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2015 (3) TMI 1013 - AT - Income TaxAssessment u/s 153C - lack of satisfaction note - Held that - 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. In the light of the judgment of the Hon ble jurisdictional High Court in the case of Pepsi Foods Pvt. Ltd. (2014 (8) TMI 425 - DELHI HIGH COURT) and also the findings of the earlier Benches of this Tribunal (supra), we hold that since there was no satisfaction Note by the AO of searched person prior to initiation of proceedings u/s 153C of the Act, the assessments concluded on the assessee u/s 153C of the Act r.w.s 153A of the Act lack jurisdiction and the same are hereby quashed. - Decided in favour of assessee.
Issues Involved:
1. Deletion of disallowances of expenditure made by the AO. 2. Deletion of additions made on account of unexplained purchases under Section 69C of the Act. 3. Validity of initiation of proceedings under Section 153C of the Act. Issue-wise Detailed Analysis: 1. Deletion of Disallowances of Expenditure Made by the AO: The Revenue's appeals raised the issue of whether the CIT(A) was justified in deleting the disallowances of expenditure made by the AO. However, this issue was not adjudicated due to the resolution of the jurisdictional challenge raised by the assessee. 2. Deletion of Additions Made on Account of Unexplained Purchases under Section 69C of the Act: Similarly, the Revenue's appeals also questioned whether the CIT(A) was justified in deleting the additions made on account of unexplained purchases under Section 69C of the Act. This issue too was not adjudicated because the primary jurisdictional issue took precedence. 3. Validity of Initiation of Proceedings under Section 153C of the Act: The assessee's cross objections primarily challenged the initiation of proceedings under Section 153C of the Act, arguing that the assessments were invalid since the AO did not record satisfaction in the files of the searched person prior to initiating proceedings under Section 153C. The Tribunal noted that the Revenue's appeal memo was dispatched on 28.03.2014, and the cross objection was filed on 11.04.2014, within the prescribed period of 30 days, thus there was no delay in filing. The Tribunal examined the satisfaction note recorded by the AO, which was crucial for initiating proceedings under Section 153C. The satisfaction note indicated that documents seized during a search belonged to the assessee, who was not covered under Section 132 of the IT Act. However, based on an RTI application, it was revealed that no satisfaction note was recorded in the files of the searched persons. The Tribunal referenced several precedents, including the judgment of the Hon'ble jurisdictional High Court in the case of Pepsico India Holding Pvt. Ltd v. ACIT, which established that recording of satisfaction by the AO having jurisdiction over the persons searched is an essential and pre-requisite condition for giving jurisdiction to the AO of the "other person." The Tribunal found that no proper satisfaction was recorded by the AO of the persons searched, and this lack of satisfaction translated into a lack of jurisdiction for the AO to proceed with the assessment under Section 153C. Consequently, the assessments made under Section 153C were deemed null and void. Conclusion: The Tribunal allowed the assessee's cross objections, quashed the assessments made under Section 153C for the assessment years 2003-04 to 2008-09 due to lack of proper jurisdiction, and dismissed the Revenue's appeals as infructuous. The decision was pronounced in the open Court on 18th March, 2015.
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