2015 (2) TMI 1116 - AT - Income Tax

Assessment u/s 153C by AO without first acquiring a valid jurisdiction - Held that - We set aside the assessment and the consequential impugned orders on the ground of lack of proper jurisdiction of the AO We set aside the assessment and the impugned orders for the reason that the AO of the persons searched namely Sh. B.K. Dhingra Smt. Poonam Dhingra & M/s Madhusudan Buildcon Pvt. Ltd. did not record any satisfaction that some money bullion jewellery or books of account or other documents found from these persons belonged to the assessee. The absence of such satisfaction in our considered opinion did not translate into conferring a valid and lawful jurisdiction to the AO of the assessee to proceed with the matter of assessment u/s 153C of the Act for all the years under consideration. - Decided in favour of assessee.

Summary

Issues involved:
Challenge to jurisdiction under section 153C of the Income Tax Act, 1961.

Analysis:
The appeals and cross-objections before the Appellate Tribunal ITAT Delhi involved a challenge to the jurisdiction under section 153C of the Income Tax Act, 1961 for the assessment years 2003-04 to 2008-09. The primary issue raised by the assessee in its cross-objections was against the validity of the orders passed by the Assessing Officer under section 153C without acquiring proper jurisdiction. The contention was that the Assessing Officer did not record a proper satisfaction before initiating the proceedings under section 153C. The Tribunal considered the arguments put forth by both sides and examined the relevant material on record, including the satisfaction notes recorded by the Assessing Officer. It was observed that the satisfaction was recorded in the file of the assessee, but not by the Assessing Officer of the persons searched, which was a crucial requirement for establishing jurisdiction.

The Tribunal referred to previous cases where similar objections were raised regarding the recording of satisfaction by the Assessing Officer of the persons searched. It was uniformly held in those cases that the recording of satisfaction by the Assessing Officer having jurisdiction over the persons searched is essential to confer jurisdiction on the Assessing Officer of the "other person." Assessments made without proper satisfaction were declared null and void. The Tribunal, in line with these precedents, set aside the assessments in the present case due to the lack of proper jurisdiction of the Assessing Officer. The Tribunal emphasized the importance of jurisdiction in tax assessments and highlighted that the absence of proper jurisdiction renders assessments invalid.

The Tribunal rejected arguments that an appraisal report could substitute the satisfaction of the Assessing Officer of the person searched and emphasized that jurisdiction cannot be equated with a technical issue. The Tribunal also dismissed contentions regarding the constitution of a special bench and conflicting decisions, stating that the facts of the present case were similar to previous decisions where such contentions were not accepted. Ultimately, the Tribunal allowed the appeals of the assessee and dismissed those of the Revenue based on the lack of proper jurisdiction in the assessments under section 153C.

In conclusion, the Tribunal's decision focused on the fundamental requirement of proper jurisdiction in tax assessments under section 153C of the Income Tax Act, 1961. The judgment underscored the significance of the Assessing Officer recording satisfaction in cases involving multiple entities and highlighted that assessments made without fulfilling this requirement are considered null and void. The Tribunal's decision was based on established legal principles and precedents regarding jurisdiction in tax matters.