2016 (6) TMI 1220 - AT - Income Tax

Assessment u/s 153C - absence of satisfaction - Held that - This is not the case of AO of the assessee in the reason recorded that documents found during search belonged to the assessee. Documents belonging to a person and transactions contained in some documents made by a person are two different things. Section 153C can be invoked only if the finding is there that documents etc. found during search belonged to the third person which is not the case made out by AO in the present case. Therefore, we hold that the jurisdiction assumed u/s 153C was lacking in the instant case and therefore the notice issued u/s 153C is held not in accordance with law and the assessment made is quashed. Since we have held that assumption of jurisdiction u/s 153C itself is bad, we do not propose to dispose the other grounds of appeal. In the result, appeal is allowed in favour of assessee.

Summary

Issues Involved:
1. Validity of the order of the Commissioner of Income Tax (Appeals).
2. Applicability of Section 153C of the Income Tax Act.
3. Confirmation of additions in the hands of an individual instead of an HUF.
4. Sustaining the addition of ?25,15,173.
5. Sustaining the addition without documentary evidence.
6. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act.
7. Admission of an additional ground of appeal regarding the validity of notice issued under Section 153C.

Issue-wise Detailed Analysis:

1. Validity of the Order of the Commissioner of Income Tax (Appeals):
The appellant argued that the order of the Commissioner of Income Tax (Appeals) was bad and against the facts and law. However, the primary focus of the judgment was on the applicability of Section 153C and the jurisdictional issues involved.

2. Applicability of Section 153C of the Income Tax Act:
The appellant contended that the provisions of Section 153C were not applicable to the transaction on which proceedings were initiated. The tribunal found that the additional ground raised by the appellant was purely legal and went to the root of the matter. The tribunal admitted the additional ground, emphasizing that the satisfaction required under Section 153C was not recorded by the Assessing Officer (A.O.) of the searched person in the case records of the searched person, Dr. Naresh Mittal. The tribunal concluded that the assumption of jurisdiction under Section 153C was invalid due to the lack of proper satisfaction being recorded.

3. Confirmation of Additions in the Hands of an Individual Instead of an HUF:
The appellant argued that the additions were wrongly confirmed in the hands of an individual, Sh. Pawan Mangla, when the transactions were carried out by Pawan Mangla & Sons (HUF). The tribunal did not specifically address this issue in detail, as the primary focus was on the jurisdictional validity of Section 153C.

4. Sustaining the Addition of ?25,15,173:
The appellant contended that the addition of ?25,15,173 was sustained erroneously when the property in question was owned and sold by Pawan Mangla & Sons (HUF) and not by Sh. Pawan Mangla (Individual). The tribunal did not delve into this issue separately, as the jurisdictional issue under Section 153C was found to be decisive.

5. Sustaining the Addition Without Documentary Evidence:
The appellant argued that the addition was sustained without any documentary evidence against the assessee on record. The tribunal did not specifically address this issue in detail, as the primary focus was on the jurisdictional validity of Section 153C.

6. Charging of Interest Under Sections 234A, 234B, and 234C of the Income Tax Act:
The appellant contended that the charging of interest under Sections 234A, 234B, and 234C was erroneous. The tribunal did not specifically address this issue in detail, as the primary focus was on the jurisdictional validity of Section 153C.

7. Admission of an Additional Ground of Appeal Regarding the Validity of Notice Issued Under Section 153C:
The appellant sought to admit an additional ground of appeal, arguing that the Principal CIT (OSD) wrongly upheld the validity of the notice issued under Section 153C without proper satisfaction being recorded by the A.O. of the searched person. The tribunal admitted this additional ground, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which allows the admission of pure legal questions that do not require fresh facts to be investigated.

Conclusion:
The tribunal found that the A.O. of the searched person did not record any satisfaction that the documents found during the search belonged to the third person (the appellant). The tribunal emphasized that the recording of satisfaction by the A.O. in the case records of the searched person is mandatory. The tribunal held that the assumption of jurisdiction under Section 153C was invalid due to the lack of proper satisfaction being recorded. Consequently, the notice issued under Section 153C was deemed not in accordance with law, and the assessment made was quashed. The appeal was allowed in these terms, and other grounds of appeal were not disposed of separately.