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IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘B’ NEW DELHI
BEFORE: SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND
SHRI GEORGE GEORGE K., JUDICIAL MEMBER
ITA Nos. 5969 to 5974/Del/2013
Assessment Years 2003-04 to 2008-09
DCIT, Central circle-21
Room No.344, E-2, ARA Centre,
Jhandewalan Ext.
New Delhi
Vs.
M/s. Consultancy Integrated Services Pvt. Ltd.
RZ-61, Gali No.25-C, Indira Park,
Palam Colony,
New Delhi -25
(PAN AACCC 1012 F)
C.O. Nos. 101 to 106/DEL/2014
(In ITA Nos. 5969 to 5974/Del/2013)
Assessment Years 2003-04 to 2008-09
M/s. Consultancy Integrated Services Vs.
Pvt. Ltd.
RZ-61, Gali No.25-C, Indira Park,
Palam Colony,
New Delhi -25
DCIT, Central circle-21
Room No.344, E-2, ARA Centre,
Jhandewalan Ext.
New Delhi
(PAN AACCC 1012 F)
(Appellant)
(Respondent)
Date of hearing
: 12.03.2015
Date of Pronouncement : 18.03.2015
Appellant by :
Respondent by:
Smt. Poonam, Khaira Sidhu, CIT,DR
Sh. Arvind Kumar, Advocate
ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
ORDER
PER BENCH:
1.
These appeals, at the instance of the Revenue and the Cross Objections filed by
the assessee, arise out of six separate orders of CIT(A), all dated 23.08.2013. The
relevant assessment years are 2003-04 to 2008-09.
2.
In Revenue’s appeals, identical grounds are raised except for variation in figures.
Two effective grounds raised in Revenue’s appeals relate to:
i)
ii)
3.
Whether the CIT (A) was justified in deleting the disallowances of
expenditure made by the AO; &.
Whether the CIT (A) was justified in deleting the additions made on
account of unexplained purchases u/s 69C of the Act.
In the assessee’s cross objections, several grounds are raised. The majority of the
grounds relate to the issue of challenging the initiation of proceedings u/s 153C of the
Act. It was submitted by the Ld. DR that the assessee’s cross objections are belated and
assessee has not filed condonation application for condoning the delay. On perusal of
the records, it is noticed that the Revenue’s appeal memo (Form 36 with the grounds of
appeals) were dispatched by the ITAT registry on 28.03.2014 and cross objection was
filed on 11.04.2014. Since, the CO’s are filed within the prescribed period of 30 days,
there is no delay in filing these cross objections and we proceed to dispose off the same
on merit.
4.
At the very outset, the ld. Counsel for the assessee, referring to the grounds raised
in the COs, submitted that the assessments made u/s 153C of the Act were invalid, since
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
satisfaction was not recorded by the AO in the files of the searched person prior to
initiation of proceedings u/s 153C of the Act. The said issue, it was submitted, was
covered in favour of the assessee by the orders of the Coordinate Benches of this
Tribunal which, in turn, had placed reliance on the judgment of the Hon’ble
jurisdictional High Court in the case of M/s. Pepsico India Holding Pvt. Ltd v. ACIT
reported in 367 ITR (673)/122 (Del) .
5.
The ld. DR present was duly heard. The ld. DR has given a written submission
with reference to the issues raised by the ld. AR.
6.
In rejoinder, the Ld. counsel for the assessee submitted that the written
submission filed in the instant case is identical to the written submission filed by the
Revenue in the case of Tanvir Finance & Leasing Ltd. in ITA Nos. 14 to 17/Del/2014 &
CO Nos.399 & 400/Del/2014 order dated 27.02.2015. It was submitted by the Ld. AR
after considering the written submission filed by the Revenue, the matter was decided
against the Revenue on identical facts and circumstances of the instant case. The Ld.
DR was unable to controvert the above contention of the Ld. AR.
7.
We have heard the rival submissions and perused the materials on record. The
search and seizure operations u/s 132 of the Act was carried out in the cases of Sri
B.K.Dhingra, Poonam Dhingra and M/s. Madhusudan Buildcon (P) Limited on
20.10.2008. The AO recorded satisfaction Note for issuing Notice u/s 153C of the Act
to the assessee on 5.7.2010 and the Notice u/s 153C of the Act was issued to the
assessee on 06.7.2010. In response, the assessee filed returns of income for all the six
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
assessment years under dispute. The satisfaction Note for initiation of proceedings u/s
153C of the Act against the assessee is placed at page 5 of the Paper Book filed by the
assessee. The satisfaction Note recorded by the AO reads as follows:
“Satisfaction Note for Issuing Notice u/s 153C of the I.T. Act, 1961 in the case of
M/s Consultancy Integrated Services Pvt. Ltd. RZL-26, West Sagarpur, Shanker
Park, New Delhi AACCC 1012 F for AY 2003-04 to 2008-09..
05/07/2010
Documents at pages 48-75 of Annexure A – 30 seized by the Party R-2 from the
premises at F-6/5, Vasant Vihar, New Delhi, during the course of search
conducted u/s 132 of the IT Act, 1961, on 20.10.2008 in the case of Sh. B.K.
Dhingra, Smt. Poonam Dhingra, M/s. Madhusudan Buildcon Pvt. Ltd have been
found to belong to M/s. Consultancy Integrated Services Pvt. Ltd. RZL-26, West
Sagarpur, Shanker Park, New Delhi which has not been covered u/s 132 of the IT
Act, 1961. Accordingly, in terms of provisions of section 153C of the Act, notices
u/s 153C are hereby issued for the AY 2003-04 to 2008-09 in the case of M/s.
Consultancy Integrated Services Pvt. Ltd. The case was centralized in the Central
Circle-17, New Delhi vide orders dated 05/Jan/10 of CIT-I, New Delhi.
DCIT, Central Circle – 17, New Delhi.”
8.
On the basis of RTI application of the assessee, a letter was issued by the AO
[F.NO.DCIT/CC-17/RTI/2013-14/122 dated 10.6.2013] stating that ‘no satisfaction’ is
recorded in the file of the searched person for initiation of proceedings u/s 153C of the
Act in the case of the assessee. The letter of the AO reads as follows:
“Sub: Application for seeking information under RTI Act, 2005 – reg –
Please refer to your application on the above mentioned subject.
2. From the assessment records of Sh. Bhupesh Kumar Dhingra which is covered
under section 153A, for the asst. years from 2003-04 to 2008-09 (block period), it is
noticed that there is no ‘satisfaction note’ available/recorded in respect of other
entities.
………………………………………”
Similar letter addressed to the other searched persons, namely, Smt. Poonam
Dhingra and M/s. Madhusudan Buildcon Pvt. Ltd are also placed on record at pages 4
and 5 of the PB filed by the assessee.
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
9.
The contention of the ld. Counsel of the assessee was that it is apparent from the
assessment records of the searched entities that the required ‘satisfaction Note’ under
section 153C of the Act was not recorded by the assessing officer of the searched
persons/entities.
10.
This issue raised by the Ld. counsel for the assessee is no longer res integra. The
Co-ordinate Benches of this Tribunal have considered an identical issue to that of the
present matter under dispute in their orders.
The details of the orders of the earlier
Benches of this Tribunal are as under:
11.
(i)
Tanvir Collections Pvt. Ltd v. ACIT [ITA No.2421/Del/2014 dated: 16.1.2015];
(ii)
DCIT v. M/s. Aakash Arogya Mindir P. Ltd [ITA Nos. 5437 to 5442/Del/2013
dated: 28.11.2014]; &
(iii)
ACIT v. Inlay Marketing Pvt. Ltd [ITA Nos.4200 to 4202/Del/2012 & 4197 to
4199/Del/2012 dated: 14.11.2014]
(iv)
DCIT Vs. Tanvir Finance & Leasing Ltd. (ITA Nos.14 to 17/Del/2014, CO Nos.
268 to 271/Del/2014 & ITA Nos. 3317 & 3318/Del/2014 dated 27.02.2015).
In the case of Tanvir Finance & Leasing Ltd. (supra), the coordinate Bench of
this Tribunal had decided the issue in favour of the assessee. Since the facts and the
contentions considered by the Revenue in the case of Tanvir Finance & Leasing Ltd.
(supra) is identical to the present case, the finding of the Tribunal in the case of
Tanvir Finance & Leasing Ltd. (Supra) is reproduced below:“4.
We have heard the rival submissions and perused the relevant material
on record. We have also taken into consideration the written submissions filed by the
ld. DR on 27.02.2012. It is manifest from the assessment orders for the years under
consideration that a search was carried out u/s 132 of the Act on Sh. B.K. Dhingra,
Smt. Poonam Dhingra & M/s Madhusudan Buildcon Pvt. Ltd. and in such search
proceedings, some incriminating documents belonging to the assessee were found
which led to the making of the instant assessments u/s 153C of the Act. In order to
properly appreciate the contention made by the ld. AR on this score, we consider it
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
expedient to consider the so-called satisfaction recorded by the AO. There is no dispute
that the satisfaction has been recorded for all the years under consideration in mutatis
mutandis similar manner. For the sake of reference and on a representative basis, we
are reproducing the satisfaction recorded for the A.Y. 2003-04, as under:
“Satisfaction Note for Issuing Notice u/s 153C of the I.T. Act, 1961 in the case of
M/s Tanveer Finance & Leasing Ltd., WZ 13, Street No. 18, Krishna Park, Tilak
Nagar, New Delhi, PAN No. for A.Y. 2003-04 to 2008-09.
05/07/2010 Documents at pages 231 – 329 of Annexure of A-23 and at pages 61 to
154 of Annexure A-32 seized by the Party R-2 from the premises at F 6/5, Vasant
Vihar, New Delhi during the course of search conducted u/s 132 of the I.T. Act, 1961
on 20/10/2008 in the case of Sh. B.K. Dhingra, Smt. Poonam Dhingra, M/s
Madhusudan Buildcon P. Ltd. have been found to belong to M/s Tanveer Finance &
Leasing Ltd., WZ 13, Street No. 18, Krishna Park, Tilak Nagar, New Delhi which
has not been covered u/s 132 of the I.T. Act, 1961. Accordingly, in terms of
provisions of sec. 153C of the Act, notices u/s 153C are hereby issued for the A.Y.
2003-04 to 2008-09 in the case of M/s Tanveer Finance & Leasing Ltd. The case was
centralized in the Central Circle – 17, New Delhi vide orders dated 03.11.2009 of
CIT-VI, New Delhi.
Sd/DCIT, Central Circle-17, New Delhi
5.
The view canvassed by the ld. AR is that no satisfaction was recorded by the AO
of the three persons searched and the above satisfaction was recorded in the file of and
by the AO of the assessee only. To substantiate this contention, the ld. AR invited our
attention towards pages 10A to 10C of the paper book, being copies of the reply given
by the Deputy Commissioner of Income Tax, Central Circle-17, New Delhi in response
to the applications filed by Sh. B.K. Dhingra, Smt. Poonam Dhingra and M/s
Madhusudan Buildcon P. Ltd. under the provisions of RTI Act, 2005. The relevant
part of the reply given to Sh. B.K. Dhingra, which is similar to that given to the other
two persons also, is reproduced as under:
“2. From the assessment records of Sh. Bhupesh Kumar Dhingra, which is
covered u/s 153A, for the assessment years from 2003-04 to 2008-09 (Block
period) it is noticed that there is no ‘satisfaction note’ available/recorded in
respect of other entities.
3. In case you intend to file the appeal, you may file the same before the
Addl. CIT, Central Range-2, 3rd Floor, ARA Centre, E-2, Jhandewalan, New
Delhi within 30 days from receipt of this letter.”
6.
From the above reproduced satisfaction recorded by the AO of the assessee and
the reply given under the RTI Act to the three persons who were searched u/s 132, it
becomes apparent that no satisfaction was recorded by the AO of the persons searched
before embarking upon the assessments of the assessee.
7.
At this stage, we want to clarify that certain cases in which the assessments
were framed u/s 153C of the Act on some entities pursuant to search on Sh. B.K.
Dhingra, Smt. Poonam Dhingra & M/s Madhusudan Buildcon Pvt. Ltd. in identical
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
circumstances, came up for consideration before the Tribunal. In all these cases
similar objections were raised by the assessee to the effect that no proper satisfaction
was recorded by the AO of such assessees. The Tribunal has disposed of such cases
including Tanvir Collections Pvt. Ltd. vs. ACIT (ITA No. 2421/Del/2014), DCIT vs.
Inlay Marketing Pvt. Ltd. (ITA No. 4197/D/2012) and more recently DCIT vs. G.S.
Findings & Investment Pvt. Ltd. (ITA No. 5980/D/2013) by uniformly holding, inter
alia, as under : i.
The recording of satisfaction by the AO having jurisdiction over the persons
searched is an essential and pre-requisite condition for giving jurisdiction to
the AO of the “other person”.
ii.
Such satisfaction is required to be recorded by the AO of the persons
searched and not the “other person”.
iii.
Assessments made without recording proper satisfaction are null and void.
iv.
Even if the AO of the persons searched and the “other person” is same, it is
only the AO of the persons searched who is obliged to record satisfaction in
his capacity as the AO of the person searched.
8.
After considering the arguments made by both the sides, on the lines similar to
those which have been made before us also, the Tribunal in the above orders has
quashed the assessments so made by declaring them void ab initio for lack of proper
jurisdiction.
9.
It is pertinent to mention that the same three persons, viz., Sh. B.K. Dhingra,
Smt. Poonam Dhingra & M/s Madhusudan Buildcon Pvt. Ltd., were searched in all
the above cases and the AOs of those assessees’ recorded satisfaction in the same
manner as has been done in the instant case. No satisfaction was recorded by the AOs
of the persons searched. All the submissions made before us are similar to those made
in the above cases. Since there is no difference in the facts and legal position of the
cases under consideration vis-a-vis those already considered and decided by the
Tribunal, respectfully following the precedents, we set aside the assessment and the
consequential impugned orders on the ground of lack of proper jurisdiction of the AO.
10.
Before parting with these appeals, we would like to record some further
arguments made by the ld. DR. She vehemently argued that the Appraisal report
clearly mentions that the assessee was to be taxed u/s 153C along with other several
persons and the persons searched were liable to tax u/s 153A. In this view of the
matter, she contended that such appraisal report should be considered as depicting a
satisfaction.
11.
We are unable to accept this submission because an Appraisal report does not
confer jurisdiction on the AO to frame assessment on the ‘other persons’. It is only the
recording of proper satisfaction by the AO of the person searched that the documents
found from such person searched belong to the “other person”, that the AO of the
`other person’ acquires jurisdiction to frame the assessment. Appraisal report is no
substitute of satisfaction of the AO of the person searched.
12.
The ld. DR further submitted that the Tribunal should not take a hyper
technical view on the question of recording satisfaction and hence the proceedings
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
should be allowed to continue since huge amounts are involved in the racket, which
was unearthed by the search party.
13.
We duly appreciate the concern of the ld. DR for the exchequer. But we are
reminded of the basic principle enshrined in Article 265 of the Constitution that no tax
can be collected without authority of law. There can be no assessment in the absence of
a proper jurisdiction of the authority. The question of jurisdiction is a very important
aspect, which cannot be equated with a technical issue. Similar contention raised by
the ld. DR has been elaborately dealt with by the Tribunal in the case of Tanvir
Collections P. Ltd. (supra). We, therefore, do not approve this contention.
14.
The contention of the ld. DR that the hearing of the instant appeals be blocked
because the request for the constitution of special bench in Konnar Enterprises Pvt.
Ltd. (ITA no. 4141/Del/2012 etc.) is pending consideration, is not acceptable. It can be
noticed that the tribunal has uniformally decided the issue in the manner as stated
above and there is no conflicting decision on the set of facts which are under
consideration. Further, the ld. AR has submitted that the issue in the case of Konnar
Enterprises Ltd. is entirely different and has no bearing to the facts of the instant case.
15.
The next contention urged by the ld. DR is that the Tribunal in some other
cases has held that where the AO of the persons searched and the “other person” is
same, then there is no need to record such satisfaction. This contention cannot be
countenanced because the same has been rejected by the Tribunal in all the above
listed cases. As the facts and circumstances of the present case are identical with those
of Tanvir Collections and Inlay etc., in which such contention has not found favour
with the tribunal, we prefer to go with a view taken by the Tribunal in these decisions.
16.
As regards the proposal of the Revenue to file Miscellaneous application in the
case of Tanvir Collection, we find that no such Miscellaneous application has so far
been filed. Further, the contention that the order in the case of Inlay Marketing is per
incurium, has been dealt with by the tribunal in the case of Tanvir Collection, by
holding that there is no flaw in such order.
17.
The other objections taken by the ld. DR in her written submissions are
nothing but reiteration of the points argued earlier, which have been elaborately dealt
with in the above referred tribunal orders.
18.
In view of the foregoing discussion and respectfully following the above
tribunal orders, we set aside the assessment and the impugned orders for the reason
that the AO of the persons searched, namely, Sh. B.K. Dhingra, Smt. Poonam Dhingra
& M/s Madhusudan Buildcon Pvt. Ltd. did not record any satisfaction that some
money, bullion, jewellery or books of account or other documents found from these
persons belonged to the assessee. The absence of such satisfaction, in our considered
opinion, did not translate into conferring a valid and lawful jurisdiction to the AO of
the assessee to proceed with the matter of assessment u/s 153C of the Act for all the
years under consideration.
19.
In view of our decision on the above preliminary legal issue, there is no need to
examine the other legal issues raised by the assessee or the merits of the case as
contested in the present appeals.
20.
In the result, all the appeals of the assessee are allowed and those of the
Revenue are dismissed.”
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
12.
In the case of M/s. Aakash Arogya Mindir P. Ltd v. DCIT (supra), the earlier
Bench of this Tribunal had followed the judgment of the Hon’ble jurisdictional High
Court in the case of Pepsi Foods P. Ltd v. ACIT (sic) Pepsico India Holding Pvt. Ltd
v. ACIT [source: Para 6 on page 6 of the order dt.28.11.2014].
13.
In the light of the judgment of the Hon’ble jurisdictional High Court in the case
of Pepsico India Holding Pvt. Ltd v. ACIT (supra) and also the findings of the earlier
Benches of this Tribunal (supra), we hold that since there was no ‘satisfaction Note’ by
the AO of searched person prior to initiation of proceedings u/s 153C of the Act, the
assessments concluded on the assessee u/s 153C of the Act r.w.s 153A of the Act lack
jurisdiction and the same are hereby quashed.
14.
In substance, the ground No.1 of the assessee’s C.Os is allowed. Since the C.O
of the assessee is partly allowed, the grounds raised by the Revenue in its appeals with
reference to the merits of the case are not adjudicated.
15.
In the result:
(i)
The assessee’s C.Os for the assessment years 2003-04 to 2008-09 are
partly allowed as indicated above; &
(ii)
The Revenue’s appeals are not adjudicated and hence dismissed as
infructuous, since the assessment orders passed u/s 153C r.w.s. 153A of
the Act for the assessment years 2003-04 to 2008-09 were quashed.
The decision was pronounced in the open Court on 18th March, 2015.
Sd/(N.K. SAINI)
Accountant Member
Dated: 18th March, 2015.
Aks/-
Sd/(GEORGE GEORGE K.)
Judicial Member
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ITA Nos. 5969Del/2013
C.O. Nos. 101/D/2014
Copy forwarded to
1.
Appellant
2.
Respondent
3.
CIT
4.
CIT(A)
5.
DR
Asst. Registrar, ITAT, New Delhi
10