M/s. Om Properties & Developers, MZSK & Associates (formerly Shah Khandelwal Jain & Associates) v. The Dy. Commissioner of Income Tax, Central Circle 1(1), Pune
[Citation -2016-LL-0928-137]

Citation 2016-LL-0928-137
Appellant Name M/s. Om Properties & Developers, MZSK & Associates (formerly Shah Khandelwal Jain & Associates)
Respondent Name The Dy. Commissioner of Income Tax, Central Circle 1(1), Pune
Court ITAT-Pune
Relevant Act Income-tax
Date of Order 28/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags non-recording of satisfaction • search and seizure • satisfaction note • valuable article • documents seized • seized material
Bot Summary: Under the provisions of section 153C of the Act, it is provided notwithstanding anything contained in sections, 139, 147, 148, 149, 151 and 153 of the Act, where the 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 belonged to a person other than the person referred to in section 153A of the Act, then such books of account or documents or assets seized or requisitioned, shall be handed over to the Assessing Officer having jurisdiction over such persons. Under the said section 153C of the Act, it is provided that if pursuant to search on a person, certain documents or assets are found or seized, which belong to such other person, then where the Assessing Officer is satisfied that such assets or 8 ITA No.1996/PN/2012 5 Ors Om Properties Developers Ors documents seized belongs to any person, other than the person searched, then such documents or assets seized would be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 153C of the Act against such other person and the provisions of Chapter shall apply accordingly. The Hon ble Supreme Court further held that the satisfaction note could be prepared at either of the following stages : at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; 9 ITA No.1996/PN/2012 5 Ors Om Properties Developers Ors along with the assessment proceedings under section 158BC of the Act; and immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purpose of assessment of income of other than the searched person. The Circular issued by the CBDT has recognized that the satisfaction note is a pre-requisite for initiating proceedings under section 158BD of the Act, which is to be prepared by the Assessing Officer before he transmits the record to other Assessing Officer, who has jurisdiction over such other person under section 158BD of the Act. The CBDT Circular further lays down that the provisions of section 153C of the Act are substantially similar / parametria to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon ble Supreme Court would apply to proceedings under section 153C of the Act, for the purpose of assessment of income of other than the searched person. In the absence of any satisfaction recorded by the Assessing Officer of the searched person before initiating proceedings under section 153C of the Act against the assessee i.e. before handing over the documents relating to the assessee and starting the proceedings under section 153C of the Act, the assessment proceedings completed against the assessee under section 153C of the Act are invalid the same are held so.


IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA No. 1996/PN/2012 Assessment Year : 2008-09 M/s. Om Properties & Developers, MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 Appellant PAN: AABFO6235E Vs. Dy. Commissioner of Income Tax, Central Circle 1(1), Pune Respondent ITA No s.1125 & 1126 /PN/2012 Assessment Years : 2007-08 & 2008-09 M/s. Aswani Associates , MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 Appellant PAN: AA MFA4202C Vs. Dy. Commissioner of Income Tax, Central Circle 1(1), Pune Respondent 2 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors ITA No. 1473/PN/2012 Assessment Year : 2008-09 Dy. Commissioner of Income Tax, Central Circle 1(1), Pune Appellant Vs. M/s. Aswani Associates , MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 Respondent PAN: AA MFA4202C ITA No. 1123/PN/2012 Assessment Year : 2007-08 Rajkumar Aswani MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 Appellant PAN: EXPA7340C Vs. Dy. Commissioner of Income Tax, Central Circle 1(1), Pune Respondent 3 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors ITA No. 1127/PN/2012 Assessment Year : 2008-09 Shrichand Aswani MZSK & Associates (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 Appellant PAN: EHPA1627G Vs. Dy. Commissioner of Income Tax, Central Circle 1(1), Pune Respondent Assessee by : Shri R.G. Nahar Revenue by : Shri Anil Chaware Date of Hearing : 15.09.2016 Date of Pronouncement: 28.09.2016 ORDER PER SUSHMA CHOWLA, JM: This bunch of six appeals relating to different assessee against separate orders of CIT(A) relate to different years, which are as under:- Sr ITA No. Appellant Respondent Assessment Date of Section No year order of under . CIT(A) which appeal filed 1 1996/PN/2012 Om Properties & DCIT, Central 2008-09 30.04.2012 143(3) Developers, Circle 1(1), r.w.s MZSK & Associates Pune 153C (formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 PAN: AABFO6235E 4 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 2 1125/PN/2012 M/s. Aswani Associates, DCIT, Cen tral 2007-08 15.12.2011 143(3) MZSK & Associates, Circle 1(1), r.w.s. (Formerly Shah Pune 153C Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 PAN: AMFA4202C 3 1126/PN/2012 -do- -do- 2008-09 15.12.2011 143(3) r.w.s. 153C 4 1473/PN/2012 DCIT, Central Circle 1(1), M/s. Aswani 2008-09 15.12.2011 143(3) Pune Associates, r.w.s. MZSK & 153C Associates, (Formerly Shah Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 PAN: AAMFA4202C 5 1123/PN/2012 Rajkumar Aswani, DCIT, Central 2007-08 15.12.2011 143(3) MZSK & Associates, Circle 1(1), r.w.s. (Formerly Shah Pune 153A Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 PAN: AEXPA7340C 6 1127/PN/2012 Shrichand Aswani DCIT, Central 2008-09 15.12.2011 143(3) MZSK & Associates, Circle 1(1), r.w.s. (Formerly Shah Pune 153A Khandelwal Jain & Associates) Chartered Accountants, Level 3, Business Bay, Plot No.84, Wellesley Road, Near RTO, Pune 411001 PAN:AEHPA1627G 2. issue arising in ITA Nos.1996/PN/2012, 1 125/PN/2012, 1126/PN/2012 and 1473/PN/2012 are inter-related and we proceed to take up these appeals first. These appeals are decided by this consolidated order for sake of convenience. 5 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 3. assessee in ITA Nos.1996/PN/2012, 1125/PN/2012 and 1126/PN/2012 has raised jurisdictional issue against initiation of proceedings under section 153C of Act which read as under:- 1. On facts and circumstances prevailing in case and as per provisions of Act it be held that, initiation of proceedings u/s. 153C is not in accordance with provisions of Act and without complying ingredients and requirements of said section. assessment framed u/s.153C therefore, be held as not tenable in eyes of law. assessment so framed be cancelled. Just and proper relief be granted to appellant on this score. Assuming without admitting that proceedings u/s.153C have lawfully being invoked and assessment framed thereunder is tenable in law. 4. learned Authorized Representative for assessee pointed out that issue raised in present appeal is challenging jurisdiction exercised under section 153C of Act. He further pointed out that there were various limbs to exercise of jurisdiction under section 153C of Act. First of all, no reasons were recorded for initiating proceedings under section 153C of Act. second issue which has to be seen is whether any documents were seized and forwarded to Assessing Officer. third limb was whether documents seized were incriminating and fourth limb was whether such documents relate to year under appeal. He stressed that satisfaction recorded by Assessing Officer in-charge of searched person is missing and even documents found were not incriminating. Our attention was drawn to copy of notice issued under section 153C of Act, wherein there is no recording of satisfaction by Assessing Officer. He further referred to letter dated 19.05.2016 filed by Assessing Officer, wherein Assessing Officer himself has admitted that no satisfaction has been recorded by Assessing Officer before forwarding information to Assessing Officer of assessee before us. He further 6 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors pointed out that notice under section 153C of Act was issued to assessee, in response to which proceedings were taken up against assessee. However, Assessing Officer of searched person, has failed to record satisfaction before initiating proceedings under section 153C of Act. He fairly admitted that Assessing Officer of searched person i.e. partner of assessee firm and assessee firm was same, but since certain documents were impounded during course of search against partner of firm, then it was incumbent upon Assessing Officer to record satisfaction note before proceeding against assessee firm perse. In this regard, learned Authorized Representative for assessee placed reliance on order of Hon ble Supreme Court in CIT Vs. Calcutta Knitwears (2014) 43 taxmann.com 446 (SC). It was further pointed out by him that though decision of Hon ble Supreme Court was in relation to section 158BD of Act, but same principle has been applied by Delhi Bench of Tribunal in Bhawna Bhalla & Anr. Vs. ACIT & Anr. (2016) 46 CCH 577 (Del - Trib), where proceedings were initiated under section 153C of Act. He further stated that even CBDT has clarified that recording of satisfaction note should be strictly complied with, even if Assessing Officer of searched person and other person is one and same. 5. learned Departmental Representative for Revenue on other hand, placed on record copies of appraisal report and on analysis of seized documents seized from residential premises of Shri Raju Shamandas Aswani, Shrichand Aswani, Satish Aswani , at Pimpri, Pune. Certain loose papers were found which related to assessee firm and hence, proceedings were initiated against assessee. 7 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 6. We have heard rival contentions and perused record. Briefly, in facts of case, assessee was partnership firm engaged in business of real estate. Search and seizure operations under section 132 of Act were carried out on 13.08.2008 against partners of assessee firm and no such action was against assessee itself i.e. against M/s. Om Properties & Developers and M/s. Aswani Associates, who are appellants before us. Though survey under section 133A of Act was carried out in group cases of assessee on 13.08.2008 itself but proceedings initiated against assessee firm were under section 153C of Act. claim of assessee before us is that before initiating aforesaid proceedings under section 153C of Act, satisfaction note is required to be recorded by Assessing Officer who is in-charge of searched person, before parting with seized material relatable to other persons and Assessing Officer incharge of other persons, then is to proceed with proceedings. 7. Under provisions of section 153C of Act, it is provided notwithstanding anything contained in sections, 139, 147, 148, 149, 151 and 153 of Act, 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 belonged to person other than person referred to in section 153A of Act, then such books of account or documents or assets seized or requisitioned, shall be handed over to Assessing Officer having jurisdiction over such persons. Under said section 153C of Act, it is provided that if pursuant to search on person, certain documents or assets are found or seized, which belong to such other person, then where Assessing Officer is satisfied that such assets or 8 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors documents seized belongs to any person, other than person searched, then such documents or assets seized would be handed over to Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 153C of Act against such other person and provisions of Chapter shall apply accordingly. In other words, in case during course of search on person certain doc uments, books of account or assets are found and / or seized, which do not belong to searched person but belong to third party, then in case Assessing Officer of searched person is satisfied that such assets or documents seized belongs to such other person, then documents, books of account or assets would be handed over to such Assessing Officer having jurisdiction over other person, who shall proceed against such other person. 8. Hon ble Supreme Court in CIT Vs. Calcutta Knitwears (supra) have laid down ratio in relation to exercise of jurisdiction under section 158BD of Act. Hon ble Supreme Court held that for purpose of section 158BD, satisfaction note is sine qua non and must be prepared by Assessing Officer, before he transmits records to other Assessing Officer, who has jurisdiction over such other person. Thus, satisfaction note is to be recorded by Assessing Officer who is in-charge of searched person and before handing over records to Assessing Officer, who has jurisdiction over such other person, documents or assets relating to whom were found during course of search. Hon ble Supreme Court further held that satisfaction note could be prepared at either of following stages : (a) at time of or along with initiation of proceedings against searched person under section 158BC of Act; (b) 9 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors along with assessment proceedings under section 158BC of Act; and (c) immediately after assessment proceedings are completed under section 158BC of Act of searched person. 9. CBDT in view of proposition laid down by Hon ble Supreme Court, has passed Circular No.24/2015, dated 31.12.2015 vis- -vis recording of satisfaction note under section 158BD / 153C of Act. Circular provides as under:- 2. Hon'ble Supreme Court in case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 (available in NJRS at 2014-LL-0312-51) has laid down that for purpose of Section 158BD of Act, recording of satisfaction note is prerequisite and satisfaction note must be prepared by AO before he transmits record to other AO who has jurisdiction over such other person u/s 158BD. Hon'ble Court held that "the satisfaction note could be prepared at any of following stages: (a) at time of or along with initiation of proceedings against searched person under section 158BC of Act; or (b) in course of assessment proceedings under section 158BC of Act; or (c) immediately after assessment proceedings arc completed under section 158BC of Act of searched person." 3. Several High Courts have held that provisions of section 153C of Act are substantially similar/pari-materia to provisions of section 158BD of Act and therefore, above guidelines of Hon'ble SC, apply to proceedings u/s 153C of IT Act, for purpose of assessment of income of other than searched person. This view has been accepted by CBDT. 4. guidelines of Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to notice of all for strict compliance. It is further clarified that even if AO of searched person and "other person" is one and same, then also he is required to record his satisfaction as has been held by Courts 5. In view of above, filing of appeals on issue of recording of satisfaction note should also be decided in light of above judgement. Accordingly, 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 guidelines laid down by Apex Court. 10 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 10. Circular issued by CBDT has recognized that satisfaction note is pre-requisite for initiating proceedings under section 158BD of Act, which is to be prepared by Assessing Officer before he transmits record to other Assessing Officer, who has jurisdiction over such other person under section 158BD of Act. It is also provided in said Circular that where Assessing Officer of searched person and other person is one and same, then also he is required to record his satisfaction as has been held by Courts. stages of recording of satisfaction note has been recognized as laid down by Hon ble Supreme Court in CIT Vs. Calcutta Knitwears (supra) in all three stages as mentioned above. CBDT Circular further lays down that provisions of section 153C of Act are substantially similar / parametria to provisions of section 158BD of Act and therefore, above guidelines of Hon ble Supreme Court would apply to proceedings under section 153C of Act, for purpose of assessment of income of other than searched person. CBDT has accepted this view categorically. Further, directions have been given by CBDT vis - -vis filing of appeals on issue of recording of satisfaction note and it is being directed that pending litigation with regard to recording of satisfaction note under section 158BD / 153C of Act should be withdrawn or not pressed, if it does not meet guidelines laid down by apex Court. 11. Delhi Bench of Tribunal in Bhawna Bhalla & Anr. Vs. ACIT & Anr. (supra) has referred to CBDT Circular and held that recording of satisfaction should be strictly complied with where even if Assessing Officer of searched person and other person was same. 11 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 12. Now, coming to facts of present case before us, search and seizure action under section 132 of Act and survey action under section 133A of Act was carried out in Aswani group cases on 13.08.2008. Admittedly, no search and seizure operations under section 132 of Act were carried out against assessee. During course of search, certain documents were found which as per search team related to assessee before us and appraisal report was prepared by search party in this regard. Assessing Officer in-charge of searched person and assessee were same. Notice under section 153C of Act was issued on 26.10.2010 and copy of same is available on record. Assessing Officer records that search and seizure was carried out on 13.08.2008 in Aswani group. During course of search, documents pertaining to assessee M/s. Om Properties & Developers were found and seized. In view of this and provisions of section 153C of Act, assessee was asked to furnish return of income in respect of each of assessment year falling within six assessment years immediately preceding assessment year relevant to previous year in which search action was conducted. assessee in this regard was issued show cause notice. Admittedly, assessee has filed return of income in response to said notice issued under section 153C of Act. However, assessee now before us has raised issue of non-recording of satisfaction by Assessing Officer who was in-charge of searched person, before handing over documents to Assessing Officer of assessee before us. No doubt, Assessing Officer of searched person and assessee to whom documents related, which were found during course of search on Aswani group were same, but dictate of Hon ble Supreme Court in CIT Vs. Calcutta 12 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors Knitwears (supra) was that there is requirement to record satisfaction before handing over documents to Assessing Officer, even in cases where Assessing Officer of searched person and other person is same. Admittedly, in present case before us, no such satisfaction was recorded. Assessing Officer vide report dated 19.05.2016, has intimated that case records of M/s. Om Properties and Developers and M/s. Aswani Associates for assessment year 2007-08 were received and after verification of said case records, it was found that satisfaction note for issuance of notice under section 153C of Act for assessment year 2007-08 was not available in case records. plea of learned Authorized Representative for assessee before us is also same that in absence of any satisfaction note being recorded before handing over documents of assessee, no proceedings under section 153C of Act could be completed against assessee. In view of ratio laid down by Hon ble Supreme Court in CIT Vs. Calcutta Knitwears (supra) and Circular issued by CBDT, we find merit in plea of assessee in this regard. In absence of any satisfaction recorded by Assessing Officer of searched person before initiating proceedings under section 153C of Act against assessee i.e. before handing over documents relating to assessee and starting proceedings under section 153C of Act, assessment proceedings completed against assessee under section 153C of Act are invalid, hence, same are held so. Accordingly, assessment order passed under section 143(3) r.w.s. 153C of Act does not stand and same is annulled. grounds of appeal raised by assessee are thus, allowed. 13 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors 13. facts and issue in ITA Nos.1125/PN/2012 and 1126/PN/2012 relating to assessment years 2007-08 and 2008-09 in case of related party M/s. Aswani Associates are similar to facts arising in ITA No.1996/PN/2012. assessments in case of M/s. Aswani Associates for both assessment years were completed under section 143(3) r.w.s. 153C of Act and in both cases also, no satisfaction was recorded and Assessing Officer has vide letter dated 19.05.2016 confirmed that no satisfaction note is available in case records. Accordingly, following same parity of reasoning as in ITA No.1996/PN/2012, grounds of appeal in ITA Nos.1125/PN/2012 and 1126/PN/2012 are allowed and assessment completed by Assessing Officer is annulled. 14. Revenue is in appeal in ITA No.1473/PN/2012, relating to assessment year 2008-09 against relief given by CIT(A). Since assessment made by Assessing Officer is already annulled, hence appeal of Revenue is also dismissed as infructuous. 15. In respect of ITA No.1123/PN/2012 relating to assessment year 2007- 08 in case of Rajkumar Aswani and ITA No.1127/PN/2012 relating to assessment year 2008-09 in case of Shrichand Aswani, assessment was also completed under section 143(3) r.w.s. 153A of Act. learned Authorized Representative for assessee pointed out that in case assessments made in case of M/s. Om Properties and Developers and M/s. Aswani Associates are annulled, then addition made in respective hands is to be upheld since assessee had asked for telescoping with addition made in hands of partnership firm. When no addition is made in 14 ITA No.1996/PN/2012 & 5 Ors Om Properties & Developers & Ors above two hands, then addition merits to be confirmed in hands of respective assessee. In view thereof, addition made in hands of Rajkumar Aswani and Shrichand Aswani are confirmed and grounds of appeal raised by assessee are dismissed. 16. In result, appeals of assessee in ITA Nos.1996/PN/2012, 1125/PN/2012 & 1126/PN/2012 are allowed, appeal of Revenue in ITA No.1473/PN/2012 and appeals of assessee in ITA Nos.1123/PN/2012 & 1127/PN/2012 are dismissed. Order pronounced on this 28th day of September, 2016. Sd/- Sd/- (ANIL CHATURVEDI ) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated : 28th September, 2016. GCVSR Copy of Order is forwarded to : 1. Appellant; 2. Respondent; 3. CIT(A)-I, Pune; 4. CIT (Central), Pune; 5. DR , ITAT, Pune; 6. Guard file. BY ORDER, //True Copy // Sr. Private Secretary ITAT, Pune M/s. Om Properties & Developers, MZSK & Associates (formerly Shah Khandelwal Jain & Associates) v. Dy. Commissioner of Income Tax, Central Circle 1(1), Pune
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