KARNATAKA STRIPS LTD, BANGALORE V. DCIT CEN CIR-33, MUMBAI

ITA 4188/MUM/2009

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8986 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Initiation of penalty proceedings; Validity of assessment; Documents seized
• Section: 143(3); 153A; 132; 15

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI . , , , BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER, ITA NOS.4184 TO 4188/MUM/2009 ASSESSMENT YEARS:-2003-04 TO 2007-08 M/S. KARNATAKA STRIPS LTD. 502, 1 ST FLOOR, RANKA PARK APTS. RICHMOND CIRCLE, BANGALORE-560027 / VS. DCIT, CENTRAL CIRCLE-33, OLD CGO BUILDING, M. K. ROAD, MUMBAI-400020 ( ! /ASSESSEE) ( / REVENUE) P.A. NO.AABCK4964F ' #$! % / DATE OF HEARING : 13/06/2019 $! % / DATE OF ORDER: 28/06/2019 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER THIS BUNCH OF FIVE APPEALS FILED BY ASSESSEE ARE DI RECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE LD. CIT(A) CENTRAL-VIII, MU MBAI, ALL DATED 02/06/2009 FOR ! !' / ASSESSEE BY SHRI RAJIV KHANDELWAL & SHRI NEEL KHANDELWAL !' / REVENUE BY SHIR B. SRINIVAS CIT- DR 2 M/S. KARNATAKA STRIPS LTD. ASSESSMENT YEARS 2003-04 TO 2007-08. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD ALTOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR ALL ASSESSMENT YEARS. FOR THE SAKE OF BREVITY, THE GROU NDS OF APPEAL FOR AY 2003-04 ARE REPRODUCED HEREUNDER:- 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ID. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.8,35,507/- MADE BY THE AO| TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING DEPRECIATION ON CERTAIN FIXED ASSETS ON THE PLEA TH AT THE PURCHASE OF THESE FIXED ASSETS IS NOT GENUINE. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT:- I) PURCHASE OF THESE FIXED ASSETS IS GE NUINE AND SUPPORTED BY ADMISSIBLE EVIDENCES AND MATERIALS; II) THE DEPRECIATION IS CLAIMED ON THE ASSETS OWNED BY THE APPELLANT AND USED FOR THE PURPOSES OF THE BUSINESS CARRIED ON BY THE APPELLANT; AND III) THESE FIXED ASSETS HAVE BEEN PHYSICALLY VERIFI ED AND VALUED BY THE CHARTERED ENGINEER. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION, THE ID. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSID ERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) FAILED TO APPRECIATE THAT THE PROCEEDING S INITIATED AGAINST THE APPELLANT U/S. 153C ARE INVALID AND CONTRARY TO THE PROVISIONS OF LAW. 3. THE ID. CIT(A) ERRED IN HOLDING THAT THE GROUND NO.7 RAISED AGAINST INITIATION OF PENALTY PROCEEDINGS U/S.271(L)(C) IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. 3. THE ASSESSEE HAD ALSO TAKEN ADDITION GROUNDS OF APPEAL FOR ALL ASSESSMENT YEARS. THE ADDITIONAL GROUNDS OF APPEAL FOR AY 2003 -04 IS REPRODUCED HEREUNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDITIONS MADE ARE BEYOND THE SCOPE OF PROVISIONS O F SECTION 153A/153C AND HENCE INVALID AND THE SAME OUGHT TO B E DELETED. 3 M/S. KARNATAKA STRIPS LTD. 4. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF RUNNING ROLLING PROCESS UNIT AT BELLARY IN KARNATAK A. A SEARCH ACTION U/S 132 OF THE INCOME TAX ACT, 1961(HEREINAFTER THE ACT) WAS CO NDUCTED ON 10/11/2006 AT VARIOUS BUSINESS/RESIDENTIAL PREMISES OF THE COMPANIES/DIRE CTORS/RELATED PERSONS BELONGING TO THE BALAJI GROUP OF CASES. THE PRINCIPAL FLAGSHIP C OMPANY OF THE GROUP IS BALAJI YARN LTD. WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN NON-FERROUS METALS AND CHEMICALS AT MUMBAI, ALIGARH AND AGRA. THE GROUP HAD SETUP ST EEL MANUFACTURING PLANTS IN THE NAME OF KARNATAKA STRIPS PVT. LTD. AND UNITED GALVA PVT. LTD. AT BELLARY IN KARNATAKA. THE SEARCH ACTION REVEALED THAT SIX COMPANIES OF TH E GROUP HAD INDULGED IN THE DUBIOUS ACTIVITY OF INTRODUCING ITS OWN UNACCOUNTED FUND IN THE NAMES OF VARIOUS NON- EXISTENT/BOGUS/BENAMI PERSONS OF NO MEANS AS SHARE CAPITAL AND THE SHARE CAPITAL SO INFUSED HAS BEEN USED FOR THE PURPOSE OF INVESTMENT IN THE SHARES OF THE NEWLY FORMED COMPANIES. ANOTHER IMPORTANT ISSUE THAT WAS UNEARTHED AS A RESULT OF SEARCH ACTION IS INFLATION IN THE VALUE OF PLANT AND MACHI NERY BY THE ASSESSEE COMPANY BY OBTAINING BOGUS BILLS FROM PERSONS WHO HAVE NEITHER RENDERED SERVICES NOR PROVIDED ANY EQUIPMENT TO THE ASSESSEE. IN THIS MANNER, THE ASSESSEE CONTINUED TO BENEFIT BY CLAIMING DEPRECIATION ON SUCH BOGUS PLANT AND MACHI NERY. THE SEARCH ACTION FURTHER REVEALED THAT THE ASSESSEE COMPANY HAD OBTAINED BOG US BILLS FROM THREE ENTITIES NAMELY M/S STAR FABRICATORS, M/S MISHRA ENGINEERING WORKS AND M/S RAVI STEEL. CONSEQUENT TO SEARCH, THE CASE WAS CENTRALISED IN T O CENTRAL CIRCLE, ACCORDINGLY, A NOTICE U/S 153C R.W.S. 153A OF THE ACT, DATED 11/08 /2008 WAS ISSUED AND SERVED ON THE ASSESSEE ON 12/08/2008. IN RESPONSE TO NOTICE U /S 153C OF THE ACT, ASSESSEE HAS 4 M/S. KARNATAKA STRIPS LTD. FILED ITS RETURN OF INCOME FOR AY 2003-04 ON 14/10/ 2008, DECLARING TOTAL LOSS OF RS.1,54,04,607/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 153C OF THE ACT, ON 17/12/2008 DETERMINING TOTAL LOSS OF RS.1,3 9,77,160/- BY MAKING ADDITIONS/DISALLOWANCES TOWARDS DEPRECIATION CLAIME D ON INFLATED VALUE OF PLANT AND MACHINERY AND ALSO DISALLOWANCE OF SHARE ISSUE EXPE NSES. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE HAS CHALLENGED VALIDITY OF ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153C OF T HE ACT, ON THE GROUND THAT NOTICE ISSUED U/S 153C DATED 11/08/2008 IS BAD IN LAW AND VOID AB-INITIO, BECAUSE THE AO OF THE SEARCHED PERSON DID NOT RECORD SATISFACTION AS REQUIRED U/S 153C OF THE ACT, THAT ANY UNDISCLOSED INCOME BELONGING TO THIRD PERSON, T HAT IS THE PERSON OTHER THAN THE PERSON WHO WAS SEARCHED OR WHOSE DOCUMENTS, ACCOUNT BOOKS OR ASSETS WERE REQUISITIONED, THEREFORE, ALL PROCEEDINGS INCLUDING ASSESSMENT ORDER PASSED U/S 153C OF THE ACT, IS BAD IN LAW AND LIABLE TO BE QUASHED. THE ASSESSEE HAS ALSO CONTESTED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF DE PRECIATION ON PLANT AND MACHINERY AND DISALLOWANCE OF SHARE ISSUE EXPENSES. THE LD. CIT(A) FOR THE DETAILED REASONS RECORDED IN ITS ORDER DATED 02/06/2009 CONF IRMED THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF DEPRECIATION AND ALSO DI SALLOWANCE OF SHARE ISSUE EXPENSES UNDER THE PROVISIONS OF SECTION 35D OF THE ACT. IN SO FAR AS, LEGAL ISSUE RAISED BY THE ASSESSEE CHALLENGING VALIDITY OF ASSE SSMENT PASSED U/S 143(3) R.W.S. 153C OF THE ACT, THE LD. CIT(A) HELD THAT THERE WAS NO MERIT IN THE CONTENTION OF THE 5 M/S. KARNATAKA STRIPS LTD. ASSESSEE THAT SUCH SATISFACTION SHOULD HAVE BEEN RE CORDED IN THE CASES SEARCHED AND NOT IN THE CASE OF THE ASSESSEE, BECAUSE THE AS SESSING OFFICER HAVING JURISDICTION OVER THE ASSESSEE AND THE AO HAVING JURISDICTION OV ER THE SEARCHED PERSON OR ONE AND THE SAME. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 7. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM ASSESSEE APPEAL IS LEGALITY OF ASSESSMENT COMPLETED U/S 143(3) R.W.S. 153C OF THE ACT. 8. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D. CIT(A) WAS ERRED IN NOT APPRECIATING THE FACTS IN THE LIGHT OF PROVISIONS O F SECTION 153C OF THE ACT, AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS M/S CALCUTTA KNITWEARS, LUDHIANA (2014) 362 ITR 673(SC) WHERE THE PROCEDURE FOR ISSUE OF NOTICE U/S 153C OF THE ACT HAS BEEN EXPLAINED BY THE HONBLE SUPREME C OURT. THE LD. AR FURTHER SUBMITTED THAT AS PER THE SAID DECISION OF THE HON BLE SUPREME COURT, FOR THE PURPOSE OF SECTION 158BD RECORDING OF SATISFACTION NOTE IS PRE-REQUISITE AND ALSO HAS LAID DOWN THE STAGES AT WHICH SUCH SATISFACTION MUST BE PREPA RED BY THE AO OF THE SEARCHED PERSON. ACCORDINGLY, THE AO OF THE SEARCHED PERSON MUST RECORD SATISFACTION HAVING REGARD TO THE BOOKS OF ACCOUNT AND OTHER ASSETS REQ UISITIONED DURING THE COURSE OF SEARCH THAT UNDISCLOSED INCOME OF A PERSON OTHER TH AN THE PERSON SEARCHED EITHER AT THE TIME OR ALONG WITH INITIATION OF PROCEEDINGS AG AINST THE SEARCHED PERSON OR IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 158BC OF THE A CT, OR IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE COMPLETED U/S 158BC OF T HE ACT OF THE SEARCHED PERSON. 6 M/S. KARNATAKA STRIPS LTD. THE LD. AR FURTHER SUBMITTED THAT THE CBDT HAS ALSO ISSUED A CIRCULAR DATED 31/12/2015 VIDE CIRCULAR NO.24 OF 2015, WHEREIN REF ERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S CAL CUTTA KNITWEARS, (SUPRA) IN PARA- 3 ACCEPTED THAT THE PROVISIONS OF SECTION 153C ARE IN PARI MATERIA TO THE PROVISIONS OF SECTION 153BD OF THE ACT. THE CIRCULAR IN PARA-4 F URTHER ISSUED GUIDELINES TO THE AO TO STRICTLY FOLLOW THE DECISION IN THE CASE OF CIT VS M/S CALCUTTA KNITWEARS (SUPRA) FOR RECORDING SATISFACTION AND HAS STATED THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME, THEN ALSO H E IS REQUIRED TO RECORD HIS SATISFACTION AS HAS BEEN UPHELD BY THE COURTS BEFOR E HANDING OVER BOOKS OF ACCOUNTS AND OTHER MATERIALS BELONGING TO THE PERSON OTHER T HAN SEARCHED PERSON. THE CBDT FURTHER CLARIFIED THAT ANY PENDING LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE U/S 158BD /153C SHOULD BE WITHDRAWN/NOT PRESSED, IF IT DOES NOT MEET THE GUIDELINES LAID DOWN BY THE APEX COURT. THE LD. AR FURTHER SU BMITTED THAT IN THIS CASE, IT IS VERY CLEAR FROM THE RECORD THAT THE AO OF THE SEARCHED P ERSON OR THE PERSON WHOM PROCEEDINGS U/S 132 HAS BEEN INITIATED HAS NOT RECO RDED SATISFACTION AS REQUIRED U/S 153C OF THE ACT, HAVING REGARD TO BOOKS OF ACCOUNT AND OTHER ASSETS THAT SUCH BOOKS OF ACCOUNTS ARE BELONG TO A PERSON OTHER THAN SEARC HED PERSON. ALTHOUGH, THE LD. DR HAS FURNISHED A COPY OF SATISFACTION NOTE RECORDED DATED 11/08/2018, BUT ON PERUSAL OF SUCH SATISFACTION NOTE, IT IS VERY CLEAR THAT THE S AID NOTE HAS BEEN PREPARED BY THE AO OF THE ASSESSEE BEFORE ISSUE OF NOTICE U/S 153C OF THE ACT, WHICH IS EVIDENT FROM THE FACT THAT THIS IS AN ORDER SHEET ENTRY DATED 11/08/ 2008, WHICH IS TAKEN FROM THE FILE OF THE ASSESSEE AND ALSO IN THE HEADING OF THE ORDER S HEET IT IS MENTIONED THAT REASONS 7 M/S. KARNATAKA STRIPS LTD. RECORDED PRIOR TO ISSUE OF NOTICE U/S 153C OF THE A CT. THEREFORE, IT IS VERY CLEAR FROM THE ABOVE THAT THERE IS NO SATISFACTION BY THE AO H AVING JURISDICTION OVER THE SEARCHED PERSON, CONSEQUENTLY, WHOLE PROCEEDINGS INCLUDING A SSESSMENT FRAMED U/S 143(3) R.W.S.153C OF THE ACT IS BAD IN LAW AND LIABLE TO B E QUASHED. 9. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THERE IS NO MERIT IN THE CONTENTION RAISED BY THE LD. AR FOR THE ASSESSEE TH AT EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME, A SEPARATE SATISFACTION IS REQUIRED TO BE RECORDED BEFORE ISSUE OF NOTICE U/S 153C OF T HE ACT, BECAUSE THE LAW IS VERY CLEAR AS PER WHICH THE AO OF THE SEARCHED PERSON IS REQUIRED TO RECORD SATISFACTION BEFORE HANDING OVER BOOKS OF ACCOUNTS AND OTHER ASS ET REQUISITIONED DURING THE COURSE OF SEARCH, BUT BELONGED TO PERSON OTHER THAN THE SEARCHED PERSON. IN THIS CASE, SINCE, THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE, THEREFORE, THE AO BEFORE ISSUANCE OF NOTICE U/S 153C HAS RECORDED SATISFACTION WITH REFERENCE TO BOOKS OF ACCOUNTS AND OTHER MATERIALS FOUND DURING THE COURSE OF SEARCH THAT UNDISCLOSED INCOME IS BELONGS TO THE ASSESSEE, THER EFORE, IT IS VERY CLEAR THAT THE SATISFACTION AS REQUIRED U/S 153C OF THE ACT HAS BE EN RECORDED BY THE AO BEFORE ISSUE OF NOTICE. THE LD. DR FURTHER SUBMITTED THAT ALTHOU GH THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S CALCUTTA KNITWEARS, (SUPRA) HAS ISSUED CERTAIN GUIDELINES TO THE AO FOR ISSUE OF SATISFACTION AS REQUIRED U/S 15 8BD AND ALSO THE SAID JUDGMENT HAS BEEN ACCEPTED BY THE DEPARTMENT BY ISSUING A CIRCUL AR, WHERE IT WAS HELD THAT EVEN IF THE AO OF THE SEARCHED PERSON AND OTHER PERSON IS O NE AND THE SAME, THEN THE 8 M/S. KARNATAKA STRIPS LTD. SEPARATE SATISFACTION AS REQUIRED U/S 153C IS REQUI RED TO BE RECORDED, BUT THE FACT REMAINS THAT THE JUDGMENT OF THE HONBLE SUPREME CO URT WAS RENDERED IN THE YEAR 2014 AND THE BOARD HAS BEEN ISSUED CIRCULAR IN THE YEAR 2015, THEREFORE, THE AO CANNOT FORESEEN OR ANTICIPATE THE PROCEDURE REQUIRE D TO BE FOLLOWED FOR ISSUE OF NOTICE U/S 153C OF THE ACT, WHICH IS OTHERWISE NOT SPECIFI ED UNDER THE PROVISIONS OF THE ACT. SINCE, THE AO HAS RECORDED SATISFACTION BEFORE ISSU E OF NOTICE U/S 153C OF THE ACT, WHICH IS SUFFICIENT AS PER PROVISIONS OF LAW AND HE NCE, THERE IS NO MERIT IN THE CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY, THE LE GAL PLEA RAISED BY THE LD. AR FOR THE ASSESSEE SHOULD BE REJECTED. 10. WE HAVE HEARD BOTH PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE S OLE DISPUTE IS WITH REGARD TO NON- RECORDING OF SATISFACTION BY THE AO HAVING JURISDIC TION OVER THE SEARCHED PERSON BEFORE HANDING OVER THE BOOKS OF ACCOUNTS OR ASSETS REQUISITIONED DURING THE COURSE OF SEARCH BUT BELONGED TO OTHER PERSON. OTHERWISE, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE AO OF THE ASSESSEE HAS RECORDED S ATISFACTION AS REQUIRED U/S 153C OF THE ACT, BEFORE ISSUE OF NOTICE U/S 153C DATED 11/0 8/2008. IN FACT, THE LD. DR FURNISHED COPY OF SATISFACTION NOTE RECORDED BY THE AO ON 11/08/2008, AS PER WHICH IT IS AN ORDER SHEET ENTRY IN THE CASE OF THE ASSESSEE M/S KARNATAKA STRIPS LTD. AND THE HEADING OF THE ORDER SHEET ENTRY STATES THAT REASON S RECORDED PRIOR TO ISSUE OF NOTICE U/S 153C OF THE ACT. IT IS ALSO NOT IN DISPUTE THA T THE AO OF THE SEARCHED PERSON AND OTHER PERSON IS ONE AND THE SAME. IN THIS FACTUAL B ACKGROUND, THE ISSUE NEEDS TO BE 9 M/S. KARNATAKA STRIPS LTD. RESOLVED IS WHETHER, A SEPARATE SATISFACTION AS REQ UIRED U/S 153C OF THE ACT SHALL BE RECORDED BY THE AO BEFORE HANDING OVER BOOKS OF ACC OUNTS AND OTHER ASSETS FOUND DURING THE COURSE OF SEARCH BUT BELONGS TO OTHER PE RSON AND ALSO BEFORE ISSUE NOTICE U/S 153C OF THE ACT, EVEN THOUGH THE AO OF THE SEAR CHED PERSON AND OTHER PERSON IS ONE AND THE SAME. AS PER PROVISIONS OF SECTION 153C (1) OF THE ACT, WHERE THE ASSESSING OFFICER IS SATISFIED THAT, ANY MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING, SEIZED OR REQUISITIONED, BELONGS TO OR ANY BOOKS OF ACCOUNT OR DOCUMENTS, SEIZED OR REQUISITIONED, PERTAINS OR PER TAIN TO, OR ANY INFORMATION CONTAINED THEREIN, RELATES TO, A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN, THE BOOKS OF ACCOUNT OR DOCUMENTS OR AS SETS, SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVIN G JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGA INST EACH SUCH OTHER PERSON AND ISSUE NOTICE AND ASSESS OR REASSESS THE INCOME OF T HE OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A, IF, THAT ASSES SING OFFICER IS SATISFIED THAT THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR R EQUISITIONED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR YEARS REFERRED TO IN SUB-SECTION (1) OF SEC TION 153A OF THE ACT. FROM THE READING OF THE ABOVE SECTION 153C OF THE ACT, IT IS VERY CLEAR FROM THE PLAIN READING OF WORDS CONTAINED IN THE SAID SECTION THAT WHERE THE AO IS SATISFIED THAT ANY INCOME, ANY MONEY, BULLION, JEWELLERY OR ANY BOOKS OF ACCOU NT OR DOCUMENTS PERTAINS TO OR RELATES TO, A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN, THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS, SEIZED OR REQUIS ITIONED SHALL BE HANDED OVER TO 10 M/S. KARNATAKA STRIPS LTD. THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. FURTHER, THE AO HAVING JURISDICTION OVER OTHER PERSON, IF HE IS SAT ISFIED THAT THE BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OTHER PERSON, THEN HE SHAL L PROCEED TO ASSESS OR REASSESS THE INCOME OF OTHER PERSON IN ACCORDANCE WITH PROVI SIONS OF SECTION 153A OF THE ACT. THE SAID LEGAL POSITION HAS BEEN EXPLAINED BY VARIO US COURTS INCLUDING THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S CALCUTTA KN ITWEARS (SUPRA), WHERE, THE HONBLE SUPREME COURT IN THE CONTEXT OF PROVISIONS OF SECTION 153BD HAS LAID DOWN CERTAIN GUIDELINES TO THE AO FOR ISSUE OF NOTICE 15 8BD OF THE ACT, AS PER THE WHICH, THE AO OF THE SEARCHED PERSON MUST RECORD SATISFACTION TO THE EFFECT THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR ANY BOOKS OF ACCOUNT OR DOCUMENTS, SEIZED OR REQUISITIONED, PERTAINS TO, OR RELATES TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 158BC OF THE ACT. THE REFORE, IT IS VERY CLEAR FROM THE OBSERVATIONS OF THE HONBLE SUPREME COURT THAT BEFO RE HANDING OVER BOOKS OF ACCOUNTS OR ASSETS SEIZED OR REQUISITIONED, IF THE AO IS SATISFIED THAT SUCH MONEY, BULLION OR JEWELLERY OR BOOKS OF ACCOUNT BELONGS TO , RELATES TO PERSON OTHER THAN THE PERSON REFER TO IN SECTION 153A, THEN HE SHALL RECO RD SATISFACTION TO THAT EFFECT. SIMILARLY, AS PER THE SAID PROVISION, IT IS VERY CL EAR THAT IF THE AO IS SATISFIED THAT THE BOOKS OF ACCOUNTS OR DOCUMENTS, ARE SEIZED OR REQUI SITIONED HAVE BEARING ON THE DETERMINATION OF TOTAL INCOME OF SUCH OTHER PERSON, THEN HE SHALL PROCEED TO ASSESS OR REASSESS THE INCOME OF THE OTHER PERSON IN ACCORDAN CE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. FROM THE READING OF ABOVE PROVISIO NS OF THE ACT IN CONJUNCTION WITH 11 M/S. KARNATAKA STRIPS LTD. OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS M/S CALCUTTA KNITWEARS (SUPRA), IT IS VERY CLEAR THAT THE AO HAV ING JURISDICTION OVER SEARCHED PERSON MUST RECORD SATISFACTION BEFORE HANDING OVER THE BO OKS OF ACCOUNT OR ASSETS OF OTHER PERSON AND ALSO THE AO OF OTHER PERSON MUST RECORD SATISFACTION BEFORE ISSUE OF NOTICE U/S 153C OF THE ACT. THIS LEGAL POSITION HAS BEEN A CCEPTED BY THE DEPARTMENT AND ACCORDINGLY ISSUED A CIRCULAR VIDE CIRCULAR NO.24/2 015 DATED 31/12/2015, WHERE THE CBDT REFERRING TO THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF CIT VS M/S CALCUTTA KNITWEARS (SUPRA), CLARIFIED THE POSIT ION OF LAW THAT RECORDING OF A SATISFACTION IS PRE-REQUISITE AND THE SATISFACTION NOTE MUST BE PREPARED BY THE AO BEFORE HE TRANSMITS THE RECORD TO OTHER AO WHO HAS JURISDICTION OVER SUCH OTHER PERSON. THE CBDT FURTHER CLARIFIED IN PARA-4 OF SA ID CIRCULAR THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME, THEN ALSO HE IS REQUIRED TO RECORD HIS SATISFACTION AS HAS BEEN HELD BY THE COURTS. THE BOARD FURTHER CLARIFIED TO ITS FIELD OFFICERS THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S CALCUTTA KNITWEARS (SUPRA), FILING OF APPEALS ON THE ISSUE RECORDING OF SATISFACTION NOTE SHOULD ALSO BE DECIDED IN THE LIG HT OF ABOVE JUDGMENT ACCORDINGLY, THE BOARD DIRECTS THE FIELD OFFICERS THAT PENDING L ITIGATION WITH REGARD TO RECORDING SATISFACTION U/S 158BD/153C SHOULD BE WITHDRAWN/N OT PRESSED IF IT DOES NOT MEAT GUIDELINES LAID DOWN BY THE HONBLE APEX COURT. FR OM THE CONJOINT READING OF THE PROVISIONS OF SECTION 153C, THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS M/S CALCUTTA KNITWEARS (SUPRA) AND CBDT CIRC ULAR NO.24/2015, IT IS VERY CLEAR THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME, 12 M/S. KARNATAKA STRIPS LTD. THEN ALSO HE IS REQUIRED TO RECORD SEPARATE SATISFA CTION AS REQUIRED U/S 153C OF THE ACT. IN THIS CASE, ON PERUSAL OF SATISFACTION NOTE FURNISHED BY THE LD. DR, WE FIND THAT THE SAID SATISFACTION NOTE WAS TAKEN FROM ASSESSMEN T RECORD OF THE ASSESSEE, WHICH IS EVIDENT FROM THE COPY OF THE NOTE FILED BY THE L D. DR THAT IT IS AN ORDER SHEET ENTRY IN THE NAME OF M/S KARNATAKA STRIPS LTD. AND THE HEADI NG STATES THAT REASONS RECORDED PRIOR TO ISSUE OF NOTICES U/S 153C OF THE ACT. THE SAID SATISFACTION NOTE WAS RECORDED BY THE AO HAVING JURISDICTION OVER OTHER PERSON I.E . IN THIS CASE, THE ASSESSEE, BEFORE ISSUE OF NOTICE U/S 153C OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT SATISFACTION AS REQUIRED U/S 153C OF THE ACT, BEFOR E TRANSMITTING BOOKS OF ACCOUNTS OR OTHER ASSETS BELONGS TO OR RELATES TO OTHER THAN TH E SEARCHED PERSON WAS NOT RECORDED BY THE AO OF SEARCHED PERSON AS REQUIRED U/S 153C O F THE ACT, CONSEQUENTLY, THE WHOLE PROCEEDINGS INCLUDING ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153C OF THE ACT, IS BAD IN LAW AND LIABLE TO BE QUASHED. HENCE, WE QUASHED THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) R.W.S. 153C OF THE ACT FOR AY 2003-04 TO 2006-07. 11. COMING TO THE ASSESSMENT YEAR 2007-08. THE AO H AS COMPLETED ASSESSMENT FOR AY 2007-08 U/S 143(3) OF THE ACT. WE FIND THAT THE AS PER THE PROVISO OF SECTION 153C OF THE ACT, AN ASSESSMENT FOR AY 2007-08 (THE YEAR IN WHICH SEARCH WAS CONDUCTED) WAS ALSO NEED TO BE COMPLETED U/S 153C O F THE ACT. THEREFORE, AS PER THE PROVISIONS OF SECTION 153A R.W.S 153C OF THE ACT, AY 2007-08, OUGHT TO HAVE BEEN COMPLETED U/S 153C OF THE ACT. THIS ALSO MEANS THAT THE AO OF THE PERSON SEARCHED OUGHT TO HAVE RECORD SATISFACTION AS REQUIRED U/S 1 53C OF THE ACT THAT ANY MONEY OR 13 M/S. KARNATAKA STRIPS LTD. BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR TH ING ARE SEIZED OR REQUISITIONED BELONGS TO OR ANY BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED PERTAINS OR PERTAINS TO ANY PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A OF THE ACT. SINCE THE AO OF THE SEARCHED PERSON HAS NOT RECORDED SATISFAC TION AS REQUIRED U/S 153C OF THE ACT, BEFORE HANDING OVER BOOKS OF ACCOUNTS OR ASSET S OF OTHER PERSON, THE WHOLE PROCEEDINGS INCLUDING ASSESSMENT ORDER PASSED U/S 1 43(3) R.W.S. 153C OF THE ACT FOR AY 2007-08 BAD IN LAW AND LIABLE TO BE QUASHED. HEN CE, WE QUASHED ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153C OF THE ACT FOR 2007-08 12. THE ASSESSEE HAS CHALLENGED ISSUES INVOLVED ON MERITS FOR ALL ASSESSMENT YEARS. SINCE, WE HAVE QUASHED ASSESSMENT ORDER PASS ED U/S 143(3) R.W.S. 153C OF THE ACT, FOR ALL ASSESSMENT YEARS, GROUNDS TAKEN BY THE ASSESSEE CHALLENGING ISSUES INVOLVED ON MERIT BECOME ACADEMIC IN NATURE AND DOE S NOT REQUIRE SPECIFIC ADJUDICATION AT THIS POINT OF TIME, HENCE, WE DISMI SSED OTHER GROUNDS TAKEN BY THE ASSESSEE REGARDING ISSUES INVOLVED ON MERIT. 13. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FO R ASSESSMENT YEARS 2003-04 TO 2007-08 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/06/2019 /2019. SD/- SD/- ( RAVISH SOOD ) (G. MANJUNATHA) #'$ /JUDICIAL MEMBER %'$ / ACCOUNTANT MEMBER ' # MUMBAI; ( DATED :28/06/2019 F{X~{T? FA P.S 14 M/S. KARNATAKA STRIPS LTD. &#'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. )* +, / THE APPELLANT (RESPECTIVE ASSESSEE) 2. -.+, / THE RESPONDENT. 3. // ' 0! ( )* ) / THE CIT, MUMBAI. 4. // ' 0! / CIT(A)- , MUMBAI, 5. 2 3-!4 , /)*%)45 , ' # / DR, ITAT, MUMBAI 6. 3 67 # / GUARD FILE. ' / BY ORDER, /' (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI