2016 (1) TMI 640 - AT - Income Tax

Validity of assessment u/s 153C - Held that - No satisfaction in terms of section 153C of the Act were recorded by the Assessing Officer of the searched person u/s 132 of the Act to reach to a conclusion that the contents in the seized documents belongs to the assesses (i.e a person other than the searched person) and accordingly, we hold that the search assessments framed u/s 153C read with section 143(3) of the Act on the assesses herein are declared illegal and void abinitio. Since the appeals of the assessee are allowed on assumption of jurisdiction , we refrain to give our findings on the merits of the issue. - Decided in favour of assessee.

Issues Involved:
1. Validity of assessments framed under Section 153C of the Income Tax Act.
2. Conditions precedent for invoking Section 153C.
3. Satisfaction requirement by the Assessing Officer of the searched person.
4. Ownership and relevance of seized documents.

Issue-wise Detailed Analysis:

1. Validity of Assessments Framed Under Section 153C of the Income Tax Act:
The primary issue raised was whether the search assessment framed under Section 153C of the Act would be sustainable in law given the facts and circumstances of the case. The assessees argued that the conditions precedent for invoking Section 153C were not satisfied, making the assessment order void ab initio. The Tribunal examined the procedural adherence to Section 153C, including the necessity of satisfaction by the Assessing Officer of the person searched.

2. Conditions Precedent for Invoking Section 153C:
The Tribunal noted that the conditions for invoking Section 153C were not met. Specifically, the CIT(A) should have canceled the assessment under Section 153C since the conditions precedent were not satisfied. The Tribunal highlighted that no documents, books of account, valuable articles, or other items belonging to the assessee were found and seized during the search.

3. Satisfaction Requirement by the Assessing Officer of the Searched Person:
The Tribunal emphasized that the Assessing Officer of the person searched must record satisfaction that any valuables, articles, documents, or books belong to the person other than the one searched. In this case, the Tribunal found that such mandatory satisfaction was absent. The Tribunal referred to the letter dated 21.12.2009 from the ACIT, Central Circle 24 & 26, Mumbai, which did not indicate that the seized documents indeed belonged to the assessees, thus failing to meet the satisfaction requirement.

4. Ownership and Relevance of Seized Documents:
The Tribunal scrutinized the seized documents and found that the documents did not indicate any cash payments as alleged. The seized loose sheets belonged to the Bharat Shah Group and not to the assessees. The Tribunal cited several judicial precedents, including the case of Vijaybhai N. Chandrani vs. ACIT, to support the view that the documents must belong to the person other than the one searched for Section 153C to be invoked.

Conclusion:
The Tribunal concluded that the initiation of proceedings under Section 153C was not warranted and declared the search assessments framed under Section 153C read with Section 143(3) of the Act as illegal and void ab initio. The Tribunal refrained from giving findings on the merits of the issue since the appeals were allowed on the grounds of assumption of jurisdiction.

Judgment:
The appeals of the assessee were allowed, and the search assessments under Section 153C were quashed. The Tribunal's decision was pronounced in open court on 6.11.2015.

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