISE THE SAID POWERS WITH EXTREME CARE AND CAUT ION; AND SEIZURE MUST BE USED WITH CIRCUMSPECTION. THE HONB LE APEX COURT AND THE HONBLE DELHI HIGH COURT IN N.K. TEXT ILE MILLS VS. CIT (1966) 62 ITR 58 (DEL), HAS FROWNED UPON THE PR ACTICE OF INDISCRIMINATE SEIZURE PAVING WAY FOR REOPENING OF ASSESSMENTS WHICH FINALLY WILL FALL IN CASE IT IS N OT INCRIMINATING AND WILL BE AN EXERCISE OF FUTILITY. 23 . IN THE RESULT, ALL THE APPEALS PREFERRED BY THE R EVENUE ARE DISMISSED AND THE CROSS-OBJECTIONS FILED BY THE ASS ESSEE ARE ALLOWED. 18.2. AS REGARDS CONDITION NO. (III) THAT THE ASSE SSING OFFICER OF SEARCHED PERSON SHOULD HAVE RECORDED A SATISFACT ION NOTE THAT INCRIMINATING DOCUMENTS BELONGING TO THIRD PERSON A RE FOUND; THE ASSESSING OFFICER, IN HIS CAPACITY AS THE ASSES SING OFFICER OF SHRI SUDHAKAR M. SHETTY (SEARCHED PERSON) HAS NE ITHER ISSUED ANY SATISFACTION NOTE NOR HANDED OVER THE DO CUMENTS TO SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 258 HIMSELF (IN THE CAPACITY OF ASSESSING OFFICER OF TH E OTHER PERSON) BY PASSING A HANDOVER NOTE. THE REASONS WE RE RECORDED BY THE ASSESSING OFFICER (IN HIS CAPACITY AS AN ASSESSING OFFICER OF OTHER PERSON I.E. OF THE ASSESSEE) FOR ISSUING NOTICE U/S. 153C TO THE ASSESSEE. THE RELEVANT NOTE IS APPEARING IN THE PAPER BOOKS FILED IN CONNE CTION WITH THE FOLLOWING APPEALS ARE AS UNDER: APPEAL NO CO.205/M/16 CO.176/M/17 CO206/M/16 ASSESSMENT YEAR 2008-09 2010-11 2011-12 PAPER BOOK PAGE NO. 48 22 35 19. NOW, WE SHALL EXAMINE THE REASONS RECORDED BY THE LD. ASSESSING OFFICER, WHICH ARE REPRODUCED HEREUND ER:- SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 259 19.1. ON PERUSAL OF AFORESAID REASONS, IT EMERGES THAT TH E REASONS SO RECORDED ARE RECORDED BY THE ASSESSING O FFICER IN HIS CAPACITY OF OTHER PERSON AND NOT BY THE ASSESSI NG OFFICER IN A CAPACITY OF SEARCHED PERSON. THIS CAN BE PROVE D ON ACCOUNT OF FOLLOWING REASONS :- A) NAME AND PAN OF THE ASSESSEE ARE MENTIONED ON THE T OP OF THE REASONS AND NOT THE NAME OF SHRI SUDHAKAR M. SHETTY , IN WHOSE CASE THE SEARCH HAD TAKEN PLACE. B) NOTHING IS MENTIONED EITHER ABOUT HANDOVER OF THE D OCUMENTS BY THE ASSESSING OFFICER OR RECEIVING OF DOCUMENTS BY THE ASSESSING OFFICER OF THE ASSESSEE. SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 260 C) AGAIN AND AGAIN, THE WORD ASSESSEE IS USED WHICH TH E ASSESSEE ONLY. D) IN PARA 3, IT WAS MENTIONED THAT I AM SATISFIED T HAT DOCUMENTS SEIZED AS ABOVE BELONG TO THE ASSESSEE A LSO SHOWS THAT THIS REASONS ARE RECORDED BY THE ASSESSING OFF ICER IN HIS CAPACITY AS A ASSESSING OFFICER OF THE ASSESSEE AND NOT BY HIM IN HIS CAPACITY AS ASSESSING OFFICER OF SEARCHED PE RSON. E) THE ASSESSING OFFICER OF THE SEARCHED PERSON CANNOT SAY AND WRITE THAT ISSUE NOTICE U/S. 153C. ON THE OTHER H AND, ONLY THE ASSESSING OFFICER OF OTHER PERSON, OTHER THAN ASSES SING OFFICER OF SEARCHED PERSON CAN SAY AND WRITE ISSUE NOTICE U/S. 153C 19.2. THE ABOVE FACTS REFLECTS THAT NEITHER SATISF ACTION NOTE WAS ISSUED BY THE ASSESSING OFFICER IN HIS CAPACITY AS A ASSESSING OFFICER OF THE SEARCHED PERSON NOR THE DO CUMENTS WERE HANDED OVER (BY WAY OF NOTE FOR TRANSFER OF DO CUMENTS) TO THE ASSESSING OFFICER OF THE OTHER PERSON. IT WAS A RGUED BY THE LEARNED DR THAT THE ASSESSING OFFICER OF THE SEARCH ED PERSON AND OTHER PERSON IS ONE AND SOME, THEN, WHY THE SAT ISFACTION NOTE PREPARED BY THE ASSESSING OFFICER OF OTHER PER SON SHOULD NOT BE TREATED AS A SATISFACTION NOTE PREPARED BY T HE ASSESSING OFFICER OF SEARCHED PERSON. WE FIND THAT WE HAVE DE LIBERATED UPON THIS ISSUE ALONG WITH CITED DECISIONS IN EARLI ER PARAS OF THIS ORDER WHILE DEALING WITH THE ISSUE IN THE CASE OF D IFFERENT ASSESSEE. ALTHOUGH THE ASSESSING OFFICER OF THE SE ARCHED PERSON AND OTHER PERSON WAS THE SAME OFFICER, EVEN IN THOS E CASES, IT SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 261 WAS HELD THAT SATISFACTION NOTE BY THE ASSESSING OF FICER IN HIS CAPACITY OF SEARCHED PERSON IS PRECONDITION REQUIRE D TO CONFER JURISDICTION ON THE ASSESSING OFFICER OF OTHER PERS ON. EVEN THE CBDT HAS ISSUED A CIRCULAR IN THIS REGARD MAKING IT CLEAR THAT EVEN IF THE ASSESSING OFFICER OF SEARCHED PERSON AN D OTHER PERSON IS SAME, A SATISFACTION NOTE IS REQUIRED TO BE PASSED BY THE ASSESSING OFFICER IN HIS CAPACITY OF SEARCH PER SON. FOLLOWING THE AFORESAID CASE LAWS, ISSUE IN HAND AND THE DELI BERATION MADE THEREUPON IN EARLIER PARAS OF THIS ORDER, WE FIND M ERIT IN THE CROSS OBJECTIONS OF THE ASSESSEE, CONSEQUENTLY, ON THIS ASPECT ALSO, WE DECIDE IN FAVOUR OF THE ASSESSEE. THUS, TH E CROSS OBJECTIONS, FILED BY THE ASSESSEE ARE ALLOWED. FINALLY, APPEALS OF THE ASSESSEE, THE APPEALS OF TH E REVENUE AND THE CROSS OBJECTIONS ARE DISPOSED OF IN TERMS I NDICTED HEREINABOVE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29/08/ 2018. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) $'% / ACCOUNTANT MEMBER &'% / JUDICIAL MEMBER MUMBAI; ( DATED:- 29/08/2018 PRADEEP J. CHOWDHURY, SR.P.S. & F{X~{T? P.S/. . / SKYLARK BUILD SKYLARK BUILDCON P. LTD. SMT. HEMLATA S. SHETTY, OASIS REALTY SHRI SUDHAKAR M. SHETTY SAHANA BUILDERS & DEVELOPERS (P) LTD. . 262 ' #'&()*+ *,( / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 00 1' ( *+ ) / THE CIT, MUMBAI. 4. 00 1' / CIT(A)- , MUMBAI 5. 3#4.' , 0*+&*5 , / DR, ITAT, MUMBAI 6. 6 7 / GUARD FILE. ' # / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
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