KREZ HOTEL & REALTY LTD, MUMBAI V. JTCIT (OSD) CEN CIR 39, MUMBAI

ITA 4575/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0428 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 03-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEEAN
• Keywords: Unexplained cash credit; Unexplained investment; Loose papers; Assessment record; Documents seized
• Section: 143(3); 153A; 132; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS. 4574 TO 4577/MUM/2014 (ASSESSMENT YEARS: 2003-04 TO 2006-07) M/S. KREZ HOTEL & REALTY LTD. (FORMERLY JAYKAYDEE INDUSTRIES LTD.) A-205, CRYSTAL PLAZA, NEW LINK ROAD, ANDHERI (W) MUMBAI 400053 VS. JCIT (OSD), CENTRAL CIRCLE - 39 MUMBAI PAN AAACJ6927E APPELLANT RESPONDENT APPELLANT BY: S/SHRI HARI RAHEJA & SHAILESH PARMAR RESPONDENT BY: SHRI R.P. MEEAN DATE OF HEARING: 23.01.2018 DATE OF PRONOUNCEMENT: 13.02.2018 O R D E R PER RAJESH KUMAR, AM ALL THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST THE ORDER OF THE CIT(A)-39, MUMBAI DATED 20.03.2014 FOR ASSESSMENT YEARS 2003-04 TO 2006-07. SINCE ALL THESE APPEALS RELATE TO THE SAME ASSESSEE AND ISSUES ARE COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 4574/MUM/2014 A.Y. 2003-04 2. THE ASSESSEE HAS RAISED THE FOLLOWING ROUNDS OF APP EAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. A. O. IN ISSUING THE NOTICE DATED 22/10/2010 U/S 153A R.W.S 153C WITHOUT APPRECIATING THE FACT THAT THE A.Y.2003-04 DOES NOT FALL WITHIN THE PURVIEW OF SECTION 153C OF THE INCOME TAX ACT A ND THEREFORE THE NOTICE ISSUED BY THE A.O. U/S 153 A R.W.S. 153C OF THE INCOME TAX ACT IS ILLEGAL, VOID, BAD IN LAW AND /OR WITHOUT JURISDICTION AND THEREFORE THE IMPUGNED ORDER IS LI ABLE TO BE QUASHED. ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESS ING OFFICER ISSUING THE NOTICE DATED 22/10/2010 U/S 153A R.W.S 153C WITHOUT APPRECIATING THE FACT THAT NO INCRIMINATING MATERIAL OR DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH THER EFORE, THE NOTICE ISSUED BY A.O. U/S 153A R.W.S. 153C OF THE I NCOME TAX ACT IS ILLEGAL, VOID, BAD IN LAW AND /OR WITHOUT JU RISDICTION AND THEREFORE THE IMPUGNED ORDER IS LIABLE TO BE QUASHE D. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESS ING OFFICER IN ISSUING NOTICE DATED 22/10/2010 U/S. 153C DESPITE T HE FACT THAT AO OF M/S. BHATIA INTERNATIONAL LTD. GROUP OF INDOR E HAS NOT RECORDED HIS SATISFACTION. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESS ING OFFICER IN MAKING AN ADDITION OF RS. 4,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT MADE IN BHATIA INTERNATIONAL LTD. ON PROTECTIVE BASIS ON THE GROUND OR GROUNDS AS STATED IN THE APPELLATE ORDER OR OTHERWISE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AS SESSING OFFICER ERRED IN MAKING AN ADDITION OF RS. 3,33,495/- ON AC COUNT OF UNEXPLAINED CASH CREDIT ON THE GROUND OR GROUNDS AS STATED IN THE APPELLATE ORDER OR OTHERWISE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AS SESSING OFFICER ERRED IN MAKING AN ADDITION OF RS. 2,71,200/- U/S 2 (22)(E) OF THE INCOME TAX ACT 1961 ON THE GROUND OR GROUNDS AS STA TED IN THE APPELLATE ORDER OR OTHERWISE. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESS ING OFFICER ERRED IN ESTIMATING INCOME FROM BUSINESS AND PROFES SION AT RS. 20,34,597/- BEING @15% OF THE TURNOVER OF RS. 1,35, 63,980/- ON THE GROUND OR GROUNDS AS STATED IN THE APPELLATE OR DER OR OTHERWISE. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AS SESSING OFFICER ERRED IN DISALLOWING AN INTEREST OF RS. 1,64,140/- U/S 36(1)(III) OF THE INCOME TAX ACT 1961 ON THE GROUND OR GROUNDS AS STATED IN THE APPELLATE ORDER OR OTHERWISE. 3. WE SHALL FIRST ADJUDICATE THE LEGAL ISSUE RAISED BY THE ASSESSEE IN GROUND NO 3. THE ISSUE RAISED IN GROUND NO. 3 IS AG AINST CONFIRMATION OF ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 3 ACTION OF THE AO UNDER SECTION 153C OF THE ACT WAS NOT VALID AS THE AO OF THE SEARCHED PERSON, I.E. AO OF M/S. BHATIA INTERN ATIONAL LTD. HAS NOT RECORDED HIS SATISFACTION AT THE TIME OF FORWARDING THE SEIZED PAPERS. 4. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH ACTI ON WAS CONDUCTED UNDER SECTION 132 OF THE ACT IN THE CASE OF M/S. BH ATIA INTERNATIONAL GROUP ON 25.09.2007. DURING THE COURSE OF SEARCH, C ERTAIN DOCUMENTS SHOWING ASSESSEES INVESTMENTS IN M/S. BHATIA INTER NATIONAL GROUP WAS FOUND AND SEIZED, WHICH WERE FORWARDED TO THE AO OF THE ASSESSEE IN MAY, 2010. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HO SPITALITY, REAL ESTATE ,TRADING & INVESTMENT. THE SAID SEIZED PAPERS PERTA INING TO THE ASSESSEE COMPRISED OF REGULAR BANK STATEMENTS OF THE ASSESSE E FOR MARCH 2003, FORM OF APPLICATION OF SHARES OF BHATIA INTERNATION AL LTD DATED 22.02.2003, COPY OF RETURN OF INCOME FILED ON 31.10 .2002 BY THE ASSESSEE FOR A.Y. 2002-03, DETAILS OF PAYMENT MADE THROUGH C HEQUE AMOUNTING TO ` 4,00,000/- DATED 23.03.2003, APPLICATION TO BOARD O F DIRECTORS OF BHATIA INTERNATIONAL LTD AND COPY OF THE RESOLUTION CERTIF YING THE LIMIT OF MAKING INVESTMENTS AS PER COMPANIES ACT. ALL THESE PAPERS WERE ALREADY PART OF AUDITED BOOKS OF ACCOUNT OF THE ASSESSEE AND WERE A VAILABLE ON RECORD AND WOULD IN NO WAY AFFECT THE INCOME OF THE ASSESSEE I N THOSE YEARS TO WHICH THESE PAPERS PERTAIN TO. THE AO OF THE BHATIA INTER NATIONAL LTD FORWARDED THE SAID LOOSE PAPERS TO THE AO OF THE ASSESSEE IN THE MONTH OF MAY, 2010, ALMOST 32 MONTHS FROM THE DATE OF SEARCH. THEREAFTE R THE AO OF THE ASSESSEE ISSUED NOTICE DATED 15.10.2010 UNDER SECTI ON 153C OF THE ACT FOR ASSESSMENT YEARS 2002-03 TO 2007-08. THE ASSESSEE F ILED RETURN OF INCOME ON 01.11.2010 FOR A.Y. 2003-04 DECLARING TOTAL LOSS OF ` 2,34,700/-. THEREAFTER STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS PROVIDED COPIES OF SEIZED DOCUMENT S VIDE LETTER DATED 02.09.2011 AND ASKED TO FURNISH VARIOUS DETAILS IN THAT RESPECT. DIFFERENT QUERIES WERE RAISED ON THE ASSESSEE BY THE AO AND I NFORMATION/DETAILS WERE EXTRACTED FROM THE ASSESSEE AND FINALLY THE A SSESSMENT WAS FRAMED UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 3 0.12.2011 ASSESSING THE TOTAL INCOME AT ` 45,72,809/-. ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 4 5. THE FIRST LEGAL ISSUE RAISED IN GROUND NO 3 BEFORE THE BENCH WAS WITH RESPECT TO NON RECORDING OF SATISFACTION BY THE AO OF THE SEARCHED PERSON AT THE TIME OF FORWARDING THE SEIZED MATERIALS TO T HE AO OF THE ASSESSING OFFICER AND WHETHER IN VIEW OF THE NON RECORDING OF SATISFACTION BY THE AO OF THE SEARCHED PERSON WOULD RENDER THE PROCEEDINGS UNDER SECTION 153C OF THE ACT AS INVALID AND VOID ABINITIO AND THE STA TUS OF CONSEQUENTIAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 153 OF THE ACT. A PERUSAL OF THE ORDER OF THE CIT(A) REVEALS THAT THE LEARNED CIT(A) CALLED FOR THE ASSESSMENT RECORD FOR VERIFICATION WHETHER ANY SATISFACTION WAS RECORDED. THE LEARNED LD CIT(A) BY REFERRING TO THE LETTER ADDRESSED BY THE AO OF THE SEARCHED PARTY HAS STATED THAT ON FORWARD ING OF THE RECORDS BY THE AO OF THE SEARCHED PARTY SATISFACTION IS PRESUM ED AND IT IS AUTOMATIC BY OBSERVING AS UNDER: - 8.9 THE APPELLANT HAS RAISED A FURTHER CONTENTION THAT THE A.O ERRED IN ISSUING NOTICE UNDER S. 153A R.W.S. 153C WITHOUT APPRECIATING THE FACT THAT THE NO INCRIMINATING MATERIAL OR DOCUMENT WAS FOUND. I HAVE VERY CAREFULLY CONSIDERED THE ADDITIONAL GROUND AS RAISED BY THE APPELLANT. ON AN EXAMINATION OF THE ADDITIONAL GROU ND IT CAN BE SEEN THAT THE CHALLENGE AGAINST THE NOTICE UNDER S. 153C IS ON THE GROUND THAT NO INCRIMINATING MATERIAL OR DOCUMENT WAS FOUN D DURING THE COURSE OF SEARCH AND THEREFORE THE NOTICE ISSUED UN DER S. 153A R.W.S. 153C IS ILLEGAL/WITHOUT JURISDICTION. I AM UNABLE T O ACCEDE TO THE SAID VIEW/GROUND AS RAISED BY THE APPELLANT. ON A PLAIN READING OF THE PROVISIONS OF SECTION 153A/153C, IT CAN BE SEEN THA T THE CONDITION PRECEDENT FOR ASSUMPTION OF JURISDICTION UNDER S. 1 53C IS THE SATISFACTION REACHED THAT ANY MONEY, BULLION, JE WELLERY OR VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENT S EIZED OR REQUISITIONED BELONGS TO A PERSON OTHER THAN A PERS ON SEARCHED. IN THE COURSE OF SEARCH IN THE PREMISES OF M/S BHATIA INTERNATIONAL GROUP, CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED. ACCORDING TO THE APPELLANT, THE DOCUMENTS S EIZED ARE BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND BANK STATEMENT, WHICH ARE PART OF THE REGULAR RETURNS FILED AND THEREFORE CANNOT B E TREATED AS ANY INCRIMINATING MATERIAL. THE SAID CONTENTION OF THE APPELLANT IS NOT SUPPORTED BY THE PROVISIONS OF LAW. THE RELEVANT PR OVISION OF THE ACT ONLY SPEAKS OF 'DOCUMENTS'; THERE IS NO MANDATE IN THE ACT THAT THE DOCUMENTS OUGHT TO BE INCRIMINATING DOCUMENTS SO AS TO ENABLE THE ASSESSING OFFICER TO ASSUME VALID JURISDICTION. IF SUCH AN INTERPRETATION IS ACCEPTED, IT WOULD RESULT IN THE SAID PROVISION BEING RENDERED OTIOSE. AS OBSERVED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF S.S.P. AVIATION LTD., SECTION 153C MERELY ENABLES THE REVENUE TO INVESTIGATE INTO THE CONTENTS OF THE DOC UMENTS SEIZED ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 5 WHICH BELONGS TO A PERSON OTHER THAN THE PERSON SEA RCHED SO THAT IT CAN BE ASCERTAINED WHETHER THE TRANSACTION OR THE I NCOME EMBEDDED IN THE DOCUMENT HAS BEEN ACCOUNTED FOR IN THE CASE OF THE APPROPRIATE PERSON. IT IS AIMED AT ENSURING THAT INCOME DOES NO T ESCAPE ASSESSMENT IN THE HANDS OF ANY OTHER PERSON MERELY BECAUSE HE HAS NOT BEEN SEARCHED UNDER S. 132. IT IS ONLY A FIRST STEP TO THE ENQUIRY WHICH IS TO FOLLOW. IN THIS VIEW OF THE MATTER, THE CONTENTION AS RAISED BY THE APPELLANT HAS TO FAIL. A FURTHER CONTENTION RAISED BY THE APPELLANT IS THAT THE SAID PROFIT & LOSS ACCOUNT AN D BALANCE SHEET CANNOT BE HELD AS BELONGING TO THE APPELLANT, BUT B ELONGS TO THE PERSON FROM WHOSE PREMISES IT HAS BEEN SEIZED. SUCH AN INTERPRETATION, TO SAY THE LEAST, IS TOO FARFETCHED AND FANCIFUL. THE APPELLANT HAS HIMSELF ACCEPTED THAT THE PROFIT & LO SS ACCOUNT AND BALANCE SHEET ARE DOCUMENTS WHICH ARE PART OF HIS R EGULAR RETURN. BY NO STRETCH OF IMAGINATION CAN IT BE STATED THAT THE SAID DOCUMENTS DO NOT BELONG TO THE APPELLANT. THE RIGHTFUL OWNERSHIP OVER A DOCUMENT OR ASSET IS NOT OBLITERATED MERELY BECAUSE IT IS FOUND AND SEIZED FROM THE PREMISES OF SOME OTHER PARTY. FOR THE ABOVE STATED REASONS, IT IS HELD THAT THE CONDITIONS PRECEDENT FOR ISSUING NOTICE UN DER S. 153C FOR ASSESSING OR REASSESSING SUCH OTHER PERSON, HAS BEE N SATISFIED IN THE CASE OF THE APPELLANT. THE ASSESSMENT IS HELD TO BE VALIDLY INITIATED AND COMPLETED. 6. THE LEARNED A.R. VEHEMENTLY SUBMITTED BEFORE US THA T NEITHER THE AO OF THE SEARCHED PARTY AT THE TIME OF FORWARDING THE SEIZED MATERIAL TO THE AO OF THE ASSESSEE RECORDED SATISFACTION NOR TH E AO OF THE ASSESSEE AT THE TIME OF ISSUING NOTICE UNDER SECTION 153C OF TH E ACT RECORDED ANY SATISFACTION AND THEREFORE ASSUMPTION OF JURISDICTI ON UNDER SECTION 153C OF THE ACT SUFFERED FROM INCURABLE DEFECTS AND THER EFORE THE CONSEQUENTIAL ASSESSMENT FRAME WERE ALSO INVALID AND DESERVED TO BE QUASHED. THE LEARNED A.R. ALSO REFERRED TO CIRCULAR NO. 24/2015 DATED 31.09.2015 WHEREIN THE CBDT BY REFERRING TO THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF M/S. CALCUTTA KNITWEARS 43 TAX MANN.COM 446 STATED THAT THE PROVISIONS OF SECTION 153C OF THE ACT ARE PARI-MATERIA TO THE PROVISIONS OF SECTION 158BD OF THE ACT. IN VIEW OF THE SAME STRICT COMPLIANCE AS TO THE PROVISIONS OF THE SUB-SECTION IS TO BE FOLLOWED. THE LEARNED A.R. RELIED ON A SERIES OF DECISIONS IN DEF ENCE OF HIS ARGUMENT: - I. CIT VS. MN RAJARAMAN 5 ITR 62 ITAT CHENNAI II. AVINESH ESTATE AND RESORTS VS. DCIT 151 ITD 399 (VI ZAG) III. CIT VS. VEERPRABHU MARKETING LTD. 388 ITR 574 (CAL) ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 6 IV. DSL PROPERTIES PVT. LTD. VS. DCIT ITA NO. 1334/DEL/ 2012 V. BEEJAY SECURITY & FINANCE LTD. ITA NO. 4859/MUM/200 9 THE LEARNED A.R. PRAYED BEFORE THE BENCH THAT THE I SSUE OF NON-RECORDING OF SATISFACTION IS COVERED IN FAVOUR OF THE ASSESSE E BY THE RATIO LAID DOWN IN THE HON'BLE HIGH COURT AND THE COORDINATE BENCHES. THEREFORE THE PROCEEDINGS UNDER SECTION 153C OF THE ACT AND THE C ONSEQUENT ASSESSMENT FRAMED DESERVED TO BE KNOCKED DOWN AND QUASHED. THE LEARNED A.R. ALSO BROUGHT TO THE NOTICE OF THE BENCH THE DISTINCTION BETWEEN THE PROVISIONS OF SECTION 153A AND 153C OF THE ACT AND SUBMITTED T HAT THEY ARE TOTALLY ON DIFFERENT FOOTINGS. HE SUBMITTED THAT IN RESPECT OF SECTION 153A OF THE ACT NO SOONER THE SEARCH ACTION IS CARRIED OUT, APPLICA BILITY OF THE PROVISIONS OF SECTION 153A OF THE ACT ARE AUTOMATIC AND NO SAT ISFACTION IS REQUIRED TO BE DRAWN FOR REASSESSMENT AND NOTICE UNDER SECTION 153A IS AUTOMATIC WHEREAS AS FAR AS ISSUE OF NOTICE UNDER SECTION 153 C OF THE ACT IS CONCERNED, THE ACT CATEGORICALLY PROVIDES THAT SATI SFACTION HAS TO BE DRAWN BY THE AO OF THE SEARCHED PERSON TO THE FACT OF TH E SIZED RECORD/ASSETS FOUND OF OTHER PERSON WERE HAVING A BEARING ON THE DETERMINATION OF TOTAL INCOME OF THAT OTHER PERSON. THE LD AR FINALLY PRAY ED BEFORE THE BENCH THE IN VIEW OF THE NON RECORDING OF SATISFACTION BY THE AO OF THE SEARCHED PERSON AS TO THE SEIZED MATERIALS RELATING TO OTHER PERSON OF HAVING ANY IMPACT ON THE DETERMINATION OF INCOME OF THE OTHER PERSON, THE PROCEEDINGS U/S 153C OF THE ACT AND CONSEQUENT ASSE SSMENT ARE BAD IN LAW AND HAS TO BE QUASHED. 7. THE LEARNED D.R., ON THE OTHER HAND STRONGLY DEFEN DED THE ORDER OF THE FIRST APPELLATE AUTHORITY ON UPHOLDING THE ISSU E OF ASSUMPTION OF JURISDICTION UNDER SECTION 153C OF THE ACT. THE LEA RNED D.R. SUBMITTED THAT THE SATISFACTION HAS BEEN RECORDED BY THE AO O F THE SEARCHED PARTY AT THE TIME OF FORWARDING THE SEIZED MATERIALS TO THE AO OF THE ASSESSEE. THUS THE LEARNED CIT(A) HAS RIGHTLY NOTED IN THE ORDER T HAT SUCH SATISFACTION IS PRESUMED AND AUTOMATIC. THE LD DR ALSO FILED BEFORE THE BENCH THE COPY OF LETTER DATED 22.01.2018 ADDRESSED TO LD CIT(DR) GIV ING COMMENTS ON THE VARIOUS GROUNDS RAISED BY THE ASSESSEE. WHILE REFER RING TO THE SAID LETTER ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 7 THE LD DR SPECIFICALLY POINTED OUT THE SATISFACTION WAS RECORDED BY THE AO OF THE SEARCHED PERSON WHILE FORWARDING SEIZED PAPE RS TO THE AO OF THE OTHER PERSON. IN VIEW OF THAT THE SAID FINDINGS OF THE CIT(A) ON THE LEGAL ISSUE RAISED BY THE ASSESSEE QUA THE PROCEEDINGS UN DER SECTION 153C OF THE ACT AND THE CONSEQUENTIAL ASSESSMENT FRAMED BEI NG INVALID AND VOID ABINITO IN ABSENCE OF ANY SATISFACTION BY THE AO O F THE SEARCHED PARTY DOES NOT HAVE ANY WEIGHT AND SHOULD BE DISMISSED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD PLACED BEFORE US INCLUDING THE IMPUGNED ORDER. WE HAVE CAREFULLY GONE THROUGH VARIOUS CITATIONS AND D ECISIONS REFERRED TO BY THE LEARNED A.R. THE LEGAL ISSUE RAISED BEFORE US I S WITH RESPECT TO THE FACT THAT THE AO HAS WRONGLY ASSUMED JURISDICTION UNDER SECTION 153C OF THE ACT AND CONSEQUENTLY BOTH THE PROCEEDINGS UNDER SEC TION 153C AND THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 153C OF TH E ACT ARE INVALID AND ARE LIABLE TO BE QUASHED ON ACCOUNT OF NON RECORDIN G OF SATISFACTION BY THE AO OF THE SEARCHED PERSON AT THE TIME OF FORWARDING SEIZED MATERIALS TO THE AO OF THE OTHER PERSON. A PERUSAL OF THE ORDER OF T HE CIT(A) REVEALS THAT THE CIT(A), AFTER CALLING FOR THE ASSESSMENT RECORDS, O BSERVED THAT THERE IS NO EXPRESS SATISFACTION RECORDED BY THE AO OF THE SEAR CHED PARTY AS IS CLEAR FROM PAGE 8 OF THE ORDER OF THE CIT(A) WHICH IS EXT RACTED BELOW: - BESIDES, IT CAN BE SEEN THAT IN THE ORDER OF ASSES SMENT, THE ASSESSING OFFICER HAS STATED THAT THE SEIZED DOCUME NTS BELONGING TO THE APPELLANT HEREIN WERE RECEIVED IN HIS OFFICE IN MAY 2010. FROM THE SAID STATEMENT IT IS IMPLICITLY CLEAR THAT THERE WA S A SATISFACTION INDICATING THAT DOCUMENTS PERTAINING TO THE APPELLA NT HEREIN WERE FOUND AT THE TIME OF SEARCH AND THAT THE ACT OF FOR WARDING OF THE MATERIAL ITSELF DENOTES SATISFACTION ON THE PART OF THE ASSESSING OFFICER OF THE PERSON SEARCHED. THUS, IT IS CLEAR FROM THE ABOVE THAT THE CIT(A) ON EXAMINATION OF THE ASSESSMENT RECORDS DID NOT FIND ANY SATISFACTION RE CORDED BY THE AO OF THE SEARCHED PERSON AND CAME TO THE CONCLUSION THAT SA TISFACTION WAS PRESUMED AND IMPLIED. WE ALSO NOTICED THAT THE PAPE RS FOUND PERTAINING THE ASSESSEE COMPRISED OF COPY OF BALANCE SHEET AS ON 31.03.2002, RETURN OF INCOME FOR A.Y. 2002-03, REGULAR BANK STATEMENT OF DISCLOSED BANK ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 8 ACCOUNT IN MARCH, 2003 AND THUS NO INCRIMINATING EV IDENCE HAVE BEEN FOUND REMOTELY WHICH HAVE A BEARING ON DETERMINATIO N OF TOTAL INCOME OF THE ASSESSEE. WE ALSO FOUND FROM THE COMBINED READI NG OF PROVISIONS OF SECTIONS 153A AND 153C THAT THEY ARE TOTALLY ON DIF FERENT PARA METERS. PROVISIONS OF SECTION 153A CLEARLY MENTION THAT WHE N SEARCH IS CARRIED OUT AND NO SATISFACTION IS REQUIRED TO BE DRAWN FOR REA SSESSMENT PROCEEDINGS UNDER SECTION 153A OF THE ACT AND THUS THE SAME IS AUTOMATIC. ON THE OTHER HAND, SO FAR AS THE ISSUE OF NOTICE UNDER SEC TION 153C OF THE ACT IS CONCERNED THE ACT CLEARLY PROVIDES FOR SATISFACTION OF THE AO OF THE SEARCHED PERSON AS TO THE SEIZED RECORD/ASSETS FOUN D OF OTHER PERSONS WHICH HAVE A BEARING ON DETERMINING THE TOTAL INCOM E OF THAT OTHER PERSON. THUS IT IS CLEAR FROM THE ABOVE THAT SATISFACTION H AS TO BE RECORDED AT THE TIME OF FORWARDING SEIZED MATERIAL BY THE AO OF THE SEARCHED PERSON TO THE AO OF THE OTHER PERSON. SIMILARLY SATISFACTION HAS TO BE RECORDED BY THE AO OF THE OTHER PERSON BEFORE ISSUING NOTICE UNDER SEC TION 153C OF THE ACT THAT THE SEIZED MATERIAL/ASSETS FOUND DURING THE SE ARCH HAVE A BEARING ON DETERMINATION OF TOTAL INCOME OF THE ASSESSEE. EVEN IN CIRCULAR NO. 15/2015 DATED 21.12.2015 THE CBDT HAS CLEARLY DIREC TED ITS OFFICERS THAT DRAWING OF SATISFACTION HAS TO BE FOLLOWED STRICTLY BY THE AO IN VIEW OF THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF C ALCUTTA KNITWEARS (SUPRA) AS PROVISIONS OF SECTION 153C OF THE ACT AR E SUBSTANTIALLY PARI- MATERIA TO PROVISIONS OF SECTION 153BD OF THE ACT. BESIDES, THE CASE OF THE ASSESSEE IS ALSO SUPPORTED BY A SERIOUS OF DECISION S RELIED UPON BY THE LEARNED A.R. AS STATED HEREIN ABOVE. IN THE CASE OF VEERPRABHU MARKETING LTD. (SUPRA) THE HON'BLE HIGH COURT HAS HELD THAT W HERE THE BOOKS OF ACCOUNT, DOCUMENT OR VALUABLES FOUND DURING THE COU RSE OF SEARCH BELONG TO A THIRD PARTY IT WOULD LEAD TO AN INFERENCE OF A N UNDISCLOSED INCOME OF THIRD PARTY SUCH INFORMATION SHOULD BE RECORDED BY THE AO HAVING JURISDICTION FOR THE SEARCHED PERSON AND COMMUNICAT E TO THE AO HAVING JURISDICTION FOR SUCH THIRD PARTY ALONG WITH SEIZED MATERIAL AND INCRIMINATING MATERIAL ON THE BASIS OF WHICH THE AO HAVING JURISDICTION OF THIRD PARTY WOULD ISSUE NOTICE UNDER SECTION 153C. IN THE CASE OF BEEJAY SECURITY & FINANCE LTD. (SUPRA) THE COORDINATE BENC H HELD AS UNDER: - ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 9 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. WE WILL FIRST CONSIDER THE PLEA OF THE ASSESSEE REGARDING THE EXI STENCE OF SATISFACTION ON THE PART OF THE ASSESSING OFFICER O F THE PERSON WHO WAS SEARCHED U/S.132 OF THE ACT, TO PROCEED AGAINST THE ASSESSEE (WHO WAS A PERSON WHO WAS NOT SEARCHED U/.132 OF TH E ACT) U/S.153- C OF THE ACT. IN DOING SO WE ARE PRESUME THAT THERE WAS A SATISFACTION NOTE RECORDED BY THE ACIT CC-10 ON 23/3/2007 AND WE ALSO PRESUME THAT THE NOTICE UNDER SECTION 153A DATED 26/3/2007 WAS IN FACT A NOTICE UNDER SECTION 153C AND THERE WAS A TYPOGRAPH ICAL ERROR IN SUCH NOTICE. WE ALSO PRESUME THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS SECTION 153A WAS CORRECTED AS 153C AFTE R DUE CONSENT BY THE ACCOUNTANT OF THE ASSESSEE ( IN THE NOTICES AS WELL AS RETURN FILED BY THE ASSESSEE). WE HOWEVER HASTEN TO ADD TH AT WE ARE NOT GIVING ANY FINDING ON THE CLAIM OF THE REVENUE OR T HE ASSESSEE REGARDING EXISTENCE OF SATISFACTION NOTE OR TYPOGRA PHICAL ERROR IN THE NOTICE U/S.153-A OF THE ACT. 12. THE FIRST ASPECT THAT HAS TO BE CONSIDERED IS A S TO WHETHER ANY SATISFACTION AT ALL IS REQUIRED TO BE ARRIVED AT BY THE AO OF THE PERSON WHO WAS SEARCHED U/S.132 OF THE ACT, REGARDING ANY UNDISCLOSED INCOME OF THE PERSON WHO WAS NOT SUBJECTED TO A SEA RCH TO HAND OVER THE SEIZED MATERIAL TO THE AO OF THE PERSON TO WHOM THE SEIZED DOCUMENT BELONGS OR IS ALLEGED TO BELONG. 13. THE ITAT DELHI IN THE CASE OF M/S.JINDAL STAINL ESS STEEL VS. ACIT ITA NO.3480 AND 3481/DEL/2006 IN ITS ORDER DATED 25 /4/2008 HAD DEALT WITH THIS ISSUE AND HAVE HELD THAT PROVISIONS OF SEC.153-C OF THE ACT ARE AKIN TO SEC.158BD OF THE ACT. (VIDE PARA 46 OF THE ORDER). THE HONBLE TRIBUNAL FURTHER HELD THAT THE AO HAS TO FO LLOW THE CONDITION PRECEDENT FOR PROCEEDING U/S.153-C OF THE ACT IN TH E SAME MANNER AS THE AO WOULD DO FOR PROCEEDING U/S.158BD OF THE ACT . THE HONBLE TRIBUNAL IN THIS REGARD REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI VS. ACIT 289 ITR 341(SC) AND HAVE HELD THAT SATISFACTION THAT UNDISCLOSED IN COME BELONGS TO THE PERSON OTHER THAN THE ONE WHO IS SEARCHED U/S.1 32 OF THE ACT, HAS TO BE ARRIVED AT BY THE AO BEFORE PROCEEDING TO HAN D OVER SEIZED DOCUMENT TO THE AO OF THE PERSON WHO WAS NOT SEARCH ED. WE THEREFORE HOLD, FOLLOWING THE DECISION OF THE ITAT DELHI BENCH REFERRED TO ABOVE, THAT THE AO HAS TO RECORD SATISFACTION RE GARDING EXISTENCE OF UNDISCLOSED INCOME BEFORE PROCEEDING U/S.153-C OF T HE ACT. 14. THE NEXT ASPECT TO BE EXAMINED IS AS TO WHETHER SUCH SATISFACTION THAT THERE WAS UNDISCLOSED INCOME OF THE ASSESSEE C AN BE SAID TO HAVE BEEN ARRIVED AT BY THE AO IN THE PRESENT CASE. WE HAVE ALREADY REFERRED TO THE SECTION 153C OF THE ACT. IT WAS THE CONTENTION OF THE LD. D.R THAT SECTION 153C OF THE ACT, WOULD BE APPLICAB LE WHENEVER DOCUMENTS SEIZED IN THE COURSE OF A SEARCH BELONG T O A PERSON OTHER THAN A PERSON IN WHOSE CASE A SEARCH IS BEING CONDU CTED. IN THIS REGARD WE FIND THAT THE PROVISIONS OF SECTION 153C HAVE TO BE READ IN ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 10 THE CONTEXT OF SECTION 132 OF THE ACT. THE EXERCISE OF THE POWER UNDER S. 132 TO INITIATE A SEARCH OF A PLACE AND EFFECT S EIZURE IS SUBJECT TO FULFILLMENT OF TWO CONDITIONS (A) EXISTENCE OF INFO RMATION IN POSSESSION OF THE AUTHORITY SPECIFIED IN S. 132, AND (B) THEIR BELIEF ON THE BASIS OF SUCH INFORMATION THAT A PERSON TO WHOM SUMMONS IS I SSUED TO PRODUCE BOOKS OF ACCOUNTS AND, OMITS TO PRODUCE SUC H BOOKS OF ACCOUNT OR WILL NOT PRODUCE THEM OR THAT THE PERSON IS IN POSSESSION OF MONEY, BULLION OR JEWELLERY OR OTHER VALUABLE ARTIC LES OR THINGS WHICH HE HAS NOT DISCLOSED OR WOULD NOT DISCLOSE FOR THE PURPOSE OF THE IT ACT, 1961. FURTHER A SEIZURE OF ONLY DOCUMENTS WHIC H WOULD NOT BE PRODUCED BY A PERSON SEARCHED CAN BE MADE. AS FAR A S THE PRESENT CASE IS CONCERNED, WE FIND THAT THE ASSESSEE HAS EN TERED INTO AN AGREEMENT FOR LEASE OF THE PROPERTY UNDER LEASE AGR EEMENT DATED 6/8/2000. THE ASSESSEE HAS BEEN DECLARING INCOME FR OM LETTING OUT OF THE AFORESAID PROPERTY REGULARLY IN ITS BOOKS OF ACCOUNT TILL THE DATE OF SEARCH AND THEREAFTER. THUS THE FACTUM OF THE AS SESSEE RECEIVING INCOME IN THE FORM OF RENT IS VERY MUCH IN THE KNOW LEDGE OF THE DEPARTMENT. IN FACT THIS FACT HAS BEEN DULY INFORME D BY THE ASSESSEE IN ITS LETTER DATED 22/1/2007 TO THE DDIT (INV.), U NIT 7(2). THE SATISFACTION NOTE UNDER SECTION 153C OF THE ACT MER ELY SAYS THAT THE DOCUMENTS WERE BEING SENT TO VERIFY THE TRANSACTION OF LEASE. ON THE FACTS OF THE CASE IT CANNOT BE SAID THAT THE AO WAS SATISFIED REGARDING EXISTENCE OF ANY UNDISCLOSED INCOME WHICH WOULD WAR RANT INITIATION OF PROCEEDINGS UNDER SECTION 153C OF THE ACT. IN OU R VIEW THE SATISFACTION REQUIRED FOR PROCEEDINGS UNDER SECTION 153C CANNOT BE REDUCED TO A MERE FORMALITY OF FORWARDING THE DOCUM ENTS FOUND IN THE COURSE OF SEARCH WHICH DID NOT BELONG TO THE PERSON SEARCHED AND WHICH BELONGED TO THE PERSON AGAINST WHOM PROCEEDIN GS UNDER SECTION 153C ARE SOUGHT TO BE INITIATED. IN THE CAS E OF ANIL P.KHIMANI VS. DCIT ITA NO.2855 TO 2860/M/08 (ORDER DATED 23.2 .2010) THIS TRIBUNAL HAD AN OCCASION TO DEAL WITH SIMILAR ISSUE . THE TRIBUNAL HELD AS FOLLOWS: 13. A PERUSAL OF THE ASSESSMENT ORDERS IN ALL THES E CASES, CLEARLY DEMONSTRATE THAT THE SOLE ADDITION IN QUEST ION IS ON ACCOUNT OF LOW WITHDRAWALS . THIS HAD NOT BEEN MADE , BASED ON ANY MATERIAL FOUND EITHER DURING THE COURSE OF SEAR CH OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. UNDER THE CIR CUMSTANCES, WE EXAMINE THE LEGAL POSITION. THE DELHI BENCH OF T HE TRIBUNAL IN THE CASE OF ANIL KUMAR BHATIA VS. ACIT HELD AS FOLL OWS: S.153 PROVIDES THAT WHERE A SEARCH IS INITIATED U/ S. 132 THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX A SSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RE LEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR REQUISITION IS MADE. THE FIRST PROVISO STATES THAT THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESS MENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS WHILE THE SECOND PROVISO STATE THAT THE ASSESSMENT OR REASSESSMENT R ELATING TO THE ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 11 SAID SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 SHALL ABATE . IN THE ASSESSEES CASE, SEARCH ACTION WAS INITIATED AND ASSESSMENT UN DER S. 153A WERE FRAME FOR SIX ASSESSMENT YEARS MAKING VARIOUS ADDITIONS. THE ASSESSEE CLAIMED THAT THE ADDITIONS WERE NOT TE NABLE AS REGULAR RETURNS HAD BEEN FILED WHERE THE PARTICULAR S RELATING TO THE ADDITIONS HAD BEEN DISCLOSED AND THE SAME HAD B EEN ACCEPTED U/S. 143(1) AND ALSO THAT NO MATERIAL HAD BEEN FOUND DURING THE SEARCH TO JUSTIFY THE ADDITIONS. THE REV ENUE CLAIMED THAT THE EFFECT OF THE PROVISOS TO S. 153A WAS THAT ALL ASSESSMENTS ABATE AND THERE HAD TO BE A DE NOVO ASS ESSMENT IN WHICH THE AO WAS NOT CONFINED TO THE MATERIAL FOUND DURING THE SEARCH. HELD REJECTING THE CLAIM OF THE REVENUE. (I) S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1ST PROVISO, THE AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEARS, UNDER THE 2ND PROVISO, ONLY THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. THE EFFECT IS THAT COMPLETE ASSESSMENTS DO NOT ABATE. THERE CAN BE TWO ASSESSMENTS FOR THE SAME ASSESSMENT YEAR. ASSESSMEN TS WHICH ARE NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH BUT ARE PENDING BEFORE AN APPELLATE AUTHORITY WILL SURVIVE. (II) AN ASSESSMENT CAN BE SAID TO BE PENDING ONLY IF T HE AO IS STATUTORILY REQUIRED TO DO SOMETHING FURTHER. IF A S. 143(2) NOTICE HAS BEEN ISSUED, THE ASSESSMENT IS PE NDING. HOWEVER, THE ASSESSMENT IN RESPECT OF A RETURN PROC ESSED U/S. 143(1) IS NOT PENDING BECAUSE THE AO IS NOT REQUIRED TO DO ANYTHING FURTHER ABOUT SUCH A RETURN . (III) THE POWER GIVEN BY THE PROVISO TO ASSESS INCOME F OR SIX ASSESSMENT YEARS HAS TO BE CONFINED TO THE UNDISCLO SED INCOME UNEARTHED DURING THE SEARCH AND CANNOT INCLU DE ITEMS WHICH ARE DISCLOSED IN THE ORIGINAL ASSESSMEN T PROCEEDINGS. (IV) ON FACTS, THE RETURNS HAD BEEN PROCESSED U/S. 143(1 ), THE ASSESSMENT WERE NOT PENDING AND AS NO MATERIAL WA S FOUND DURING THE SEARCH, THE ADDITIONS COULD NOT BE SUSTAINED RESPECTFULLY FOLLOWING THE SAME, WE DELETE ALL THE ADDITIONS MADE AND ALLOW THE APPEALS OF THE ASSESSEE. 15. IN THE PRESENT CASE WE ARE OF THE VIEW THAT THA T THERE WAS NO SATISFACTION REGARDING EXISTENCE OF ANY UNDISCLOSED INCOME WHICH WARRANTS PROCEEDINGS UNDER SECTION 153 OF THE ACT. WE, THEREFORE, HOLD THAT THE NECESSARY SATISFACTION DOES NOT EXIST FOR THE PROCEEDINGS ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 12 UNDER SECTION 153C OF THE ACT. ON THIS GROUND THE A SSESSMENT IS ANNULLED. 9. AFTER CONSIDERING THE FACTS OF THE CASE OF THE ASSE SSEE IN THE LIGHT OF THE CBDT CIRCULAR AND RATIO LAID DOWN BY THE HONBL E CALCUTTA HIGH COURT AND VARIOUS COORDINATE BENCHES , WE ARE OF THE CONS IDERED VIEW THAT THE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR. IN T HE PRESENT CASE ALSO NO SATISFACTION HAS BEEN RECORDED BY THE AO OF THE SEA RCHED PARTY, WHICH IS APPARENT FROM THE FINDING GIVEN BY THE CIT(A) IN HI S ORDER THAT SATISFACTION IS PRESUMED AND AUTOMATIC WHEN THE SEIZED PAPERS AR E FORWARDED TO THE AO OF THE THIRD PARTY. IN VIEW OF THIS WE ARE QUASH ING THE PROCEEDINGS UNDER SECTION 153C OF THE ACT AND CONSEQUENT ASSESS MENT FRAMED. 10. SINCE WE HAVE QUASHED THE ASSESSMENT FRAMED, THEREF ORE THE OTHER LEGAL ISSUES AND ISSUES RAISED ON MERITS BY THE ASS ESSEE ARE NOT ADJUDICATED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NOS. 4575 TO 4577/MUM/2014 - AYS 2004-05 TO 2006-07 12. ASSESSEE HAS ALSO RAISED IDENTICAL LEGAL ISSUE IN A LL THESE APPEALS BESIDES OTHER GROUNDS ON LEGAL ISSUE AND ON MERITS. THEREFORE, OUR FINDINGS GIVEN IN ITA NO. 4574/MUM/20014 FOR A.Y. 2003-04 AR E, MUTATIS MUTANDIS, APPLICABLE TO THE FACTS OF THE CASE IN AL L THESE APPEALS AS WELL. THEREFORE, FOLLOWING THE ABOVE DECISION WE ALLOW TH E APPEAL OF THE ASSESSEE. 13. TO SUM UP, ALL THE APPEALS FILED BY THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2018. SD/ - SD/ - (D.T. GARASIA) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13 TH FEBRUARY, 2018 ITA NOS. 4574 TO 4577/MUM/2014 M/S. KREZ HOTEL & REALTY LTD. 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -39, MUMBAI 4. THE CIT, CENTRAL-III, MUMBAI 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.