2016 (8) TMI 1360 - AT - Income Tax

Assessment u/s 153C - non recording of satisfaction - Held that - Since no satisfaction was recorded by the Assessing Officer and the so-called reasons being vague, it is of the firm view that the initiation of proceedings under section 153C of the Act deserves to be quashed as it do not stand the test of law. - Decided in favour of assessee.

Summary

Issues involved:
Challenge to the validity of proceedings under section 153C of the Income Tax Act.

Detailed Analysis:

Issue 1: Validity of Notice under Section 153C
The assessee contended that the Assessing Officer erred in invoking section 153C without recording proper satisfaction, as required by law. The assessee argued that the notice under section 153C was vague and lacked specific reasons. The order sheet and letter from the Assessing Officer did not provide clear reasons for initiating proceedings under section 153C. The Assessing Officer admitted that specific reasons were not recorded, indicating a lack of proper justification for the notice.

Issue 2: Compliance with Legal Requirements
The Tribunal analyzed the legal provisions of section 153C, which mandate the Assessing Officer to record satisfaction before initiating proceedings. It was emphasized that incriminating material must be found during the search, and proper satisfaction must be recorded by both Assessing Officers involved. The Tribunal highlighted the importance of following legal procedures and recording specific reasons for invoking section 153C.

Issue 3: Precedent and Judicial Interpretation
The Tribunal referred to a previous judgment by the ITAT Hyderabad Bench in a similar case, where proceedings were quashed due to the non-recording of reasons. The Tribunal cited the importance of the term "satisfaction" in both section 158BD and section 153C, emphasizing the need for proper justification before initiating proceedings. The Tribunal also mentioned a decision by the Hon'ble A.P. High Court affirming the ITAT's order, further supporting the requirement for recording satisfaction.

Conclusion:
The Tribunal held that the initiation of proceedings under section 153C was not valid due to the lack of proper satisfaction and vague reasons. Citing legal precedents and the requirement for compliance with statutory provisions, the Tribunal ruled in favor of the assessee, quashing the proceedings under section 153C. As the initiation of proceedings was deemed unlawful, the Tribunal did not delve into other issues raised by the assessee on merits, ultimately allowing the appeals filed by the assessee.