The ACIT, 1(1), Bhopal V. Smt. Indiradevi Sudhir Kumar Gothi, Itarsi

ITSSA 1/IND/2012

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7648 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: S S DESH
• Keywords: Search and seizure; Loose papers; Document seized; Assessment record; Block assessment; Documents seized
• Section: 143(3); 133A; 153A; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER IT(SS)A NO.1/IND/2012 BLOCK PERIOD 1.4.1996 TO 22.10.2002 ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL :: APPELLANT VS SMT. INDIRADEVI SUDHIR KUMAR GOTHI ITARSI PAN AFWPG-0363D :: RESPONDENT APPELLANT BY SHRI ARUN DEWAN RESPONDENT BY SHRI S.S. DESHPANDE DATE OF HEARING 21 .03.2012 DATE OF PRONOUNCEMENT 2 6 .03.2012 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 24 TH OCTOBER, 2011 WHEREIN THE LEARNED FIRST APPELLATE A UTHORITY 2 DELETED THE PENALTY OF RS. 4 LACS LEVIED U/S 158BFA (2) OF THE ACT BY THE ASSESSING OFFICER. 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SHRI ARUN DEWAN, LEARNED SENIOR DR AND SHRI S.S. DESHPANDE, L EARNED COUNSEL FOR THE ASSESSEE. AT THE OUTSET, MR. DESHPA NDE CONTENDED THAT THE TRIBUNAL IN QUANTUM APPEAL DELET ED THE ADDITION IN THE CASE OF THE ASSESSEE VIDE ORDER DAT ED 18 TH AUGUST, 2011, THEREFORE, NO PENALTY SURVIVES. THIS ASSERTIO N OF THE ASSESSEE WAS NOT CONTROVERTED BY THE REVENUE BEING FACTUALLY CORRECT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE FACTS, IN BRIEF, ARE THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT WAS CARRIED OUT ON 23.10.2002 TO 25.10.2002 AT THE BUSINESS AND RESIDE NTIAL PREMISES OF GOTHI FAMILY IN WHICH THE ASSESSEE IS A LSO ONE OF THE FAMILY MEMBERS. THE GOTHI FAMILY DEALS IN PURCHASE/ SALE OF SILVER AND GOLD ORNAMENTS ALONG WITH PAWNING AND GIRVI BUS INESS. SHRI SUDHIR KUMAR GOTHI AND SHRI SANJAY KUMAR GOTHI ARE THE PARTNERS OF THE FIRM, VIZ. M/S GOTHI JEWELLERS HAV ING EQUAL SHARES. DURING THE COURSE OF SEARCH AND SEIZURE AC TION, CASH, GOLD AND SILVER JEWELLERY, FDRS, BOOKS OF ACCOUNTS AND CERTAIN 3 LOOSE PAPERS WERE SEIZED. CONSEQUENT TO THE SEARCH , BLOCK ASSESSMENT WAS FRAMED IN RESPECT OF M/S GOTHI JEWEL LERS, SATISH CHANDRA SAMITMAL GOTHI, SUDHIR SAMIRMAL GOTHI, SANJ AY KUMAR SAMIRMAL GOTHI, SAMIRMAL GOTHI, SAMIRMAL PHOOLCHAND GOTHI, M/S GOTHI BROTHERS, PUSHPADEVI SATISHCHANDRA GOTHI, INDRADEVI SUDHIRKUMAR GOTHI AND SMT. SUSHILADEVI GOTHI. THE SE ASSESSES AND THE REVENUE WERE IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL ELABORATELY DISCUSSED THE ISSUE RUNNING IN TO 230 PAGES AND VIDE ORDER DATED 18 TH AUGUST, 2011, DISMISSED THE APPEALS OF THE REVENUE AND PARTLY ALLOWED THE CROSS OBJECTIONS FILED BY THE ASSESSEE AS INDICATED IN THE ORDER. TO CUT SHORT TH E MATTER, WE ARE REPRODUCING HEREUNDER THE SAID ORDER OF THE TRI BUNAL :- IT(SS) A NO. 33, 34/IND/2006 AND IT(SS) 225/IND/07 214. IN ALL THESE CASES, ASSESSMENTS WERE FRAMED U/S 158BD OF THE ACT. THE LEGAL GROUND TAKEN BY THE ASSESSEE RELATES TO NON-RECORDING OF SATISFACTION U/S 158BD BY THE ASSESSING OFFICER WHICH IS A MANDATORY REQUIREMENT BEFORE INITIATION OF PROCEEDINGS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER U/S 158BD WAS NOT JUSTIFIED SINCE THERE WAS NO SATISFACTION TO THE EFFECT THAT ANY DOCUMENT WAS FOUND DURING THE COURSE OF 4 SEARCH INDICATING ANY UNDISCLOSED INCOME OF PRESENT ASSESSEES SO AS TO EMPOWER THE ASSESSING OFFICER TO ASSUME JURISDICTION U/S 158BD. OUR ATTENTION WAS ALSO DRAWN TO THE PROCEEDINGS DATED 23.7.2003 WHICH MERELY STATED IN VIEW OF THE CIRCUMSTANCES MENTIONED REGARDING SEARCH AND IN VIEW OF THE PROPOSAL MADE BY THE INVESTIGATING WING IN THE APPRAISAL REPORT, NOTICE U/S 158BD WAS BAD IN LAW. AS PER THE LD. COUNSEL FOR THE ASSESSEE, EVEN THE ISSUE WITH REGARD TO TREATING THE APPRAISAL NOTE AS SATISFACTION FOR THE PURPOSE OF SECTION 158BD HAS BEEN DEALT IN DETAIL BY THE COORDINATE BENCH IN THE CASE OF CHIRCHID HYDRO LIMITED REPORTED AT 17 ITJ 197 ORDER DATED 29.10.2010. 215. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE JURISDICTION TO FRAME ASSESSMENT HAS BEEN ASSUMED BY THE ASSESSING OFFICER U/S 158BD OF THE ACT, UNDER WHICH RECORDING OF SATISFACTION IS A CONDITION MANDATORY WHICH HAS NOT BEEN COMPLIED WITH. EVEN AFTER GIVING OPPORTUNITY TO THE DEPARTMENT, NOTHING COULD BE PRODUCED BEFORE US TO SUBSTANTIATE THAT ANY SUCH SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER BEFORE INITIATION OF SUCH PROCEEDINGS U/S 158BD OF THE ACT. THE ISSUE WITH REGARD TO ASSUMPTION OF JURISDICTION U/S 158BD OF THE ACT WITHOUT RECORDING OF SATISFACTION HAS BEEN ELABORATELY DEALT WITH BY THE COORDINATE BENCH IN THE CASE OF CHIRCHIND 5 HYDRO (SUPRA) WHEREIN FOLLOWING WAS THE OBSERVATION OF THE BENCH :- 78. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND DELIBERATED ON THE CASE LAWS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AND BY THE RESPECTIVE COUNSELS DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD WE FIND THAT THE SEARCH WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF DIRECTORS/PARTNERS OF THESE CONCERNS AND NOT AT THE PREMISES OF THESE CONCERNS. AFTER THE SEARCH WAS CARRIED OUT AT THE RESIDENCE OF DIRECTORS/PARTNERS OF THESE ASSOCIATE CONCERNS, ASSESSMENT WAS FRAMED IN RESPECT OF THESE CONCERNS U/S 153C OF THE ACT ON THE PLEA THAT INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AT THE RESIDENCE OF PARTNERS/DIRECTORS. THE ASSUMPTION OF POWER BY THE ASSESSING OFFICER U/S 153C OF THE ACT FOR FRAMING THE ASSESSMENT IS SUBJECT TO THE CONDITION THAT THE ASSESSING OFFICER ASSESSING THE SEARCH PARTY, IS SATISFIED THAT THE JEWELLERY O R OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS, SEIZED OR REQUISITIONED, PERTAIN TO SOME PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCOUNTS OR THE DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED, SHALL BE HANDED OVER BY THE ASSESSING OFFICER OF SEARCHED PERSON TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT THE ASSESSING OFFICER SHALL PROCEED AGAINST EACH OF SUCH PERSONS AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. THE OPENING WORD OF SECTION 153C SPEAKS THAT NOT- WITH-STANDING ANYTHING CONTAINED IN SECTIONS 139, 147, 148, 149, 151 AND 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, JEWELLERY OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS TO A PERSON OTHER 6 THAN THE PERSON REFERRED TO IN SECTION 153A, MEANING THEREBY THE ASSESSING OFFICER IS TO RECORD A SATISFACTION TO THE EFFECT THAT SUCH JEWELLERY OR DOCUMENT SO SEIZED DOES NOT BELONG TO THE SEARCHED PERSON BUT TO SOME OTHER PERSON REFERRED TO IN SECTION 153A OF THE ACT. THUS, THE PRE-REQUISITE OF SECTION 153C IS THAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO SATISFY HIMSELF THAT SOME MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERSON. THEN THE ASSESSING OFFICER MAKING THE ASSESSMENT OF SEARCHED PERSON HAS TO HAND-OVER THE SAID INCRIMINATING MATERIAL BELONGING TO SOME PERSON OTHER THAN THE SEARCHED PERSON TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE SAID OTHER PERSON. THEREAFTER, THE ASSESSING OFFICER HAVING THE JURISDICTION OVER THE PERSON OTHER THAN THE SEARCHED PERSON SHALL ISSUE A NOTICE U/S 153C TO SUCH OTHER PERSON AND ASSESS HIS INCOME IN TERMS OF THE PROVISIONS OF SECTION 153A OF THE ACT. THUS, THE NOTICE U/S 153C OF THE ACT IS TO BE ISSUED ONLY AFTER RECORDING OF SATISFACTION. THE ASSUMPTION OF JUSRISDICTION TO ISSUE NOTICE AND FRAME ASSESSMENT UNDER SECTION 153C READ WITH SECTION 153A IS ACQUIRED BY THE ASSESSING OFFICER ONLY AFTER HAVING BEEN SATISFIED AND SUCH SATISFACTION IS RECORDED IN WRITING. THESE PROVISIONS OF SECTION 153C ARE IN PARI MATERIA WITH THE PROVISIONS OF SECTION 158BD WHICH PROVIDES THAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO SATISFY HIMSELF THAT SOME UNDISCLOSED INCOME FOUND BY HIM BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERSON AND THEN HE OR THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AFTER RECEIPT OF RECORD FROM THE ASSESSING OFFICER OF THE SEARCHED PERSON HAS TO ISSUE NOTICE U/S 158BD OF THE ACT AND HAS TO ASSESS INCOME OF SUCH OTHER PERSON. THE PROVISIONS OF SECTION 158BD OF THE ACT WERE EXAMINED IN DETAIL BY THE 7 HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI; 208 CTR 97. THE SAID HONBLE SUPREME COURT DECISION WAS FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF NEW DELHI AUTO FINANCE LIMITED; 300 ITR 83. THE HONBLE SUPREME COURT HAS LAID DOWN A PROPOSITION THAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO NECESSARILY RECORD IN WRITING THE SPECIFIC OBJECTIVE SATISFACTION WHICH I S MANDATORY TO THE EFFECT THAT THE UNDISCLOSED INCOME FOUND BY HIM, ON THE BASIS OF SEIZED MATERIAL, BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERSON. INSOFAR AS THE PROVISIONS OF SECTION 153C OF THE ACT ARE IN PARI MATERIA WITH THE PROVISIONS OF SECTION 158BD OF THE ACT WITH REGARD TO THE REQUIREMENTS OF RECORDING NECESSARY SATISFACTION BY THE ASSESSING OFFICER OF SEARCHED PERSON, THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (SUPRA) SHALL APPLY WITH FULL FORCE IN CASE OF INITIATION OF PROCEEDINGS U/S 153C. THE ASSUMPTION OF JURISDICTION AND FRAMING OF ASSESSMENT BY THE ASSESSING OFFICER U/S 153C WITHOUT RECORDING SUCH SATISFACTION IS VOID AB INITIO. APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT, AS DISCUSSED ABOVE, IT IS QUITE EVIDENT THAT RECORDING OF SATISFACTION BEFORE ISSUE OF NOTICE U/S 153C IS MANDATORY AND IN CASE WHERE NO SUCH SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER IN THE CASE OF SEARCHED PERSON TO THE EFFECT THAT SOME INCRIMINATING MATERIAL SO FOUND BELONGS TO SOME OTHER PERSON, THE ASSESSMENT FRAMED U/S 153C WILL BE LIABLE TO BE QUASHED. HOWEVER, DETAILED FINDING HAS BEEN RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER EXAMINING THE ASSESSMENT RECORDS OF THE CONCERNED PERSON/PARTIES TO THE EFFECT THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON. THIS FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT BEEN CONTROVERTED 8 BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, APPLYING THIS PROPOSITION OF LAW, THE ASSUMPTION OF JURISDICTION AND FRAMING OF ASSESSMENT IN THE INSTANT CASES BY THE ASSESSING OFFICER U/S 153C WERE BAD IN LAW. 79. IT WAS ARGUED BY SHRI K.K. SINGH, THE LEARNED CIT DR, THAT SATISFACTION NOTE, AS STIPULATED U/S 153C OF THE ACT, IS TO BE SEEN IN THE CONTEXT OF SATISFACTION NOTE PREPARED BY THE ADIT IN THE FORM OF APPRAISAL NOTE AFTER THE SEARCH IS OVER. HE PLACED ON RECORD A COPY OF THE APPRAISAL NOTE WHICH IS PREPARED BY THE ADIT AFTER THE SEARCH WAS OVER WHEREIN DETAILS OF SEARCH HAVING BEEN CARRIED OUT ALONG WITH THE SURVEY CARRIED OUT ON THE SAME FAMILY MEMBERS OF THE GROUP, WERE DULY MENTIONED ALONG WITH ASSERTION FOR ISSUE OF NOTICE U/S 153C IN CASES OF ASSESSEE NOT COVERED BY SEARCH BUT WHERE ONLY SURVEY ACTION HAS BEEN UNDERTAKEN. IT WAS CONTENDED BY THE LEARNED CIT DR THAT WHENEVER A SEARCH IS BEING PLANNED, ON THE BASIS OF DETAILED INFORMATION COLLECTED BY THE DEPARTMENT AND AFTER DUE APPLICATION OF MIND, STRATEGIES ARE FINALIZED IN RESPECT OF PLACES/PERSONS/CONCERNS WHERE SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT IS TO BE UNDERTAKEN AS WELL AS THE PLACES/PERSONS/CONCERNS WHERE ACTION U/S 133A OF THE ACT WILL SERVE THE PURPOSE. THE WHOLE ACTION OF SEARCH AND SURVEY IS PLANNED AT A TIME AND THE DEPARTMENT ALSO KEEPS IN MIND THAT THERE SHOULD NOT BE ANY HARASSMENT TO THE PERSONS/CONCERNS FALLING IN THE SAME GROUP, WHO ARE NOT SO IMPORTANT BUT ARE VERY MUCH RELEVANT AND ASSOCIATED WITH THE ASSESSEE, WHICH NECESSITATED SIMULTANEOUS SURVEY AT THEIR PREMISES, SO THAT NOTHING IS LEFT OUT. OUR ATTENTION WAS DRAWN TO VARIOUS LISTS PREPARED AS A PART OF APPRAISAL NOTE DULY MENTIONING THE NAMES OF THE PERSONS ALONG WITH THEIR ADDRESSES, DATE OF SEARCH, WHO ARE APPEARING IN THE WARRANT 9 OF AUTHORIZATION U/S 132. A LIST WAS ALSO PREPARED TO SHOW THE PREMISES WHEREIN SURVEY WAS UNDERTAKEN U/S 133A OF THE ACT. IN THE APPRAISAL NOTE, A LIST WAS ALSO GIVEN WHERE ACTION U/S 153C OF THE ACT WAS INTENDED TO BE INITIATED. AS PER THE LEARNED CIT DR, SUCH LIST COMPRISES OF THE PERSONS OTHER THAN THE PERSON AT WHOSE PREMISES SEARCH IS BEING CARRIED OUT IN RESPECT OF THE DOCUMENTS FOUND AT SUCH PLACES WHICH PERTAIN TO THE PERSON OTHER THAN PERSON AGAINST WHOM ACTION U/S 132 WAS UNDERTAKEN. AS PER THE LEARNED CIT DR , IT IS NOT ONLY THE OFFICER FRAMING THE ASSESSMENT SHOULD BE CONSIDERED AS ASSESSING OFFICER FOR RECORDING SATISFACTION BUT THE OTHER OFFICERS INVOLVED IN THE SEARCH AND SURVEY LIKE ADIT/DDIT SHOULD ALSO BE CONSIDERED. OUR ATTENTION WAS ALSO DRAWN TO THE PROVISIONS OF SUB-SECTION (7A) OF SECTION 2 DEFINING THE ASSESSING OFFICER TO MEAN ASSISTANT COMMISSIONER, DEPUTY COMMISSIONER, ASSISTANT DIRECTOR, DEPUTY DIRECTOR OR THE ITO, WHO IS VESTED WITH THE RELEVANT JURISDICTION BY VIRTUE OF DIRECTIONS OR ORDERS ISSUED UNDER SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 120 OR ANY OTHER PROVISION OF THIS ACT AND THE ADDITIONAL COMMISSIONER OR THE ADDITIONAL DIRECTOR OR JOINT COMMISSIONER OR JOINT DIRECTOR, WHO IS DIRECTED UNDER CLAUSE (B) OF SUB-SECTION (4) OF THAT SECTION TO EXERCISE OR PERFORM ALL OR ANY OF THE POWERS AND FUNCTIONS CONFERRED ON OR ASSIGNED TO AN ASSESSING OFFICER. AS PER THE LEARNED CIT DR, UNDER THE NEW SCHEME OF SECTION 153A/C, THERE IS NO NEED TO FIND OUT UNDISCLOSED INCOME, BUT THE ASSESSMENT IS MADE AFTER THE SEARCH IS CARRIED OUT TO ASSESS OR REASSESS THE INCOME OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING SIX ASSESSMENT YEARS AND THE CURRENT ASSESSMENT YEAR FALLING UPTO THE DATE OF SEARCH. HE FURTHER CONTENDED THAT UNDER THE OLD SCHEME OF SECTION 158BC/158BD OF THE ACT, THE DEPARTMENT WAS TO ASSESS THE UNDISCLOSED INCOME ON THE BASIS INCRIMINATING DOCUMENTS FOUND DURING THE COURSE 10 OF SEARCH WHEREAS UNDER THE NEW SCHEME OF SECTION 153A/153C, WHERE A SEARCH IS INITIATED U/S 132 OR BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED U/S 132A, THEN THE DEPARTMENT HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH ASSESSEE FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ACCORDINGLY, IT WAS PLEADED THAT JUDICIAL COGNIZANCE GIVEN TO THE LANGUAGE OF SECTION 158BD IN CASE OF MANISH MAHESHWARI BY THE HONBLE SUPREME COURT INSOFAR AS RECORDING OF NECESSARY SATISFACTION IS CONCERNED, SHOULD NOT BE TAKEN WHILE INTERPRETING SECTION 153C OF THE INCOME TAX ACT UNDER THE NEW SCHEME OF FRAMING ASSESSMENT IN SEARCH CASES. AS PER THE LEARNED CIT- DR, IN THE NEW SCHEME OF THE ACT, APPRAISAL REPORT AMOUNTS TO SATISFACTION BY THE ASSESSING OFFICER FOR ISSUING A NOTICE U/S 153C OF THE ACT. 80. ON THE OTHER HAND, IN REPLY TO THE LEARNED CIT DR'S CONTENTIONS, IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT EVEN UNDER THE NEW SCHEME OF ASSESSMENT U/S 153C OF THE ACT, SATISFACTION IS TO BE NECESSARILY RECORDED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON INDICATING THE DOCUMENTS SEIZED OR REQUISITIONED, WHICH BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A OF THE ACT. HE INVITED OUR ATTENTION TO THE PRECISE LANGUAGE USED IN SECTION 153C OF THE ACT WHICH CATEGORICALLY REQUIRES THE ASSESSING OFFICERS SATISFACTION TO THE EFFECT THAT VALUABLES, SEIZED DOCUMENTS FOUND DURING THE COURSE OF SEARCH, WHICH BELONG TO A PERSON OTHER THAN A PERSON SEARCHED AND THE PROCEDURE OF HANDING OVER OF THESE DOCUMENTS/VALUABLES, ETC. TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THEREAFTER OBLIGATION OF THE ASSESSING OFFICER OF SUCH OTHER PERSON TO PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON 11 NOTICE AND THEREAFTER TO ASSESS OR REASSESS THE INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. AS PER THE LEARNED COUNSEL FOR THE ASSESSEE, COPY OF SUCH SATISFACTION NOTE SHOULD BE GIVEN TO THE ASSESSEE WHEREAS THE APPRAISAL NOTE, AS REFERRED BY THE LEARNED CIT DR, IS A CONFIDENTIAL DOCUMENT PREPARED BY THE DEPARTMENT FOR THEIR INTERNAL USE AND COPY OF WHICH IS NOT HANDED OVER TO THE ASSESSEE. SUCH APPRAISAL REPORT IS A SECRET DOCUMENT PREPARED BY THE DEPARTMENT AND WHICH IS NOT OPEN TO THE ASSESSEE, THEREFORE, CANNOT BE TREATED AT PAR WITH THE SATISFACTION NOTE AS CONTEMPLATED U/S 153C OF THE ACT WITH REGARD TO THE DOCUMENTS SEIZED DURING THE PROCEEDINGS U/S 132, WHICH IS ALLEGED TO BE BELONGING TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A OF THE ACT. RELIANCE WAS ALSO PLACED ON THE PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI; 289 ITR 341(SUPRA) AND G.K. DRIVE SHAFT; 259 ITR 19 AND THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF RISHI CONSTRUCTION; 10 ITJ 346 AND ASNANI BUILDERS; 10 ITJ 618. 81. WE HAVE DELIBERATED UPON THE CONTENTIONS OF THE LEARNED CIT DR, SHRI K.K. SINGH AND LEARNED COUNSEL FOR THE ASSESSEE, SHRI H.P. VERMA, WITH REGARD TO INTERPRETATION OF RECORDING OF SATISFACTION WHILE ASSUMING JURISDICTION U/S 153C OF THE ACT. EVEN IN THE NEW SCHEME OF FRAMING OF ASSESSMENT IN CASE OF SEARCH CASES, THE LEGISLATURE HAS CLEARLY STIPULATED THE REQUIREMENT FOR RECORDING OF SATISFACTION WHILE ASSUMING JURISDICTION TO ISSUE NOTICE AND FRAME ASSESSMENT U/S 153C OF THE ACT WHICH REQUIRES THAT SATISFACTION TO BE RECORDED WITH REFERENCE TO THE DOCUMENTS AND OTHER MATERIALS FOUND DURING THE COURSE OF SEARCH BELONGING TO A PERSON OTHER THAN THE SEARCHED PERSON. PRIMA FACIE, ASSESSING OFFICER OF 12 SEARCHED PERSON SHOULD FORM AN OPINION WITH REGARD TO ANY DOCUMENT, VALUABLE, ETC. AS FOUND DURING THE COURSE OF SEARCH THAT SUCH DOCUMENT, WHICH IS DECLINED BY THE SEARCHED PERSON, ACTUALLY BELONGS TO SOME OTHER PERSON AGAINST WHOM PROCEEDINGS U/S 153C ARE REQUIRED TO PUT INTO OPERATION. AFTER SUCH RECORDING, OF SATISFACTION, THE DOCUMENTS SO SEIZED SHOULD BE HANDED OVER TO THE ASSESSING OFFICER OF SUCH OTHER PERSON. THE LEGAL REQUIREMENT OF RECORDING OF SUCH SATISFACTION CANNOT BE SUBSTITUTED BY APPRAISAL NOTE WHICH IS PREPARED BY THE SEARCH PARTY AFTER COMPLETION OF SEARCH INSOFAR AS SUCH APPRAISAL NOTE IS A SECRET DOCUMENT PREPARED BY THE DEPARTMENT FOR THEIR INTERNAL USE, CONTENTS OF WHICH ARE NOT CONVEYED TO THE ASSESSEE NOR ITS COPY IS SUPPLIED TO THE ASSESSEE EVEN ON MAKING A WRITTEN REQUEST. THE APPRAISAL NOTE SO PREPARED BY THE DEPARTMENT IS MEANT TO MONITOR AFTER THE SEARCH PROCEEDINGS ARE OVER SO AS TO ENSURE EXHAUSTIVE ASSESSMENT OF ALL SEARCHED PERSON WITH RESPECT TO THEIR CORRECT INCOME AND TO PLAN A STRATEGY FOR FURTHER DEEP INQUIRY AND INVESTIGATION OF DOCUMENTS FOUND DURING THE COURSE OF SEARCH. SINCE COPY OF SUCH APPRAISAL NOTE IS NOT SUPPLIED TO THE ASSESSEE, IT CANNOT BE TAKEN AT PAR WITH THE REQUIREMENT OF RECORDING OF SATISFACTION NOTE AS STIPULATED U/S 153C OF THE ACT, WHICH IS A MANDATORY REQUIREMENT. WHAT IS THE LEGISLATIVE INTENT OF SUCH SATISFACTION AND IN WHAT MANNER IT SHOULD BE RECORDED HAS BEEN DEALT WITH IN THE JUDICIAL PRONOUNCEMENTS IN THE CASES OF MANISH MAHEHWARI AND G.K. DRIVE SHAFT BY THE HONBLE SUPREME COURT. ACCORDINGLY, WE ARE NOT INCLINED TO AGREE WITH THE PROPOSITION THAT THE APPRAISAL NOTE PREPARED BY THE DEPARTMENT SHOULD BE TREATED AS A SATISFACTION NOTE AS REQUIRED TO BE RECORDED IN TERMS OF SECTION 153C OF THE ACT SO AS TO EMPOWER THE ASSESSING OFFICER TO ASSUME JURISDICTION TO ISSUE NOTICE AND THEREAFTER FRAME ASSESSMENT U/S 153A READ WITH SECTION 143(3) OF THE ACT. 13 82. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHO HAS QUASHED THE ASSESSMENT FRAMED U/S 153C OF THE ACT. FURTHER, THE DETAILED FINDING RECORDED BY THE LEARNED COMMISSIONER OF INCOME ./TAX (APPEALS) WITH RESPECT TO RECORDING OF SATISFACTION HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) QUASHING THE ASSESSMENTS FRAMED U/S 153C OF THE ACT IN THE CASES OF ALL THESE ASSESSES. 216. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SUBHASHCHANDRA BHANIRAMKA V. ACIT; 320 ITR 349 HELD THAT SATISFACTION MUST BE INDEPENDENT AND CONTAINS REASONS. SATISFACTION RECORDED HAD TO BE INDEPENDENT AND SUBJECTIVE AND NOT A CASUAL REFERENCE TO THE SEIZED MATERIALS. SIMILARLY, HONBLE DELHI HIGH COURT IN THE CASE OF ANUPAM SWEETS; 321 ITR 485 HELD THAT NO SATISFACTION RECORDED IN CASE OF ASSESSEE I.E. THIRD PERSON, ASSESSMENTS ON ASSESSEE NOT JUSTIFIED AND BAD IN LAW AND WITHOUT JURISDICTION. SIMILAR VIEW HAS BEEN TAKEN BY DELHI HIGH COURT IN CASE OF NEW DELHI AUTO FINANCE PVT. LTD. 300 ITR 83 WHEREIN IT WAS HELD THAT NO SATISFACTION HAVING BEEN RECORDED IN THE CASE OF THE ASSESSEE AND THEREFORE THE NOTICE ISSUED WAS VAGUE AND SHOW PATENT NON-APPLICATION OF MIND AND WAS NOT VALID. 217. RECENTLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RADHEY SHYAM BANSAL HELD AS UNDER :- 14 (II) THE WORD SATISFACTION HAS NOT BEEN DEFINED I N THE ACT. BY ITS VERY NATURE SATISFACTION MUST PRECEDE THE SENDING OF PAPERS/DOCUMENTS BY THE SEARCHED PERSON S A.O. TO THE THIRD PERSONS A.O. MERE USE OR MENTION OF THE WORD SATISFACTION IN THE ORDER/NOTE WILL NOT MEET THE REQUIREMENT OF CONCEPT OF SATISFACTION AS USED IN S. 158BD. THE SATISFACTION HAS TO BE IN WRITING AND C AN BE GATHERED FROM THE ASSESSMENT ORDER, IF IT IS SO MENTIONED/RECORDED, OR FROM ANY OTHER ORDER, NOTE O R RECORD MAINTAINED BY THE A.O. OF THE PERSON SEARCHE D. THE A.O. MUST REACH A CLEAR CONCLUSION THAT GOOD GR OUND EXISTS FOR THE A.O. OF THE THIRD PERSON TO INITIATE PROCEEDINGS AS MATERIAL BEFORE HIM SHOWS OR WOULD ESTABLISH UNDISCLOSED INCOME OF A THIRD PERSON. THERE MUST BE RATIONAL AND TANGIBLE NEXUS BETWEEN THE MATERIAL FOUND IN SEARCH AND THE SATISFACTION : (III) ON FACTS (WITHOUT GOING INTO THE ISSUE OF WHE THER THE A.O. WAS FUNCTUS OFFICIO), THE ASSESSMENT OR DER PASSED IN THE CASE OF MANOJ AGGARWAL DOES NOT SHOW ANY SATISFACTION THAT ANY UNDISCLOSED INCOME BELONGS TO THE ASSESSEE. THOUGH MANOJ AGGARWALS A.O. WROTE A LETTER TO THE ASSESSEES A.O. INFORMING HIM THAT THE ASSES SEE WAS PROVIDING BOGUS ACCOMMODATION BOOK ENTRIES AND THE QUANTUM OF TRANSACTIONS WAS GIVEN AS PER ANNEXU RES, THE ANNEXURES WERE MISSING FROM THE FILE. NO EVIDENCE AND MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAD RECEIVED CASH FOR THE ENTRIES. SO, TH E ONUS ON THE A.O. THAT THERE WAS VALID SATISFACTION WAS NOT DISCHARGED. 218. IN THE CASE OF INDRA DEVI GOTHI; IT(SS) 34/06 AND SMT. PUSHPADEVI GOTHI; IT(SS) 34/06 WE FIND THAT NO SATISFACTION WAS RECORDED AS ENVISAGED U/S 158BD, THEREFORE, ASSESSMENT FRAMED WITHOUT RECORDING OF SATISFACTION IS SET ASIDE ON THIS LEGAL GROUND ITSELF. THE FINDINGS RECORDED BY THE LEARNED CIT(A) IN THE CASE OF SUSHILADEVI GOTHI (IT(SS)A NO. 15 225/IND/07) TO THE EFFECT THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO AS ENVISAGED U/S 158BD HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. THE FINDING RECORDED BY THE CIT(A) IS AS PER MATERIAL ON RECORD. APPLYING THE PROPOSITION OF LAW AS DISCUSSED IN THE ABOVE CASES TO THE FACTS OF THE INSTANT CASE I.E. ITA NO. 225/IND/2007, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN ANNULLING THE ASSESSMENT FRAMED U/S 158BD WITHOUT RECORDING SATISFACTION. THE ISSUE IN ALL THESE THREE APPEALS IN (IT(SS) A NO. 33, 34/IND/2006 AND IT(SS) A NO. 225/IND/2007 IS SQUARELY COVERED BY THE AFORESAID ORDER, ACCORDINGLY THE ASSESSMENT FRAMED U/S 158BD IS HELD TO BE NULL AND VOID. IN THE CASE OF THE PRESENT ASSESSEE, SINCE NO SATIS FACTION WAS RECORDED, AS ENVISAGED UNDER SECTION 158BD OF THE A CT, THE COMMISSIONER OF INCOME TAX (APPEALS) SET ASIDE THE ASSESSMENT ON THE LEGAL GROUND AND THUS ANNULLED THE ASSESSMEN T. NOW THE QUESTION ARISES WHEN THE BASIS ON WHICH THE PENALTY WAS IMPOSED DOES NOT SURIVE, WHETHER THE PENALTY SURVIE S ? THE OBVIOUS REPLY IS NO. SECTION 158BFA(2) OF THE ACT IS IN PARA MATERIAL WITH SECTION 271(1)(C) OF THE ACT. AS PER SUB-SECTION (2) OF SECTION 158BFA, THE ASSESSING OFFICER OR THE COM MISSIONER, IN THE COURSE OF ANY PROCEEDINGS, MAY DIRECT THAT A PE RSON SHALL PAY 16 BY WAY OF PENALTY A SUM, AS PRESCRIBED IN THE SECTI ON IN RESPECT OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING O FFICER UNDER CLAUSE (C) OF SECTION 158BC OF THE ACT. HOWEVER, T HE BASIS ON WHICH THE PENALTY WAS IMPOSED IS NO MORE IN EXISTEN CE, AFTER THE ORDER OF THE TRIBUNAL, THERE REMAINS NO BASIS A TAL L FOR LEVYING THE PENALTY, CONSEQUENTLY, IT DOES NOT SURVIVE AND LIAB LE TO BE CANCELLED. OUR VIEW IS FORTIFIED BY THE RATIO LAID DOWN IN THE DECISION OF THE HONBLE APEX COURT IN K.C. BUILDERS VS. ACIT (2004) 265 ITR 562/135 TAXMAN 461 (SC). IN VIEW OF THESE FACTS, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 21 ST MARCH, 2012. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 26.3.2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-