Lucky Fashion (P) Ltd., New Delhi V. ITO, New Delhi

ITA 807/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7109 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: SUMIT GOE L
• Keywords: Bogus Share capital; Document seized; Question of law; Corroborative evidences; Validity of assessment; Documents seized
• Section: 68

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH D, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 807/DEL./2017 ASSESSMENT YEAR: 2010-11 LUCKY FASHION (P) LTD., C/O RAJ KUMAR & ASSOCIATES, CAS, L-7A (LGF), SOUTH EXT. PART-2, NEW DELHI. (PAN- AAACL9558P) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 15(4), NEW DELHI (RESPONDENT) ASSESSEE BY SHRI RAJ KUMAR GUPTA AND SHRI SUMIT GOEL, C.A. REVENUE BY SHRI VIJAY VERMA, CIT/DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-5, DELHI DATED 08.12.2016 FOR THE ASSESSMENT YEAR 2010 -11 ON THE FOLLOWING GROUNDS : 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE IMPU GNED A.Y. 2010- 2011 BEING AN UNABATED ASSTT. YEAR AND THE DOCUMENT S RELATING TO ASSESSEE FOUND IN SEARCH OF A 3 RD PARTY ARE NOT INCRIMINATING IN NATURE, HENCE, THE A.O. EXCEEDED HIS JURISDICTION TO FRAME ASSTT. U/S 153C AND FURTHER EXCEEDED HIS JURISDICTION IN EXAMINING THE ISSUE OF RECEIPT OF RS.90 LACS AS SHARE CAPITAL FROM M/S. MRIDUL SECURI TIES (P) LTD. (MRIDUL). ON THIS ISSUE, THE FINDINGS OF THE LD. CIT(A) ARE AL SO UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 2. THAT WITHOUT PREJUDICE, LD. CIT(A) ERRED IN LAW IN NOT ADJUDICATING ON MERITS, THE ISSUE OF ADDITION OFRS.90 LACS RECEIVED AS SHARE CAPITAL FROM MRIDUL. DATE OF HEARING 05.06.2018 DATE OF PRONOUNCEMENT 18 .07.2018 ITA NO. 807/DEL/2017 2 3. THAT WITHOUT PREJUDICE UNDER THE FACTS AND CIRCUM STANCES, BOTH THE LOWER AUTHORITIES ERRED IN LAW AS WELL AS ON MERITS IN MAKING AND SUSTAINING ADDITION OF RS.90 LACS U/S. 68 FOR SHARE CAPITAL RECEIVED FROM MRIDUL. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND S EIZURE OPERATION WAS CONDUCTED ON 19.10.2011 AT THE BUSINESS PREMISES OF M/S. JAINCO GROUP OF CASES COMPRISING M/S. JAINCO PROMOTERS PVT. LTD. WH EREIN SOME DOCUMENTS WERE SEIZED. AMONGST THE SEIZED DOCUMENTS, A TRIAL BALANCE SHEET IN THE NAME OF APPELLANT ALONGWITH DOCUMENTS RELATING TO S HARE ALLOCATION TRANSACTIONS BETWEEN THE APPELLANT AND M/S. MRIDUL SECURITIES PVT. LTD. BASED ON THE ABOVE DOCUMENTS SEIZED, THE ASSESSING OFFICER RECEIVED A SATISFACTION NOTE OF DCIT, CENTRAL CIRCLE GHAZIABAD DATED 21.02.2014. CONSEQUENT UPON THIS SATISFACTION NOTE, THE ASSESSI NG OFFICER OF THE ASSESSEE ALSO RECORDED A SATISFACTION NOTE ON 03.03.2014 AN D ISSUED NOTICE U/S. 153C OF THE ACT TO THE ASSESSEE. IN RESPONSE, THE ASSESS EE STATED THAT THE RETURN FILED ORIGINALLY MAY BE TREATED TO HAVE BEEN FILED IN RESPONSE TO THE NOTICE U/S. 153C OF THE ACT. FROM THE DETAILS OF ISSUED SH ARES FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.90,00,000/- AS SHARE CAPITAL FROM M/S. MRIDUL SE CURITIES PVT. LTD. AGAINST WHICH 36000 SHARES WERE STATED TO HAVE BEEN ISSUED BY THE ASSESSEE. ON BEING ASKED, THE ASSESSEE FILED COPY OF ITS BANK ST ATEMENT SHOWING RECEIPT OF RS.90,00,000/- ON 12.03.2010 FROM M/S. MRIDUL SECUR ITIES PVT. LTD. THROUGH TWO MANAGERS CHEQUES ISSUED BY HDFC LTD. AND PHOTOC OPY OF CONFIRMATION BY THE SHARE APPLICANT, M/S. MRIDUL SECURITIES PVT. LTD. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT THE DIS TINCTIVE NUMBERS OF SHARES ALLOTTED TO MRIDUL SECURITY PVT. LTD. AND NO OTHER CORROBORATIVE EVIDENCES ITA NO. 807/DEL/2017 3 WERE FURNISHED TO JUSTIFY THE GENUINENESS OF THE TR ANSACTIONS; AND THAT THE SHARE PREMIUM AMOUNT SHOWN WAS MORE THAN THE NET WO RTH OF ASSESSEE COMPANY. THE ASSESSING OFFICER ALSO EXAMINED THE FI NANCIAL RESULTS OF THE APPELLANT. THE ASSESSING OFFICER ALSO EXAMINED THE INFORMATION RECEIVED FROM THE ASSESSING OFFICER OF THE PERSON SEARCHED A ND ALSO REFERRED TO THE LOCAL ENQUIRY MADE WHERE THE PREMISES STATED TO BE OF M/S. MRIDUL SECURITIES (P) LTD. WAS FOUND LOCKED. ON THE BASIS OF AN ENQUI RY MADE FROM ROC ALSO, THE ASSESSING OFFICER OBSERVED THAT NO TRANSACTION WAS MADE BY MRIDUL SECURITIES WITH THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. HE, THEREFORE, FINDING THE EXPLANATIONS OF THE ASSESSEE AS UNSATISFACTORY, ADDED A SUM OF RS.90,00,000/- U/S. 68 OF THE ACT VIDE ORDER U/S. 153C OF THE ACT, TREATING THE SAME TO BE THE BOGUS SHARE CAPITAL REC EIVED BY THE ASSESSEE IN THE GARB OF ACCOMMODATION ENTRY. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHERE HE CHALLENGED THE VALIDITY OF ASSESSMENT PROCEEDING S U/S. 153C AS WELL AS THE ADDITION ON MERITS. THE LD. CIT(A) WHILE DECIDING T HE APPEAL OF ASSESSEE, REJECTED THE LEGAL PLEAS RAISED ON THE VALIDITY OF ASSESSMENT PROCEEDINGS, BUT DID NOT DECIDE THE ADDITION OF RS.90,00,000/- ON ME RITS THEREOF. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFOR E US, INTER ALIA, ON THE GROUNDS, MENTIONED HEREINABOVE. 4. REITERATING THE GROUNDS OF APPEAL, THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE VERY FOUNDATION OF PROCEEDINGS U /S.153C IN THE INSTANT CASE IS THE SATISFACTION NOTE DATED 21.02.2014 RECO RDED BY THE A.O. OF THE SEARCHED PERSON, FOLLOWED BY THE SATISFACTION NOTE DATED 03.03.2014 RECORDED BY THE A.O. OF THE ASSESSEE; THAT ON THE B ASIS OF THESE SATISFACTION ITA NO. 807/DEL/2017 4 NOTES, NO LEGALLY VALID PROCEEDINGS U/S.153C CAN BE INITIATED. THE LD. AR ALSO INVITED OUR ATTENTION TO THE SATISFACTION NOTE DATE D 21.02.2014 RECORDED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON, WHICH READS AS UNDER : SATISFACTION FOR INITIATING PROCEEDINGS U/S.153C OF THE I.T. ACT, 1961 DATE: 21.02.2014 A SEARCH & SEIZURE OPERATION U/S.132 WAS CONDUCTED ON 19.10.2011 AT THE PREMISES OF JAINCO GROUP OF CASES COMPRISING M/S JAINCO PROMOTERS (P) LTD. & OTHERS AT G-10, PLOT NO.6, ADITYA COMMERCIAL COMPLEX, PREET VIHAR, DELHI-92. THE SEIZED DOCUMENTS FROM THE ABOVE PREMISES CONTAINS DOCUMENT, PAGE NO.127 TO 148 OF LP-2 WHICH IS TRIAL BALANCE IN THE NAME OF M/S LUCKY FASHIONS (P) LTD. FOR F.Y.2009-10. I HAVE GONE THROUGH THE SEIZED DOCUMENTS. I AM SATISFIED THAT THE DOCUMENT PERTAINS TO M/S LUCKY FASHIONS (P) LTD. THEREFORE, THE ASSESSEE COMES UNDE R THE PURVIEW OF SECTION 153C OF THE INCOME TAX ACT, 1961. THEREFORE, PROCEEDINGS UNDER SECTION 153C ARE REQUIRED TO BE INITIATED IN THIS CASE. THE JURISDICTION OF THE CASE LIES WITH THE ASSESSIN G OFFICER I.E. ITO, WARD-4 (4) NEW DELHI. THEREFORE, PHOTOCOPIES OF SEIZED DOCUMENT/INFORMATION ARE BEIN G PASSED TO THE CONCERNED A.O., FOR NECESSARY ACTION AS PER PROVISIONS OF THE I.T. ACT AT HIS END. (L.S. YADAV) DY. COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE), GHAZIABAD 4.1 IT IS NEXT CONTENDED THAT IN THE ABOVE MENTIONE D SATISFACTION NOTE, THE DETAILS OF SEIZED DOCUMENTS AND THE NATURE THEREOF HAS BEEN GIVEN. THE SEIZED DOCUMENTS ARE PG. NOS.127 TO 148 OF LP-2 . THE NATURE OF THESE SEIZED ITA NO. 807/DEL/2017 5 DOCUMENTS HAS BEEN MENTIONED AS .... TRIAL BALANCE IN THE NAME OF M/S LUCKY FASHIONS PVT. LTD. FOR F.Y.2009-10 . THESE DOCUMENTS WERE SEIZED DURING SEARCH OPERATION CONDUCTED ON 19.10.2011 AT THE PRE MISES OF AGARWAL ASSOCIATES AND JAINCO GROUP OF CASES AT G-10, PLOT NO.6, ADITYA COMMERCIAL COMPLEX, PREET VIHAR, DELHI-92. THE SAID DOCUMENTS WERE HANDED OVER TO THE THEN ASSESSING OFFICER OF THE ASSESSEE VIDE LET TER DATED 21.02.2014 (PLACED AT PAGE 27 OF DRS PAPER BOOK). 4.2 THEREAFTER, THE LD. AR FURTHER REFERRED TO THE SATISFACTION NOTE DATED 03.03.2014 RECORDED BY THE A.O. OF THE ASSESSEE, WH ICH READS AS UNDER : M/S LUCKY FASHIONS PRIVATE LIMITED (A.Y.2010-11) A SATISFACTION NOTE DATED 21/02/2014 HAS BEEN RECEI VED FROM THE DCIT CENTRAL CIRCLE, GHAZIABAD VIDE LETTER F.NO. DCIT / CC / GZB / AGARWAL ASSOCIATES GROUP / 2013-2014 / 2855 DATED 21/02/2014 IN THIS CASE. SEARCH HAS TAKEN PLACE ON 19/10/2011 IN THE CASE OF M/S AGARWAL ASSOCIATES GR OUP OF CASES. IN VIEW OF THE DETAILS OF SATISFACTION NOTE RECEIVE D I AM SATISFIED THAT IT IS A FIT CASE FOR ISSUE OF NOTICE U/S.153C FOR THE ASSESSMENT YEAR 2010-11 . S D/- 4.3 REFERRING TO THE SATISFACTION NOTE DATED 21.02. 2014, THE LD. AR POINTED OUT THAT IN THE SAID SATISFACTION NOTE THE SEIZED P AGES HAVE BEEN IDENTIFIED AS .... TRIAL BALANCE IN THE NAME OF M/S LUCKY FASHIONS PVT . LTD. FOR F.Y.2009-10 . THE COPIES OF ALL SEIZED PAGES HAVE BEEN FILED BY T HE LD. AR AS WELL AS LD. DR IN THEIR RESPECTIVE PAPER BOOKS. THE LD. AR POINTED OUT THAT THERE IS NO TRIAL BALANCE AT ALL IN ANY OF THESE SEIZED PAGES, AS NOT ED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON IN ITS SATISFACTION NOTE. TH E SAID SEIZED PAGES ARE THE DOCUMENTS SHOWING ISSUE OF 36000 EQUITY SHARES OF T HE ASSESSEE COMPANY TO M/S MRIDUL SECURITIES PVT. LTD. IT IS FURTHER SUBMI TTED THAT THE SATISFACTION ITA NO. 807/DEL/2017 6 NOTE MENTIONS THE SEIZED PAPERS AS THE TRIAL BALANC E OF ASSESSEE FOR F.Y.2009- 10, HOWEVER THERE IS NO TRIAL BALANCE IN THE SAID S EIZED PAPERS. IT HAS BEEN FURTHER CONTENDED THAT THE A.O. OF THE ASSESSEE ALS O, IN HIS SATISFACTION NOTE DATED 03.03.2014, ADOPTED THE FINDINGS OF THE SATIS FACTION NOTE DATED 21.02.2014 WHICH IS EVIDENT FROM THE SAID SATISFACT ION NOTE WHERE A.O. OF THE ASSESSEE RECORDED AS IN VIEW OF THE DETAILS OF SATISFACTION NOTE RECEIVE D I AM SATISFIED THAT IT IS A FIT CASE FOR ISSUE OF NOTICE U/S.153C FOR THE ASSESSMENT YEAR 2010-11 . IT HAS BEEN STATED THAT THE FOUNDATION AND THE BASIS OF INITIATION OF PROCEEDINGS U/S.153C IS THE SATISFACTION NOTE, WHIC H MENTIONS WRONG AND NON-EXISTENT FACTS. IT HAS BEEN CONTENDED THAT ON T HE BASIS OF SUCH WRONG FACTS, NO VALID PROCEEDINGS U/S.153C CAN BE INITIAT ED. THE LD. AR FURTHER SUBMITTED THAT THIS SHOWS THE TOTAL NON APPLICATION OF MIND BY BOTH THE SATISFACTION RECORDING AUTHORITIES. IT IS ALSO A CA SE OF PURE MECHANICAL INITIATION OF PROCEEDINGS U/S.153C. THE CONTENTION MADE IS THAT SUCH SATISFACTION NOTES DO NOT PROVIDE LEGALLY VALID JUR ISDICTION FOR INITIATION OF PROCEEDINGS U/S.153C OF THE I.T. ACT. THE LD. AR, A GAIN, BY REFERRING TO BOTH THE SATISFACTION NOTES AS STATED ABOVE, CONTENDED T HAT THERE IS NO FINDING IN THESE SATISFACTION NOTES THAT THE DOCUMENTS FOUND A RE OF INCRIMINATING NATURE. THERE IS ABSOLUTELY NO WHISPER THAT EITHER THE SAID ALLEGED TRIAL BALANCE OR THE DOCUMENTS SEIZED ARE OF INCRIMINATIN G NATURE. THIS LAPSE ON THE PART OF ASSESSING OFFICERS OF SEARCHED PERSON A S WELL AS THE ASSESSING OFFICER OF THE ASSESSEE GOES TO SUGGEST THAT NO VAL ID JURISDICTION U/S.153C CAN BE ASSUMED ONLY ON A FINDING THAT THE DOCUMENTS FOU ND DURING THE COURSE OF SEARCH, WHICH RELATES TO A PARTY OTHER THAN THE PAR TY SEARCHED. IN SUPPORT, THE LD. AR RELIED UPON CIT VS. IBC KNOWLEDGE PARK P VT. LTD. 385 ITR 346 (KAR.) FOR THE PROPOSITION THAT THE SATISFACTION NOTE MUST RECORD THAT INCRIMINATING MATERIAL HAS BEEN FOUND WHICH BELONGE D TO 3 RD PERSON. IN VIEW ITA NO. 807/DEL/2017 7 OF THIS, THE LD. AR ARGUED THAT THE PROCEEDINGS INI TIATED U/S.153C ON THE BASIS OF SUCH SATISFACTION NOTES CANNOT SURVIVE. TH E LD. AR FURTHER CONTENDED THAT, EVEN OTHERWISE, NONE OF THE DOCUMENTS FOUND A ND SEIZED DURING THE COURSE OF SEARCH ARE OF INCRIMINATING NATURE. IT HA S BEEN SUBMITTED THAT ALL THESE DOCUMENTS RELATES TO ISSUANCE OF 36000 SHARES TO M/S MRIDUL SECURITIES PVT. LTD. FOR RS.90 LACS BY ASSESSEE AND THIS TRANSACTION OF ISSUANCE OF SHARES BY ASSESSEE TO M/S MRIDUL SECURITIES PVT. LTD. STOOD RECORDED IN THE FINANCIAL AUDITED BOOKS OF THE ASSESSEE AS WELL AS OF M/S MRIDUL SECURITIES PVT. LTD., AT THE TIME WHEN THE SAID TRANSACTION TO OK PLACE IN A.Y.2010-11 AND MUCH BEFORE THE DATE OF SEARCH ON JAINCO GROUP ON 1 9.10.2011 (A.Y.2012- 13). IT HAS BEEN CONTENDED THAT WHEN THE SAID TRANS ACTION HAS TAKEN PLACE IN NORMAL COURSE, THROUGH BANKING CHANNEL AND RECORDED IN THE BOOKS OF BOTH THE PARTIES, THEN THE DOCUMENTS RELATING THERETO CA NNOT BE HELD AS OF INCRIMINATING NATURE. IT HAS BEEN CONTENDED THAT CE RTAIN DOCUMENTS, NOT FULLY FILLED UP AND THAT THE DOCUMENTS BEING FOUND WITH T HE SEARCHED PARTY CANNOT PUT A TAG OF INCRIMINATING NATURE ON THOSE DOCUMENT S. THE LD. AR ALSO EXPLAINED THE REASONS AND CIRCUMSTANCES FOR THE SAM E. THE LD. AR RELIED UPON ON NUMBER OF CASE LAWS FOR THE PREPOSITION THA T DISCOVERY OF INCRIMINATING MATERIAL IS A PRECONDITION FOR ASSUMI NG THE JURISDICTION U/S.153C OF THE I.T. ACT. THE LD. AR ALSO ADDRESSED AT LENGTH ON THE MERITS OF THE ADDITION. 5. THE LD. D.R. APART FROM ADDRESSING ORAL ARGUMENT S, ALSO FILED SYNOPSIS DURING THE COURSE OF HEARING, WHICH IS PLACED ON RE CORD. THE LD. D.R. ADMITTED THAT AS PER THE SATISFACTION NOTE DATED 21 .02.2014 RECORDED BY THE A.O. OF THE SEARCHED PERSON, THE NATURE OF DOCUMENT S SEIZED IN SEARCH ON M/S JAINCO PROMOTERS PVT. LTD. & ORS. AT G-10, PLOT NO. 6, ADITYA COMMERCIAL ITA NO. 807/DEL/2017 8 COMPLEX, PREET VIHAR DELHI, HAVE BEEN IDENTIFIED AS THE TRIAL BALANCE IN THE NAME OF LUCKY FASHIONS PVT. LTD. FOR F.Y.2009-10. T HE LD. D.R. ALSO DID NOT DISPUTE THAT THE A.O. OF THE ASSESSEE, AS HE WAS TH EN, VIDE HIS SATISFACTION NOTE RECORDED ON 03.03.2014 ABSOLUTELY TOOK THE FI NDINGS OF SATISFACTION NOTE DATED 21.02.2014 AS THE REASONS FOR ISSUANCE O F NOTICE U/S.153C FOR THE A.Y.2010-11. THE LD. D.R., ALSO DID NOT DISPUTE THA T THE SEIZED PAGES NAMELY PG. NO.127 TO 148 OF LP-2, DID NOT CONTAIN ANY TRIA L BALANCE IN THE NAME OF LUCKY FASHIONS PVT. LTD. FOR F.Y.2009-10. HOWEVER H E CONTENDED THAT IT CAN BE PROBABLY A TYPOGRAPHICAL ERROR IN THE SATISFACTI ON NOTE DATED 21.02.2014 RECORDED BY THE A.O. OF THE SEARCHED PERSON. IT HAS BEEN CONTENDED BY THE LD. D.R. THAT ALTHOUGH IN SATISFACTION NOTE DATED 03.03 .2014 RECORDED BY A.O. OF THE ASSESSEE, THE FINDINGS OF SATISFACTION NOTE DAT ED 21.02.2014 ARE THE BASIS FOR SATISFACTION OF THE A.O. TO ISSUE NOTICE U/S.15 3C TO THE ASSESSEE, BUT THIS ERROR IN THE SATISFACTION NOTE CANNOT BE FATAL FOR INITIATING PROCEEDINGS U/S.153C. IT IS ALSO SUBMITTED THAT IT IS NOT THE C ASE OF ASSESSEE THAT THERE IS NO SATISFACTION NOTE BEING RECORDED AND IT IS ALSO NOT THE CONTENTION OF THE ASSESSEE THAT THE SEIZED DOCUMENTS ON THE BASIS OF WHICH PROCEEDINGS U/S.153C HAVE BEEN INITIATED DO NOT RELATE TO HIM. IT HAS BEEN ARGUED THAT, UNDER THESE FACTS, A TYPOGRAPHICAL ERROR IN THE SAT ISFACTION NOTES CANNOT INVALIDATE THE INITIATION OF WHOLE PROCEEDINGS U/S. 153C. THE LD. D.R. FURTHER CONTENDED THAT THE LAW NOWHERE MANDATES THAT THE DO CUMENTS FOUND AND SEIZED IN SEARCH OF A PARTY OTHER THAN THE ASSESSEE , SHOULD BE INCRIMINATING IN NATURE FOR INITIATING PROCEEDINGS U/S.153C. THE CLAIM OF THE LD. D.R. IS THAT, THE PAPERS FOUND AND SEIZED DURING SEARCH ON A 3 RD PARTY, IF RELATES TO THE ASSESSEE, THIS FACT IN ITSELF IS SUFFICIENT FOR PRO VIDING THE LEGALLY VALID JURISDICTION TO THE A.O. TO INITIATE PROCEEDINGS U/ S.153C. IT HAS BEEN CONTENDED THAT IT IS NOT NECESSARY THAT IN THE SATI SFACTION NOTE RECORDED BY ITA NO. 807/DEL/2017 9 THE A.O. OF THE ASSESSEE, THE FINDINGS FOR THE DOCU MENTS SEIZED TO BE OF INCRIMINATING NATURE MUST EXISTS, NOR IS THERE ANY SUCH MANDATE IN THE PROVISIONS OF SECTION 153C. THE LD. D.R. FURTHER S UBMITTED THAT THE DOCUMENTS FOUND DURING SEARCH RELATES TO SOME TRANS ACTION OF ISSUE OF 36,000 SHARES OF THE ASSESSEE COMPANY TO ONE M/S MR IDUL SECURITIES PVT. LTD. FOR RS.90,00,000/- DURING THE FINANCIAL YEAR RELEVA NT TO ASSESSMENT YEAR 2010-11, HOWEVER THE DOCUMENTS BEING FOUND AT THE P LACE OF SEARCHED PARTY PROVES THE NATURE AND CHARACTER OF THESE DOCUMENTS AS INCRIMINATING ONE. THE LD. D.R. ALSO SUBMITTED THAT THE SAID DOCUMENTS , AT PLACES, ARE NOT FULLY FILLED UP IN ALL RESPECTS WHICH ALSO MAKES THEM INC RIMINATING IN NATURE. IN THE SYNOPSIS FILED BY THE LD. D.R., THE ARGUMENTS H AVE BEEN TAKEN MAINLY ON THE MERITS OF THE ADDITION WITH AN ATTEMPT TO SHOW THAT THESE DOCUMENTS WERE OF INCRIMINATING NATURE AND THE SHARE ISSUE TR ANSACTION FOR RS.90 LACS BY THE ASSESSEE TO M/S MRIDUL SECURITIES PVT. LTD. CANNOT BE HELD AS BEING TAKEN IN THE NORMAL COURSE OF BUSINESS. THE LD. D.R . REFERRED TO VARIOUS AUTHORITIES ALSO IN SUPPORT OF HIS CONTENTIONS THAT THE TRANSACTION OF ISSUE OF SHARES, UNDER CONSIDERATION IS NOT ABOVE THE BOARD, THEREFORE SHOULD NOT BE ACCEPTED AND UNDER THESE FACTS, THE ADDITION OF RS. 90 LACS HAS BEEN VALIDLY MADE BY THE A.O. AND CORRECTLY CONFIRMED BY THE LD. CIT (A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD INCLUDING THE F INDINGS REACHED BY BOTH THE AUTHORITIES BELOW. THE ASSESSEE, HAS CONTESTED THAT UNDER THE FACTS AND CIRCUMSTANCES, INITIATION OF PROCEEDINGS U/S.153C I S ILLEGAL AND UNSUSTAINABLE IN LAW, CONSEQUENTIALLY THE IMPUGNED ASSESSMENT ORDER IS ALSO ILLEGAL. THE ASSESSEE HAS CONTESTED THE ADDITION OF RS.90,00,000/- MADE BY THE A.O. U/S.68 OF THE I.T. ACT ON MERITS ALSO. FOR THE SAKE OF CONVENIENCE, WE ITA NO. 807/DEL/2017 10 FIRST PROCEED TO EXAMINE THE VALIDITY OF INITIATIO N OF PROCEEDINGS U/S.153C OF THE ACT W.R.T. THE SATISFACTION NOTE DATED 21.02.20 14 RECORDED BY THE A.O. OF THE SEARCHED PERSON AND THE SATISFACTION NOTE DATED 03.03.2014 RECORDED BY THE A.O. OF THE ASSESSEE. BEFORE WE EXAMINE THE IS SUE IN THE ABOVE LIGHT, WE THINK IT PROPER TO MENTION THAT THE PROVISIONS OF S ECTION 153C OF THE IT ACT 1961 STIPULATE THAT WHERE THE AO IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS TO PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE ASSESSING OFF ICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. FROM THE ABOVE PROVISIONS OF SECTION 153C, IT IS SINE QUA NON ON THE PART OF THE ASSESSING OFFICER OF SEARCHED PARTY TO RECORD A VALID SATISFACTION AS TO THE DOCUMENTS SEIZED ON SUCH SEARCH BELONGING TO THE ASSESSEE, I.E., THE PERSON OTHER THAN THE PERSONS SEARCHED, SO AS TO AC QUIRE JURISDICTION U/S. 153C OF THE ACT. IN OTHER WORDS, THE CONDITION PREC EDENT FOR ISSUING NOTICE U/S. 153C AND ASSESSING OR RE-ASSESSING THE INCOME OF SUCH OTHER PERSON, IS THAT THE DOCUMENTS SEIZED SHOULD BELONG TO SUCH OTH ER PERSON. IF SUCH REQUIREMENT IS NOT SATISFIED, RECOURSE CANNOT BE HA D TO THE PROVISIONS OF SECTION 153C OF THE ACT. IN ORDER TO RECORD VALID S ATISFACTION, THE ASSESSING OFFICER OF THE SEARCHED PERSON IS ALSO LEGALLY OBLI GED TO CORRECTLY RECORD THE DOCUMENTS SEIZED IN THE SEARCH OPERATION, WHICH HE THINKS BELONGING TO OTHER PERSON. IN THE CASE AT HAND, THE SATISFACTION NOTE, AS REPRODUCED ABOVE, UNEQUIVOCALLY SPEAKS OF THE DOCUMENTS SEIZED AS TR IAL BALANCE IN THE NAME OF APPELLANT FOR F.Y. 2009-10 AND IT IS ON THE BASI S OF THIS TRIAL BALANCE THAT THE ASSESSING OFFICER OF THE SEARCHED PERSON RECORD ED THE SATISFACTION THAT IT PERTAINS TO THE APPELLANT. IT IS, HOWEVER, ADMITTED BY THE LD. DR THAT NO SUCH ITA NO. 807/DEL/2017 11 TRIAL BALANCE OF ASSESSEE FINDS PLACE IN THE DOCUME NTS SEIZED ON THE IMPUGNED SEARCH NOR ANY SUCH TRIAL BALANCE WAS FORW ARDED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON TO THE ASSESSING OFF ICER OF THE ASSESSEE. ON THIS PREMISE ONLY, WE ARE OF THE OPINION THAT THE S ATISFACTION NOTE RECORDED BY THE SEARCHED PARTY ITSELF IS DEFECTIVE. AS ALREA DY NOTED, IT PERTINENT TO NOTE THAT FOR INVOCATION OF SECTION 153C, VALID SATISFAC TION NOTE OF THE ASSESSING OFFICER OF SEARCHED PARTY IS ESSENTIAL CONDITION TO BE SATISFIED. SUCH SATISFACTION NOTE NEEDS TO BE RECORDED BY GIVING CO RRECT DETAILS OF DOCUMENTS SEIZED IN THE SEARCH BEFORE BEING SATISFIED THAT SU CH DOCUMENTS BELONG TO THE PERSON OTHER THAN THE PERSON SEARCHED. THEREFORE, O N THIS ASPECT OF THE CASE, WE FIND SUBSTANCE IN THE CONTENTIONS OF THE ASSESSE E THAT ONCE THE VERY FOUNDATION OF PROCEEDINGS, I.E., RECORDING OF VALID SATISFACTION NOTE, IS DEFECTIVE, THE ASSESSING OFFICER OF THE ASSESSEE WO ULD NOT ACQUIRE A LEGALLY VALID JURISDICTION TO INITIATE PROCEEDINGS U/S. 153 C OF THE ACT. 7. THE LD. D.R. CONTENDED THAT THIS APPEARS TO BE A TYPOGRAPHICAL ERROR WHICH SHOULD NOT BE GIVEN ANY WEIGHTAGE AT ALL FOR DECIDING THE VALIDITY OF INITIATION OF PROCEEDINGS U/S.153C W.R.T. SATISFACT ION NOTE. WE DO NOT FIND SUBSTANCE IN THE CONTENTION OF THE LD. DR THAT IT W AS A SHEER TYPOGRAPHICAL MISTAKE. ONCE, THE ASSESSING OFFICER OF THE SEARCHE D PERSON MADE A MISTAKE IN MENTIONING THE DOCUMENTS IN THE SATISFACTION NOT E, AND FORWARDED SOME OTHER DOCUMENTS PERTAINING TO SHARE TRANSACTIONS TO THE ASSESSING OFFICER OF ASSESSEE, THE ASSESSING OFFICER OF THE APPELLANT WA S ALSO REQUIRED TO VERIFY AND EXAMINE THOSE DOCUMENTS AND THEN TO RECORD HIS OWN SATISFACTION FOR ISSUING NOTICE U/S. 153C OF THE ACT. HOWEVER, HE AL SO DID NOT REFER RECOVERY OF ANY SUCH DOCUMENTS IN HIS OWN SATISFACTION NOTE DATED 03.03.2014, AS REPRODUCED ABOVE, BUT RECORDED HIS SATISFACTION ABS OLUTELY RELYING ON THE ITA NO. 807/DEL/2017 12 SATISFACTION NOTE OF THE ASSESSING OFFICER OF SEARC HED PARTY. SUCH A GRAVE DISCREPANCY WHICH HITS THE ACQUISITION OF JURISDICT ION AT THE THRESHOLD OF INITIATION OF PROCEEDINGS U/S. 153C, IN OUR MIND CA NNOT BE BRANDED AS A TYPOGRAPHICAL MISTAKE AT THE END OF BOTH THE ASSESS ING OFFICERS OF THE PERSON SEARCHED AND OF THE APPELLANT. HAD IT BEEN A CASE OF TYPOGRAPHICAL ERROR, THEN IT COULD HAD BEEN CORRECTED AT APPROPRIATE STA GE AND ALSO THE SAME THING WOULD NOT HAVE BEEN REPEATED BY THE A.O. OF T HE ASSESSEE IN HIS SATISFACTION NOTE DATED 23.03.2014 TOO. IN FACT, BO TH THE SATISFACTION NOTES HAVE BEEN RECORDED WITHOUT APPLICATION OF MIND, BAS ED ON WRONG AND NON- EXISTENT FACTS. 8. ADVERTING TO OTHER CONTENTION OF THE LD. AR THAT THE SATISFACTION NOTE SHOULD MENTION THAT THE DOCUMENT FOUND AND SEIZED A RE INCRIMINATING IN NATURE. IT WAS CONTENDED THAT IF THERE IS NO SUCH F INDING IN THE SATISFACTION NOTE, SUCH SATISFACTION NOTE CANNOT PROVIDE VALID J URISDICTION TO INITIATE PROCEEDINGS U/S.153C. IT WAS ALSO CONTENDED THAT TH E LAW NEVER INTENDED TO INITIATE PROCEEDINGS U/S.153C IN ALL SUCH CASES WHE RE THE DOCUMENTS ARE FOUND AND SEIZED RELATING TO A 3 RD PARTY IN A SEARCH CARRIED ON SOMEONE, IRRESPECTIVE OF THE NATURE OF SUCH DOCUMENTS I.E. W HETHER OF INCRIMINATING NATURE OR NOT. THE DETAILED ARGUMENTS ON THIS ASPEC T HAVE BEEN ADVANCED BY BOTH THE PARTIES, AS MENTIONED ABOVE. ON EXAMINATIO N OF BOTH THE SATISFACTION NOTES DATED 21.02.2014 AND 03.03.2014, WE FIND THAT THERE IS NOT EVEN A WHISPER THAT THE DOCUMENTS FOUND AND SEIZED, WHICH ARE THE BASIS OF INITIATION OF PROCEEDINGS U/S.153C ARE INCRIMINATIN G IN NATURE. THE SATISFACTION NOTES SIMPLY MENTIONS THE DOCUMENTS SE IZED W.R.T. THE PG. NOS. AND NATURE THEREOF AS TRIAL BALANCE OF ASSESSEE FOR F.Y.2009-10. THE SATISFACTION NOTES EVEN DO NOT MENTIONED THAT THE S AID TRIAL BALANCE ITA NO. 807/DEL/2017 13 MENTIONED IN THE SATISFACTION NOTE OR ANY OTHER DOC UMENT FOUND & SEIZED IS OF INCRIMINATING NATURE. THE QUESTION WHETHER THE S ATISFACTION NOTE SHOULD REFLECT THE INCRIMINATING NATURE OF DOCUMENTS SEIZE D FOR ACQUIRING JURISDICTION U/S. 153C, HAS BEEN ANSWERED BY HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. IBC KNOWLEDGE PARK PVT. LTD. 385 ITR 346 (K AR.) . ON PG.378, PARA-56 OF THE SAID CASE, THE HONBLE HI GH COURT HAS HELD AS UNDER:- WE ANSWER THE SUBSTANTIAL QUESTION OF LAW NO.2 BY HOLDING THAT THE TRIBUNAL WAS NOT CORRECT IN HOLDIN G THAT THE ASSESSMENT UNDER SECTION 153C WAS VALID DESPITE THERE BEING NO SATISFACTION RECORDED TO THE EFFECT THAT THE DOCUMENT FOUND DURING THE SEARCH ON 17 TH JUNE 2008 WERE INCRIMINATING IN NATURE AND PRIMA FACIE REPRESENTED UNDISCLOSED INCOME WHILE HOLDING AS ABOVE, HONBLE KARNATAKA HIGH COUR T HAS TAKEN SUPPORT FROM PLETHORA OF OTHER DECISIONS AS REFERRED TO IN THE SAID DECISION. FURTHER, THE LEGISLATURE HAS NEVER INTENDED TO PROVIDE A BLA NKET LICENSE TO THE REVENUE FOR INITIATING PROCEEDINGS U/S.153C IN THE CASES OF ALL SUCH ASSESSEES OF WHOM THE DOCUMENTS ARE FOUND AND SEIZED IN SEARC H OF A 3 RD PARTY. THE DOCUMENTS FOUND AND SEIZED SHOULD BE PRIMA FACIE OF INCRIMINATING NATURE FOR PROVIDING THE JURISDICTION TO INITIATE PROCEEDI NGS U/S.153C ON SUCH PERSONS. IN THIS CASE, FOLLOWING THE RATIO OF IBC K NOWLEDGE PARK PVT. LTD. (SUPRA) AND FOR THE OTHER REASONS AS DELIBERATED AB OVE, WE HOLD THAT IN THE ABSENCE OF A FINDING IN THE SATISFACTION NOTES FOR THE DOCUMENTS FOUND AND SEIZED ARE OF INCRIMINATING NATURE, NO LEGALLY VALI D PROCEEDINGS U/S.153C CAN BE INITIATED. IN THE PRESENT CASE, UNDISPUTEDLY, TH ERE IS NO SUCH FINDING. IN VIEW OF ALL THE ABOVE DISCUSSION, WE ARE, THEREFORE , OF THE CONSIDERED OPINION THAT THE INITIATION OF PROCEEDINGS U/S.153C CANNOT BE VALIDATED ON THIS COUNT ITA NO. 807/DEL/2017 14 TOO. ACCORDINGLY, THE PROCEEDINGS U/S.153C AND CONS EQUENTIAL ASSESSMENT DESERVE TO BE QUASHED. 9. ONCE, THE IMPUGNED ASSESSMENT U/S. 153C OF THE A CT HAS BEEN QUASHED ON LEGAL ASPECT OF THE CASE, AS DISCUSSED ABOVE, WE NEED NOT TO ADJUDICATE UPON EXTENSIVE ARGUMENTS MADE BY BOTH THE PARTIES O N THE MERITS OF THE ADDITION MADE AND SUSTAINED BY THE AUTHORITIES BELO W. 10. IN RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 18TH JULY, 2 018. SD/- SD/- (BHAVNESH SAINI) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH JULY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI