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Judgment
PER C.N. PRASAD, J.M.
The appeal and cross objection are filed by the revenue and assessee respectively against the order of the Ld. CIT(A) -22, New Delhi dated 22.04.2025 for the A.Y.2020-21.
The revenue has challenged the order of the Ld.CIT(A) in deleting the addition made u/s. 69A of the Act in respect of jewellery seized and whereas the cross objection is filed by the assessee challenging the order of the Ld. CIT(A) on the ground that the common satisfaction note recorded by the AO for all the seven years without correlating the seized materials to a particular assessment year in question as defective and void-ab-initio in terms of provision of section 153C of the Act.
The Ld. Counsel for the assessee referring to ground Nos. 7 and 8 of the grounds of cross objection and the copy of satisfaction note recorded by the AO u/s.153C of the Act, submitted that a common satisfaction note was recorded for the A.Ys 2014-15 to 2020-21. Referring to para-3 of the satisfaction note Ld. Counsel for the assessee submitted that the AO in the satisfaction note stated that the seized jewellery may have bearing on the determination of the total income of the assessee Smt. Teena Ghai for various assessment years. The Ld. Counsel referring to the satisfaction note submits that the AO has listed out of various lockers wherein the jewellery of Rs.1,80,18,795/-was found and out of which jewellery of Rs.1,38,30,214/-which was seized and treated as unexplained income for the A.Y.2020-21 without correlating the seized materials with relevant assessment year to which the income pertains to.
The Ld. Counsel for the assessee placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Sinhgad Technical Education Society (378 ITR 84) submitted that the Hon’ble High Court held that in the absence of correlating document wise with the assessment years involved in question, notice issued u/s.153C of the Act to the assessee to assess such income was held to be bad in law. The Ld. Counsel further submitted that this decision of the Hon’ble Bombay High Court was affirmed by the Hon’ble Supreme Court in the case of CIT Vs. Sinhgad Technical Education Society (397 ITR 344). Referring to the said decision of the Hon’ble Supreme Court, the Ld. Counsel submits that the Apex Court held that where loose papers found and seized from residence of the President of educational institution, indicating capitation fees received by various institutions run by the assessee, did not establish correlation document wise with assessment year in question, notice issued u/s.153C of the Act had rightly been quashed and set aside by the Hon’ble Tribunal and rightly affirmed by the Hon’ble High Court.
The Ld. Counsel for the assessee submitted that in the case of the assessee also the jewellery which was listed out in the satisfaction note found from various lockers were not correlated with assessment year wise and not established by the AO to which assessment year it has a bearing on determination of total income. Therefore, in absence of correlation of amount i.e. seized jewellery with the assessment years, the common satisfaction note recorded by the AO for the A.Y. 2014-15 to 2020-21 and consequent issue of notice u/s.153C of the Act are bad in law and thus, the assessment year framed based on such satisfaction note and notice u/s.153C are bad in law and void ab-initio and the same are liable to be quashed.
On the other hand the Ld. DR submitted that jewellery seized from the lockers pertains to only one assessment year and therefore, the satisfaction note issued by the AO is valid.
Heard rival contentions and perused the orders of the authorities below and the case laws relied on. On plain reading of the satisfaction note recorded u/s.153C r.w.s. 153A of the Act by the AO in the case of the assessee, we observed that the AO referred to lockers from which certain jewellery was found and seized. The said satisfaction note was a common satisfaction note recorded by the AO for the A.Y. 2014-15 to 2020-21. In the satisfaction note recorded the AO did not correlate the amount of jewellery seized i.e. Rs.1,38,30,214/- with that of the assessment year. In other words the AO did not record any satisfaction of the seized material/ jewellery of having a bearing on determination of total income of the assessee for any relevant assessment year as mandated under the provisions of section153C of the Act.
The Hon’ble Supreme Court in the case of CIT Vs. Sinhgad Technical Education Society (397 ITR 344) affirming the decision of the Hon’ble Bombay High court in the case of CIT Vs. Sinhgad Technical Education Society (378 ITR 84), held as under :-
“15.At the outset, it needs to be highlighted that the assessment order passed by the AO on August 7, 2008 covered eight Assessment Years ie. Assessment Year 1999-2000 to Assessment Year 2006-07. As noted above, insofar as Assessment Year 1999-2000 is concerned, same was covered under Section 147 of the Act which means in respect of that year, there were re-assessment proceedings. Insofar as Assessment Year 2006-07 is concerned, it was fresh assessment under Section 143(3) of the Act. Thus, insofar as assessment under Section 153C read with Section 143(3) of the Act is concerned, it was in respect of Assessment Years 2000-01 to 2005-06. Out of that, present appeals relate to four Assessment Years, namely, 2000-01 to 2003-04 covered by notice under Section 153C of the Act. There is a specific purpose in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment.
16.In these appeals, quo the aforesaid four Assessment Years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee.
17.First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground.
18.The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act, Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred.
19.We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is n necessary to enter into this controversy.”
As could be seen from the above, the Hon’ble Apex Court affirmed the decision of the Tribunal and also the High Court in holding that as per provision of section 153C of the Act incriminating material which was seized had to pertain to assessment years in question and if the documents which were seized did not establish any correlation, document wise with the assessment year, the requirement u/s.153C of the Act which is essential for assessment under that provision which is jurisdictional fact, is not met.
In the case before us also the AO while recording the satisfaction note u/s.153C of the Act did not correlate the seized materials / jewellery with that of the assessment years in question establishing the fact of having a bearing on determination of total income of a relevant assessment year especially when the satisfaction note was recorded for several assessment years i.e., for the A.Y.2014-15 to 2020-
Therefore, the ratio of the decision of the Hon’ble Apex Court (supra) squarely applies to the facts of the assessee’s case. Thus, respectfully following the decision of the Apex Court in the case of CIT Vs. Sinhgad Technical Education Society (supra) we hold that the notice issued u/s.153C of the Act based on the satisfaction note recorded by the AO is bad in law and consequently the assessment framed u/s.153C r.w.s. 143(3) of the Act for the A.Y.2020-21 is also bad in law and void-ab-initio and hence the same is hereby quashed. Ground No. 7 and 8 of grounds of cross objection of the assessee are allowed.
Since we have quashed the assessment framed u/s.153C r.w.s. 143(3) of the Act on legal ground all other grounds of the assessee in the cross objection need not be adjudicated as they become academic in nature at this stage and the same are left open.
Further as we have quashed the assessment framed u/s.153C r.w.s. 143(3) of the Act allowing ground No.7 and 8 of grounds of appeal of cross objection of the assessee, the appeal filed by the revenue became infructuous.
In the result, the cross objection filed by the assessee is partly allowed as indicated above and appeal filed by the revenue is dismissed as infructuous.