HiKlass Moving Picture Pvt. Ltd vs. ACIT (ITAT Mumbai)

DATE: September 30, 2016 (Date of pronouncement)
DATE: November 7, 2016 (Date of publication)
AY: 2002-03 to 2007-08
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S. 153C: An order u/s 153C passed without obtaining the approval of the JCIT u/s 153D is without jurisdiction and void in view of Calcutta Knitwears 362 ITR 673 (SC) and CBDT Circular No. 24/15 dated 31.12.2015

(i) The Hon’ble Supreme Court in the case of M/s Calcutta Knitwear in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.2014 362 ITR 673 (SC) (available in NJRS at 2014-LL-0312-5 l) has laid down that for the purpose of section 158BD of the Act recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s.158BD. The Hon’ble Court held that “the satisfaction note could be prepared at any of the following stages:

(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act: or

(b) in the course of the assessment proceedings under section 158BC of the Act; or

(c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.”

(ii) Furthermore, CBDT vide Circular No.24/15 dated 31-12-15 have observed as under :-

“Several High Courts have held that the provision of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guideline of the Hon’ble SC, apply to proceeding u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.

4. The guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the “other person” is one and the same then also he is required to record his satisfaction as has been held by the Courts.

5.In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the 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hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.”

(iii) In view of the above, recording of satisfaction before proceedings u/s.153C is mandatory, which is lacking in all these cases.

(iv) From the record we found that these appeals were filed on 04/02/2013 and the Bench has asked DR to produce copy of approval from Joint Commissioner of Income Tax as prescribed u/s 153D. The department was also asked to confirm as to whether u/s 153C notice or u/s 143(2) notice was issued. However, nothing came from the department. On 24/02/2016 hearing was adjourned at the request of the CIT DR and it was also mentioned that last opportunity was given to the department and cases were adjourned on 09/03/2016. Again on 09/03/2016 at the request of the CIT DR cases were adjourned to 18/04/2016 as last chance. Again on 09/05/2016 hearing was adjourned at the request of CIT DR. However, on 05/07/2016 following note sheet was written by the Bench.

“We find that on 09/03/2016 last opportunity was provided to the department to produce the relevant record / report. Thereafter this appeal was adjourned on 18/04/2016, 09/05/2016 and 12/05/2016. Today the ld. CIT DR states that the letter sent to Assessing Officer but he not responded in such situation the ld AO is directed appearance in person with record/report. Otherwise adverse view will be taken. Ld CIT DR is also directed to inform the Assessing Officer. Accordingly adjourned to 28/07/2016 as suggested by both side. Parties informed (ITA926 to 929/M/13 and ITA931/M/13)”

(v) However, none of the evidence as asked by the Bench was supplied. Under these circumstances, we do not find any merit in the order passed under Section 153C without having approval from Joint Commissioner of Income Tax as prescribed u/s 153D. No evidence of any satisfaction have been recorded was brought to our notice. Even it was also not shown whether any notice u/s 143 (2) was issued. Accordingly, we set aside the order passed by the lower authorities and the appeals of the assessee are allowed.

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