2017 (3) TMI 1866 - AT - Income Tax

Assessment u/s 153C - Whether mandatory requirement of the recording of the satisfaction note for the exercise of the power under Section 153C has not been complied with? - HELD THAT - Circular issued by the CBDT No.24/2015 dated 31.12.15 when applied to the present case, shows that the mandatory requirement of the recording of the satisfaction note for the exercise of the power u/s 153C has not been complied with either at the time of the institution of the proceedings against the searched person under Section 153A or in the course of the assessment proceedings u/s 153A in the case of the searched person or immediately after the assessment proceedings were completed under Section 153A of the searched person. Though it has been submitted that, the Assessing Officer of both the searched person and the assessee are the same, still in view of the circular issued by the CBDT as requisite satisfaction has not been recorded, respectfully following the decision in the case of Pepsi Foods Pvt. Ltd. 2014 (8) TMI 425 - DELHI HIGH COURT as also following the principles laid down in the case of Arihant Aluminium Corporation 2016 (5) TMI 791 - KARNATAKA HIGH COURT and the circular issued by the CBDT in Circular No. 24/2015 dated 31.12.2015, the notices issued on the assessee under Section 153C and consequently assessments completed under Section 143(3) read with section 153C stands annulled. In the circumstances appeals filed by the assessee stands allowed and the appeals filed by the revenue stands dismissed.

Summary

Issues Involved:
Appeals against notice under section 153C of the Act challenging satisfaction recording and search conduct.

Analysis:
The appeals involved challenges against the notice issued under section 153C of the Act. The issue revolved around the recording of satisfaction before issuing the notice. The appeals by the assessee and the revenue were disposed of collectively due to common issues.

The assessee contended that no satisfaction had been recorded before the notice under section 153C was issued. It was argued that the search conducted did not pertain to the assessee directly, and no incriminating evidence was found at the searched premises related to the assessee. The Departmental Representative admitted that there was no search warrant in the name of the assessee. The order sheet entry provided was contested by the assessee as not constituting proper satisfaction as required under Section 153C.

The Authorized Representative of the assessee cited legal precedents and circulars to support the argument that proper satisfaction recording was mandatory before issuing notices under section 153C. The Delhi High Court's decision in Pepsi Foods Pvt. Ltd. case was referenced to emphasize the necessity of displaying reasons for concluding that seized documents belonged to another person. The circular issued by the CBDT also highlighted the importance of recording satisfaction in accordance with guidelines.

After considering the submissions, the Tribunal found that the order sheet noting produced did not meet the criteria for proper satisfaction recording under Section 153C. The assessment order also failed to refer to seized materials. As per the CBDT circular, the mandatory requirement of recording satisfaction had not been fulfilled. Citing legal precedents, the Tribunal annulled the notices issued under Section 153C and dismissed the revenue's appeals while allowing the assessee's appeals.

In conclusion, the Tribunal ruled in favor of the assessee, annulling the notices issued under Section 153C due to the lack of proper satisfaction recording. The appeals filed by the assessee were allowed, and those by the revenue were dismissed. The judgment was pronounced at the hearing in Goa on March 29, 2017.