1 RESERVED Court No. - 36 Case :- INCOME TAX APPEAL No. - 108 of 2014 (ASSESSMENT YEAR 2006-07) Appellant :- Commissioner Of Income Tax (C) Kanpur Respondent :- Smt. Nirmala Keshwani Counsel for Appellant :- Shambhu Chopra, Sr. Sc Counsel for Respondent :- Rahul Agarwal AND Case :- INCOME TAX APPEAL DEFECTIVE No. - 43 of 2014 (ASSESSMENT YEAR 2002-03) Appellant :- Commissioner Of Income Tax (C) Kanpur Respondent :- Smt. Madhu Keshwani Counsel for Appellant :- Shambhu Chopra, Sr. Sc Counsel for Respondent :- Rahul Agrawali AND Case :- INCOME TAX APPEAL DEFECTIVE No. - 44 of 2014 (ASSESSMENT YEAR 2002-03) Appellant :- Commissioner Of Income Tax (C) Kanpur Respondent :- Smt. Nisha Keshwani Counsel for Appellant :- Shambhu Chopra, Sr. Sc Counsel for Respondent :- Rahul Agarwal Hon'ble Tarun Agarwala,J. Hon'ble Dr. Satish Chandra,J. All three appeals have been filed by Department against consolidated order dated 29.11.2013 passed by Income Tax Appellate Tribunal, Agra in ITA Nos. 200, 305 and 306/Agra/2013 for assessment year 2002-03 and 2006-07. brief facts of case are that all assessees belong to M/s. Shanker Gutka Group, where search and seizure operation was carried out on 30/31 January 2008. During course of search, some cash was found and seized. No search warrant was issued in name of assessees, but proceedings under Section 153C were initiated and assessees were asked to file returns. Later, A.O. passed assessment order on account of house property and long term capital gain under Section 153C read with Section 153A/143(3) of Income Tax Act. CIT(A) has confirmed additions, but Tribunal has deleted said additions. Being, aggrieved Department has filed present appeals. 2 With this background, Shri Shambhu Chopra, learned counsel for Department submits that core issue is that Tribunal himself has interpreted provision of Section 153C of Income Tax Act but same only provides procedure to be followed. For purpose, learned counsel submits that in case of CIT vs. Classic Enterprises [2013] 358 ITR 465 (Alld.), it was observed that: ...Section 153C of Income Tax Act, 1961, prescribed procedure to be adopted for initiating proceedings under section 153A against person who has not be searched, in situation where Assessing Officer having jurisdiction over other person is different from Assessing Officer having jurisdiction over person in respect of whom search has been conducted. Assessing Officer has to be satisfied that undisclosed income found during search operations belongs to third person before notice can be issued under section 153C. Mere use or mention of word satisfaction in order or note will not meet requirement of concept of satisfaction as used in section 158BD. satisfaction has to be in writing and can be gathered from assessment order, if it is so mentioned or recorded, or from any other order, note or record maintained by Assessing Officer of person searched. Assessing Officer is satisfied when he makes up his mind or reached clear conclusion when he take prima facie view that material available establishes undisclosed income of third party. Assessing Officer must reach clear conclusion that good ground exists for Assessing Officer of third person to initiate proceedings as material before him shows or would establish undisclosed income of third person. At this stage, as proceedings are at very initial stage, satisfaction is neither required to be firm or conclusive... On enquiry by Bench, learned counsel for Department accepted that in instant cases, no satisfaction was recorded. He read out para 7 of Tribunal's order, where it was mentioned that A.O. did not make any addition against assessee on basis of any adverse material. No material is produced to prove that A.O. was satisfied that any money, bullion, jewellery or other valuable articles or things or books of accounts, or documents seized or requisitioned belong to or belonging to person other than person referred to in Section 153A of IT Act. 3 learned DR also admits that no satisfaction note has been recorded in these cases before initiating proceeding under Section 153C of Income Tax Act as mentioned by Tribunal in para 7 of order. However, he made request that Tribunal's order may kindly be set aside. On other hand, Shri Rahul Agrawal, learned counsel for assessee relied on impugned order passed by Tribunal. Learned counsel further submits that satisfaction is mandatory requirement. For purpose he relied on ratio laid down in following cases : (a) Commissioner of Income Tax vs. Gopi Apoartment [2014] 365 ITR 411 (Alld); and (b) CIT vs. M/s. Shettys Pharmaceuticals & Biologicals Limited ITA Nos 662 and 668 of 2014 (AP) It is also submission of learned counsel for assessee that Income Tax Act however provides for taking recourse to assessment of income of any other person other than person searched and conditions precedent for invoking such provisions against such other person are : (a) search or requisitioin must have taken place in case of any person. (b) Where AO is satisfied that any money, bullion, jewellery or other valuable articles or other things or books of accounts or documents seized or requisitions belongs or belong to person other than person referred to in Section 153A. (c) books accounts or documents or assets seized or requisitioned shall be handed over to AO having jurisdiction over such other persons. (d) AO has proceeded under Section 153C against such other person. section mandates about recording of satisfaction by Assessing Officer(s) and it is pre-condition for invoking jurisdiction and it is not mere formality because recording of satisfaction postulates application of mind consciously as documents seized must be belonging to any other person other than person referred to in Section 153-A of Act. 4 Lastly, he made request that order passed by Tribunal may kindly be uphold. We have heard both parties at length and gone through materials available on record. From record, it appears that this Court has taken constant view that satisfaction is pre-condition. Satisfaction has to be in writing and can be gathered from order passed by searched person, if it is so mentioned/recorded, or from any other order, note or record maintained by Assessing Officer of person searched. satisfaction always reflects in writing/averments where it is recorded. satisfaction may be recorded at any stage. In instant case, order passed by Tribunal, final fact finding authority, clearly states that no satisfaction note has been recorded before initiating proceedings under Section 153C of Income Tax Act. In case of Vijaybhai N. Chandrani vs. ACIT, 333 ITR 436 (Guj.), it was held that : ..Section 153A, 153B and 153C of Income Tax Act, 1961, lay down scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of Act, proves that where Assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to person other than person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is distinction between two provisions inasmuch as under section 153C notice can be issued only where money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if Assessing Officer was satisfied that any undisclosed income belongs to any person, other than person with respect to whom search was made under Section 132 or whose books of account or other documents or assets were requisitioned under Section 132A, he could proceed against such other person under Section 158BC. Thus condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned should belong to such person. If requirement is not satisfied, recourse cannot be had to 5 provisions of section 153C. In view of above discussion, it is evident that when no satisfaction was recorded then requirement of Section 153C was not satisfied. Therefore, we have no reason to interfere with impugned order passed by Tribunal, who has not sustained proceedings under Section 153C of Act, for reason that there was no satisfaction at any stage. Needless to mention that in case of Manish Maheshwari vs. Asst. CIT and Another [2007] 289 ITR 341 (SC), similar views were expressed. In case of CIT vs. Anil Kumar Chadha, Income Tax Appeal No. 86 of 2011 decided on 18th February 2015, same was followed too. By considering totality of facts and circumstances of case, it appears that in instant cases, no substantial question of law is emerging from impugned order. When it is so, then we find no reason to interfere with impugned order passed by Tribunal, same is hereby sustained alongwith reasons mentioned therein. In result, appeals filed by Department are hereby dismissed at admission stage. Order Date :- 11.03.2015 Anurag/- (Dr. Satish Chandra, J.) (Tarun Agarwala, J.) Commissioner Of Income-tax (C) Kanpur v. Smt. Nirmala Keshwani