2017 (3) TMI 1839 - AT - Income Tax

Assessment u/s 153C - whether any satisfaction was recorded u/s 153A of the Act in the case of the person searched in order to initiate proceedings u/s 153C of the Act in the case of the assessee? - HELD THAT - Even though the AO of the person searched and the assessee before us is the same the requirement of law is that the satisfaction has to be recorded before initiating proceedings u/s 153C of the Act. Therefore the Additional Grounds of appeal being legal grounds and the facts are already on record we deem it proper to admit the grounds. Since the AO has reported that the satisfaction has not been recorded as required under the law we are inclined to allow the additional ground and hold that the assessment u/s 153C is not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Validity of the order of Ld. CIT (A)-VII, Hyderabad
2. Invocation of provisions of Section 153C of the Act
3. Existence of incriminating material for invoking Section 153C
4. Nexus between material impounded during search and additions made
5. Claim for deduction u/s 35D of the Act
6. Additional grounds of appeal raised by the assessee

Analysis:
1. The appeal pertains to the assessment year 2010-11, challenging the order of Ld. CIT (A)-VII, Hyderabad on the grounds of being erroneous both on facts and in law. The appellant contends that the order is prejudicial to their interest, leading to a detailed examination of the assessment.

2. The primary contention revolves around the invocation of Section 153C of the Act by the Assessing Officer. The appellant argues that the conditions of Sec. 153C were not satisfied as no seized document or material was referred to in the assessment order. The absence of incriminating material related to the year under consideration questions the validity of invoking Section 153C.

3. Another crucial aspect is the nexus between the material impounded during the search and the additions made in the assessment. The appellant asserts that the addition made lacks connection with the seized material, raising concerns about the legality of such additions.

4. Furthermore, the appellant claims entitlement to a deduction u/s 35D of the Act, emphasizing the need for proper consideration of this claim by the authorities. The issue of claiming this deduction adds complexity to the overall assessment.

5. Additional grounds of appeal were raised, challenging the upholding of the Assessing Officer's order under Section 153C of the Act. The appellant argues that the satisfaction required for initiating proceedings under Section 153C was not recorded, rendering the assessment unsustainable.

6. The Tribunal, after examining the facts and legal grounds presented, admitted the additional grounds of appeal and held that the assessment under Section 153C was not sustainable due to the lack of recorded satisfaction. Consequently, the appeal was partly allowed, and the assessment was deemed void ab initio, obviating the need for further adjudication on other grounds raised by the appellant.