Girish Agrawal & Nisha Lahoti, ARs, for the Assessee. Ashima Gupta, CIT-DR, for the Revenue.

These three appeals by the assessee are directed against the different orders of ld. Commissioner of Income Tax (Appeal)in short ‘Ld. CIT(A)-2, Bhopal all dated 21.03.2016 pertaining to Assessment Years 2005-06, 2006-07 & 2007-08. All these appeals were taken up together and are being disposed of by way of consolidated order as the grounds are identical except the change into figures.

2. We take the assessee appeal in ITANo.126/Ind/2016 for A.Y. 2005-06 as a lead case. In this appeal the assessee has raised following grounds of appeal:

“On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in upholding that the addition of Rs.20,00,000/- by treating the deposits made by the members of the society as unexplainable as done by the assessing officer.”

3. During the course of appellate proceedings before this Tribunal the assessee also raised following additional grounds of appeal:

“1.On the facts and in the circumstances of the case and in law, Ld. Assessing Officer erred in making the addition of Rs.20,00,000/- and passing the impugned assessment order under section 153C (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961) without reference to any incriminating material found and seized from the searched persons during the conduct of their search.

2. On the facts and in the circumstances of the case and in law, Ld. Assessing Officer erred in making the addition of Rs.20,00,000/- and passing the impugned assessment order under section 153C (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961) without reference to satisfaction recorded by the Assessing Officer of the searched persons and without supplying a copy of the said satisfaction to the appellant from the file of searched persons in whose case assessments were completed under section 153A (of Income Tax Act, 1961).

3. On the facts and in the circumstances of the case and in law, Ld. Assessing Officer erred in making the addition of Rs.20,00,000/- and passing the impugned assessment order under section 153C (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961) more particularly when provisions of section 292C (of Income Tax Act, 1961) applies on person from whom the seized material is found in the possession or control of, in the course of a search under section 132 (of Income Tax Act, 1961) or survey under section 133A (of Income Tax Act, 1961) and not the other person.

4. The facts giving rise to the present appeal are that a search and seizure operation u/s 132(1) (of Income Tax Act, 1961)(hereinafter referred as the Act) was carried out in the case of Mohd. Shafique Group cases on 21.09.2006.

During the search and seizure operation u/s 132(1) (of Income Tax Act, 1961), documents relating to the assessee namely Taj Grih Nirman Society were also found. Thereafter, having recorded the reasons a notice u/s 153C (of Income Tax Act, 1961) was issued on 19.05.2008. Again, notice u/s 142(1) (of Income Tax Act, 1961) r.w.s. 153C (of Income Tax Act, 1961) was issued on 20.06.2008 calling the assessee to attend hearing on 06.06.2008. In response thereto, a return of income for A.Y. 2005-06 was filed on 30.09.2008 declaring income of Rs.2,290/-.

5. Thereafter, the assessing officer made assessment u/s 153 (of Income Tax Act, 1961) r.w.s. 143(3) (of Income Tax Act, 1961) on 31.12.2008 and assessed the income at Rs.20,02,290/- hence making an addition of Rs.20,00,000/-. The matter travelled up to the Tribunal and impugned order therein was set aside and assessment was restored back to the file of assessing officer vide order dated 03.09.2012. In pursuance of the Tribunal order the assessing officer issued a notice u/s 143(2) (of Income Tax Act, 1961) dated 30.01.2014, no one appeared before the assessing officer on the dates so fixed. Thereafter, again a notice was issued, in response thereto, the Authorized Representative (AR) of the assessee, Shri Rohit Pathak, advocate attended the hearing and filed written submission which were placed on record. The Assessing Officer recorded that the assessee failed to give any documentary evidences in support of its claim. Therefore, he made an addition of Rs.20,00,000/-.

6. Aggrieved against this the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions dismissed the appeal. It is also noted that before the ld. CIT(A) the assessee had furnished certain evidences. Those evidences were not found to be sufficient, hence, Ld. CIT(A) sustained the addition. Now the assessee is in appeal before this Tribunal. During the course of hearing the assessee filed additional grounds of appeal. First we would decide the issue of admissibility of additional grounds taken by the assessee.

7. Ld. counsel for the assessee submitted that the additional grounds are legal in nature. They can be raised at any stage. He vehemently argued that in the light of the judgments relied by the assessee these grounds deserve to be admitted and allowed. Ld. counsel further reiterated the submission as made in the synopsis. The submissions of the assessee are reproduced as under:

A. Additional Grounds of Appeal For all the three years under appeal i.e. A.Y. 2005-06 to 2007- 08, assessee has filed additional grounds of appeal through a separate application dated 07.09.2018 which are legal grounds on fundamental issue of jurisdiction going to the root of the matter. Assessee prays that these grounds of appeal may please be admitted in the interest of natural justice and appropriate adjudication of the matter.

1. Instant proceedings are the second round of appeal before the Hon’ble ITAT Bench of Indore after the matter was set aside by the Hon’ble Bench to the file of AO vide order pronounced on 03.09.2012 in appeal nos. IT(SS)A 300 to 302/Ind/2012.[refer PB 209 – 214]

The matter was set aside by the Hon’ble Bench owing to additional evidences filed by the assessee which were not considered by the authorities below.[refer PB 174]

While setting aside the matter to the file of Ld. AO, Hon’ble ITAT noted the following facts in its order at internal Page 5[PB 211] – “On the issue as to why these documents could not be filed before the learned Assessing Officer, it was explained by the learned counsel that the search took place on 21.09.2006 and notice u/s 153C (of Income Tax Act, 1961) was issued on 16.09.2008 approximately after two years of the search. The return was claimed to be filed on 16.09.2008. It was also pointed that the questionnaire was issued on 11.10.2008, therefore, the assessment was to be completed by 31.12.2008.”[emphasis supplied]

2. Search was conducted in the case of Mohd. Shafique, Mohd. Atique and M/s. Ekta Transport Co. for whom assessments were completed u/s 153A (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961). Cases of Mohd. Shafique and Mohd. Atique are in appeal before your Honors along with the instant case.

3. In the instant case, the matter relates to fundamental issue of jurisdiction as the impugned assessments for the assessee Society were completed u/s 153C (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961).

Recording of satisfaction in the file of searched person is of vital importance. It is only on the basis of satisfaction recorded in the case of searched persons that proceedings u/s 153C (of Income Tax Act, 1961) could have been initiated in the case of assessee.

4. Assessee filed a reminder application for the supply of certified true copy of satisfaction recorded in the case of searched persons to the office of Ld. CIT(A) – 2, Bhopal as well as to the office of Ld. ACIT – 3(1), Bhopal on 02-03 August 2018 which was in continuation to the erstwhile pending application dated 16.08.2012.[PB 194]

Another reminder dated 25.08.2018 was filed before the ACIT – 3(1), Bhopal for supply of required satisfaction recorded in the case of searched persons. Till date,copies of the required satisfaction note recorded in the cases of searched persons have not been provided to the assessee.[copy annexed to this submission]

Assessee also filed an application under the Right to Information Act, 2005 (RTI)on 17.09.2018 requesting to provide the status of above referred pending applications and also to make available certified true copy of the satisfaction note recorded in the case of searched persons,viz.Mohd. Atique, Mohd. Shafique and M/s. Ekta Transport Company. [copy annexed to this submission]

5. As per the law enshrined in section 153C (of Income Tax Act, 1961) which relates to assessment of income of any other person, it is the 'satisfaction' of the Assessing Officer of the person searched which is sine qua non for acquiring the jurisdiction u/s 153C (of Income Tax Act, 1961). Only when 'satisfaction' has been recorded by the Assessing Officer of the person searched who alone is required under the law to record such satisfaction, even though 'satisfaction' has been recorded by the Ld. Assessing Officer of the assessee and therefore, in terms of law enshrined in section 153C (of Income Tax Act, 1961) such a recording of satisfaction does not clothe the Assessing Officer with the jurisdiction to initiate proceedings u/s 153C (of Income Tax Act, 1961) and consequently to frame any assessment u/s 153C (of Income Tax Act, 1961) rws 143(3) (of Income Tax Act, 1961). In the instant case, Ld. Assessing Officer of the assessee issued notice u/s 153C (of Income Tax Act, 1961) for the impugned assessment years on 16.09.2008.

In other words, at the first stage, the AO of the person who has been searched must arrive at a satisfaction that the assets or documents seized does not belong to the searched person but to some 'other person'; in the second stage, that is, after such satisfaction is arrived by the AO of person searched, then he is required to transfer or hand over the assets or documents to the AO having jurisdiction over the 'other person'; and lastly, the AO of 'other person' shall commence the proceedings under section 153C (of Income Tax Act, 1961) and consequently pass assessment /reassessment order in the manner provide u/s 153A (of Income Tax Act, 1961). If such a procedure is not followed then needless to say that jurisdiction to proceed u/s 153C (of Income Tax Act, 1961) cannot be acquired by the AO of 'other person', i.e., other than the person searched.

6. Reliance is placed on following judicial precedence of the Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Mechmen [2015] 60 taxmann.com 484(MP)– Para 15– [CLPB - xx]

7. These additional grounds go to the root of matter and are vital to the disposal of said appeals. Their admittance shall help the assessee in getting justice. Reliance is placed on the following decisions for admittance of legal grounds in the instant appeals –

a. Hon’ble Apex Court in the case of National Thermal Power Co. Ltd – [1998] 229 ITR 383 – [CLPB - xx]

b. Hon’ble ITAT bench of Chennai (TM) in the case of Hemal Knitting Industries – [2010] 127 ITD 160 – [CLPB - xx]

8. Assessee prays that the additional grounds of appeal being legal grounds on fundamental issue of jurisdiction and go the root of matter and hence please be admitted for adjudication of matter.

In the course of hearing held on 06.02.2019, Hon’ble Bench was kind in giving an opportunity to the Ld. CIT(DR) to make her submission on the case laws relating to the additional grounds filed by the assessee.

2. A written submission on the additional grounds along with relevant judicial decisions is already on record. This further submission may please be considered in continuation to the earlier submission already on record which specifically deals with admission of additional ground challenging the legal and jurisdictional issue for the first time in the second round of appellate proceedings before the Tribunal.

3. Assessee vide application dated 04.09.2018 filed on 07.09.2018 raised additional grounds of appeal. These additional grounds of appeal go the root of the matter and are vital to the disposal of the said appeals. Their admittance shall help appellant in getting justice.

4. Rule 11 (of Income Tax Rules, 1962) of the Income Tax (Appellate Tribunal) Rules, 1963 reads –

“The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule :

Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.” Tribunal is under statutory obligation not only to entertain plea but also to decide the same after providing sufficient opportunity of being heard to the other side.

5. There are direct decisions which deal with the subject matter of this submission relating to admission of additional ground in the second round of appellate proceedings before the Hon’ble Tribunal. These are in addition to and in continuation of the case law paper book already on record. A Case Law Paper Book – Volume 2 has been furnished with the similar

submission made in the appeals of Mohd. Atique.

a) Hon’ble Bombay High Court in the case of Inventors Industrial Corpn. Ltd – [1992] 194 ITR 548 – HEAD NOTE – “Section 251 (of Income Tax Act, 1961) – Commissioner (Appeals) – Powers of – Assessment year 1958-59 – Whether a ground by which jurisdiction to make assessment itself is challenged can be urged before any authority for first time – Held, yes – Whether, therefore, assessee was entitled to challenge jurisdiction of Income-tax Officer to initiate reassessment proceedings before Appellate Assistant Commissioner in second round of proceedings even though he had not raised it earlier before Income-tax Officer or in earlier appeal before AAC – Held, yes” [emphasis supplied]

b) Hon’ble ITAT Bench of Kolkata ‘A’ in the case of Peerless Gen. Fin. & Inv. Co. Ltd. – [2008] 21 SOT 440 – HEAD NOTE - Section 253 (of Income Tax Act, 1961) - Appellate Tribunal - Appeals to - Assessment year 1994-95 - Whether jurisdictional provision, which is mandatory, can be taken up in second round of litigation and an assessee can raise issue relating to validity of order in second round of litigation even if same was not raised in first round - Held, yes” [emphasis supplied]

c) Hon’ble Bombay High Court (Full Bench) in the case of Ahmedabad Electricity Co. Ltd. – [1993] 6 Taxman 27 – HEAD NOTE – “Section 254 (of Income Tax Act, 1961) - Appellate Tribunal - Powers of - Assessment years 1962-63 to 1971-72 - During assessment assessee did not claim deduction of amounts transferred to 'reserve' as per Electric Supply Act, 1948, either before ITO or AAC - Later, on basis of a High Court decision holding such amounts as deductible on revenue account assessee claimed deduction of same before Tribunal by way of additional ground while appeal was pending before Tribunal - Tribunal refused to permit assessee to raise such additional ground - Whether phrase 'pass such order thereon' occurring in section 254(1) (of Income Tax Act, 1961) confers widest possible jurisdiction on Tribunal including jurisdiction to permit any additional ground of appeal if in its discretion and for good reasons it thinks it necessary and permissible to do so - Held, yes - Whether Tribunal had jurisdiction to permit additional grounds to be raised before it even though these might not have arisen from AAC's order, so long as these grounds were in respect of subject-matter of entire tax proceedings - Held, yes” [emphasis supplied]

d) Hon’ble Gujarat High Court in the case of P.V. Doshi – [1978] 113 ITR 22 – HELD – “..as the Tribunal had failed to notice this material distinction between a mere procedural provision which could be waived and such jurisdictional provision or a mandatory provision enacted in public interest which could not be waived, because by consent no jurisdiction could be conferred on the authority unless the conditions precedent were first fulfilled. The Tribunal's view was clearly erroneous that the matter became final when the Tribunal passed the earlier remand order so that this point of jurisdiction got finally settled, which could not be agitated unless the assessee had come in the reference to the High Court at this stage. The Tribunal’s view was also incorrect that in restoring the case to the file of the ITO by the earlier order, the only point left open was in respect of addition on merits and that the legal or jurisdictional aspect whether the re-assessment proceedings were legally initiated was not kept open. Even the Tribual’s view was erroneous that even though this point went to the root of the jurisdiction and was a pure question of law, merely because the point was initially raised and not pressed when the matter was taken up before the AAC, it could be waived and it could not be reagitated.” [emphasis supplied]

e) Hon’ble Apex Court in the case of S. Nelliappan – [1967] 66 ITR 722 – HEAD NOTE – “Section 254 (of Income Tax Act, 1961) [Corresponding to section 33(4) (of Income Tax Act, 1961), 1922] - Appellate Tribunal - Power of - Whether in hearing an appeal Tribunal may give leave to assessee to urge grounds not set forth in memorandum of appeal, and in deciding appeal Tribunal is not restricted to grounds set forth in memorandum of appeal or taken by leave of Tribunal - Held, yes” [emphasis supplied]

f) The legal and jurisdictional issue raised in the instant additional grounds by the appellant was dealt by the Hon’ble Delhi High Court in the case of Kabul Chawla – [2016] 380 ITR 573 - Para 2 – ‘The issue that the Court proposes to address in these appeals is the same that was considered by the ITAT viz., ‘Whether the additions made to the income of the Respondent Assessee for the said AYs under Section 2(22) (of Income Tax Act, 1961)e of the Income Tax Act, 1961 (‘Act’) were not sustainable because no incriminating material concerning such additions were found during the course of search and further no assessments for such years were pending on the date of search?’ [emphasis

supplied]

6. The above judicial precedents adequately fortify the case of the appellant. Addition made in absence of incriminating material relating to such addition found and seized during the course of search of Mohd. Atique and Mohd. Shafique, assessee being ‘other person’ and assessed under section 153C (of Income Tax Act, 1961), ought to be deleted.

The above issue of admittance of additional legal ground raised for the first time before Hon’ble Tribunal in second round of appellate proceedings is also raised in the case of searched persons namely, Mohd. Atique and Mohd. Shafique. The ratio of submission made in the case of searched persons applies with equal force in the instant case also, without prejudice to the other legal grounds of appeal.

8. Ld. CIT-DR opposed these submissions and submitted that at this belated stage these additional grounds as raised should not be admitted. Ld. CIT-DR further submitted that the case laws relied by the Ld. counsel for the assessee are distinguishable. The Ld. CIT-DR further submitted that the assessee ought to have been vigilant and should not be allowed to raise the stale issue at such belated stage.

9. We have heard the rival submissions and perused the materials available on records. There is no dispute with regard to the fact that the issue so raised goes to the root of the jurisdiction. Ld. counsel for the assessee has drawn our attention to the judgment of the Hon'ble jurisdictional High court in the case of Nandlal Sachdeva vs. CIT (2012) 19 ITJ 361. The Hon'ble Court has decided this issue as under:

“10. The issue with regard to legality of proceedings undertaken u/s 154 (of Income Tax Act, 1961) after issue of notice u/s 143(2) (of Income Tax Act, 1961) is a purely legal issue can be raised at any stage. This issue was not raised by the assessee in the first round of appeal either before the CIT(A) or before the Tribunal. On the ground of notice u/s 143(2) (of Income Tax Act, 1961) having not been issued, the Ld. CIT(A) in the first round of appeal has annulled the assessment, However, in further appeal filed by the Revenue before the Tribunal, it was held by the Tribunal, vide order dated 3.6.2008 that notice was issued u/s 143(2) (of Income Tax Act, 1961) within the specified time, however, since issue raised on merit were not considered by the Ld. CIT(A), the matter was restored to him for deciding the issue on merit. To give effect to the order of the Tribunal, the ID. CIT(A) issued notice on 1.08.2008 during which a legal issue was also raised before him, but the Ld. CIT(A) did not entertain the same. Now the assessee has pleaded before us that the ld. CIT(A) was not justified in entertaining the legal issue raised before him and also contended that in view of various decisions cited by him as discussed above, the proceedings initiated u/s 154 (of Income Tax Act, 1961) after the issue of notice u/s 143(2) (of Income Tax Act, 1961) was not sustainable in law. We found substance in the contention of the Ld. AR the ground of legality of proceedings u/s 154 (of Income Tax Act, 1961) after issue of notice u/s 143(2) (of Income Tax Act, 1961) is a purely legal issue, which deserves to be accepted in view of the decision of Hon'ble Supreme court in the case of National Thermal Power Corporation (supra). We also found that all the facts with regard to issue of notice u/s 143(2) (of Income Tax Act, 1961) and rectification of order passed u/s 154 (of Income Tax Act, 1961) thereafter, is already on record. As all the facts with regard to the legal issue are already on record, there is no merit in the action of the ld. CIT(A) for declining to entertain the legal issue, even though raised for the first time before him. In the interest of justice and fair play, we restored this legal issue to the file of CIT(A) and direct him to decide the same as per law keeping in view various decisions discussed herein above.”

The tribunal allowed the contention of the assessee for raising the legal issue, but remanded the matter to the CIT(A) to consider the aforesaid legal issue.

In this appeal the sole contention of the appellant before this court is that in place of remand the Tribunal itself ought to have adverted itself to the legal issue and remand in the matter was not required. While the learned counsel for revenue supported the remand order. In this case, as per the finding recorded by the Tribunal in para 10 of the order, we find that all the facts were before the Tribunal and the Tribunal in this para specifically have recorded this fact. When all the facts for deciding the legal issue were already on record, in the aforesaid circumstances, whether the Tribunal could have remanded the matter or ought to have decided the matter itself it to be seen. The powers of the Tribunal are vested under section 254 (of Income Tax Act, 1961).

Section 254(1) (of Income Tax Act, 1961) provides thus, “ 254(1) the Appeal Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.”

The appellate Tribunal after extending both the parties an opportunity of being heard, can pass such orders thereon as it think fit. Meaning thereby the Tribunal is empowered to decide the legal issue and also other issues based on facts.

The powers of the tribunal are very wide. The legislation has given wide powers to the Tribunal under section 254(1) (of Income Tax Act, 1961). A similar question was considered by the Gujarat High Court in Saurashtra Packaging Pvt. Ltd. CIT (1993) 204 ITR 443)(Guj) in which the division bench of Gujarat High Court held thus:

. In our opinion, the contentions raised on behalf of the assessee deserve to be accepted. Though reliance was placed by the assessee on the dissolution deed before the ITO for a different purpose, the fact remains that a copy of the dissolution deed was on the record of the case. As pointed out by the learned advocate for the assessee, the said dissolution deed has provided for rights and liabilities of the assessee which took over the running business of the partnership firm. In view of this material, the Tribunal could have easily looked into the relevant provisions of the Gujarat Sales-tax Act and the Gujarat Sales-tax Rules if that was found necessary and decided the appeals. Thus, there was no justification for setting aside the orders passed by the CIT(A) and sending the matters back to him for a fresh decision. The Tribunal, therefore, can be said to have erred in holding that it was unable to decide the point in controversy finally in the absence of relevant material. In order to save time and avoid multiplicity of proceedings, we are of the opinion that instead of directing the Tribunal to state the case and refer to this Court the questions raised by the assessee, the Tribunal be directed to consider the dissolution deed itself and dispose of the matter finally. It would be open to the parties to produce whatever material they deem fit and necessary for the purpose of deciding the point in issue. This application is disposed of accordingly. No order as to costs.

A similar issue came before the Madras High Court in Remgosri Construction (P) Ltd. vs. Income Tax Officer (209) 308 ITR 290 (Mad), in which the Division Bench held in para 8 of the judgments which reads thus:

“8.The Tribunal has not set aside the finding of the appellate authority and remitted the entire issue to the file of the AO. The Tribunal had merely contended itself by saying that neither the AO nor the appellate authority had examined the relevant details and that it is not clear whether the records were before the AO. But, it does not appear to be correct since there were materials before the AO as well as the appellate authority for them to draw the respective conclusions. Therefore, we remit the matter back to the Tribunal to decide the matter afresh as expeditiously as possible on the basis of the available materials.”

In the aforesaid both the judgments, it has been held that when the entire material is before the Tribunal, the Tribunal in place of remand ought to have decided the matter on its own merits.

In this case a pure legal issue was before the Tribunal and the Tribunal itself has recorded that all the facts are already on record, then in the aforesaid circumstances the Tribunal itself ought to have decided the matter itself.

Apart from this, the matter relates to the assessment year 2000-01. Earlier the matter was remanded by the Tribunal vide Annexure A-4 on 3.6.2008 and a sufficient period has elapsed in the proceedings and at this juncture if the matter is remanded to decide the aforesaid legal issue, then it will be the another round of litigation. To save time, money and energy, it would be appropriate if the Tribunal is directed to decide on the aforesaid legal issue.

In view of the aforesaid we find that the Tribunal erred in remanding the matter to the CIT(A) and accordingly the aforesaid part of the order is hereby set aside and the matter is remanded back to the Tribunal to decide it afresh, in accordance with law. However, while setting aside the aforesaid order, we observe that in case after hearing both the parties, the Tribunal still records an opinion that the matter deserves to be remanded back to decide the issues. The tribunal shall be freed to pass such order, after giving its reasons in this regard.

10. Further, reliance has been placed on the judgments of Hon'ble M.P. High Court rendered in the case of DCIT vs. Torquoise Investment & Finance Ltd. (2006) 154 Taxman 80 (MP) wherein the Hon'ble Court has decided this issue as under:

15. Coming to the question Nos. 3 and 4, whether the issue could be raised by the assessee before the Tribunal for the first time and having dismissed the cross-objection, the Tribunal could proceed to give a finding on the same, the learned counsel for the assessee has invited our attention to the decision of the CIT(A) Ex./C in IT Appeal No. 112 of 2003 in which reference has been made to the decision of the Hon'ble Madras High Court in CIT v. VR. S.R.M. Firm (supra), but he has erroneously stated that it was held in the said decision that the said dividend is taxable in India under Sections 8 (of Income Tax Act, 1961) and 9 of the IT Act, 1961, though the decision holds to the contrary. Learned counsel, therefore, contends that the fact that the said decision was cited bears testimony to the fact that contention was raised with regard to the non-taxability of the dividend earned in Malaysia in India under the agreement in question. Learned counsel has further submitted that in the appeals filed by the respondents, they have clearly raised the questions that the Tribunal was not justified in dismissing the cross-objection filed by the assessee on the ground of limitation specially when it

took the view that the dividend income was not taxable in India. Attention has also been invited to Rule 27 of the ITAT Rules, 1963. The said rule reads as under:

27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.

16. Reference has also been made to the decision of the apex Court in National Thermal Power Co. Ltd. v. CIT in which their Lordships have observed that the power of the Tribunal in dealing with appeals is expressed in widest possible terms. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. From the above position it is clear, that if the material is on record on the basis whereof objection can be raised, the parties to the appeal cannot be precluded from raising such contention, especially the respondent, in view of Rule 27 of the ITAT Rules, 1963, quoted above. We are, therefore, of the considered view that both questions No. 3 and No. 4 in the Department's appeal deserve to be answered against the Department. In view of the wide powers that the Tribunal is invested with, as clearly referred to and spelt out by their Lordships in their decision in National Thermal Power Co. Ltd. (supra), the Tribunal cannot be precluded from considering the questions of law arising in an assessment proceeding not raised earlier, and restricted to issues arising out of appeal before the CIT(A). The assessees have also filed appeal from item Nos. 14 to 26 captioned above. Though a large number of questions have been raised by the assessees, the appeals have been admitted on the following questions, as formulated in IT Appeal No. 112 of 2003.

(i) Whether the Tribunal was justified in dismissing the cross- objection filed by the appellant (assessee) on the ground of limitation and if so, whether such finding is sustainable in law ?

(ii) Having considered the case of the assessee on merits and recorded a categorical finding on the merits of the case to the effect that dividend income received from Pan Malaysia cannot be taxed in India, did it not result in allowing the cross-objection so submitted by the appellant/assessee ?

(iii) Having held in favour of the assessee that the dividend income in question is not taxable in the hands of assessee, was it not necessary for the Tribunal to have further recorded the finding that issue relating to grant of credit sought by the assessee has become redundant and hence need not be gone into ?

(iv). Having decided the issue in favour of the assessee, whether the Tribunal was justified in then allowing the appeal filed by the Department or the Tribunal should have then either dismissed the appeal filed by the Revenue or should have held it to have rendered infructuous in the light of a categorical finding recorded in favour of the assessee ?

17. Though in view of our answer to the questions formulated in the Revenue appeals, it is not necessary to decide the questions formulated in the appeals filed by the assessees, we may observe that since we have held that the dividend income is not chargeable under the Act in view of the agreement, the question with regard to the grant of credit for the TDS in relation therewith, is rendered redundant.”

11. In the light of the above judgments of the Hon'ble jurisdictional High Court additional ground raised by the assessee are admitted for adjudication.

12. Additional Ground No.1 is qua the addition made without reference to any seized documents. Ld. Counsel for the assessee contended that the impugned addition deserves to be deleted on the sole ground that there is no reference to the seized material. The addition has been made purely on the basis of material already available with the revenue. Such conduct of the Assessing Officer is not justifiable and is contrary to the judicial pronouncements.

To buttress this contention Ld. Counsel for the assessee has relied upon the decision of Tribunal rendered in the case of Shri Kamal Kishore Kotwani IT(SS) A No.186 to 190/Ind/2016 dated 04.07.2018, Kanta Prasad Dwivedi IT (SS)A No.182 to 185/Ind/2016 dated 19.09.2018 and decision of the Delhi Tribunal rendered in the case of Jay Dee Securities & Finance Ltd (2017) 88 taxmann.com 626. Ld. Counsel submitted that the assessee is a cooperative society vide Registration No.D978 dated 29.4.2004 with main object to collect amount from members to purchase land. The land so purchased is then developed and divided units are allotted to the members of the society.

13. Ld. Departmental Representative opposed the submission and supported the orders of lower authorities. Ld. DR submitted that there is a categorical reference to the incriminating material related to the society.

14. Ld. Counsel for the assessee submitted that the reference is related to the objectives of the society which cannot be termed as incriminating material. As such no evidence has been gathered during the course of search.

15. We have heard rival contention and perused the records placed before us. We find that the A.O has made addition by observing as under;

7. It is noticed hat in this ease assessee has not submitted even a single paper as additional evidences. The submissions made by the assessee were already considered by the then Assessing Officer and after examination of the same, he has given the following findings in his assessment order:-

“In the year under consideration, assessee has shown current liability of Rs.20,00,000/- In the order sheet entry dated 11.10.2008, assessee was asked to furnish. details of current liability viz. Name, Address and Amount. On which assessee is not able to submit any details except copy of account of advance for plot. Further, in the order sheet entry dated 15.10.2008, assessee was asked to furnish Bank Statement and Return of Income. Bu: assessee is not able to submit any details in this regard. Even the name and address of the members of the society has not been produced.

In the light of above discussion, assessee is not able to prove, identity, creditworthiness arid genuineness of advances received. Therefore, advance of Rs.20,OO,OOO/- will be deemed to be treated as income of the assessee."

The said findings of the Assessing Officer was also confirmed by the CIT(A)-II, Bhopal. During the set aside proceedings also the assessee has failed to give any documentary evidence in support of cash credit available with him. Therefore, The assessee has failed to prove identity, creditworthiness and genuineness of the advances received. Therefore, an amount of Rs.20,OO,OOO/- is hereby added to the total income of the assessee under section 68 (of Income Tax Act, 1961). I am also satisfied that the assessee has concealed his income and also furnished inaccurate particulars of income within the meaning of the section 271(1)(c) (of Income Tax Act, 1961). Hence, penalty proceedings u/s. 271(1)(c) (of Income Tax Act, 1961) are being initiated separately.

16. From the above observation of the A.O it is evident that the A.O has not made any specific reference to the incriminating material found during the search. Under these facts non reference to the incriminating material by the A.O is contrary to the settled position of law. We hold accordingly. This ground of assessee’s appeal is allowed.

17. Ground No.2 of the additional ground is against non recording of satisfaction by the A.O of the searched person. Ld. Counsel for the assessee reiterated the averments made in the written submissions. He contended that during the course of hearing the revenue was directed to furnish the satisfaction recorded by the assessing officer of the searched person. However, the revenue has grossly failed to furnish the satisfaction note recorded by the assessing officer of the searched person. He submitted that the law is clear on this issue as per section 153C (of Income Tax Act, 1961). The assessing officer of the searched person is required to record a satisfaction note in case the material found during the curse of search does not relate to the searched person. The assessing officer of the searched person is required record a satisfaction in this regard and transmits the record to the assessing officer of the other person. Ld. counsel submitted that the issue is squarely covered by the judgment of jurisdictional High Court rendered in the case of CIT vs. Mechmen (2015) 60 taxmann.com 484 (MP).

18. On the contrary, Ld. CIT-DR opposed these submissions and supported the orders of the authorities below. He placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of Ganpati Fincap Services Private Limited (2017) 82 taxmann.com 408. In rejoinder Ld. counsel for the assessee submitted that in fact the judgment relied by the revenue helps the assessee. He drew our attention to paragraph no.26 & 27 of the judgment of the Hon'ble Delhi High Court.

19. We have heard the rival submissions and perused the materials available on records and gone through the orders of the authorities below. In this case undisputed facts are that the revenue has placed on record vide letter dated 22.07.2019 a satisfaction note by the ACIT-3(1), Bhopal which is related to the assessee herein. It is stated in the later that the assessing officer of the searched person and the assessee are the same, therefore, the judgment of the Hon'ble’ Delhi High Court rendered in the case of Ganpati Fincap Services Private Limited(supra) & Instronics Limited (2017 82 taxmann.com 357 (Delhi) help the revenue. We find that the Hon'ble Delhi High Court in the case of Ganpati Fincap Services Private Limited(supra) para 26 to 28 held as under:

“26. The Court is of the view that a plain reading of Section 153C (of Income Tax Act, 1961) does not require the AO of the searched person (A) to prepare two satisfaction notes. Only as far as the „other person' B is concerned‟ the AO is expected to prepare a satisfaction note stating that the 2 documents belong to B. The failure by the AO to add in the said satisfaction note that the 2 documents do not belong to A will not vitiate the entire proceedings against B under Section 153C (of Income Tax Act, 1961) for the simple reason that there is no such requirement.

27. What the settled legal position as explained in several cases, which will be discussed shortly, is that the recording by the AO of the searched person that some documents seized during the search 'belong to' the other person is mandatory in order to assume jurisdiction qua the other person under Section 153C (of Income Tax Act, 1961). This is mandatory even where the AO of the searched person and the other person is the same. This is also what the CBDT Circular now clarifies. In a particular case, given the nature of the document, it may become necessary for the AO to indicate the basis of his satisfaction that the document belongs only to B and not to A. But then that is dictated by the nature of the document. What he has to be sure about, and the note should reflect this, is that it does belong to B. Once the note says that then the requirement of Section 153C (of Income Tax Act, 1961) is fulfilled.

28. Therefore, the Court does not agree with Mr. Sabharwal that there have to be two separate satisfaction notes prepared by the AO of the searched person even where he is also the AO of the other person. In such event, the AO need make only one satisfaction note. That satisfaction note is qua the other person. Further it is sufficient that such satisfaction note is placed in the file of the other person by the AO in his capacity as the AO of such other person.”

20. For the sake of clarity section 153C (of Income Tax Act, 1961) is reproduced as under:

In section 153C of the Income Tax Act, 1961, in sub-section (1), with effect from the 1st day of June, 2015 for the portion beginning with the words and figures "Notwithstanding anything contained in section 139 (of Income Tax Act, 1961)" and ending with the words "the Assessing Officer having jurisdiction over such other person", the words, figures, brackets and letters "Notwithstanding anything contained in section 139 (of Income Tax Act, 1961), section 147 (of Income Tax Act, 1961), section 148 (of Income Tax Act, 1961), section 149 (of Income Tax Act, 1961), section 151 (of Income Tax Act, 1961) and section 153 (of Income Tax Act, 1961), where the Assessing Officer is satisfied that,—

(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or

(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A (of Income Tax Act, 1961), then, the books of account or documents or assets, seized or requisitioned, shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A (of Income Tax Act, 1961), if that Assessing Officer is satisfied that the books of account or documents or assets, seized or requisitioned, have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A (of Income Tax Act, 1961).

Provided that in case of such other person, the reference to the date of initiation of the search under section 132 (of Income Tax Act, 1961) or making of re4quisition under section 132A (of Income Tax Act, 1961) in the second proviso to {sub- section (1) of ] Section 153A (of Income Tax Act, 1961) shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the assessing officer having jurisdiction over such other person:]

Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.".

(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 (of Income Tax Act, 1961) or requisition is made under section 132A (of Income Tax Act, 1961) and in respect of such assessment year—

(a) no return of income has been furnished by such other person and no notice under subsection (1) of section 142 (of Income Tax Act, 1961) has been issued to him, or

(b) a return of income has been furnished by such other person but no notice under subsection (2) of section 143 (of Income Tax Act, 1961) has been served and limitation of serving the notice under sub-section (2) of section 143 (of Income Tax Act, 1961) has expired, or

(c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A (of Income Tax Act, 1961).

21. Undisputedly, the revenue has not placed on record satisfaction note by the assessing officer of the searched person recording that the documents belong to the other person in this case assessee herein. In the absence of such recording the assessment so framed is contrary to provision of law and the binding precedence. We, therefore, hold that the assumption of jurisdiction by the assessing officer u/s 153C (of Income Tax Act, 1961) is not in accordance with law.

Hence, the assessment so framed u/s 153C (of Income Tax Act, 1961) is bad in law deserves to be quashed. This ground of the assessee’s appeal is allowed.

22. Since we have held that the assumption of jurisdiction by the assessing officer for framing assessment is not in accordance with law and quashed the assessment on this ground, the other grounds on merit have become academic in nature. Therefore, we are not adjudicating the same.

23. As a result, appeal of the assessee is partly allowed.

Now we take up IT(SS)ANo.127 & 128/Ind/2016 for A.Ys. 2006-07 & 2007-08

Taj Grih Nirman Society /IT(SS)ANos.126 to 128/Ind/2016

24. The facts are identical as were in the IT(SS)ANo.126/Ind/2019 in assessee’s own case for A.Y.2005-06. The Ld. counsel for the assessee advanced the same arguments and Ld. DR also adopted the same arguments. Accordingly, for the same reasoning recorded in IT(SS)ANo.126/Ind/2019 as above, the assessments so framed are held to be bad in law. Consequently, grounds raised in these appeals are also partly allowed.

25. In result, these appeals filed by the assessee are partly allowed.

Order was pronounced in the open court on 08.01.2021.