2015 (12) TMI 1225 - AT - Income Tax

Cognizance of section 153C - no satisfaction was recorded by the AO of the searched persons authorizing the AO of the assessee to issue notice under section 153C - Held that - The satisfaction note in other cases as well as recorded in the case of assessee are verbatim same except the assessment years. A perusal of the satisfaction note would indicate that it is totally vague. It does not disclose what is the material found during the course of search, which belonged to the assessee. There is no reference to any such documentary evidence. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction under section 153C - Recording of satisfaction by AO of searched person.
2. Addition of Rs. 8,23,298 upheld by CIT(A).

Jurisdiction under section 153C - Recording of satisfaction by AO of searched person:
The appellant contested that the AO erred by invoking section 153C without proper satisfaction recorded by the AO of the searched persons. The Tribunal considered the core issue of whether the satisfaction note recorded by the AO of the searched person was valid under section 153C. The appellant argued that the issue was covered by a previous ITAT order and presented a copy of the order for reference. The AO claimed to have made a reference to the books of accounts to establish the escapement of income for the non-searched person. However, upon review, the Tribunal found that the satisfaction note in the notice under section 153C was vague and did not specify the incriminating material found belonging to the appellant. The Tribunal held that the basic condition for issuing notice under section 153C was not satisfied due to lack of proper recording of satisfaction by the AO of the searched person.

Addition of Rs. 8,23,298 upheld by CIT(A):
The appellant's grievance also included the addition of Rs. 8,23,298, which was confirmed by the CIT(A). The appellant produced a copy of the alleged satisfaction note, which was found to be identical to notes in other cases. The Tribunal noted that the satisfaction note lacked specificity regarding the material found during the search that belonged to the appellant. In line with previous decisions, the Tribunal allowed the appeal and quashed the assessment order due to the invalidity of the notice issued under section 153C. Consequently, the Tribunal did not adjudicate on other issues raised by the appellant, as the assessment order was quashed.

In conclusion, the Tribunal allowed the appellant's appeal, emphasizing the importance of proper recording of satisfaction by the AO of the searched person before issuing notices under section 153C. The Tribunal found the satisfaction note to be vague and lacking essential details, leading to the quashing of the assessment order. The decision highlighted the necessity for adherence to procedural requirements to maintain the validity of notices issued under the Income Tax Act.