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Delhi High Court in the case of Canyon Financial Services Ltd. v. ITO in Writ Petition No. 3241/2015 dated 10.07.2017

·            A search and seizure operation was carried out in Dalmia Group of cases. During the assessment proceedings of Dalmia, AO recorded a satisfaction note on 13.03.2014 stating that the seized material (being letter regarding share application along with confirmation, copy of memorandum, copy of return of income of canyon Financial Services Ltd.) belonged to Canyon Financial Services Ltd.

·            High Court took note of the fact that the provisions of section 153C, as it stood prior to the amendment with effect from 01st June 2015, would apply to the present case. Therefore, the AO of the searched person had to be satisfied that the document seized ‘belongs to’ a person other than the person searched.

·            High Court further observed that in the present case, AO of searched person recorded his satisfaction on 13.03.2014 and forwarded the same to the AO of assessee. Thereafter, on 19.03.2014, the AO of assessee recorded verbatim satisfaction note as of the AO of searched person.

·            High Court referring to its earlier decisions in the case of Pepsico India Holdings (P) Ltd. v. ACIT [2015] 370 ITR 295 and Pepsi Foods (P) Ltd. v. ACIT [2015] 376 ITR 87, stated as under:

(a)    The satisfaction note of the AO of searched person has to record that the documents seized belong to the person other than the person referred to in section 153A

(b)    If the AO of searched person and the other person is not same, then the AO of the other person also has an obligation to examine if the documents handed over to him in fact belong to that other person, and further, if they constitute incriminating material

·            High Court held that the jurisdictional requirement u/s 153C of the Act, that the AO of the searched person should be satisfied that the documents seized does not belong to the searched person but to the other person, has not been fulfilled in the present case.

·            Therefore, in view of above, High Court quashed both the satisfaction notes and the consequent proceedings u/s 153C.

 

For further reading, refer the attachment. 

  Further Reading
Posted on: 17-07-2017