Case: M/S. SUPER MALLS PRIVATE LIMITED Vs. PRINCIPAL COMMISSIONER OF INCOME TAX 8, NEW DELHI

2. For the sake of convenience, the facts of Civil Appeals arising from Special Leave Petition (C) Nos. 8449-8450/2017 arising from I.T.A. No. 453/2016 & Review Petition No. 16/2017 for Assessment Year 2008-09 are stated and considered. The facts in nutshell are as under:2.1 By virtue of the authorization of the Director of Income Tax (Investigation), Chandigarh, a search and seizure operation under Section 132(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried out on 8/9.04.2010 at the residential/business premises of Shri Tejwant Singh and Shri Ved Prakash Bharti group of companies at Karnal, Panipat and Delhi. A survey under Section 133A of the Act was also carried out at the business premises of M/s Super Mall (P) Limited – the assessee, at Karnal and New Delhi. That during the course of the search on 8/9.04.2010 at the residence of Shri Ved Prakash Bharti, a Director in the assessee company – M/s Super Mall (P) Limited, pen drive was found and seized from the vehicle parked in front of Shri Ved Prakash Bhartis residence. That some documents were seized after taking out the print from the above said pen drive. The said documents contained the details of the cash receipts on sale of shops/offices at M/s Super Mall, Karnal, also besides other concerns. That as a consequence of the aforesaid search and seizure operation, a notice was issued to the assessee – M/s Super Mall (P) Limited (hereinafter referred to as the Assessee) under Section 153C of the Act by the Assessing Officer. At this stage, it is required to be noted that co-incidentally it so happened that the Assessing Officer of the assessee and the Assessing Officer of the search persons – Tejwant Singh and Ved Prakash Bharti was the same. The assessee filed its return for the assessment year 2008-09. The assessment for the assessment year 2008-09 was finalised by the Assessing Officer and additions were made in the assessment year 2008-09. The assessment order was the subject matter of appeal before the Commissioner of Income Tax (Appeals). The assessment order was challenged mainly on the ground that the satisfaction note recorded under Section 153C of the Act in respect of the assessee, i.e., a third party, was invalid. That the learned CIT (Appeals) dismissed the assessees appeal. However, the learned Income Tax Appellate Tribunal (for short ITAT) allowed the appeal preferred by the assessee and held that the satisfaction note recorded under Section 153C of the Act in respect of the assessee, i.e., a third party, was invalid. In the appeal before the High Court, by the impugned Judgment and Order, the High Court has allowed the said appeal preferred by the Revenue and has observed and held that there was a compliance of Section 153C of the Act. The High Court also observed that the Assessing Officer was justified in recording the satisfaction that the documents so seized belonged to the assessee. Consequently, the High Court has set aside the order passed by the learned ITAT and remanded the matter to the learned ITAT to hear the appeals afresh on merits. At this stage, it is required to be noted that the learned ITAT set aside the order passed by the learned CIT(Appeals) solely on the satisfaction note being invalid and did not enter into the merits. Therefore, the High Court set aside the learned ITATs decision with respect to satisfaction note recorded by the Assessing Officer under Section 153C of the Act. Hence, the present appeal.

Reasoning: 6. This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd. (supra). As held, before issuing notice under Section 153C of the Act, the Assessing Officer of the searched person must be satisfied that, inter alia, any document seized or requisitioned belongs to a person other than the searched person. That thereafter, after recording such satisfaction by the Assessing Officer of the searched person, he may transmit the records/documents/things/papers etc. to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue a notice for the purpose of completion of the assessment under Section 158BD of the Act and the other provisions of Chapter XIV-B shall apply6.1 It cannot be disputed that the aforesaid requirements are held to be mandatorily complied with. There can be two eventualities. It may so happen that the Assessing Officer of the searched person is different from the Assessing Officer of the other person and in the second eventuality, the Assessing Officer of the searched person and the other person is the same. Where the Assessing Officer of the searched person is different from the Assessing Officer of the other person, there shall be a satisfaction note by the Assessing Officer of the searched person and as observed hereinabove that thereafter the Assessing Officer of the searched person is required to transmit the documents so seized to the Assessing Officer of the other person. The Assessing Officer of the searched person simultaneously while transmitting the documents shall forward his satisfaction note to the Assessing Officer of the other person and is also required to make a note in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in the case of Ganpati Fincap (supra), the same is for the administrative convenience and the failure by the Assessing Officer of the searched person, after preparing and dispatching the satisfaction note and the documents to the Assessing Officer of the other person, to make a note in the file of a searched person, will not vitiate the entire proceedings under Section 153C of the Act against the other person. At the same time, the satisfaction note by the Assessing Officer of the searched person that the documents etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the Assessing Officer of the other person is mandatory. However, in the case where the Assessing Officer of the searched person and the other person is the same, it is sufficient by the Assessing Officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, then the requirement of Section 153C of the Act is fulfilled. In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himselfFrom the aforesaid satisfaction note, it emerges that the Assessing Officer is satisfied that the documents containing the details of the cash receipts on sale of shop/offices at M/s Super Mall, Karnal belonged to the other person – assessee – M/s Super Mall. He is also satisfied that the documents/pen drive are seized from the searched person. He is also satisfied that the documents so seized from the residence of the searched person/Ved Prakash Bharti belonged to the assessee – the other person. Therefore, the Assessing Officer was satisfied and it is specifically mentioned that the documents so seized belonged to the assessee – the other person. Therefore, it cannot be said that the mandatory requirements of Section 153C of the Act, in the facts and circumstances of the case, have not been complied with. The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person – the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of Section 153C has been fulfilled. On facts, we are in complete agreement with the view taken by the High Court on the requirement of Section 153C of the Act being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C of the Act.