Satisfaction Note by AO that Documents belong to Other Person is enough to proceed against such Person u/s 153C: SC [Read Judgment]

In a significant ruling, the Apex Court, while upholding the view of the High Court held that the satisfaction note by the Assessing Officer(AO) clearly states that the documents so seized belonged to the other person i.e. the assessee and not the searched person, so the requirement of Section 153C of the Income Tax Act, 1961 being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C of the Act.

The Director of Income Tax (Investigation) carried out a search and seizure operation under Section 132(1) of the Income Tax Act, 1961 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. During the course of the search 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. Further, some documents were seized after taking out the print from the pen drive. The documents contained the details of the cash receipts on sale of shops/offices at M/s Super Mall, Karnal. As a consequence of the search and seizure operation, a notice was issued to the assessee under Section 153C of the Act by the Assessing Officer.

The assessment order was challenged by the assessee 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.

The CIT(A) dismissed the assessee’s appeal. However, the 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, observed that the Assessing Officer was justified in recording the satisfaction that the documents so seized “belonged” to the assessee.

The division bench of Justice Ashok Bhushan and Justice M.R. Shah while upholding the view of the High Court held that the satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person i.e. the assessee and not the searched person, so the requirement of Section 153C of the Income Tax Act, 1961 being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C of the Act.

“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 is 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,” the bench noted.