KETAN CERAMICS PVT. LTD., Nagpur V. THE ACIT, CENTRAL-CIRCLE-2(3), Nagpur

ITA 428/NAG/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3233 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Keywords: Search and seizure; Document seized; Period of limitation; Block assessment; Time period of passing order; Documents seized; Set aside
• Section: 234B; 43(5); 195; 250; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI, JM ./ I.T.A. NO S . 428 TO 430 /NAG/2013 ( / ASSESSMENT YEAR: 2006 - 07 , 2007 - 08 & 2009 - 10 ) KETAN CERAMICS PVT. LTD. GU PTA HOUSE, CIVIL LINES, C/O. M/S. LOYA BAGRI & CO., CHARTERED ACCOUNTANTS, GANDHIBAG, NAGPUR - 400 002 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), NAGPUR - 440 001 ./ ./ PAN/GIR NO. AAACK 6099 A ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH LOYA / RESPONDENT BY : DR. MILIND BHUSARI / DATE OF HEARING : 10.05.2018 / DATE OF PRONOUNCEMENT : 23.05 .2018 / O R D E R PER BENCH : T HESE ARE APPEALS BY THE ASSESSEE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) F OR THE CONCERNED THE ASSESSMENT YEARS. 2. SINCE THE ISSUES ARE COMMON AND CONNECT ED AND THE APPEALS WERE HEARD TOGETHER THESE ARE BEING CONSOLIDATED AND DISPOSED OF TOGETHER BY THIS COMMON ORDER. THE COMMON GROUNDS OF APPEAL RAISED READ AS UNDER: ( 1) THAT THE ORDER OF THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), NAG PUR IS BAD IN LAW AND WRONG ON FACTS AND THE LEARNED C.I.T.(A) HAS ERRED 2 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. IN CONFIRMING THE SAME. THAT THE NOTICE ISSUED U/ S. 153C AND THE PROCEEDINGS THEREAFTER IS BAD IN LAW. ON THE FACTS AND CIRCUMSTANCES OF THE CASE ACTION OF BOTH THE AUTHORITIES IS UN JUSTIFIED. (2) THAT THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN DISALLOWING RS.30,47,960/ - (A.Y. 2006 - 07) (*) FROM OUT OF FINANCIAL EXPENSES AND THE LEARNED CIT(A) WAS UNJUSTIFIED IN ONLY PARTLY ALLOWING THE EXPENDITURE. ON THE FACTS AND CIRCU MSTANCES OF THE CASE, THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS AND THEREFORE ALLOWABLE. (3) THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE TRADING TRANSACTION, IN WHICH DELIVERY IS NOT TAKEN, CONSTITUTES SPECULAT IVE TRANSACTION. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE TRADING TRANSACTIONS ENTERED BY THE ASSESSEE ARE OUTSIDE THE PURVIEW THE DEFINITION OF SPECULATIVE TRANSACTION AS ENVISAGED AS PER SECTION 43(5) OF THE INCOME TAX ACT. (4) THAT THE LEARN ED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE FINANCIAL EXPENSES (PARTLY) HAVE BEEN INCURRED FOR SPECULATIVE TRANSACTION. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE FUNDS AVAILABLE THROUGH LC TRANSACTION HAVE BEEN UTILISED FOR THE WORKING CA PITAL OF THE REGULAR BUSINESS OF THE ASSESSEE. (5) THAT THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN CHARGING INTEREST UNDER SECTION 234A, 234B AND 234C AND THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. (6) THAT FOR ANY OTHER GROUND WITH KIND PERMISSION OF HONTDLE MEMBERS AT THE TIME OF HEARING OF APPEAL. (*) RS. 63,67,578/ - (A.Y. 2007 - 08) RS.33,35,702 / - (A.Y. 2009 - 10) 3. IN ALL THESE CASES THERE WAS A SEARCH ACTION CARRIED OUT IN THE BUSINESS PREMISES OF GUPTA INDUSTRIES LTD. AND AT THE RESIDENTIAL PREMISES AS WELL AS OTHER PREMISES BELONGING TO MUKESH GUPTA ON 29 - 07 - 2009. DURING THE COURSE OF SEARCH, CERTAIN BOOKS OF ACCOUNTS AND DOCUMENTS WERE SEIZED. ON THE BASIS OF THESE SEIZED MATERIAL, NOTICE U/S 153C WAS ISSUED ON THE ASSESSEE. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS REJECTED THE ASSESSEE'S PLEA AGAINST THE LACK OF VALIDITY OF THE JURISDICTION FOR ISSUING NOTICE; U/S 153C AND HAD MADE ADDITIONS MAINLY ON ACCOUNT OF FINANCIAL EXPENSES. 3 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. 4 . UPON THE ASSESSE E'S APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS DEALT WITH THE ASSESSEE'S CHALLENGE OF JURISDICTION AS UNDER : 2.1 THE AO NOTED THAT IN THE ASSESSMENT ORDE R THAT IN THE RETURN FILED U/S.1 53C ASSESSEE HAS TAKEN A PLEA THAT THE NOTICE U/S.153C IS BAD IN LAW, WITHOUT SUBSTANTIATING HIS CLAIM. IN THE ABSENCE OF ANY SUBSTANTIAL REASON THE PLEA TAKEN BY THE ASSESSEE WAS HELD TO BE NOT TENABLE, MORE SO WHEN THERE IS SEARCH AND SEIZURE ACTION ON THE ASSESSEE U/S.132 OF THE ACT. 2 .2 IN APPEAL PROCEEDINGS IT WAS SUBMITTED FOR THE APPELLANT THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF SHRI MAHESH GUPTA ON 09.17.2009 AND OTHER PREMISES BELONGING TO SHRI MAHESH GUPTA. THERE WAS NO SEIZURE OF CASH AND V ALUABLES BELONGING TO THE ASSESSEE. AS PER THE AO, DURING THE COURSE OF SEARCH, SE VERAL ITEMS OF BOOKS OF ACCOUNTS AND INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. HOWEVER N O INCRIMINATING DOCUMENTS WERE FOUND. THROUGHOUT THE POST SEARCH PROCEEDINGS, THE ASSESSEE MADE REPEATED REQUESTS TO THE INVESTIGATION WING & TO AO PROVIDE THE COPY OF THE STATEMENTS RECORDED IN CASE OF THE ASSESSEE. HOWEVER, NEITHER WAS THE REQUEST FOR INSPECTION AND PROCUREMENT OF COPY OF SEIZED MATERIAL FAVOURABLY CONSIDERED NOR WAS THE SAME PROVIDED TO THE ASSESSEE. ALSO THE ASSESSEE WAS NOT PROVIDED ANY EVIDENCE ON THE BASIS OF WHICH THE ORDER WAS PASSED BY THE AO. THE ORDER IS BASED ON CONJECTURES AND SURMISES OF THE AO. NO EVIDENCE WAS BROUGHT ON RECORD BY THE AO EITHER DURING TH E ASSESSMENT PROCEEDINGS OR IN HIS ORDER TO SUPPORT THE CLAIM MADE IN THE ORDER BY HIM. THUS, THAT THE ORDER OF AO IS UNJUSTIFIED AND LIABLE TO BE S E T ASIDE. 2.3 IN ADDITION TO THE FACT THAT AS NOTED IN THE ASSESSMENT ORDER, THE APPELLANT RAISED NO SUBSTA NTIAL REASON FOR ITS OBJECTION TO NOTICE U/S 153C, AND THE FACT THAT THE AO HAS NOTED THAT DURING THE COURSE OF SEARCH SEVERAL ITEM OF BOOKS OF ACCOUNTS AND INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED, AND THAT THE SEIZED MATERIAL VIDE ANNEXURE - B OF ITEM NO. 2 AND ITEM NO. 26 BELONG TO THE ASSESSEE WHICH IS INCRIMINATING IN NATURE, AND FURTHER THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE INSPECTED THE SEIZED MATERIAL AND TOOK PHOTOCOPIES OF RELEVANT DOCUMENTS ETC., THE APPELLANT'S GROUND IS HELD TO BE WITHOUT SUBSTANCE AND IS DISMISSED. 5. A GAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 4 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. 6. AS EMANATING FROM THE GROUNDS OF APPEAL REFERRED ABOVE , THE ASSESSEE AT THE THRESHOLD HAS RAISED THE ISS UE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE NOTICE ISSUED U /S. 153C IS RALLIED. 7. THE LD. COUNSEL OF THE ASSESSEE HAS ASSAILED THE VALIDITY OF NOTICE ON TWO COUNTS. FIRSTLY HE HAS SUBMITTED THAT THERE IS NO SATISFAC TION RECORDED IN THE CASE OF SEARCHED PERSON NAMELY S HRI M AHESH GUPTA AND SECONDLY NO INCRIMINATING MATERIAL WAS FOUND DURING SEARCH. THE LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED HIS SUBMISSIONS IN THIS REGARD IN BRIEF AS UNDER : (1) THE NOTICE ISSUED U/S.153C AND THE PROCEEDINGS THEREAFTER ARE BAD IN LAW. (A) THERE IS NO SATISFACTION RECORDED IN THE CASE OF SEARCHED PERSON I.E. SHRI MAHESH GUPTA. CBDT HAS ISSUED CIRCULAR NUMBER 24/2015 IN F. NO. 279/MISC/140/2015/IT DATED 31 - 12 - 2015 WHEREIN IT HAS BEEN ACCEPTED THAT RECORDING OF SATISFACTION NOTE BY THE AO BEFORE TRANSMITTING THE RECORD IS A PRE - CONDITION TO ISSUE NOTICE U/S.153C. COPY ENCLOSED. WE RELY ON : CIT VS. CALCUTTA KNITWEARS (2014) 362 ITR 673 (SC) (B) NO INCRIMINATING DOCUMENT WAS F OUND DURING SEARCH. THE DOCUMENTS IN ANNEXURE REFERRED TO IN ASSESSMENT ORDER ARE AS UNDER : - ANNEXURE B ITEM 2 : PAGE NO. 33 TO 54 - SALE DEED DATED 3 - 8 - 2002. PAGE NO. 29 AND 30 - DISCHARGE LETTER OF COLLATERAL SECURITY BY SBI DATED 6 - 11 - 2006 PAGE NO. 21 TO 26 - SERVICES AGREEMENT DATED 1 - 6 - 2006 WITH THE TENANT. PAGE NO. 4 TO 16 - LEAVE AND LICENSE AGREEMENT DATED 1 - 6 - 2006 WITH THE TENANT. ANNEXURE B ITEM 26 : PAGE NO. 128 - LEDGER ACCOUNT OF CARRIAGE INWARD FOR FY 2006 - 07 PAGE NO. 46 TO 65 - AUDITED FI NANCIAL STATEMENT FOR THE YEAR ENDING ON 31 - 3 - 2007 THESE ARE THE REGULAR DOCUMENTS WHICH CAN BE FOUND IN THE PREMISES OF THE DIRECTOR. (C) ALL THE TRANSACTIONS OF THE DOCUMENTS WERE FOUND DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THESE DOCUMENT S CANNOT BE CALLED AS INCRIMINATING DOCUMENTS FOR THE PURPOSE OF ISSUE OF NOTICE U/S.153C. FURTHERMORE, ON PERUSAL OF THE ASSESSMENT ORDER, IT WILL BE REVEALED THAT ADDITION IS NOT MADE ON THE BASIS OF 5 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. THESE DOCUMENTS. THIS ITSELF ESTABLISHES THAT THE DOCU MENTS ARE NOT INCRIMINATING IN NATURE. THE ALLEGATION BY THE AO AS WELL AS CIT(A) IS MISCONSTRUED AND CONTRARY TO FACTS ON RECORD. (D) THE SATISFACTION NOTE RECORDED IN THE CASE OF ASSESSEE ONLY MENTIONS THE ANNEXURE SEIZED FROM THE PREMISES OF SEARCH ED PERSON. THERE IS NO OBSERVATION/CONCLUSION THAT THE MATERIAL SEIZED WAS INCRIMINATING IN NATURE OR IT HAS BEARING ON ASSESSABLE INCOME OF ASSESSEE FOR WHICH JURISDICTION IN CASE OF THE ASSESSEE U/S.153C IS ASSUMED. THE NOTICE DOES NOT SATISFY THE REQUIR EMENT OF VALID NOTICE U/S.153C. CONSEQUENTLY, ASSESSMENT FRAMED THEREUPON IS LIABLE TO BE CANCELLED. WE RELY ON : MANISH MAHESHWARI VS. CIT 289 ITR 0341 (SC) (E) THE DOCUMENTS PERTAIN TO ASSESSMENT YEAR 2007 - 08 AND THEREFORE, THE PROCEEDINGS U /S. 153C FOR ASSTT YEAR 2006 - 07 AND 2009 - 10 ARE OTHERWISE ALSO ILLEGAL. WE RELY ON : CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY 63 TAXMAN.COM 14 (BOMBAY HC) AFFIRMED BY THE HON'BLE SUPREME COURT IN (2017) 250 TAXMAN 225 (F) THE OBJECTION TO THE NOTICE U/S.153C AND THE PROCEEDINGS WAS MADE IN THE ASSESSMENT PROCEEDINGS REFERENCE OF WHICH CAN BE FOUND IN THE ASSESSMENT ORDER AT PARA 4 ON PAGE 2. THE ILLEGALITY OF PROCEEDINGS AND THE ADDITION WERE ALSO CONTESTED BEFORE THE LEARNED CIT(A) AND WRITTE N SUBMISSION IN THIS REGARD WAS FILED, THE REFERENCE OF WHICH CAN BE FOUND AT PARAS 2.2 AND 2.3 ON PAGE 3 OF THE CIT(A) ORDER. (G) THE AO AT PARA 4 OF THE ASSESSMENT ORDER HAS OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT THE NOTICE U/S.153C IS BA D IN LAW IS WITHOUT SUBSTANTIATING ITS CLAIM AND FURTHER OBSERVED THAT SEARCH AND SEIZURE ACTION U/S. 132 WAS TAKEN ON THE ASSESSEE. THE OBSERVATION OF THE AO IS FACTUALLY INCORRECT AS THE AO HIMSELF ISSUED NOTICE U/S.153C, THUS ACCEPTING THAT NO SEARCH WA S UNDERTAKEN ON THE ASSESSEE. (H) THERE IS NO VALID NOTICE U/S.153C AND THEREFORE, ASSESSMENT FRAMED IN BAD IN LAW AND LIABLE TO BE CANCELLED. WE RELY ON THE FOLLOWING DECISIONS. I) CIT VS. SATKAR ROADLINES PVT. LTD. (2015) 155 ITD 0501 (DELHI) II) CIT VS. SHETTYS PHARMACEUTICALS & BIOLOGICAL LTD. (2015) 232 TAXMAN 0268 (AP) ( I II ) M/S. MECHMEN VIDE ORDER DATED 10/07/2015 PASSED BY HON'BLE M.P. HIGH COURT ORDER IN ITANO. 44/2011. IV) CIT VS. GOPI APARTMENT (2014) 365 ITR 0411 (ALL) V) M/S. INGR AM MICRO (INDIA) EXPORTS PTE. LTD PASSED BY HON'BLE BOMBAY HIGH COURT IN ITANO.1337 OF 2013 VI) NIKKI DRUGS & CHEMICALS PVT. LTD. VIDE ORDER ITA NO.422/2015 DATED 03/12/2015 VII) M/S. SHIELD HOME PVT. LTD. VIDE ORDER ITAT ORDER IN ITA NOS.4228/DEL/2011 6 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. (I) WE FURTHER RELY ON THE FOLLOWING CASE LAWS WHEREIN THE NOTICE U/S.153C WAS HELD TO BE INVALID : - I) CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY 63 TAXMAN.COM 14 (BOMBAY HC) II) BHARATI VIDYAPEETH MEDICAL FOUNDATION VS. ACIT ITA NO.959/PN/2010 DT 28/04/2011 III) CIT VS. M/S. REFAM MANAGEMENT SERVICES (P) LTD. (DELHI HC) IN ITA NO.171/2015 IV) CIT VS. RRJ SECURITIES LTD. 62 TAXMANN.COM 391 (DELHI HC) V) DCITVS. EMPIRE MALL PVT. LTD. ITA NOS. 1541 & (MUMB TRIB) VI) TRISHUL HI - TECH INDUSTRIES IN IT(SS)A NOS.84 - 86/KOL/2011 DATED 4/09/2014. 8. PER CONTRA , THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER'S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). HE SUBMITTED THAT INCRIMINATING MATERIALS WERE FOUND IN THIS CASE. HOWEVER , HE COULD NOT REBUT THE SUBMISSION THAT THERE WAS NO SATISFACTION RECORD IN THE CASE OF THE SEARCHED PERSON NAMELY SHRI MAHESH GUPTA. 9. W E HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT UPON SIMILAR FACTS IN THE CASE OF GROUP COMPANY NAMELY RADHEY MINERALS LTD. FOR ASSESSMEN T YEARS 2007 - 08 TO 2009 - 10, THIS TRIBUNAL IN ITA NO.426 & 427/NAG/2013, 184/NAG/2014 VIDE ORDER DATED 30 .03. 2017 HAS DECIDED THE ISSUE AS UNDER: 16. FROM THE ABOVE CASE LAW S 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 ISSUE OF NOTICE U/S 153C EVEN IF THE AO OF THE SEARCHED PERSON AND THE ASSESSEE ARE SAME. IT IS ABUNDANTLY CLEAR FROM THE SATISFACTION NOTE RECORDED IN THE CASE OF THE SEARCHED PERSON THAT THERE IS NO REQUISITE SATISFACTION GRANTING THE AO JURISDICTION FOR ISSUING NOTICE TO THE ASSESSEE U/S 153C OF THE I.T. ACT. THE SATISFACTION NOTE AS EMANATED FR OM FILES OF SEARCHED PERSONS, NAMELY, M/S MUKESH GUPTA AND GUPTA INDUSTRIES LTD, DPES NOT SHOW AT ALL THAT THAT THE AO IN THEIR CASE HAS RECORDED A SATISFACTION THAT ANY OF THE SEIZED MATERIAL IS BELONGING TO THE ASSESSEE HAS BEEN FOUND, ARID IS INCRIMINATIN G IN NATURE WHICH IS TO BE HANDED OVER T O THE AO OF THE ASSESSES: IN SUCH CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSEE DESERVES TO SUCCEED ON THIS ACCOUNT AND THE ASSESSMENTS ARE LIABLE TO BE QUASHED ON ACCOUNT OF LACK OF VALIDITY OF JURISDICTION . 7 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. ACCORDINGLY WE SET ASIDE THE ORDERS OF LEARNED CIT(APPEALS) ON THIS ASPECT OF JURISDICTION AND QUASH THE ASSESSMENTS BY HOLDING THAT REQUISITE SATISFACTION WAS NOT RECORDED BEFORE THE ISSUE OF NOTICE U/S 17. IN THIS REGARD WE FURTHER NOTE THAT IN SIMIL AR SITUATION WHEN THE FINDING WAS THAT REQUISITE SATISFACTION WAS NOT THERE IN THE CASE OF THE SEARCHED PERSON QUA INCRIMINATING MATERIAL RELATING TO ASSESSEE HAVING BEEN FOUND, THE REVENUE HAD WITHDRAWN THIS APPEAL BEFORE THE HON'BLE DELHI HIGH COURT IN T HE LIGHT OF CIRCULAR NO. 24/2015 AS REFERRED ABOVE, CIT VS. SATKAR ROADLINES (SUPRA). 18. WE FURTHER NOTE THAT AN IDENTICAL VIEW AS ABOVE HAS BEEN TAKEN BY THIS. BENCH IN SIMILAR CASE OF GROUP CONCERN IN THE CASE OF M/S GRACE INDUSTRIES LTD. IN ITA NOS. 296 T O 300/NAG/2014 AND 348 TO 352/NAG/2014 VIDE ORDER DATED 25 TH NOVEMBER, 2016 AND IN THE CASE OF MANSI COMMODITIES PVT. LTD. IN ITA NOS. 146,147&148/NAG/2014 & TASMSEEM COMMERCIAL PVT. LTD. IN ITA NOS. 149, 150 & 151/NAG/2014 VIDE ORDER DATED 19 TH DEC. , 2016 10. S IMILARLY THIS TRIBU NAL IN THE CASE OF ANOTHER GROUP COMPANY OF THE ASSESSEE NAMELY M/S. GUPTA DOMESTIC FUELS (NAGPUR) LTD. IN ITA NO. 195 /NAG/2014 & OTHERS VID E ORDER DATED 06.03.2018 HAS HELD AS UNDER : 9. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY , THERE IS NO INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH IN RELATION TO ASSESSMENT YEARS 2004 - 05 TO 2008 - 09. THE DOCUMENTS CONTAINING PAGES 44 TO 65 OF ANNEXURE A - 2(25) ARE PUR CHASE BILLS OF THE ASSESSEE COMPANY ON ACCOUNT OF PURCHASE OF COAL. REVENUE HAS NOT CONTESTED THE CLAIM OF THE ASSESSEE THAT THE ENTRIES FOR THE PURCHASE MADE BY THE COMPANY ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THESE DOCUMENTS CANNOT BE CALLED A S INCRIMINATING DOCUMENT FOR THE PURPOSE OF ISSUANCE OF NOTICE U/S 153C OF THE ACT. EVEN GOING BY THE SATISFACTION NOTE, WHICH IS RECORDED IN THE CASE OF THE ASSESSEE AND NOT WHILE FRAMING ASSESSMENT OF THE SEARCHED PERSON, CLEARLY R EVEALS THAT THE MATERIAL SEIZED IS PAGES 44 TO 65 OF ANNEXURE A - 2(25) FROM THE RESIDENCE OF SHRI MUKESH GUPTA. BUT, CAN THESE BE SAID TO BE INCRIMINATING MATERIAL WHEN ASSESSEE CONTESTED THAT THESE ARE ENTRIES FOR PURCHASE OF COAL BY THE ASSESSEE COMPAN Y AND WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND, ON THE BASIS OF WHICH, NO ADDITION IS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ACCORDING TO US, THESE CANNOT BE TREATED AS INCRIMINATING DOCUMENTS. EVEN OTHERWISE, THE SATISFACTION REC ORDED BY THE ASSESSING OFFICER VIDE SATISFACTION NOTE DATED 23 RD JUNE, 2010 IS IN THE CASE OF THE ASSESSEE AND NOT IN THE CASE OF THE SEARCHED PERSON. THIS POSITION HAS BEEN EXPLAINED BY HON'BLE SUPREME 8 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. COURT IN THE CASE - OF CALCUTTA KNITWEARS (SUPRA) WHERE IN COMPLETE PROCEDURE FOR RECORDING OF SATISFACTION HAS BEEN SET OUT FROM PARAGRAPH 38 TO 45 AS UNDER; - '38. HAVING SAID THAT, LET US REVERT TO DISCUSSION OF SECTION 158BD OF THE ACT. THE SAID PROVISION IS A MACHINERY PROVISION AND INSERTED IN THE STATUTE BOOK FOR THE PURPOSE OF CARRYING OUT ASSESSMENTS OF A PERSON OTHER THAN THE SEARCHED PERSON UNDER SECTIONS 132 OR 132A OF THE ACT. UNDER SECTION .158BD OF THE ACT, IF AN OFFICER IS SATISFIED THAT THERE EXISTS ANY UNDISCLOSED INCOME WHICH MAY BELONG TO A O THER PERSON OTHER THAN THE SEARCHED PERSON UNDER SECTIONS 132 OR 132A OF THE ACT, AFTER RECORDING SUCH SATISFACTION, MAY TRANSMIT THE RECORDS/DOCUMENTS/CHITS/PAPERS ETC TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. AFTER RECEIPT OF T HE AFORESAID SATISFACTION AND UPON EXAMINATION OF THE SAID OTHER DOCUMENTS RELATING TO SUCH OTHER PERSON, THE JURISDICTIONAL ASSESSING OFFICER MAY PROCEED TO ISSUE A NOTICE FOR THE PURPOSE OF COMPLETION OF THE ASSESSMENTS UNDER SECTION 158BD OF THE ACT, TH E OTHER PROVISIONS OF XIV - B SHALL APPLY. 39. THE OPENING WORDS OF SECTION 158BD OF THE ACT ARE THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT 'UNDISCLOSED INCOME' BELONGS TO ANY OTHER PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM A SEARCH WAS MADE UNDER SECTION 132 OF THE ACT OR A REQUISITION OF BOOKS WERE MADE UNDER SECTION 132A OF THE ACT AND THEREAFTER, TRANSMIT THE RECORDS FOR ASSESSMENT OF SUCH OTHER PERSON. THEREFORE, THE SHORT QUESTION THAT FALLS FOR OUR CONSIDERATION AND DECISION IS AT WHAT STAGE OF THE PROCEEDINGS SHOULD THE SATISFACTION NOTE BE PREPARED BY THE ASSESSING OFFICER: WHETHER AT THE TIME OF INITIATING PROCEEDINGS UNDER SECTION 158BC FOR THE COMPLETION OF THE ASSESSMENTS OF THE SEARCHED PERSON UNDER SECTION 132 AND 132A OF THE ACT OR DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT OR AFTER COMPLETION OF THE PROCEEDINGS UNDER SECTION 158BC OF THE ACT. 40. THE TRIBUNAL AND THE HIGH COURT ARE OF THE OPINION THAT IT COULD ONLY BE PREPARED BY THE ASSESSIN G OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT AND NOT AFTER THE COMPLETION OF THE SAID PROCEEDINGS. THE COURTS BELOW HAVE RELIED UPON THE LIMITATION PERIOD PROVIDED IN SECTION 158BE(2)(B) OF THE ACT IN RESPECT OF THE ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 158BD, I.E., TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NOTICE UNDER CHAPTER XIV - B WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED ON OR AFTER 01.01.1997. WE WOULD EXAMINE WHETHER THE TRIBUNAL OR THE HIGH COURT ARE JUSTIFIED IN COMING TO THE AFORESAID CONCLUSION. 41. WE WOULD CERTAINLY SAY THAT BEFORE INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT, THE AS SESSING OFFICER WHO HAS INITIATED PROCEEDINGS FOR COMPLETION OF THE ASSESSMENTS UNDER SECTION 158BC OF THE ACT SHOULD BE SATISFIED THAT THERE IS AN UNDISCLOSED INCOME WHICH HAS BEEN 9 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. TRACED OUT WHEN A PERSON WAS SEARCHED UNDER SECTION 132 OR THE BOOKS OF A CCOUNTS WERE REQUISITIONED UNDER SECTION 132A OF THE ACT, THIS IS IN CONTRAST TO THE PROVISIONS OF SECTION 148 OF THE ACT WHERE RECORDING OF REASONS IN WRITING ARE A SINE QUA NON. UNDER SECTION 158BD THE EXISTENCE OF COGENT AND DEMONSTRATIVE MATERIAL IS GE RMANE TO THE ASSESSING OFFICERS' SATISFACTION IN CONCLUDING THAT THE SEIZED DOCUMENTS BELONG TO A PERSON OTHER THAN THE SEARCHED PERSON IS NECESSARY FOR INITIATION OF ACTION UNDER SECTION 158BD. THE BARE READING OF THE PROVISION INDICATES THA T THE SATISFACTION NOTE COULD BE PREPARED BY THE ASSESSING OFFICER EITHER AT THE TIME OF INITIATING PROCEEDINGS FOR COMPLETION OF ASSESSMENT OF A SEARCHED PERSON UNDER SECTION 15SBC OF THE ACT OR DURING THE STAGE OF THE ASSESSMENT PROCEEDINGS. IT DO ES NOT MEAN THAT AFTER COMPLETION OF THE ASSESSMENT, THE ASSESSING OFFICER CANNOT PREPARE THE SATISFACTION NOTE TO THE EFFECT THAT THERE EXISTS INCOME TAX BELONGING TO ANY PERSON OTHER THAN THE SEARCHED PERSON IN RESPECT OF WHOM A SEARCH WAS MADE UND ER SECTION 132 OR REQUISITION OF BOOKS OF ACCOUNTS WERE MADE UNDER SECTION 132A OF THE ACT. THE LANGUAGE OF THE PROVISION IS CLEAR AND UNAMBIGUOUS. THE LEGISLATURE HAS NOT IMPOSED ANY EMBARGO ON THE ASSESSING OFFICER IN RESPECT OF THE STAG E OF PROCEEDINGS DURING WHICH THE SATISFACTION IS TO BE REACHED AND RECORDED IN RESPECT OF THE PERSON OTHER THAN THE SEARCHED PERSON. 42. FURTHER, SECTION 158BE(2)(B) ONLY PROVIDES FOR THE PERIOD OF LIMITATION FOR COMPLETION OF BLOCK ASSESSMENT UNDER SECT ION 158BD IN CASE OF THE PERSON OTHER THAN THE SEARCHED PERSON AS TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NOTICE UNDER THIS CHAPTER WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH CARRIED ON AFTER 01.01.1997. THE SAID SECTION DOES NEITHER PRO VIDES FOR NOR IMPOSES ANY RESTRICTIONS OR CONDITIONS ON THE PERIOD OF LIMITATION FOR PREPARATION THE SATISFACTION NOTE UNDER SECTION 158BD AND CONSEQUENT ISSUANCE OF NOTICE TO THE OTHER PERSON. 43. IN THE LEAD CASE, THE ASSESSING OFFICER HAD PREPARED A SATISFACTION NOTE ON 15.07.2005 THOUGH THE ASSESSMENT PROCEEDINGS IN THE CASE OF A SEARCHED PERSON, NAMELY, S.K. BHATIA WERE COMPLETED ON 30.03.2005. AS WE HAVE ALREADY NOTICED, THE TRIBUNAL AND THE HIG H COURT ARE OF THE OPINION THAT SINCE THE SATISFACTION NOTE WAS PREPARED AFTER THE PROCEEDINGS WERE COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 158BC OF THE ACT WHICH IS CONTRARY TO THE PROVISIONS OF SECTION 158BD READ WITH SECTION 158BE( 2)(B) AND THEREFORE, HAVE DISMISSED THE CASE OF THE REVENUE. IN OUR CONSIDERED OPINION, THE REASONING OF THE LEARNED JUDGES'OF THE HIGH COURT IS CONTRARY TO THE PLAIN AND SIMPLE LANGUAGE EMPLOYED BY THE LEGISLATURE UNDER SECTION 158BD OF THE ACT WHICH CLEARLY PROVIDES ADEQUATE FLEXIBILITY TO THE ASSESSING OFFICER FOR RECORDING THE SATISFACTION NOTE AFTER THE COMPLETION OF PROCEEDINGS IN RESPECT OF THE SEARCHED PERSON UNDER SECTION 158BC. FURTHER, THE 10 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. INTERPRETATION PLACED BY THE COURTS BEL OW BY READING INTO THE PLAIN LANGUAGE OF SECTION 158BE(2)(B) SUCH AS TO EXTEND THE PERIOD OF LIMITATION TO RECORDING OF SATISFACTION NOTE WOULD RUN COUNTER TO THE AVOWED OBJECT OF INTRODUCTION OF CHAPTER TO PROVIDE FOR COST - EFFECTIVE, EFFICIENT AN D EXPEDITIOUS COMPLETION OF SEARCH ASSESSMENTS AND A VOIDING OR REDUCING LONG DRAWN PROCEEDINGS. 44. IN THE RESULT, WE HOLD THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT A SATISFACTION NOTE IS SINE QUA NON AND MUST BE PREPARED BY THE ASSESSING OFFICER BEFORE HE TRANSMITS THE RECORDS TO THE OTHER ASSESSING OFFICER WHO HAS JURISDICTION OVER SUCH OTHER PERSON. THE SATISFACTION NOTE COULD BE PREPARED AT EITHER OF THE FOLLOWING STAGES: (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST TH E SEARCHED PERSON UNDER SECTION 158BC OF THE ACT; (B) ALONG WITH THE ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT; AND (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE COMPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERSON. 45. WE AR E INFORMED BY SHRI SANTOSH KRISHAN, WHO IS APPEARING IN SEVEN OF THE APPEALS THAT THE ASSESSING OFFICER HAD NOT RECORDED THE SATISFACTION NOTE AS REQUIRED UNDER SECTION 158BD OF THE ACT, THEREFORE, THE TRIBUNAL AND THE HIGH COURT WERE JUSTIFIED IN SETTING ASIDE THE ORDERS OF ASSESSMENT AND THE ORDERS PASSED BY THE FIRST APPELLATE AUTHORITY. WE DO NOT INTEND TO EXAMINE THE AFORESAID CONTENTION CANVASSED BY THE LEARNED COUNSEL SINCE WE ARE REMANDING THE MATTERS TO THE HIGH COURT FOR CONSIDERATION OF THE INDIV IDUAL CASES HEREIN IN LIGHT OF THE OBSERVATIONS MADE BY US ON THE SCOPE AND POSSIBLE INTERPRETATION OF SECTION 158BD OF THE ACT, ' 10. FURTHERMORE, WE FIND THAT THIS POSITION HAS BEEN ACCEPTED BY THE CBDT VIDE ITS CIRCULAR NO. 24/2015 WHEREIN THE GUIDELI NES SET BY HON'BLE SUPREME COURT THAT EVEN IF THE ASSESSING OFFICER OF THE SEARCHED PERSON AND THE OTHER PERSON IS THE ONE AND THE SAME, THEN ALSO THE ASSESSING OFFICER HAS TO RECORD HIS SATISFACTION IN THE CASE OF THE OTHER PERSON I.E., OTHER THAN THE SEA RCHED PERSON. IN VIEW OF THE FACTS IN ENTIRETY AND THE DICTUM OF HON'BLE SUPREME COURT, WHICH WAS FURTHER ADOPTED BY CBDT VIDE CIRCULAR NO. 24/2015 DATED 31 ST DECEMBER, 2015, RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER FOR ISSUANCE OF NOTICE U/S 153C OF THE ACT AND CONSEQUENT ASSESSMENT FRAMED IS BAD IN LAW. CONSEQUENTLY, WE HOLD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS BAD IN LAW AND LEARNED CIT(A ) HAS ERRED IN UPHOLDING THE SAME. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDER. GROUND NOS.L & 2 OF THE ASSESSEE'S CROSS - OBJECTION ARE ALLOWED. 11. EXAMINING THE PRESENT CASE , ON THE TOUCHSTONE OF FACTUAL DETAILS OF THIS CASE AND THE ABOVE ITAT DECISIONS IN ASSESSEE'S OWN GROUP CASE, WE FIND THAT FACTS ARE IDENTICAL. IN 11 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. FACT , THERE IS NO DISPUTE THAT FACTS ARE DIFFERENT. IT IS ALSO NOT THE CASE THAT HONOURABLE JURISDICTIONAL HIGH COURT HAS REVERSED THE ITAT DECISIONS AS ABOVE. HENCE , RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE HOLD THAT THE ASSESSING OFFICER IN THE PRESENT CASE HAS NO VALID JURISDICTION INASMUCH AS , FIRSTLY , THERE IS NO SATISFACTION IN T HE CASE OF THE SEARCHED PERSON REGARDING INCRIMINATING MATERIAL FOUND TO BE RELATING TO THE ASSESSEE TO BE HANDED OVER TO THE ASSESSING OFFICER OF THE ASSESSEE. SECONDLY , NO INCRIMINATING MATERIAL QUA THE ADDITION MADE HAS BEEN FOUND. HENCE , THE ASSESSMENT MADE IN THESE CASES IS QUASHED IN ABSENCE OF VALID JURISDICTION. 12. SINCE WE HAVE ALREADY QUASHED TH E ASSESSMENT ORDER'S , THE OTHER GROUND RAISED BY THE ASSESSEE ON MERITS OF THE ADDITION ARE NOW ONLY OF ACADEMY INTEREST AND WE ARE NOT ENGAGING WITH THE SAME. 13. IN THE RESULT , THESE APPEALS BY THE ASSESSEE STAND S ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER D ATED : 23.05.2018 . . ./ ROSHANI , SR. PS 12 ITA NO. 428/NAG/2013 KETAN CERAMICS PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, NAGPUR 6. / GUARD F ILE // TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, NAGPUR