M/S SUPER MALLS PRIVATE LIMITED versus PRINCIPAL COMMISSIONER OF INCOME TAX 8, NEW DELHI on 5 March 2020

676

SUPREME COURT REPORTS

[2020] 4 S.C.R.

AM/S SUPER MALLS PRIVATE LIMITED

v.

PRINCIPAL COMMISSIONER OF INCOME TAX 8,NEW DELHI

(Civil Appeal Nos. 2006-2007 of 2020)

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MARCH 05, 2020

[ASHOK BHUSHAN AND M. R. SHAH, JJ.]

Income Tax Act, 1961 – s.153C – Search and seizure operationcarried out at residential/business premises of Director (the searchedCperson) of assessee-company – A pen drive was found and seized –Some documents were seized containing details of cash receipts onsale of shops/offices at assessee-company – Notice issued to assesseeu/s.153C by Assessing Officer who co-incidentally happened to bethe same for the assessee and the searched person – Assessee filedDreturn for assessment year 2008-09 – Assessment finalised by theAssessing Officer – Assessment order challenged contending thatsatisfaction note recorded u/s.153C w.r.t the assessee, i.e., a thirdparty, was invalid – Dismissed by CIT (Appeals) – Assessee’s appealallowed by ITAT – Revenue’s appeal allowed by High Court – Held:Before issuing notice u/s.153C, the Assessing Officer of the searchedEperson must be “satisfied” that, inter alia, any document seized orrequisitioned “belongs to” a person other than the searched person– After recording such satisfaction, he may transmit the records/documents/papers etc. to the Assessing Officer having jurisdictionover such other person – After receipt of the said satisfaction & onFexamination of such other documents relating to such other person,the jurisdictional Assessing Officer may proceed to issue notice forcompletion of assessment u/s.158BD – There can be twoeventualities- Assessing Officer of the searched person is differentfrom the Assessing Officer of the other person; the Assessing Officerof the searched person and the other person is the same – WhereGthe Assessing Officer is different, there shall be a satisfaction noteby the Assessing Officer of the searched person who then is requiredto transmit the documents so seized to the Assessing Officer of theother person – Simultaneously he shall forward his satisfaction noteand is also required to make a note in the file of searched person H

that he has done so – However, in case where the Assessing Officeris the same, it is sufficient by the Assessing Officer to note in thesatisfaction note that the documents seized from the searched personbelonged to the other person – Once the note says so, then therequirement of s.153C is fulfilled – Second requirement oftransmitting the documents so seized would not be there as he himselfwill be the Assessing Officer of the other person also – In the factsof the present case, it cannot be said that the mandatory requirementsof s.153C were not complied – High Court justified in observingthat requirement of s.153C was fulfilled – ITAT to decide and disposeof the appeals afresh on merits, at the earliest, in accordance withlaw.

Dismissing the appeals, the Court

Conclusion

Dismissing the appeals, the Court

HELD: 1.1 Before issuing notice under Section 153C ofthe Income Tax Act, 1961, the Assessing Officer of the searchedperson must be “satisfied” that, inter alia, any document seizedor requisitioned “belongs to” a person other than the searchedperson. That thereafter, after recording such satisfaction by theAssessing Officer of the searched person, he may transmit therecords/documents/things/papers etc. to the Assessing Officerhaving jurisdiction over such other person. After receipt of theaforesaid satisfaction and upon examination of such otherdocuments relating to such other person, the jurisdictionalAssessing Officer may proceed to issue a notice for the purposeof completion of the assessment under Section 158BD of the Actand the other provisions of Chapter XIV-B shall apply. Theaforesaid requirements are held to be mandatorily complied with.There can be two eventualities. It may so happen that theAssessing Officer of the searched person is different from theAssessing Officer of the other person and in the secondeventuality, the Assessing Officer of the searched person andthe other person is the same. Where the Assessing Officer ofthe searched person is different from the Assessing Officer ofthe other person, there shall be a satisfaction note by theAssessing Officer of the searched person and as that thereafterthe Assessing Officer of the searched person is required totransmit the documents so seized to the Assessing Officer of theother person. The Assessing Officer of the searched person AB

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Asimultaneously shall forward his satisfaction note to the AssessingOfficer of the other person and is also required to make a note inthe file of a searched person that he has done so. However, inthe case where the Assessing Officer of the searched person andthe other person is the same, it is sufficient by the AssessingOfficer to note in the satisfaction note that the documents seizedBfrom the searched person belonged to the other person. Oncethe note says so, then the requirement of Section 153C of theAct is fulfilled. The second requirement of transmitting thedocuments so seized from the searched person would not be thereas he himself will be the Assessing Officer of the searched personCand the other person and therefore there is no question oftransmitting such seized documents to himself. It cannot be saidthat the mandatory requirements of Section 153C of the Act, inthe facts and circumstances of the case, were not complied with.[Paras 6, 6.1 and 6.2][682-G-H; 683-B-H; 684-A-C]

DCommissioner of Income Tax v. Calcutta Knitwears(2014) 6 SCC 444 : [2014] 5 SCR 855 – relied on.Pepsi Food Pvt. Ltd. v. Assistant Commissioner of IncomeTax 2014 (367) ITR 112 (Delhi) ; Ganpati FincapService Pvt. Ltd. v. Commissioner of Income Tax 2017E(395) ITR 692 (Delhi) – approved.Commissioner of Income Tax v. Bipinchandra ChimanlalDoshi 2017 (395) ITR 632 (Gujarat) – referred to.

GCIVIL APPELLATE JURISDICTION: Civil Appeal Nos.2006-2007 of 2020.

From the Judgment and Order dated 22.11.2016 and 13.01.2017of the High Court of Delhi at New Delhi in ITA No.453/2016 and inReview Petition No.16/2017 in ITA No.453/2016 respectively.

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R.P. Bhat, Sr. Adv., Samrat Nigam, Ms. Prerna Mehta, Advs. forthe Appellant.

Arijit Prasad, Sr. Adv., Mrs. Rekha Pandey, Balaji Srinivasan,Mrs.Anil Katiyar, Advs. for the Respondent.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. As common question of law and facts arise in this group ofappeals, and are with respect to common assessee, but with respect todifferent assessment years, all these appeals are being decided togetherby this common Judgment and Order.

2. For the sake of convenience, the facts of Civil Appeals arisingfrom Special Leave Petition(C) Nos. 8449-8450/2017 arising from I.T.A.No. 453/2016 & Review Petition No. 16/2017 for Assessment Year2008-09 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 Section132(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 ofShri Tejwant Singh and Shri Ved Prakash Bharti group of companies atKarnal, Panipat and Delhi. A survey under Section 133A of the Act wasalso 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 thesearch on 8/9.04.2010 at the residence of Shri Ved Prakash Bharti, aDirector in the assessee company – M/s Super Mall (P) Limited, pendrive was found and seized from the vehicle parked in front of Shri VedPrakash Bharti’s residence. That some documents were seized aftertaking out the print from the above said pen drive. The said documentscontained the details of the cash receipts on sale of shops/offices atM/s Super Mall, Karnal, also besides other concerns. That as aconsequence of the aforesaid search and seizure operation, a noticewas issued to the assessee – M/s Super Mall (P) Limited (hereinafterreferred to as the ‘Assessee’) under Section 153C of the Act by theAssessing Officer. At this stage, it is required to be noted that co-incidentally it so happened that the Assessing Officer of the assesseeand the Assessing Officer of the search persons – Tejwant Singh andVed Prakash Bharti was the same. The assessee filed its return for theassessment year 2008-09. The assessment for the assessment year 2008- A

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A09 was finalised by the Assessing Officer and additions were made inthe assessment year 2008-09. The assessment order was the subjectmatter of appeal before the Commissioner of Income Tax (Appeals).The assessment order was challenged mainly on the ground that thesatisfaction note recorded under Section 153C of the Act in respect ofthe assessee, i.e., a third party, was invalid. That the learned CITB(Appeals) dismissed the assessee’s appeal. However, the learned IncomeTax Appellate Tribunal (for short ‘ITAT’) allowed the appeal preferredby the assessee and held that the satisfaction note recorded under Section153C 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 andCOrder, the High Court has allowed the said appeal preferred by theRevenue and has observed and held that there was a compliance ofSection 153C of the Act. The High Court also observed that the AssessingOfficer was justified in recording the satisfaction that the documents soseized “belonged” to the assessee. Consequently, the High Court hasset aside the order passed by the learned ITAT and remanded the matterDto 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 passedby the learned CIT(Appeals) solely on the satisfaction note being invalidand did not enter into the merits. Therefore, the High Court set aside thelearned ITAT’s decision with respect to satisfaction note recorded byEthe Assessing Officer under Section 153C of the Act. Hence, the presentappeal.

2.2 Therefore, the short question which is posed for theconsideration of this Court is with respect to the satisfaction note recordedby the Assessing Officer, as required under Section 153C of the Act.F3. Shri R.P. Bhatt, learned Senior Advocate appearing on behalfof the assessee has made the following submissions:

3.1 That in the facts and circumstances of the case, the HighCourt has materially erred in observing and holding that the AssessingOfficer has complied with the provisions of Section 153C of the Act;G

3.2 That in the present case there was no satisfaction note by theAssessing Officer of the searched party. That as per the scheme ofSection 153C of the Act, the Assessing Officer of searched person, i.e.,the Directors in this case has to be firstly “satisfied” that any money,jewellery or other valuable articles, books of accounts or documents H

seized or requisitioned “belong to”, i.e., in this case, the assessee company,a person other than the person referred to under Section 153A of theAct. It is submitted that thereafter and on being satisfied that the booksof accounts or documents or assets so seized or requisitioned shall behanded over by the Assessing Officer of searched person, i.e., theDirectors in this case to the Assessing Officer having jurisdiction oversuch other person i.e., the assessee company. That the aforesaidrequirements before issuing notice under Section 153C of the Act areheld to be mandatory by this Court in catena of decisions. Reliance isplaced upon the decision of this Court in the case of Commissioner ofIncome Tax v. Calcutta Knitwears (2014) 6 SCC 444; decision of theDelhi High Court in the case of Pepsi Food Pvt. Ltd. v. AssistantCommissioner of Income Tax 2014 (367) ITR 112 (Delhi); decisionof the Gujarat High Court in the case of Commissioner of Income Taxv. Bipinchandra Chimanlal Doshi 2017 (395) ITR 632 (Gujarat);and the decision of the Delhi High Court in the case of Ganpati FincapService Pvt. Ltd. v. Commissioner of Income Tax 2017 (395) ITR692 (Delhi); 3.3 That even the CBDT also issued a Circular explaining therequirements to be followed by the Assessing Officer before issuingnotice under Section 153C of the Act. That the said Circular has beenreferred to and considered by the Delhi High Court in the case of GanpatiFincap (supra) and after considering the various decisions of differentHigh Courts, it is observed that when proceedings are proposed to beinitiated under Section 153C of the Act against the “other person”, it hasto be preceded by a satisfaction note by the Assessing Officer of thesearched person. It is further observed that he will record in hissatisfaction note that the seized documents belong to “other person”.That in the present case there was no satisfaction note by the AssessingOfficer of the searched person. That there is a non-compliance of theprovisions of Section 153C of the Act as well as even the Circular issuedby the CBDT and therefore the learned ITAT rightly set aside theassessment order.

3.4 Making the above submissions and relying upon the aforesaiddecisions, it is prayed to allow the present appeals.

4. Shri Arijit Prasad, learned Senior Advocate appearing on behalfof the Revenue, while opposing the present appeal/s has vehementlysubmitted that in the facts and circumstances of the case and after AB

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Aconsidering the satisfaction note recorded by the Assessing Officer, theHigh Court has rightly observed and held that there is a sufficientcompliance of Section 153C of the Act. In support he has made thefollowing submissions:

4.1 That in the present case, the Assessing Officer of the assesseeBand the Assessing Officer of the searched person was the same andtherefore if one looks at the satisfaction note, it can be seen that there isa satisfaction note by the Assessing Officer of the searched personalso. It is submitted that as the Assessing Officer was the same, therewas no question of thereafter transmitting the documents so seized fromthe searched person to another Assessing Officer as he himself was theCAssessing Officer of the searched person as well as the Assessing Officerof the assessee. Therefore, there was a sufficient compliance of therequirements under Section 153C of the Act.

4.2 That even as observed and held by the Delhi High Court inthe case of Ganpati Fincap (supra), in case the Assessing Officer ofDthe searched person and the other person is the same, there need not betwo separate satisfaction notes recorded by the Assessing Officer ofthe searched person, where he is also the Assessing Officer of the otherperson.

4.3 Making the above submissions and relying upon the aforesaidEdecision, it is prayed to dismiss the present appeals.5. We have heard the learned counsel for the respective partiesat length.

5.1 As observed hereinabove, the short question which is posedfor the consideration of this Court is, whether there is a compliance ofFthe provisions of Section 153C of the Act by the Assessing Officer andall the conditions which are required to be fulfilled before initiating theproceedings under Section 153C of the Act have been satisfied or not?

6. This Court had an occasion to consider the scheme of Section153C of the Act and the conditions precedent to be fulfilled/compliedGwith before issuing notice under Section 153C of the Act in the case ofCalcutta Knitwears (supra) as well as by the Delhi High Court in thecase of Pepsi Food Pvt. Ltd. (supra). As held, before issuing noticeunder Section 153C of the Act, the Assessing Officer of the searchedperson must be “satisfied” that, inter alia, any document seized orHrequisitioned “belongs to” a person other than the searched person. That thereafter, after recording such satisfaction by the Assessing Officer ofthe searched person, he may transmit the records/documents/things/papers etc. to the Assessing Officer having jurisdiction over such otherperson. After receipt of the aforesaid satisfaction and upon examinationof such other documents relating to such other person, the jurisdictionalAssessing Officer may proceed to issue a notice for the purpose ofcompletion of the assessment under Section 158BD of the Act and theother provisions of Chapter XIV-B shall apply.

6.1 It cannot be disputed that the aforesaid requirements are heldto be mandatorily complied with. There can be two eventualities. It mayso happen that the Assessing Officer of the searched person is differentfrom the Assessing Officer of the other person and in the secondeventuality, the Assessing Officer of the searched person and the otherperson is the same. Where the Assessing Officer of the searched personis different from the Assessing Officer of the other person, there shallbe a satisfaction note by the Assessing Officer of the searched personand as observed hereinabove that thereafter the Assessing Officer ofthe searched person is required to transmit the documents so seized tothe Assessing Officer of the other person. The Assessing Officer of thesearched person simultaneously while transmitting the documents shallforward his satisfaction note to the Assessing Officer of the other personand is also required to make a note in the file of a searched person thathe has done so. However, as rightly observed and held by the DelhiHigh Court in the case of Ganpati Fincap (supra), the same is for theadministrative convenience and the failure by the Assessing Officer ofthe searched person, after preparing and dispatching the satisfactionnote and the documents to the Assessing Officer of the other person, tomake a note in the file of a searched person, will not vitiate the entireproceedings under Section 153C of the Act against the other person. Atthe same time, the satisfaction note by the Assessing Officer of thesearched person that the documents etc. so seized during the searchand seizure from the searched person belonged to the other person andtransmitting such material to the Assessing Officer of the other personis mandatory. However, in the case where the Assessing Officer of thesearched person and the other person is the same, it is sufficient by theAssessing Officer to note in the satisfaction note that the documentsseized from the searched person belonged to the other person. Once thenote 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 A

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Aother person is the same, there can be one satisfaction note prepared bythe Assessing Officer, as he himself is the Assessing Officer of thesearched person and also the Assessing Officer of the other person.However, as observed hereinabove, he must be conscious and satisfiedthat the documents seized/recovered from the searched person belongedto the other person. In such a situation, the satisfaction note would beBqua the other person. The second requirement of transmitting thedocuments so seized from the searched person would not be there as hehimself will be the Assessing Officer of the searched person and theother person and therefore there is no question of transmitting such seizeddocuments to himself.C

6.2. Now let us consider from the satisfaction note recorded bythe Assessing Officer, in the present case. Whether there is a sufficientcompliance of Section 153C of the Act or not. The satisfaction notereads as under:

“Name and address ofD

the assessee:M/s Super Malls (P) Ltd.

Sector 12, HUDA, Karnal

Regd. Office at 51, Transport

CentreE

Punjabi Bagh, New Delhi.

PAN:AAICS2163FStatus:Company

Reasons/Satisfaction note for taking up the case of M/s SuperFMalls (P) Ltd. Sector-12, HUDA, Karnal Regd. Office at 51, TransportCentre, Punjabi Bagh, New Delhi under Section 153C of the IncomeTax Act, 1961.

The jurisdiction of this case has been assigned to this Office u/s127 of the Income Tax Act, 1961 by the worthy Commissioner of IncomeGTax-III New Delhi vide order F. No. CITIII/Delhi/Centralization/1012-1312455 dated 15.01.2013.

By virtue of the authorization of the Director of Income Tax(Investigation), Chandigarh, a search & seizure operation u/s 132(1) ofthe Act was carried out on 08/09.04.2010 at the residential/businessHpremises of Sh. Tejwant Singh & Sh. Ved Parkash Bharti Group of

cases, Karnal, Panipat & Delhi and a survey u/s 133A of the IT. Act,1961 was also carried out at the business premises of M/s Super Mall(P) Ltd. Karnal & New Delhi. During the course of search on08/09.04.2010 at residence of Sh. Ved Parkash Bharti who is a Directorin the assessee company M/s Super Mall (P) Ltd., Pen drives werefound and seized as per Annexure-3 from vehicle No. HR06N-0063parked in front of the residence of Sh. Ved Parkash Bharti. Somedocuments as per Annexure A-1 were seized after taking print out ofthe above said pen drives. These documents contain the details of cashreceipt on sale of shop/offices at M/s Super Mall, Karnal also besideother concerns. These documents are required for assessmentproceedings. During the statement of Sh. Ved Parkash Bharti at thetime of search, he has also stated that these documents pertain to himand M/s Super Mall (P) Ltd., Karnal in which he is Director. In view ofthe above and as per the provisions of sub-section 91 of Section 153C ofthe Act, I am satisfied that the document seized from the residence ofSh. Ved Parkash Bharti belongs to a person i.e. Super Mall (P) Ltd.,other than the person referred in section 153A. Accordingly, it is directedto issue such person (M/s Super Mall (P) Ltd.) notice and assess andreassess income in accordance with the provision of section 153A of theAct.

Dated: 22.02.2013

sd/-

(VED PARKASH KALIA)”

From the aforesaid satisfaction note, it emerges that the AssessingOfficer is satisfied that the documents containing the details of the cashreceipts on sale of shop/offices at M/s Super Mall, Karnal belonged tothe other person – assessee – M/s Super Mall. He is also satisfied thatthe documents/pen drive are seized from the searched person. He isalso satisfied that the documents so seized from the residence of thesearched person/Ved Prakash Bharti belonged to the assessee – theother person. Therefore, the Assessing Officer was satisfied and it isspecifically mentioned that the documents so seized belonged to theassessee – the other person. Therefore, it cannot be said that themandatory requirements of Section 153C of the Act, in the facts andcircumstances of the case, have not been complied with. The satisfactionnote by the Assessing Officer clearly states that the documents so seizedbelonged to the other person – the assessee and not the searched person.

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AThus, the High Court is justified in observing that the requirement ofSection 153C has been fulfilled. On facts, we are in complete agreementwith the view taken by the High Court on the requirement of Section153C of the Act being fulfilled by the Assessing Officer before initiatingthe proceedings under Section 153C of the Act.

B7. In view of the above and for the reasons stated above, all theseAPPEALS fail and the same deserve to be dismissed and are accordinglydismissed. Now, the learned ITAT shall decide and dispose of the appealsafresh on merits, at the earliest, in accordance with law, as observed bythe High Court in the impugned Judgment(s) and Order(s).

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Divya Pandey

Appeals dismissed.

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