2019 (7) TMI 1525 - AT - Income Tax

Proceedings u/s 153C - AO of the person searched not recorded the satisfaction note - HELD THAT - In the present case there was no satisfaction recorded in the case of the assessee as evident from the order sheet entries - the assessee received the information under RTI that there was no satisfaction recorded by the AO having jurisdiction over the assessee. AO having jurisdiction over the assessee has recorded the satisfaction note dated 31st July 2015. Thus there are contradictory information available on record. Accordingly, a doubt arises about the genuineness of the satisfaction note recorded dated 31st July 2015. However, on perusal of the order sheet entry of the AO having jurisdiction over the assessee, it is revealed that there was no such entry/recording regarding the impugned satisfaction note recorded by the AO. On a question to the Ld. DR, he has not brought anything on record suggesting the genuineness of the satisfaction note recorded by the AO having jurisdiction over the assessee. He simply stated that there can be of technical lapse regarding the date mentioned in the satisfaction note viz a viz reply of the RTI. Be that as it may, there was no evidence suggesting that the AO of Nayan Kothari has recorded any satisfaction note before handing over the requisition material to the AO having jurisdiction over the assessee. From the above, it is concluded that the recording of satisfaction note for invoking the provision of section 153C is a mandatory requirement as it reveals that the AO has applied his mind to reach to the conclusion that the materials belong to the other person. If the AO of the person searched not recorded the satisfaction note, then initiation of proceedings u/s 153C of the Act was not held to be valid. Accordingly, we hold that the assessment framed under section 153C is not sustainable

Summary

Issues Involved:
1. Validity of the requisition under Section 132A of the Income Tax Act, 1961.
2. Validity of the proceedings under Section 153C of the Income Tax Act, 1961.
3. Recording of satisfaction by the Assessing Officer (AO) before initiating proceedings under Section 153C.
4. Approval under Section 153D of the Income Tax Act, 1961.
5. Addition of ?2,05,22,600/- for alleged unaccounted Silver Bullion.
6. Addition of ?27,80,100/- for alleged unaccounted Cash.
7. Consideration of evidence and material furnished during assessment/appellate proceedings.

Detailed Analysis:

1. Validity of the Requisition under Section 132A:
The appellant contended that the requisition under Section 132A was declared illegal by the Hon’ble Madhya Pradesh High Court, which was affirmed by the Supreme Court. Consequently, the proceedings under Sections 153A/153C were also claimed to be invalid. The Tribunal acknowledged this argument, emphasizing that valid requisition proceedings are a prerequisite for invoking Sections 153A/153C.

2. Validity of the Proceedings under Section 153C:
The appellant argued that the proceedings under Section 153C were invalid due to the absence of a valid requisition under Section 132A. The Tribunal noted that for Section 153C to be invoked, there must be a valid requisition. Since the requisition was declared invalid by the High Court and affirmed by the Supreme Court, the proceedings under Section 153C were also deemed invalid.

3. Recording of Satisfaction by the AO:
The appellant contended that there was no satisfaction recorded by the AO of the searched person (Nayan Kothari) or the appellant before initiating proceedings under Section 153C. The Tribunal examined the order sheets and other records and found no evidence of such satisfaction being recorded. The Tribunal reiterated that recording of satisfaction is a mandatory requirement for invoking Section 153C, and the absence of such satisfaction renders the proceedings invalid.

4. Approval under Section 153D:
The appellant argued that the approval under Section 153D was granted without application of mind, as the approval was given on the same day the application was received. The Tribunal noted that the approval process appeared mechanical and lacked proper consideration of the materials on record. This non-application of mind in granting approval further invalidated the assessment proceedings.

5. Addition of ?2,05,22,600/- for Alleged Unaccounted Silver Bullion:
The appellant contested the addition on the grounds that the silver bullion was purchased through account payee cheques and was part of the stock-in-trade/business assets, which was duly explained and accepted by the High Court. However, since the Tribunal quashed the entire assessment under Section 153C, this issue was not specifically adjudicated.

6. Addition of ?27,80,100/- for Alleged Unaccounted Cash:
Similar to the silver bullion, the appellant argued that the cash was part of the business assets and was duly explained. Again, due to the quashing of the assessment, this specific issue was not separately addressed by the Tribunal.

7. Consideration of Evidence and Material Furnished:
The appellant claimed that various pieces of evidence and materials furnished during the assessment/appellate proceedings were not properly considered. The Tribunal, having quashed the assessment on technical grounds, did not delve into the merits of this contention.

Conclusion:
The Tribunal quashed the assessment framed under Section 153C due to the absence of valid requisition proceedings under Section 132A and the lack of recorded satisfaction by the AO. The approval under Section 153D was also found to be mechanically granted without proper application of mind. Consequently, the assessment was held to be invalid, and the appeal of the assessee was partly allowed.