Case Law Details
Hon’ble Supreme Court in the case of M/s Calcutta Knitwear has laid down that for the purpose of section 158BD of the Act recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s158BD. The Hon’ble Court held that “the satisfaction note could be prepared at any of the following stages:
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act: or
(b) in the course of the assessment proceedings under section 158BC of the Act; or
(e) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.”
Relevant Extract of the Judgment
5. It was argued by ld. AR that AO erred in passing assessment order u/s.143(3) rws 153C without obtaining prior approval of JCIT u/s.153D and hence bad in law. Since no approval is taken before passing the assessment order it was not mentioned in the body of assessment order. Our attention was also invited to application filed u/s.6 of the RTI Act on 9- 4-13, 16-4-13, 22-5-13 and 28-5-13 asking for copy of proof of approval obtained u/s.153D for the assessment year 2002-03 to 07-08. However, no such approval was given. We found that in reply to the RTI application, department has only supplied copy of the order of Commissioner of Income Tax-6, Mumbai dated 23-7-2010 and no approval was obtained by AO u/s.153D was supplied in reply to the RTI application. However, CIT(A) has treated approval to reopen the case u/s.147 r.w.s.148 to be the approval available to the AO for passing assessment u/s.153D.
6. It was contended by ld. AR that AO erred in passing assessment order u/s.143(3) rws 153C even though there was no satisfaction report as contemplated u/s.153-C and hence any proceedings u/s.153-C were rendered null and void. Reliance was placed on the decision of the Supreme Court in the case of Manish Maheshwari 289 ITR 341. Our attention was also invited to application dated 9-4-13, 16-4-13, filed u/s.6 of RTI Act to ACIT-6(3) asking for copy of documents received u/s.153C and the satisfaction recorded u/s.153C transferring the records to the AO of the assessee for all the years. We found that in reply to the RTI application the department has supplied copy of letter of assessee itself dated 23-12-10, however, no proof of any satisfaction having been recorded u/s.153C was supplied to the assessee nor produced before us during the course of hearing. We found that on a further enquiry through RTI the department has supplied copy of the correspondence between Central Circle Nagpur, reason for the reopening u/s.147, postal acknowledgement of letter sent to Central Circle Nagpur and copy of notice u/s.153C dated 14-12-09.
7. We found that the CIT appeals has mentioned in his order that it is not explicitly mentioned in section 1 53C that the satisfaction is to be recorded by their AO in writing.
8. We have considered rival contentions. The Hon’ble Supreme Court in the case of M/s Calcutta Knitwear in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 (available in NJRS at 2014-LL-0312-5 l) has laid down that for the purpose of section 158BD of the Act recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s158BD. The Hon ble Court held that “the satisfaction note could be prepared at any of the following stages:
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act: or
(b) in the course of the assessment proceedings under section 158BC of the Act; or
(e) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.”
Furthermore, CBDT vide Circular No.24/15 dated 31-12-15 have observed as under :-
Several High Courts have held that the provision of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guideline of the Hon’ble SC, apply to proceeding 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 referred to in para 2 above, with regard to recording of satisfaction note may be brought to the notice of all for strict compliance. It is further clarified 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.
5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.”
9. In view of the above, recording of satisfaction before proceedings u/s.153C is mandatory, which is lacking in all these cases.
10. From the record we found that these appeals were filed on 04/02/2013 and the Bench has asked DR to produce copy of approval from Joint Commissioner of Income Tax as prescribed u/s 153D. The department was also asked to confirm as to whether u/s 153C notice or u/s 143(2) notice was issued. However, nothing came from the On 24/02/2016 hearing was adjourned at the request of the CIT DR and it was also mentioned that last opportunity was given to the department and cases were adjourned on 09/03/2016. Again on 09/03/2016 at the request of the CIT DR cases were adjourned to 18/04/2016 as last chance. Again on 09/05/2016 hearing was adjourned at the request of CIT DR. However, on 05/07/2016 following note sheet was written by the Bench.
“We find that on 09/03/2016 last opportunity was provided to the department to produce the relevant record / report. Thereafter this appeal was adjourned on 18/04/2016, 09/05/2016 and 12/05/2016. Today the ld. CIT DR states that the letter sent to Assessing Officer but he not responded in such situation the ld AO is directed appearance in person with record/report. Otherwise adverse view will be taken. Ld CIT DR is also directed to inform the Assessing Officer. Accordingly adjourned to 28/07/2016 as suggested by both side. Parties informed (ITA926 to 929/M/13 and ITA931/M/13)”
11. However, none of the evidence as asked by the Bench was supplied. Under these circumstances, we do not find any merit in the order passed under Section 153C without having approval from Joint Commissioner of Income Tax as prescribed u/s 153D. No evidence of any satisfaction have been recorded was brought to our notice. Even it was also not shown whether any notice u/s 143 (2) was issued. Accordingly, we set aside the order passed by the lower authorities and the appeals of the assessee are allowed.
