PRAKASH P. MALI, MUMBAI V. ASST(NOW DY) CIT (OSD-I) CR 7, MUMBAI

ITA 540/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8434 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMT SASMITA MISRA
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 143(3); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 7406/MUM/2013 ITA NO. 540/MUM/2016 (ASSESSMENT YEARS: 2005-06 & 2006-07) SHRI PRAKASH P. MALI VS. ACIT (OSD - 1), CENTRAL RANGE 7 33, ASHISH INDUSTRIAL ESTATE GOKHALE ROAD (S), DADAR (W) MUMBAI 400025 ROOM NO. 409, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN ADSPM1174C APPELLANT RESPONDENT APPELLANT BY: SHRI GIRISH DAVE RESPONDENT BY: SMT. SMT. SASMITA MISRA DATE OF HEARING: 08.02.2017 DATE OF PRONOUNCEMENT: 01.03.2017 O R D E R PER JASON P. BOAZ, A.M. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A)-40, MUMBAI DATED 26.09.2013 FOR ASSESSMENT Y EARS 2005-06 AND OF THE CIT(A)-52, MUMBAI DATED 24.11.2015 FOR A.Y. 200 6-07. BOTH APPEALS, HAVING CERTAIN COMMON/CONNECTED ISSUES, WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THESE APPEALS, THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 2.1 FOR A.Y. 2005-06 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IN HOLDING NOTICE ISS UED UNDER SC. 153C OF THE ACT AS VALID AND CONSEQUENTIAL ERRED IN LAW IN HOLDING THE ASSESSMENT MADE UNDER SEC.153C OF THE A CT AS VALID. WITHOUT PREJUDICE TO THE ABOVE, 2. LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON TH E FACTS & IN THE CIRCUMSTANCES OF THE CASE IN UPHOLDING THE ESTIMATE ON OF ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 2 UNACCOUNTED SALE PARTLY OF RS.43,06,287/- OUT OF RS.1,09,37,871/- ESTIMATED BY AO. 3. LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON TH E FACTS & IN THE CIRCUMSTANCES OF THE CASE IN UPHOLDING THE ESTIMATE D ADDITION OF RS.6,54,030/- TOWARDS GROSS PROFIT ON THE UNACCOUNT ED SALES. 4. THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMIN G THE LEVY OF INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT. 2.2 FOR A.Y. 2006-07 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IN HOLDING NOTICE ISS UED UNDER SC. 153C OF THE ACT AS VALID AND CONSEQUENTIAL ERRED IN LAW IN HOLDING THE ASSESSMENT MADE UNDER SEC.153C OF THE A CT AS VALID. WITHOUT PREJUDICE TO THE ABOVE, 2. LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON TH E FACTS & IN THE CIRCUMSTANCES OF THE CASE IN ADOPTING GROSS PROFIT RATE 15.74% ON UNACCOUNTED SALES OF RS.1,72,23,006/- AND MAKING AD DITION OF RS.27,10,901/- INSTEAD OF GROSS PROFIT AT 60% ON SU CH SALES. 3. THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMIN G THE LEVY OF INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT. 3. GROUND NO. 1 (FOR BOTH ASSESSMENT YEARS 2005-06 AND 2006-07) VALIDITY OF ASSESSING OFFICERS ASSUMPTION OF JURIS DICTION UNDER SECTION 153A OF THE ACT AND CONSEQUENT PASSING OF O RDERS OF ASSESSMENT UNDER SECTION 143(3) R.W.S 15C OF THE AC T. 3.1.1 IN THIS GROUND, FOR BOTH ASSESSMENT YEARS 200 5-06 AND 2006-07, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ASSESSI NG OFFICERS (AO) ASSUMPTION OF JURISDICTION BY ISSUE OF NOTICE UNDER SECTION 153C OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND CONSE QUENT PASSING OF ORDERS OF ASSESSMENT FOR THESE YEARS UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 29.12.2008. ACCORDING TO THE LEARNED A.R. OF THE ASSESSEE, IT IS EVIDENT FROM A PERUSAL OF THE ORDERS OF ASSESSMENT THAT THE AO INITIATED PROCEEDINGS IN THE CASE ON HAND ON THE BASIS THAT T HE ASSESSEES PREMISES WERE SEARCHED UNDER SECTION 132 OF THE ACT ON 28.06 .2006, WHEREAS ONLY A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THAT DAY AT THE ASSESSEES BUSINESS PREMISES AT M/S. JUNCTION AT 33 , ASHISH INDUSTRIAL ESTATE, GOKHALE ROAD (S), DADAR (W), MUMBAI. IT IS FURTHER SUBMITTED THAT IN THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATIO N, THE ENTIRE BASIS FOR ADDITIONS MADE ARE THE DOCUMENTS EVIDENCING UNRECOR DED SALES WHICH ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 3 WERE FOUND FROM THE ASSESSEES PREMISES IN THE COUR SE OF SURVEY NOTICE UNDER SECTION 133A OF THE ACT ON 28.06.2006 AND CON TENDED THAT IT IS NOT THE AOS CASE THAT THE ADDITIONS WERE MADE BASED ON INCRIMINATING BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED UNDER SECTION 132 O F THE ACT IN THE CASE OF A PERSON OTHER THAN THE ASSESSEE, I.E. FROM HIS BROTHERS PREMISES. 3.1.2 THE LEARNED A.R. FURTHER SUBMITS THAT THE AO HAS NOT RECORDED HIS SATISFACTION TO THE EFFECT THAT THE HE IS RELYING O N INCRIMINATING BOOKS OF ACCOUNT OR DOCUMENTS FOUND AND SEIZED IN THE COURSE OF SEARCH AT THE PREMISES OF PERSON OTHER THAN THAT OF THE ASSESSEE AND THEREFORE THE ASSUMPTION OF JURISDICTION BY THE AO UNDER SECTION 153C OF THE ACT IS INVALID AND CONSEQUENTLY THE ORDERS OF ASSESSMENT M ADE UNDER SECTION 143(3) R.W.S. 153C OF THE ACT FOR BOTH ASSESSMENT Y EARS 2005-06 AND 2006-07 ARE BAD IN LAW AND CONSEQUENTLY REQUIRED TO BE CANCELLED. IN SUPPORT OF THIS PROPOSITION THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT EVEN AFTER SEVERAL OPPORTUNITIES AFFORDED BY THE BE NCH, THE LEARNED D.R. FOR REVENUE WAS UNABLE TO PRODUCE THE RELEVANT RECORD T O PROVE THAT THE AO HAD RECORDED HIS SATISFACTION FOR INITIATING PROCEE DINGS UNDER SECTION 153C OF THE ACT IN THE CASE ON HAND. THE LEARNED A.R. OF THE ASSESSEE THEN DREW THE ATTENTION OF THE BENCH TO THE AOS LETTER DATED 24.11.2016; WHEREIN AT PARA 2(II) ON PAGE 1 THEREOF THE AO ACKNOWLEDGES TH AT ONLY ACTION UNDER SECTION 133A OF THE ACT WAS CONDUCTED AT THE ASSESS EES PREMISES WHERE CASH OF ` 3,14,000/- WAS FOUND; AT PARA 2(4) ON PAGE 2 THEREO F IT IS MENTIONED THAT DETAILS OF UNACCOUNTED SALES EXPENSE S LISTED IN ANNEXURE A-1 TO A-5 WERE FOUND AT THE ASSESSEES PREMISES IN THE COURSE OF SURVEY UNDER SECTION 133A AND FINALLY TO PARA 3(B) ON PAGE 3 WHERE IT IS MENTIONED THAT AFTER VERIFICATION OF THE ASSESSEES CASE RECORDS FOR, INTER ALIA, THE ASSESSMENT YEARS IN QUESTION, THERE IS NO RECORD AVAILABLE THAT CAN BE REFERRED TO AS SATISFACTION/REASONS RECORDE D BY THE TRANSFEROR/ TRANSFEREE AO FOR INITIATING PROCEEDINGS UNDER SECT ION 153C OF THE ACT. IN SUPPORT OF THE PROPOSITION CANVASSED BY THE ASSESSE E THAT WHEN THERE IS NOTHING ON RECORD, IN THE ORDER OF ASSESSMENT OR CA SE RECORDS, TO SHOW THAT THE AO, EVEN IF HE IS THE SAME ONE FOR THE PERSON S EARCHED, RECORDED HIS SATISFACTION THAT IS SINE QUA NON FOR INITIATION OF PROCEEDINGS UNDER SECTION ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 4 153C OF THE ACT, THE VALIDITY OF ASSUMPTION OF JURI SDICTION BY THE AO FOR ISSUE OF NOTICE UNDER SECTION 153C OF THE ACT CANNO T BE UPHELD AND THE CONSEQUENT ORDERS OF ASSESSMENT PASSED UNDER SECTIO N 143(#) R.W.S. 153 OF THE ACT WOULD THEREFORE LIABLE TO BE CANCELLED, THE LEARNED A.R. OF THE ASSESSEE PLACED RELIANCE ON, INTER ALIA, THE FOLLOW ING JUDICIAL PRONOUNCEMENTS: - (I) DIT VS. INGRAM MICRO (INDIA) EXPORTS (P.) LTD. (2015) 60 TAXMANN.COM 57 (BOMBAY (II) NARSI CREATIONS VS. DCIT (2016) 70 TAXMANN.COM 156 (DELHI-TRIB) 3.1.3 RELIANCE WAS ALSO PLACED ON THE CBDT CIRCULAR NO. 24/2015 (F.NO. 279/MISC/140/2015/ITJ) DATED 31.12.2015, WHEREIN IT HAS BEEN CLARIFIED THAT RECORDING OF SATISFACTION NOTE BY THE AO IS A PREREQUISITE FOR ASSUMPTION OF JURISDICTION FOR ISSUE OF NOTICE UNDE R SECTION 153C OF THE ACT AND THAT EVEN IF THE AO OF SEARCHED PERSON AND THE OTHER PERSON IS ONE AND THE SAME, THEN ALSO HE IS REQUIRED TO RECORD HI S SATISFACTION. IT WAS CONTENDED BY LEARNED A.R. OF THE ASSESSEE THAT INSP ITE OF SUCH CLEAR DIRECTIONS BY CBDT THAT PENDING LITIGATION WITH REG ARD TO RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD/153C SHOULD B E WITHDRAWN/NOT PRESSED AS THEY DO NOT MEET THE GUIDELINES LAID DOW N BY THE HON'BLE APEX COURT IN M/S. CALCUTTA KNITWARES (2014) 43 TAXMANN. COM 446(SC), NEITHER HAVE THESE APPEALS BEEN WITHDRAWN/NOT PRESSED. IT IS PRAYED THAT IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION OF THE CASE ON HAND, THE ORDERS OF ASSESSMENT FOR ASSESSME NT YEARS 2005-06 AND 2006-07 BE QUASHED SINCE THE VALIDITY OF AOS ASSUM PTION OF JURISDICTION FOR ISSUE OF NOTICES UNDER SECTION 153C OF THE ACT, IN THE ABSENCE OF RECORDING SATISFACTION NOTES, FOR THE SAME CANNOT B E UPHELD. 3.2 PER CONTRA, THE LEARNED D.R. FOR REVENUE SUPPOR TED THE ORDERS OF THE LEARNED CIT(A) UPHOLDING THE VALIDITY OF ASSUMPTION OF JURISDICTION BY THE AO UNDER SECTION 153C OF THE ACT. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE ISSUE FOR CONSIDERATION AND ADJUDICATION BEFORE US IS THE VALIDITY OF AOS ASSUMPTION OF JURISDICTION FOR ISSUE OF NOT ICE UNDER SECTION 153C OF ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 5 THE ACT AND CONSEQUENT VALIDITY OF ORDERS OF ASSESS MENT UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 29.12.2008 FOR ASSESSMENT YEARS 2005- 06 AND 2006-07. ON AN APPRECIATION OF THE FACTS ON RECORD, IT IS SEEN THAT THIS LEGAL ISSUE WAS RAISED BY THE ASSESSEE BEFORE THE CONCERNED CIT(A) AS A GROUND OF APPEAL IN A.Y. 2006-07 AND AS AN ADDITION AL GROUND OF APPEAL IN THE A.Y. 2005-06. IN BOTH THESE ASSESSMENT YEARS TH E ARGUMENTS, FACTS PUT FORWARD BY THE ASSESSEE WERE REJECTED BY THE CONCER NED CIT(A) AND THE NOTICES ISSUED UNDER SECTION 153C OF THE ACT WERE H ELD TO BE VALID AND CONSEQUENTLY THE ASSESSMENTS PASSED UNDER SECTION 1 43(3) R.W.S. 153C OF THE ACT FOR BOTH THESE YEARS WERE ALSO HELD TO BE V ALID. 3.3.2 BRIEFLY STATED, THE FACTS OF THE CASE AS EMAN ATE FROM THE RECORD ARE THAT THERE WAS A SEARCH AND SEIZURE ACTION UNDER SE CTION 132 OF THE ACT CONDUCTED IN THE MALI GROUP ON 28.06.2006. IT IS NO T IN DISPUTE THAT THERE WAS NO SEARCH UNDER SECTION 132 OF THE ACT ON THE A SSESSEE IN THE CASE ON HAND, BUT A SURVEY UNDER SECTION 133A OF THE ACT WA S CONDUCTED AT HIS BUSINESS PREMISES AT JUNCTION, 33. ASHISH INDUSTRIA L ESTATE, GOKHALE ROAD, DADAR (W), MUMBAI ON THE SAME DAY. ON A PERUS AL OF THE ORDERS OF ASSESSMENT FOR BOTH ASSESSMENT YEARS 2005-06 AND 20 06-07 DATED 29.12.2008, AT PARA 5 THEREOF, IT IS STATED THAT NO TICES UNDER SECTION 153C OF THE ACT WERE ISSUED ON 08.06.2007 CALLING FOR RE TURNS OF INCOME FOR THE TWO YEARS ON THE BASIS OF SEIZED MATERIAL. HOWEVER, FROM A PERUSAL OF THESE ORDERS OF ASSESSMENT, IT IS SEEN THAT THE ADDITIONS IN RESPECT OF UNDISCLOSED SALES, ETC. ARE MADE ONLY ON THE BASIS OF DOCUMENTS FOUND AND INVENTORISED IN THE COURSE OF SURVEY ACTION UNDER SECTION 133A O F THE ACT AND NOT IN RESPECT OF ANY INCRIMINATING DOCUMENT SEIZED IN COU RSE OF SEARCH OF THE MALI GROUP OR ELSE REFERENCE THERETO AND ADDITIONS THERE ON SHOULD HAVE BEEN PART OF THE ORDERS OF ASSESSMENT FOR THESE TWO YEARS. RE VENUE HAS NOT BEEN ABLE TO CONTROVERT THE ABOVE FACTUAL POSITION BEFORE US. 3.3.3 THE CONTENTION OF THE ASSESSEE WAS THAT THE A O HAD NOT RECORDED SATISFACTION THAT HE IS RELYING ON INCRIMINATING BO OKS OF ACCOUNTS/ DOCUMENTS BELONG TO THE ASSESSEE FOUND/SEIZED IN TH E COURSE OF SEARCH UNDER SECTION 132 OF THE ACT AT THE PREMISES OF PER SONS OTHER THAN THAT OF THE ASSESSEE AND THEREFORE THE ASSUMPTION OF JURISD ICTION BY THE AO FOR ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 6 ISSUE OF NOTICES UNDER SECTION 153C OF THE ACT WAS INVALID AND CONSEQUENTLY THE ORDERS OF ASSESSMENT FOR BOTH ASSE SSMENT YEARS 2005-06 AND 2006-07 ARE BAD IN LAW AND REQUIRED TO BE CANCE LLED. IN VIEW OF THIS CONTENTION OF THE ASSESSEE, THE BENCH ON A NUMBER O F OCCASIONS DIRECTED THE LEARNED D.R. FOR REVENUE TO PLACE BEFORE IT THE RELEVANT RECORDS OF ASSESSMENT/SATISFACTION NOTES RECORDED BY THE AOS F OR ASSUMPTION OF JURISDICTION TO ISSUE THE NOTICES UNDER SECTION 153 C OF THE ACT. DESPITE THESE OPPORTUNITIES BEING AFFORDED, REVENUE HAS FAI LED TO PRODUCE SATISFACTION NOTES RECORDED BY THE AO FOR PROPER AS SUMPTION OF JURISDICTION OF ISSUE OF THE NOTICES UNDER SECTION 153C OF THE A CT. ALL THAT HAS BEEN FILED BY REVENUE BEFORE THE BENCH IS THE AOS LETTER DATE D 24.11.2016, WHICH CONFIRMS AT PARA 2(II) THEREOF THAT THERE WAS NO SE ARCH UNDER SECTION 132 OF THE ACT CONDUCTED ON THE ASSESSEE, BUT A SURVEY UND ER SECTION 133A OF THE ACT WAS CONDUCTED AT HIS BUSINESS PREMISES ON 28.06 .2008 AND AT PARA 2(V) CONFIRMS THAT CERTAIN PAPERS RELATING TO UNDIS CLOSED SALES, PURCHASES, EXPENSES WERE FOUND IN SURVEY PROCEEDINGS. AT PARA 3(B) OF THIS LETTER, THE AO ADMITS THAT AFTER VERIFICATION OF THE CASE RECOR DS PAGE BY PAGE AND ORDER SHEETS, THERE IS NO RECORD AVAILABLE TO ESTAB LISH THAT SATISFACTION NOTES WERE RECORDED BY THE TRANSFEROR AND/OR TRANSF EREE OFFICER FOR ASSUMPTION OF JURISDICTION FOR ISSUE OF NOTICES UND ER SECTION 153C OF THE ACT FOR THE CONCERNED ASSESSMENT YEARS. IN THIS FAC TUAL MATRIX OF THE CASE BEFORE US, WE ARE OF THE CONSIDERED OPINION AND ARE CONSTRAINED TO DRAW THE CONCLUSION THAT THE AOS CONCERNED HAVE NOT RECO RDED ANY SATISFACTION, WHICH IS PREREQUISITE FOR ASSUMPTION OF PROPER JURI SDICTION UNDER SECTION 153C OF THE ACT. IN THE CASE OF NARSI CREATIONS (20 16) 70 TAXMANN.COM 156 (DELHI-TRIB) THE ITAT, DELHI BENCH HAS HELD THAT WH ILE RECORDING OF SATISFACTION BY THE AO OF THE ASSESSEE IS A REQUISI TE FOR ASSUMPTION OF JURISDICTION TO ISSUE NOTICE UNDER SECTION 153C OF THE ACT, EVEN IF THE AO OF PERSON SEARCHED AND SUCH OTHER PERSON IS SAME, THEN ALSO, FIRST WHILE MAKING THE ASSESSMENT IN THE CASE OF THE PERSON SEA RCHED, THE AO HAS TO RECORD SUCH SATISFACTION NOTE AND THEN A COPY OF TH IS SATISFACTION NOTE AND RELEVANT INCRIMINATING DOCUMENTS SEIZED ARE TO BE P LACED IN THE FILE OF SUCH OTHER PERSONS. IT IS ONLY AFTER THIS, IN THE CAPACI TY OF THE AO OF SUCH OTHER ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 7 PERSON, CAN THE AO PROPERLY ASSUME JURISDICTION TO ISSUE NOTICE UNDER SECTION 153C OF THE ACT. 3.3.4 IN THE CASE OF DIT VS. INGRAM MICRO (INDIA) E XPORTS (P) LTD. (2015) 60 TAXMANN.COM 57 (BOM), ON SIMILAR FACTS AS IN THE CA SE ON HAND, THE HON'BLE BOMBAY HIGH COURT OBSERVED THAT WHERE THE A SSESSEE WAS NOT SEARCHED, IN TERMS OF SECTION 153A AND 153C OF THE ACT, PROCEEDINGS CAN ONLY BE VALIDLY INITIATED AFTER THE AO RECORDS HIS SATISFACTION THAT THE SEIZED MATERIAL PERTAINS TO PERSONS OTHER THAN THE SEARCHE D PERSON(S). IT IS ONLY THEN THAT THE PERSONS OTHER THAN THE SEARCHED PERSO N CAN BE PROCEEDED AGAINST. SINCE THERE WAS NOTHING IN THE ORDER OF AS SESSMENTS AND NO RECORDS OF ASSESSMENT WERE PRODUCED BY REVENUE TO E STABLISH THAT SATISFACTION WAS RECORDED BY THE AO, THE TRIBUNAL W AS JUSTIFIED IN NULLIFYING THE PROCEEDINGS. 3.3.5 THE LEGAL PROPOSITIONS UPHELD BY THE DECISION S OF THE HON'BLE BOMBAY HIGH COURT AND THE DELHI BENCH OF ITAT CITED ABOVE, HAVE ALSO BEEN ECHOED BY THE CBDT IN ITS CIRCULAR NO. 24/2015 (F.NO. 279/MISC/140/2015/ITJ) DATED 31.12.2015 WHEREIN CLA RIFICATION HAS BEEN ISSUED TO THE EFFECT THAT FOR THE PURPOSE OF SECTIO N 158BD AND 153C OF THE ACT, WHICH PROVISIONS ARE PARI-MATERIA, RECORDING O F SATISFACTION NOTE IS A PREREQUISITE AND THE SAME MUST BE PREPARED BY THE A O BEFORE HE TRANSMITS TO THE AO WHO HAS JURISDICTION OVER SUCH OTHER PERS ON UNDER SECTION 158BD/153C OF THE ACT. IT IS FURTHER CLARIFIED BY T HIS 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. IN THIS REGARD, WE FEEL IT WOULD BE RELEVAN T AND THEREFORE EXTRACT THE CBDT CIRCULAR (SUPRA) HEREUNDER: - CIRCULAR NO. 24/2015 [F.NO.279/MISC./140 /2015/ITJ ] SECTION 153C, RAD WITH SECTION 158BD, OF THE INCOME TAX ACT, 1961 SEARCH AND SEIZURE ASSESSMENT OF INCO ME IN CASE OF OTHER PERSON RECORDING OF SATISFACTION NO TE UNDER SECTION 158DB/153C OF SAID ACT CIRCULAR NO. 24/2015 [F.NO.279/MISC./140 /2015/ITJ] DATED 31- 12-2015 THE ISSUE OF RECORDING OF SATISFACTION FOR THE PURP OSES OF SECTION 158BD/1 53C HAS BEEN SUBJECT MATTER OF LITIGATION. ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 8 2. THE HON'BLE SUPREME COURT IN THE CASE OF M/S CAL CUTTA KNITWEARS IN ITS DETAILED JUDGMENT IN CIVIL APPEAL NO.3958 OF 2014 DATED 12.3.20 1 4(AVAILABLE IN NJRS AT 2014-LL-0312-5 1) HAS LAID DOWN THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT, R ECORDING OF A SATISFACTION NOTE IS A PREREQUISITE AND THE SATISFA CTION NOTE MUST BE PREPARED BY THE AO BEFORE HE TRANSMITS THE RECORD T O THE OTHER AO WHO HAS JURISDICTION OVER SUCH OTHER PERSON U/S 158 131). THE HON'BLE COURT HELD THAT IT SATISFACTION NOTE COULD BE PREPARED AT ANY OF THE FOLLOWING STAGES: (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROC EEDINGS AGAINST THE SEARCHED PERSON UNDER SECTION 158BC OF THE ACT; OR (B) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER S ECTION 158BC OF THE ACT,. (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE CO MPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERS ON.' 3. SEVERAL HIGH COURTS HAVE HELD THAT THE PROVISION S OF SECTION 153C OF THE ACT ARE SUBSTANTIALLY SIMILAR/PARI-MATERIA T O THE PROVISIONS OF SECTION 158131) OF THE ACT AND THEREFORE, THE ABOVE GUIDELINES OF THE HON'BLE SC, APPLY TO PROCEEDINGS U/S 153C OF THE IT ACT, FOR THE PURPOSES OF ASSESSMENT OF INCOME OF OTHER THAN THE SEARCHED PERSON. THIS VIEW HAS BEEN ACCEPTED BY CBDT. 4, THE GUIDELINES OF THE HON'BLE SUPREME COURT AS R EFERRED TO IN PARA 2 ABOVE, WITH REGARD TO RECORDING OF SATISFACTION N OTE, MAY BE BROUGHT TO THE NOTICE OF ALL FOR STRICT COMPLIANCE. IT IS F URTHER CLARIFIED THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE 'OTHER PER SON' IS ONE AND THE SAME, THEN ALSO HE IS REQUIRED TO RECORD HIS SATISF ACTION AS HAS BEEN HELD BY THE COURTS. 5. IN VIEW OF THE ABOVE, FILING OF APPEALS ON THE I SSUE OF RECORDING OF SATISFACTION NOTE SHOULD ALSO BE DECIDED IN THE LIG HT OF THE ABOVE JUDGEMENT. ACCORDINGLY, THE BOARD HEREBY DIRECTS TH AT PENDING LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD /153C SHOULD BE WITHDRAWN/NOT PRESSED IF IT D OES NOT MEET THE GUIDELINES LAID DOWN BY THE APEX COURT. 3.3.6 IN THE FACTUAL AND LEGAL MATRIX OF THE CASE A S DISCUSSED ABOVE IT IS EVIDENTLY AND ADMITTEDLY CLEAR THAT THE AO HAS NOT RECORDED SATISFACTION NOTES FOR PROPER ASSUMPTION OF JURISDICTION FOR ISS UE OF NOTICE UNDER SECTION 153C OF THE ACT IN THIS CASE. WE ARE THEREF ORE OF THE OPINION THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECI SION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT VS. INGRAM MIC RO (INDIA) EXPORTS (P) LTD. (SUPRA) AND OF THE ITAT DELHI BENCH IN THE CAS E OF NARSI CREATIONS (SUPRA). IN COMING TO THIS DECISION, WE ALSO DREW S UPPORT FROM THE CLARIFICATIONS ISSUED BY CBDT IN ITS CIRCULAR NO. 2 5/2015 DATED ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 9 31.12.2015 (SUPRA) WHICH IS BINDING ON REVENUE TO W ITHDRAW AND NOT PRESS SUCH CASES, AS IN THE CASE ON HAND, WHERE THE AOS CONCERNED, I.E. TRANSFEROR AND TRANSFEREE HAVE NOT RECORDED SATISFA CTION NOTE FOR PROPER ASSUMPTION OF JURISDICTION FOR ISSUE OF NOTICE UNDE R SECTION 153C OF THE ACT. IN THIS VIEW OF THE FACTUAL AND LEGAL MATRIX O F THIS CASE, WE HOLD THAT SINCE THE AOS CONCERNED (I.E. TRANSFEROR/TRANSFEREE AOS) HAVE NOT RECORDED ANY SATISFACTION NOTES FOR PROPER ASSUMPTION OF JUR ISDICTION FOR ISSUE OF NOTICES UNDER SECTION 153 OF THE ACT, THE SAID NOTI CES ISSUED UNDER SECTION 153C OF THE ACT ON 08.06.2017 FOR BOTH ASSESSMENT Y EARS 2005-06 AND 2006-07 ARE HELD TO BE INVALID AND CONSEQUENTLY THE RESULTANT ORDERS OF ASSESSMENT FOR THESE TWO ASSESSMENT YEARS PASSED UN DER SECTION 143(3) R.W.S. 153C DATED 29.12.2008 ARE BAD IN LAW AND ARE BOTH CANCELLED. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, GROUND N O. 1 OF ASSESSEES APPEAL IS ALLOWED. 4. GROUNDS NO. 2 TO 4 WITHOUT PREJUDICE ON MERITS 4.1 IN VIEW OF THE FINDING RENDERED BY US ALLOWING GROUND NO. 1 OF ASSESSEES APPEAL, THEREBY ADDRESSING THE ASSESSEE S GRIEVANCE BY CANCELLING THE ORDERS OF ASSESSMENT FOR ASSESSMENT YEARS 2005-06 AND 2006-07 AS BAD IN LAW IN VIEW OF THE FACT THAT SINC E NO SATISFACTION NOTES WERE RECORDED BY THE CONCERNED TRANSFEROR/TRANSFERE E AOS FOR PROPER ASSUMPTION OF JURISDICTION FOR ISSUE OF NOTICES UND ER SECTION 153C OF THE ACT RENDERING THE SAID NOTICE INVALID, THESE ALTERN ATIVE GROUNDS ON MERITS, RAISED BY THE ASSESSEE ARE NOW ONLY ACADEMIC IN NAT URE AND THEREFORE THERE IS NO NECESSITY TO ADJUDICATE THEM AT THIS JU NCTURE. 5. IN THE RESULT, THE ASSESSEES APPEALS FOR ASSESSMEN T YEARS 2005-06 AND 2006-07 ARE ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2017. SD/ - SD/ - (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 ST MARCH, 2017 ITA NOS. 7406 & 540/MUM/2013 SHRI PRAKASH P. MALI 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -40, MUMBAI 4. THE CIT, CENTRAL -II, MUMBAI 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.