2015 (12) TMI 1081 - HC - Income Tax

Assessment u/s 153C - assumption of jurisdiction by the AO under Section 153C - Held that - Admittedly, the Assessee was not one of the entities that was subjected to search and seizure operation under Section 132 of the Act. The assessments were also framed under Section 153C of the Act; although the assessments order reflect that the assessments were framed under Section 143(3)/153A(b) of the Act, the orders passed by the CIT(A) indicates the same to be a typographical error. Section 153C of the Act provides for assessment/reassessment in cases where assets/documents have been found during the search and seizure operations and the same do not belong to the searched person(s). It is seen that the facts and the issues involved are similar in all material aspects to the facts and issues involved in Pr. Commissioner of Income Tax - 06 v. Nikki Drugs & Chemicals Pvt. Ltd. 2015 (12) TMI 304 - DELHI HIGH COURT . Thus, for the reasons stated in therein we find no infirmity with the view of the ITAT that the proceedings under Section 153C of the Act were without jurisdiction. In the circumstances, it is not necessary to consider the other issues sought to be raised by the Revenue. - Decided against revenue

Summary

Issues Involved:
1. Requirement of separate satisfaction recording by AOs under Sections 153A and 153C.
2. Deletion of addition under Section 68 despite the assessee being an entry operator.
3. Basis of additions under Section 68 not being found during the search.
4. Validity of search and subsequent additions under Sections 153C/143(3).
5. Validity of additions in non-abated assessments.
6. Perverse findings by ITAT.

Detailed Analysis:

1. Requirement of Separate Satisfaction Recording by AOs:
The Revenue questioned whether the ITAT could hold that both the AO making the assessment under Section 153A and the AO initiating proceedings under Section 153C should separately record their satisfaction, even if the same AO was involved. The High Court, referencing the ITAT's decision, upheld that the satisfaction note was necessary for valid jurisdiction under Section 153C.

2. Deletion of Addition under Section 68:
The Revenue contended that the ITAT wrongly upheld the deletion of additions under Section 68, even when it was established that the assessee was an entry operator. The ITAT found that the sources of money received by the assessee were duly explained, leading to the deletion of the addition. The High Court found no infirmity in this conclusion.

3. Basis of Additions under Section 68:
The Revenue argued that the ITAT wrongly deleted additions under Section 68 on the ground that they were not based on any material found during the search on the assessee company. The ITAT held that the documents seized did not belong to the assessee, thus invalidating the additions. The High Court agreed with the ITAT's reasoning.

4. Validity of Search and Subsequent Additions:
The Revenue questioned the ITAT's decision that there was no valid search since the impugned additions were made under Sections 153C/143(3) without reference to any material found as a result of the search. The ITAT upheld the assessee's contention that the documents found did not belong to them, making the assumption of jurisdiction under Section 153C unsustainable. The High Court concurred with this finding.

5. Validity of Additions in Non-Abated Assessments:
The Revenue challenged the ITAT's holding that additions made in non-abated assessments were invalid. The ITAT found that the proceedings under Section 153C were without jurisdiction, rendering the additions invalid. The High Court upheld this view.

6. Perverse Findings by ITAT:
The Revenue claimed that the ITAT's findings were perverse. The High Court, however, found no substantial question of law arising from the ITAT's findings and dismissed the appeals.

Conclusion:
The High Court dismissed the appeals, agreeing with the ITAT that the assumption of jurisdiction under Section 153C was invalid as the documents seized did not belong to the assessee. Consequently, the ITAT's deletion of additions under Section 68 was upheld, and no substantial question of law was found to arise from the Revenue's appeals. The parties were left to bear their own costs.