REPORTABLE

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

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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

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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

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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

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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

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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

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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

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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

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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:

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“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

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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.

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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]

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