2016 (3) TMI 53 - AT - Income Tax

Validity of the issue of notice u/s 153C - Held that - The first and foremost step for initiation of proceedings u/s 153C i.e., the recording of the satisfaction by the Assessing Officer of the person searched is missing, the proceedings are invalid and, therefore, the other arguments of the assessee need not be examined in detail. We, therefore, respectfully following the decision of Hon ble Jurisdictional High Court in the case of RRJ Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT ) and the Circular of CBDT No.24/2015 dated 31st December, 2015, hold the initiation of proceedings u/s 153C to be invalid and quash the same - Decided in favour of assessee

Summary

Issues:
Validity of notice u/s 153C and assessment order based on it.

Analysis:
The appeals and cross-objections were against the CIT(A)'s order. The assessee challenged the notice u/s 153C and the subsequent assessment order. The assessee cited precedents where the recording of satisfaction note by the Assessing Officer of the person searched was deemed necessary for jurisdiction under section 153C. The absence of incriminating material and reliance on seized material were also highlighted. The CIT-DR argued that all conditions for initiating proceedings u/s 153C were fulfilled, including the satisfaction being recorded by the Assessing Officer before issuing the notice.

The ITAT found that the assessee's ground on the validity of Section 153C was raised before the CIT(A) and thus could be argued at any stage. The jurisdictional High Court's requirement of the Assessing Officer's satisfaction regarding seized assets belonging to the assessee was emphasized. The CBDT's Circular No.24/2015 clarified the necessity of recording a satisfaction note before transferring records to the AO having jurisdiction over the assessee. As no such satisfaction was recorded in this case, the initiation of proceedings u/s 153C was deemed invalid.

Despite other objections raised by the assessee, the absence of the crucial step of the Assessing Officer's satisfaction rendered the proceedings invalid. Following the High Court's decision and the CBDT's circular, the ITAT held the initiation of proceedings u/s 153C and the subsequent assessment order as invalid, leading to the dismissal of the Revenue's appeals and allowing the assessee's cross-objections. The assessment order was quashed, rendering the appeals by the Revenue moot.

In conclusion, the ITAT dismissed the Revenue's appeals and allowed the cross-objections of the assessee, declaring the initiation of proceedings u/s 153C as invalid due to the lack of the Assessing Officer's satisfaction note, ultimately leading to the quashing of the assessment order.