Asst. Commissioner of Income Tax, Central Circle-3(1), Hyderabad V. Satyanarayana Sankaramanchi , Hyderabad

ITA 496/Hyd/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6474 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Documents seized; Capital Gains
• Section: 143(3); 142(1); 153; 153C

Judgement Text

ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad (Through Video Conferencing) Before Shri A.M. Alankamony, Accountant Member and Shri S.S. Godara, Judicial Member ITA No.496/Hyd/2020 Assessment Year: 2009-10 ACIT Central Circle-3(1) Hyderabad Vs Shri Satyanarayana Sankaramanchi Hyderabad PAN:AULPS1897G (Appellant) (Respondent) Revenue by: Sri K. Madhusudan, CIT(DR) Assessee by : Sri P. Murali Mohan Rao, CA Date of hearing: 10/01/2022 Date of pronouncement: 21/03/2022 ORDER Per S. S. Godara, J.M. This Revenue’s appeal for the A.Y 2009-10 rise against the order of the CIT (A)-11, Hyderabad, dated 28.02.2020 passed in case Nos.10099/2019-20 involving proceedings u/s 143(3) r.w.s. 153C of the Income Tax Act, 1961, in short, the Act. Heard both the parties. Case files perused. 2. We notice at the outset that assessee’s instant appeal suffers from 09 days delay in filing before the ITAT. In this connection, the assessee has filed a petition for condonation along with an affidavit, wherein, inter-alia, it was submitted that since there was an ambiguity in the order of the CIT(A) in adjudicating the grounds of appeal, caused the impugned delay in filing the appeal belatedly. ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 2 of 8 We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that revenue’s impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits. 3. Coming to the Revenue’s identical sole substantive grievance that the CIT (A) has erred in law and on facts in quashing the impugned assessment order for want of a valid satisfaction recorded u/s 153C of the Act, we note that the corresponding lower appellate discussion to this effect reads as under: “4. During the appellate proceedings, Sri. P. Murali Mohan Rao, AR appeared and the case was heard. The contention of the appellant is that the proceedings u/s.153C are not validly initiated as there is no material belonging to the appellant which was seized, no satisfaction was recorded as required and the addition made is not based on the documents referred to while issuing the notice. In this regard, it was submitted as under: A Search and Seizure operation was conducted at the premises of M/s. MBS jewelers P Ltd and others. Consequent to that, assessments in the case of appellant was completed and passed by the Assessing Officer u/s 143(3) r.w.s l53G., dt.30.l2.20ll. In connection to these it is submitted that the Hon'ble ITAT in one of the group cases of the appellant, namely P.S Prasad for A. Y-2006-07 vide its order dt. 09.12.2015 having ITA No.1211/H/2014 (para no.4) has quashed the order on account of nonsatisfaction u/s.153C of the act and has allowed the appeal of the assessee. ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 3 of 8 Since, no valid satisfaction has been recorded in the case of the appellant, the case of the appellant is squarely covered by the above order of the Hon'ble !TAT, Hyderabad, as the assessee is covered under the same search and belongs to same group. Therefore, it is humbly requested to quash the assessment order passed u/s.143(3) r. w.s 153C of the act for a.y-2009-l 0 as they were made without recording any satisfaction for making assessment u/s.143(3) r. w.s 153C of the Act. 11 4. 1 It was further submitted during the appellate proceedings as under: "In this regard, we would like to submit that an appeal was preferred against the order passed by the AO, u/s.143(3) r. w.s 153C of the act and Ld. CIT(A) abated the proceedings as proceedings u/s.263 of the act were initiated by the CIT. Thereafter, the Hon'ble ITAT vide order dt.20.01.2016 quashed the 263 proceedings and thus the original assessment proceedings u/s.143(3) r.w.s 153C got reviewed. Further appeal was preferred to ITAT where in the Hon'ble ITAT vide order dt.01.07.2016 set aside the case to CIT(A) for adjudication on the original assessment proceedings of 143(3) r.w.s 153C of the Act. In connection to these it is submitted that the Hon'ble ITAT in assessee's own case for A. Y-2006-07 vide its order dt.09.12.2015 having ITA No.1212/H/2014(Para no.4) has quashed the order on account of non-satisfaction u/s.153C of the act and has allowed the appeal of the assessee. Further, in one of the group case of cases of the appellant, namely P. 5 Prasad for the similar assessment year under consideration i.e A. Y-2009-1 0 an order was passed on 29.02.2016 by Hon'ble CIT(A)-12 vide appeal no. 0160/2015-16 allowing the appeal in favour of the assessee." 5. I have considered the grounds of appeal, the order of the Hon'ble ITAT relied on by the appellant in their own group cases and order of CIT(Appeals)12, Hyderabad in one of the group cases. The CIT(A)-12, in order in ITA NO.0160j2015- 16, dt.29.02.2016 in the cas4e of Mr. P. S. Prasad for A.Y- 2009-10 held as under: "4.0 The appellant, an individual was served with notice u/s. 153C, in connection with the search proceedings conducted in MBS Jewellers Group on 11.03.2010, during which certain incriminating material related to the assessee were found, from which the AO found that a sale deed in respect of the immovable property situated at Hydernagar Village, Balanagar Mandal, R.R. District containing/revealing sale consideration received by the assessee, wherein the vendee/purchaser shown as tn/s. MBS Impex Pvt. Ltd. The AO invoked ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 4 of 8 the provisions of Sec. 153C for initiating assessment proceedings and the return of income was filed in response to notice u/s. 153C, admitting total income of Rs. 4,01,840/-. The AO finalized the assessment by computing the total income at Rs. 28,47,44,746/-, raising a demand of Rs. 7,57,51,257/-. 4.1 The appellant has filed the appeal by raising as many as 20 precise grounds, questioning the basis of additions made and the validity of proceedings, as indicated at para 2 above. During the course of the appellate proceedings, the appellant raised 10 additional grounds, which are nothing but repetition of the grounds that were already raised through the precise grounds of appeal. The grounds relates to various issues such as the validity of order u/s. 143(3) rws 153C, without there being any incriminating material and non-recording of satisfaction of the AO, as well as assessment of income from capital gains on protective basis, etc. The additional ground No. 38 & 39 (Gr. No. 2 & 3 of precise grounds) are regarding the issue of invoking the provisions of Sec. 153C, there being no satisfaction recorded by the AO and the AO having jurisdiction over the person searched and the invalidation of such proceeding by virtue of judicial decision in case of Shettys Pharmaceuticals by jurisdictional High Court. 5.0 During the course of the appeal proceedings, the appellant furnished a copy of the common order of ITAT, Hyderabad, 'B' Bench, dated 09.12.2015, in the case of Mr.S.Satyanarayana & and 7 others, on the issue of necessity of recording of satisfaction by the AO. Since the issue related to the validity of order u/s. 143(3) rws 153C, has been taken as the main ground and the same is taken up for detailed discussions. 6.0 In this case, while initiating the proceedings u/s. 153C, the AO had issued notice, based on the findings of search proceedings conducted in the case of MBS Jewellers Group on the ground that such information related to the asessee. As per the AD, some specific documents were found seized from the premises of M/s. MBS Jewellers, during the course of search proceedings conducted on 11.03.2010 and based on such references, the AD had come to the conclusion that the appellant had intricate relationship with the transactions as found and seized vide the search proceedings in case of MBS Jewellers and as such the AD held that the said information was related to or belong to the assessee. On centralization of this case with the AD, the notice u/s. 153C was issued. During the course of 'the assessment proceedings, the AD undertook steps such as assessing the' income from capital gains and bringing them to tax, based on the observations/finding of assessment proceedings/ investigations etc. Apart from raising the ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 5 of 8 general grounds on the additions made, the appellant raised specific grounds on the validity of assessment proceedings u/s. 153C, in light of the judicial decisions/findings on the said subject matter. The appellant also furnished the copy of order sheets of the case, for the year under reference, indicating that the AD had not recorded the reasons before issuing notice u/s. 153C. Based on the submissions of the appellant the information and basis that lead to issuing of notice u/s. 153C in this case are called for from the AD, by way of calling for a report and the assessment records. There was no report from the AD, indicating the contradiction of submissions of the assessee. Further, the notings from the assessment record indicate that there are no specific recording of reasons for issuing the notice u/s. 153C, in this case, for the year under reference. Thus, the findings support the contention of the assessee. In this regard, it is pertinent to refer to the most important development that has taken place meanwhile is the outcome of the decision of ITAT, Hyderabad 'B' Bench dated 09.12.2015, in the case of the Mr.S.Satyanarayana & 7 others, belonging to the same group, wherein the Hon'ble ITAT has quashed the proceedings u/s. 143(3) rws 153C, on the ground that there is no satisfaction recorded by the AO in the case of MBS Jewellers P. Ltd. and the income mentioned in the documents belongs to the assessee. Hon'b!e ITAT relied on the decision of jurisdictional High Court in the case of Shettys Pharmaceuticals & Biologicals i.td., wherein it was held that- "It is clear from section 153C that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other « than the person referred to in section 153A. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of account or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the seizing officer. In other words, it is not an automatic action. Satisfaction of two officers is missing. The aforesaid section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in section 153A. It was contended that the same Assessing Officer was involved in the matter. This fact does not dispense with above requirement. It is settled position of law that when a ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 6 of 8 thing is to be done in one particular manner under law this has to be done in that manner alone and not other way. The Tribunal has correctly followed the principle. There was no element of law to be decided. " 6.1 Reverting back to the case under reference, the copy of the order sheet is placed on record. As per the information brought on record, the notings in order sheet as regard to the reference to the seized material and for issuing of notice u/s. 153C, runs as under: "Sri Dr.P.S.Prasad, PAN: AAMPP4844K IInd Floor, 6110, A. Y.: 2009-10 Shanthi Niketan, New Delhi. Search & seizure operations were conducted in the MBS Jewellers Pvt. Ltd. group of cases on 11.03.2010. During the course of search, books of accounts, documents & other loose sheets were found and seized. As per the seized documents, Pages 1 to 9 of Annexure AIPCGIRESI01 relates to Sri Dr. P.S. Prasad. Hence proceeding u/s. 153C initiated. Put up Notices u/s. 153C & 142(1) of the I T Act. Thus, as could be made out, there are no recording of reasons by the AO of M/s. MBS Jewellers (P) Ltd. that the said documents belongs to the assessee of the AO under reference and no reasons recorded by the AO of the assessee under reference, that the said documents belong to the assessee and incomes reflected therein represent his/her unaccounted income., 6.2 The judicial decision by ITAT, Hyderabad under reference is a connected case of appeal in the same group, against the order u/s. 143(3) rws 153C, filed before ITAT, which had quashed the order u/s. 143(3) rws 153C, on similar set of facts. In light of the order of ITAT, on similar set of facts, I am of the considered opinion that the order under reference do not survive with no valid reasons were recorded by the Assessing Officers concerned, as such the proceedings u/s. 153C are held to be annulled, on the ratio and the similar facts of the decisions by the jurisdictional High Court and the jurisdictional ITAT, as referred to in this order. It is also a fact that additions made in assessment and the reasons recorded for issue of notice u/s. 153C, have no relation. Thus, the proceedings u/s. 143(3) rws 153C held to have no legs to stand and held to be annulled, for want of recording of reasons before issue of notices. Since, the order under reference held to be non-existent, the other grounds of appeal, may not require separate ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 7 of 8 adjudication. On these lines, the appeal of the assessee against the order u/s. 143(3) rws 153, is treated as allowed, subject to the condition that the assessed income will not go below the returned/admitted income, in return of income filed by the assessee, in pursuance of notice u/s. 153e. 7.0 In the result, the appeal is ALLOWED." 5.1 On consideration of the above and facts of the appellant's case, it is seen that the facts are similar and the reasons recorded are also on similar lines. This being the case, following the orders of Hon'ble ITAT and also that of CIT(Appeals)-12, Hyderabad discussed above, it is held that the proceedings u/s. 143(3) rws 153C held to have no legs to stand and held to be annulled, for want of recording of reasons before issue of notices. Since, the order under reference held to be non-existent, the other grounds of appeal, do not require separate adjudication. On these lines, the appeal of the assessee against the order u/s 143(3) rws 153 is treated as allowed, subject to the condition that the assessed income will not go below the returned/admitted income, in return of income filed by the assessee, in pursuance of notice u/s 153C. 6. In the result, appeal is treated as allowed”. 4. Learned DR could hardly rebut the fact that the Assessing Officer herein had only recorded the corresponding seized material as “relates to” the assessee whereas the said statutory expression stood inserted in the Act w.e.f.1.6.2015 only. We wish to reiterate here that we are dealing with the search in question dated 11.03.2010 in M/s. MBS Jewellers (P) Ltd. And that the corresponding satisfaction on the Assessing Officer’s part had to be only to the effect that the specified incriminating seized material “belongs to” a person other than the searched parties. Coupled with this, learned counsel has already filed a copy of the tribunal’s order in M/s Ashi Plywood Industries relating to the very search that the Assessing Officer had not recorded a valid satisfaction u/s 153C as well. We thus follow judicial consistency to affirm the CIT(A)’s identical lower appellate findings in the absence of any distinction on facts and circumstances involved herein. ITA No 496 of 2020 Satyanarayana Sankaramanchi Hyderabad Page 8 of 8 5. In the result, Revenue’s appeals are dismissed. Order pronounced in the Open Court on 21 st March, 2022. Sd/- Sd/- (A.M.ALANKAMONY) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER Hyderabad, dated 21 st March, 2022. Vinodan/sps Copy to: S.No Addresses 1 ACIT, Central Circle 3(1) 7 th Floor, Aayakar Bhavan, Hyderabad 2 Shri Satyanarayana Sankaramanchi, Plot No.26 Indraprastha Colony, GSI(PO), Bandlaguda, Hyderabad 3 CIT (A)- 11, Hyderabad 4 Pr. CIT – Central,Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order