Case Law Details
ACIT v Vijay Traders (ITAT Indore) – The provisions of section 153C are analogous to section 158BD and, therefore, decisions rendered with reference to the provisions of section 158BD would apply with reference to the cases falling u/s 153C unless the context requires otherwise. The Apex Court in the case of Manish Maheshwari (supra) after considering the provisions of section 158BD held that:
a. Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act
b. The books of accounts or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and
c. The Assessing Officer has proceeded u/s 158BC against such other person.
Since the provisions of section 153A are analogous of section 158BD in this regard, the above observation of the Apex Court would squarely apply with reference to the provisions of section 153A/153C of the Act.
Block assessment proceedings can be initiated only for the assessment of undisclosed income found as a result of a search and not for the verification of capital accretion of the source of an investment.
ACIT v Vijay Traders
ITAT BENCH, INDORE
ITA No. 6/Jab/2008
Assessment Year: 2002-2003
Decided on: 31 May 2011
Order
Per: R C Sharma, AM:
This is an appeal filed by the Revenue against the order of ld. CIT(A)-I, Jabalpur, dated 31.10.2007 for the AY 2002-03 in the matter of order passed u/s 153C r.w.s.143(3) of the I.T. Act, 1961. The following grounds have been raised by the Revenue:
1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in not appreciating the facts of the case.
2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in declaring the order of assessment passed u/s 153C r.w.s. 143(3) of the I.T. Act passed by the AO to be ab-initio null and void.
3. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs.24.66 lacs made by the AO against unexplained capital investment by the partners.
4. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in not considering interest charged u/s 234A, 234B and 234C of the I.T. Act treating the proceedings u/s 153C to be void ab-initio.
5. On the facts and in the circumstances of the case, the order of the ld. CIT(A) on the above issues may be set aside and that of the AO be restored.
2. In this appeal, the revenue is basically aggrieved by the order of the learned Commissioner of Income-tax (Appeals) declaring the order passed by the Assessing Officer u/s 153C as null and void ab initio.
3. Rival contentions have been heard and record perused. The facts in brief are that search and seizure operation was carried out u/s 132 at the residential and business premises of Santosh Sahu group of Sagar on 10.12.2003. Neither there was survey nor any search at the assessee’s premises. The assessee was issued notice u/s 153A of the Act on 28.3.2005 in compliance to which the assessee filed return on 2.1.2006. Thereafter, on 8.3.2006, the department again issued notice u/s 153C of the Act and the assessee filed return in compliance with notice u/s 153C on 13.3.2006. As per the material on record, the department has not issued any notice u/s 143(2) neither after filing of return u/s 153A nor after filing of return u/s 153C of the Act. On both the instances, notices u/s 143(2) were issued prior to filing of the return u/ss. 153A and 153C of the Act. Thereafter, the assessment was framed u/s 153C of the Act on 30.3.2006. This assessment was annulled by the learned Commissioner of Income tax (Appeals) by observing that jurisdiction was not correctly assumed by the 65Assessing Officer u/s 153C of the Act after having made the following observations :-
“6.2 I have carefully considered the facts on record and the submissions made by the rival parties. First of all, it is noted that the section 153C effects the substantive rights of a person in so far as a person who has not been searched is made to face the harsh consequences of reopening of six years’ cases. This section thus cannot be given a liberal interpretation since if it is so done, then the proceedings under this section can be initiated against a person-not searched merely on the ground that some account or even a bank statement of the person has been found in a search action. If in such a case invoking of section 153C is held to be justified, then this section can become a ready tool for reopening six year cases on any pretext of a person who had some dealing with the person-searched. The ld. AR has argued that before invoking section 153C there has to be some material on record to come out of the presumption of section 292C and which is possible only after confronting the impugned material to the person-searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12cases, involving about 40 assessments the AO has recorded identical stereo type satisfactions by stating that during search actions carried out in December 2003 in the cases of Santosh Kumar Sahu and others incriminating documents pertaining to each of the years were found and seized whereas the fact is that in some of the years the firm was not in existence and even in other cases too similar was the position. However these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is because of the reason that on a plain reading of section 153C it does not transpire that recording of a satisfaction is a must. But at the same time it is also to hold that it does not mean that required satisfaction could be highly subjective not open to scrutiny by the appellate authorities. The minimum requirement to justify the invoking of section 153C is that at least it should be possible to gather a satisfaction on having regard to the facts on record. But to gather this satisfaction there should be some seized record pertaining to the assessee which had been found in a search action. Further the same should have also been confronted to the assessee. But during assessment proceedings no seized record pertaining to the assessee was confronted to him. What was confronted were the documents impounded during survey action conducted at the office of Shri R.P. Kesharwani and even those were not found to be relevant for determining any income as no addition on the basis of these documents have been made. In view of these facts, it is hold that the invoking of section 153C against the assessee was bad in law. The proceedings so initiated therefore is held to be void ab initio and therefore this assessment is declared ab-initio null & void.
4. Ëven the addition on merit amounting Rs. 24.66 lacs in respect of the capital introduced by the partners was deleted by the learned Commissioner of Income tax (Appeals) after having made the following observations :-
“7. In the next ground of appeal the appellant on merit has challenged the addition of Rs.24.66 lacs representing the total amount of the capitals introduced by the partners during the year, which according to the A.O. have remained unexplained. The capital introduced by all the partners has been held to be unexplained for the reason that no documentary evidence in respect of the sources of investment was produced. The ld. A.R. in this regard has made detailed submission in which it is stated that all the partners introduced the capitals by cheque save for the initial amount of Rs. 1,000/- each which was deposited in cash. Four of the partners out of the six are holding PAN card. The source of the capital introduced in each case was the withdrawals made by the partner from another firm in which he was a partner. In support of the claim of withdrawals made from another firm, copy of the audited balance sheet of that firm has also been filed on additional evidence. In this application it is stated that the as could not file those evidences for the reason that no due opportunity was given while making the addition. Further the capital contributed by the partners cannot be brought to tax in the hands of the firm as long as the partners are identifiable and the transaction is genuine. The partners are identifiable as all of them hold bank accounts and the genuineness of the transactions cannot be doubted since almost the whole of the amount has been received by cheques. In such circumstances, action if any can only be taken in the hands of the partners and in this regard reliance has been placed on the decision of the Madhya Pradesh High Court in the case of M/s Metachem Industries – 245 ITR 160. Copy of the written submission as well as the application made under rule 46A was sent to the A.O. vide letter dtd. 16.10.2007 but in response no counter comment was received by the stipulated date. Thus on considering the facts on record I am of the view that even on merit this addition is not sustainable. The capitals introduced by the partners are by way of cheques. The source of this amount in each case is the withdrawals made from another firm and in support of which copy of the audited balance sheet of that firm has been filed on record and from which this fact is verifiable. Even otherwise, in view of the decision of the Hon’ble Madhya Pradesh High Court (supra), no addition in the case of the firm can be made. This addition therefore is deleted.”
5. Aggrieved by the above order, the revenue is in further appeal before us.
6. The learned CIT DR placed on record the order of Chhattisgarh High Court in the case of Trilok Singh Dhillon; 17 ITJ 446 wherein it was held that when the Assessing Officer framing the assessment u/s 153A and 153C is the same, there is no requirement of handing over the material by the Assessing Officer of the searched person to the Assessing Officer of the person other than the searched person.
7. The learned CIT DR further submitted that it has been clearly held in the case of Trilok singh Dhillon that the decision of the Hon’ble Supreme Court in the case of Manish Maheshwari is not applicable. We have carefully gone through the order of the Hon’ble Supreme Court in the case of Manish Maheshwari and also perused the notices issued by the Assessing Officer in the case of Manish Maheshwari and find that the notices u/s 158BC and 158BD were issued by the same Assessing Officer. Thus, the observation made in the case of Triloksingh Dhillon to the effect that since the Assessing Officer was the same, there is no requirement of handing over the documents by the Assessing Officer of the searched person to the Assessing Officer of the other person against whom no search has been conducted, are not as per the view taken by Hon’ble Supreme Court in the case of Manish Maheshwari (supra).
8. However, in view of the notices placed before us, wherein the Assessing Officer was the same and Hon’ble Supreme Court held that there is a requirement of handing over the documents by the Assessing Officer of the searched person to the Assessing Officer of the other person against whom proceedings u/s 158BD are to be launched, the contention of the learned CIT DR in this respect is not maintainable.
9. We find that the decision of the Hon’ble Supreme Court in the case of Manish Maheshwari (supra) is still a good law insofar as in this case the verdict is for recording a satisfaction before issuing notice u/s 153C that such other person had undisclosed income and transmitted material. Hon’ble Chhattisgarh High Court in the above case distinguished the Hon’ble Supreme Court decision in the case of Manish Maheshwari narrating that since the Assessing Officer is the same in proceedings u/s 153A and 153C, there is no requirement of handing over the documents by the Assessing Officer of 153A proceedings to the Assessing Officer of 153C proceedings. In view of the notices placed before us in the case of Manish Maheshwari which arose only out of MP High Court decision, we find that in case of Manish Maheshwari and Indore Construction Company Private Limited; the Assessing Officer was the same which can be very well verifiable from the copy of notices u/s 158BC of Manish Maheshwari and Indore Construction Company Pvt. Ltd. placed before us by the learned counsel for the assessee. As such, the decision of the Hon’ble Chhattisgarh High Court is not at all applicable to the facts of the instant case. In all the instant cases before us, no satisfaction has been recorded by the Assessing Officer which is a mandatory requirement before proceeding u/s 153C.
10. In the case of Krishna Sugar Corporation v. DCIT (2010) 133 TTJ 33 Lucknow, it was held that even when the Assessing Officer in the case of “person searched” and “other person” is same, satisfaction is to be recorded in the case of “person searched” before taking any action u/s 158BD in the case of other person – Therefore, the proceedings initiated under section 158BD in the hands of the assessee were invalid. The ‘other person’ comes into picture only by virtue of satisfaction of the Assessing Officer and therefore the same has to be strictly interpreted. That the powers of the Assessing Officer u/s 158BD cannot be invoked in a light-hearted cursory manner. The recording of satisfaction is not an empty formality but is to be viewed as a legal compulsion based on the material available on such date. In the case of ACIT v. Smt. Mukta Goenka (2011) 137 TTJ 249 Jab (TM) it was held that satisfaction should be recorded by the Assessing Officer of the person searched as per the provisions of section 158BD – Further, the satisfaction recorded by the Assessing Officer has to be objective/judicious satisfaction and not a subjective satisfaction. Satisfaction recorded in the instant case does not fulfil this condition as in no case the Assessing Officer could have examined the seized record on 4.9.2003 and sought assessee’s explanation in respect of the seized record – So called satisfaction recorded on 4.9.2003 by the Assessing Officer is based on assumption and presumption and not on seized record and is not a judicious satisfaction. It is well settled that block assessment proceedings can be initiated only for assessment of undisclosed income found as a result of search and not for verification of capital accretion of source of investment. There is no material on record to show that the Assessing Officer made any inquiry till 4.9.2003 either from the assessee or the person searched.
11. The Hon’ble 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, Hon’ble 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.
12. With regard to the mandatory requirement of recording of satisfaction before assuming jurisdiction u/s 153C, the matter has already been dealt with in detail by the coordinate Bench in the case of Chidchid Hydro; 17 ITJ 197 wherein following was the observation and conclusion 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 or 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-withstanding 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 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 prerequisite 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 jurisdiction 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 Hon’ble Supreme Court in the case of Manish Maheshwari; 208 CTR 97. The said Hon’ble Supreme Court decision was followed by the Hon’ble Delhi High Court in the case of New Delhi Auto Finance Limited; 300 ITR 83. The Hon’ble 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 is 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 Hon’ble 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 Hon’ble 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 by the department by bringing any positive material on record. Accordingly, applying this propostion 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 here 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 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 subsection (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 subsection (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 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 Hon’ble 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 CITDR, 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 Officer’s 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 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 Hon’ble 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 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 Hon’ble 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.
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.”
13. Recently, the Hon’ble Delhi High Court in the case of CIT v. Radhey Shyam Bansal held as under :-
“(ii) The word “satisfaction” has not been defined in the act. By its very nature “satisfaction” must precede the sending of papers/documents by the searched person’s A.O. to the third person’s 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 can be gathered from the assessment order, if it is so mentioned/recorded, or from any other order, note or record maintained by the A.O. of the person searched. The A.O. must reach a clear conclusion that good ground 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 whether the A.O. was “functus officio”), the assessment order passed in the case of Manoj Aggarwal does not show any “satisfaction” that any undisclosed income belongs to the assessee. Though Manoj Aggarwal’s A.O. wrote a letter to the assessee’s A.O. informing him that the assessee was providing bogus accommodation book entries and the quantum of transactions was given as per Annexures, 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, the onus on the A.O. that there was valid satisfaction was not discharged.”
14. As already observed hereinabove, the provisions of section 153C are analogous to section 158BD and, therefore, decisions rendered with reference to the provisions of section 158BD would apply with reference to the cases falling u/s 153C unless the context requires otherwise. The Apex Court in the case of Manish Maheshwari (supra) after considering the provisions of section 158BD held that:
a. Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act
b. The books of accounts or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and
c. The Assessing Officer has proceeded u/s 158BC against such other person.
15. Since the provisions of section 153A are analogous of section 158BD in this regard, the above observation of the Apex Court would squarely apply with reference to the provisions of section 153A/153C of the Act.
16. We have carefully gone through the order of the coordinate Bench wherein facts and circumstances are in pari materia. Respectfully following the same, we uphold the order of the learned Commissioner of Incometax (Appeals) for annulling the assessment framed undisclosed income/s 153C of the Act. Even in view of the decision of the Hon’ble Supreme Court in the case of Hotel Blue Moon; 229 CTR 219, the assessment framed without issue of notice u/s 143(2) of the Act after filing of return is bad in law.
17. With regard to the merit of the addition, the learned Commissioner of Income tax (Appeals) has deleted the same after recording a detailed finding as has been mentioned hereinabove which has not been controverted by the department. We, accordingly, do not find any reason to interfere with the same.
18. In the result, the appeal of the revenue is dismissed.
