Super Malls Private Limited vs. PCIT (Supreme Court)

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.2006-2007 OF 2020
(Arising out of SLP(C) Nos. 8449-50/2017)
M/S SUPER MALLS PRIVATE LIMITED …APPELLANT
VERSUS
PRINCIPAL COMMISSIONER OF INCOME
TAX 8, NEW DELHI …RESPONDENT
WITH
CIVIL APPEAL NOS.2008-2009 OF 2020
(Arising out of SLP(C) Nos. 8453-54/2017)
CIVIL APPEAL NOS.2010-2011 OF 2020
(Arising out of SLP(C) Nos. 8451-52/2017)
CIVIL APPEAL NOS.2012-2013 OF 2020
(Arising out of SLP(C) Nos. 8455-56/2017)
J U D G M E N T
M.R. SHAH, J.
As common question of law and facts arise in this group of appeals, and
are with respect to common assessee, but with respect to different assessment
1
years, all these appeals are being decided together by this common Judgment
and Order.
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 Bharti’s 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
2
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 assessee’s 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
3
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 ITAT’s decision with respect to satisfaction note recorded
by the Assessing Officer under Section 153C of the Act. Hence, the present
appeal.
2.2 Therefore, the short question which is posed for the consideration of this
Court is with respect to the satisfaction note recorded by the Assessing Officer,
as required under Section 153C of the Act.
3. Shri R.P. Bhatt, learned Senior Advocate appearing on behalf of the
assessee has made the following submissions:
3.1 That in the facts and circumstances of the case, the High Court has
materially erred in observing and holding that the Assessing Officer has
complied with the provisions of Section 153C of the Act;
3.2 That in the present case there was no satisfaction note by the Assessing
Officer of the searched party. That as per the scheme of Section 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 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 the Act. It is submitted that thereafter and on being satisfied
that the books of accounts or documents or assets so seized or requisitioned
shall be handed over by the Assessing Officer of searched person, i.e., the
4
Directors in this case to the Assessing Officer having jurisdiction over such
other person i.e., the assessee company. That the aforesaid requirements before
issuing notice under Section 153C of the Act are held to be mandatory by this
Court in catena of decisions. Reliance is placed upon the decision of this Court
in the case of Commissioner of Income Tax v. Calcutta Knitwears (2014) 6 SCC
444; decision of the Delhi High Court in the case of Pepsi Food Pvt. Ltd. v.
Assistant Commissioner of Income Tax 2014 (367) ITR 112 (Delhi); decision of
the Gujarat High Court in the case of Commissioner of Incoem Tax v.
Bipinchandra Chimanlal Doshi 2017 (395) ITR 632 (Gujarat); and the decision
of the Delhi High Court in the case of Ganpati Fincap Service Pvt. Ltd. v.
Commissioner of Income Tax 2017 (395) ITR 692 (Delhi);
3.3 That even the CBDT also issued a Circular explaining the requirements to
be followed by the Assessing Officer before issuing notice under Section 153C
of the Act. That the said Circular has been referred to and considered by the
Delhi High Court in the case of Ganpati Fincap (supra) and after considering
the various decisions of different High Courts, it is observed that when
proceedings are proposed to be initiated under Section 153C of the Act against
the “other person”, it has to be preceded by a satisfaction note by the Assessing
Officer of the searched person. It is further observed that he will record in his
satisfaction note that the seized documents belong to “other person”. That in
the present case there was no satisfaction note by the Assessing Officer of the
searched person. That there is a non-compliance of the provisions of Section
5
153C of the Act as well as even the Circular issued by the CBDT and therefore
the learned ITAT rightly set aside the assessment order.
3.4 Making the above submissions and relying upon the aforesaid decisions,
it is prayed to allow the present appeals.
4. Shri Arijit Prasad, learned Senior Advocate appearing on behalf of the
Revenue, while opposing the present appeal/s has vehemently submitted that in
the facts and circumstances of the case and after considering the satisfaction
note recorded by the Assessing Officer, the High Court has rightly observed and
held that there is a sufficient compliance of Section 153C of the Act. In support
he has made the following submissions:
4.1 That in the present case, the Assessing Officer of the assessee and the
Assessing Officer of the searched person was the same and therefore if one
looks at the satisfaction note, it can be seen that there is a satisfaction note by
the Assessing Officer of the searched person also. It is submitted that as the
Assessing Officer was the same, there was no question of thereafter transmitting
the documents so seized from the searched person to another Assessing Officer
as he himself was the Assessing Officer of the searched person as well as the
Assessing Officer of the assessee. Therefore, there was a sufficient compliance
of the requirements under Section 153C of the Act.
4.2 That even as observed and held by the Delhi High Court in the case of
Ganpati Fincap (supra), in case the Assessing Officer of the searched person
and the other person is the same, there need not be two separate satisfaction
6
notes recorded by the Assessing Officer of the searched person, where he is also
the Assessing Officer of the other person.
4.3 Making the above submissions and relying upon the aforesaid decision, it
is prayed to dismiss the present appeals.
5. We have heard the learned counsel for the respective parties at length.
5.1 As observed hereinabove, the short question which is posed for the
consideration of this Court is, whether there is a compliance of the provisions of
Section 153C of the Act by the Assessing Officer and all the conditions which
are required to be fulfilled before initiating the proceedings under Section 153C
of the Act have been satisfied or not?
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
7
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 apply.
6.1 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
8
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 himself.
6.2. Now let us consider from the satisfaction note recorded by the Assessing
Officer, in the present case. Whether there is a sufficient compliance of Section
153C of the Act or not. The satisfaction note reads as under:
9
“Name and address of
the assessee : M/s Super Malls (P) Ltd.
Sector 12, HUDA, Karnal
Regd. Office at 51, Transport
Centre
Punjabi Bagh, New Delhi.
PAN : AAICS2163F
Status : Company
Reasons/Satisfaction note for taking up the case of M/s Super
Malls (P) Ltd. Sector-12, HUDA, Karnal Regd. Office at 51,
Transport Centre, Punjabi Bagh, New Delhi under Section 153C of
the Income Tax Act, 1961.
The jurisdiction of this case has been assigned to this Office u/s
127 of the Income Tax Act, 1961 by the worthy Commissioner of
Income Tax-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) of the Act was carried out on 08/09.04.2010 at the
residential/business premises 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 on 08/09.04.2010 at residence of Sh.
Ved Parkash Bharti who is a Director in the assessee company M/s
Super Mall (P) Ltd., Pen drives were found and seized as per
Annexure-3 from vehicle No. HR06N-0063 parked in front of the
residence of Sh. Ved Parkash Bharti. Some documents as per
Annexure A-1 were seized after taking print out of the above said
pen drives. These documents contain the details of cash receipt on
sale of shop/offices at M/s Super Mall, Karnal also beside other
concerns. These documents are required for assessment
proceedings. During the statement of Sh. Ved Parkash Bharti at
the time of search, he has also stated that these documents pertain
to him and M/s Super Mall (P) Ltd., Karnal in which he is Director.
In view of the above and as per the provisions of sub-section 91 of
Section 153C of the Act, I am satisfied that the document seized
from the residence of Sh. Ved Parkash Bharti belongs to a person
10
i.e. Super Mall (P) Ltd., other than the person referred in section
153A. Accordingly, it is directed to issue such person (M/s Super
Mall (P) Ltd.) notice and assess and reassess income in accordance
with the provision of section 153A of the Act.
Dated: 22.02.2013 sd/-
(VED PARKASH KALIA)”
From 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.
11
7. In view of the above and for the reasons stated above, all these APPEALS
fail and the same deserve to be dismissed and are accordingly dismissed. Now,
the learned ITAT shall decide and dispose of the appeals afresh on merits, at the
earliest, in accordance with law, as observed by the High Court in the impugned
Judgment(s) and Order(s).
……………………………………J.
[ASHOK BHUSHAN]
NEW DELHI; ……………………………………J.
MARCH 05, 2020. [M.R. SHAH]
12