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2019 (3) TMI 1979 - AT - Income TaxAssessment u/s 153C - Validity of satisfaction note on the basis of which the assessing officer initiated the proceedings u/s 153C - HELD THAT - As seen that the impugned satisfaction note provided to the assessee vide AO s letter unsigned, with no date indicating the date on which satisfaction was drawn, and with no mention of the assessment year for which satisfaction was drawn, while the satisfaction found in the assessment folder is on the note sheet side (X2) - with no page marking on the satisfaction prior to 06.01.2016 when the assessment folders were sent back to the AO by me, but subsequently found marked in the case of the appellant and that of Sh. Kartik Patel and Sh. Abhishek Kartik Patel and in the case of Smt. Meenakshi Patel and M/s Kartik Chandulal Patel HUF (in fact the satisfaction in the file of Sh. Kartik Pate is that of Smt. Meenakshi Patel) - and the correspondence sheets are marked up to pages 187, 411, 192, 194 and 187 respectively which do not include tne satisfaction note on the correspondence side. Besides, on the satisfaction note, both X1 X2, the name of the searched company M/s Sheela Foam Pvt Ltd is noted on top, meaning thereby that the satisfaction was recorded in the case of SFPL on 28.08.2013 when notice u/s 153A was issued to SFPL, but there is no satisfaction recorded in the case of the appellants (Kartik Patel Group hamily members). In this view of the matter, and in terms of the AO s reply that the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee , the satisfaction enclosed with the AO s letter F.No.DCIT/CC- 11/2013-14/1634 dt. 06.01.2014 sent to the assessee cannot be considered as valid satisfaction of the AO. We further note that since the AO has mentioned in his reply dt. 14.01.2016 that The assessment records as available in this office were sent as desired by your goodself, it is necessary to mention that the assessment folders of all the five cases of the group was sent back to the AO on 06.01.2016 and the AO s reply is dt. 14.01.2016. We do not find any reason to interfere in the order of the Ld. CIT(A), wherein it has been held that the satisfaction recorded by the AO and the issuance of notices u/s. 153C of the Act held to be invalid and therefore, the reassessment orders in this case cannot be sustained and appeal of the assessee was rightly partly allowed on the legal issue itself, hence, we uphold the action of the Ld. CIT(A) on the legal issue and dismiss the appeal of the Revenue.
Issues Involved:
1. Validity of the satisfaction note for initiating proceedings under Section 153C of the Income Tax Act. 2. Whether the seized documents "belong to" the assessee as required under Section 153C. 3. Adequacy of opportunity provided to the assessee for being heard and cross-examining the evidence. 4. Whether the additions made by the Assessing Officer (AO) are sustainable on merits. Detailed Analysis: 1. Validity of the Satisfaction Note: The Revenue argued that the satisfaction note prepared by the AO was valid and justified the initiation of proceedings under Section 153C. However, the CIT(A) and the Tribunal found that the satisfaction note was not in accordance with the law. The satisfaction note was unsigned, undated, and did not specify the assessment year, which made it invalid. The Tribunal noted that the satisfaction note must display the reasons or basis for the conclusion that the seized documents belong to a person other than the searched person. The Tribunal upheld the CIT(A)'s decision, citing judgments from higher courts, including the Supreme Court and the Delhi High Court, which emphasized the necessity of a proper satisfaction note. 2. Seized Documents "Belong to" the Assessee: The CIT(A) and the Tribunal found that the documents seized during the search did not "belong to" the assessee, a crucial requirement for initiating proceedings under Section 153C. The documents were seized from the premises of Sheela Foam Pvt. Ltd. (SFPL) and not from the assessee. The Tribunal noted that the documents referred to in the satisfaction note related to other groups and not the assessee's group. The Tribunal relied on various judgments, including those from the Delhi High Court, which held that documents must belong to the assessee for Section 153C to apply. 3. Adequacy of Opportunity for Being Heard: The assessee argued that they were not provided with adequate opportunity to be heard and to cross-examine the evidence used against them. The Tribunal noted that the AO did not provide copies of all the seized documents or the statements of key individuals, which were relied upon in the assessment order. The Tribunal emphasized that assessments made in violation of the principles of natural justice, i.e., without providing necessary documents and adequate opportunity for cross-examination, are invalid. 4. Sustainability of Additions on Merits: The Tribunal did not delve into the merits of the additions made by the AO, as the appeal was allowed on legal grounds related to the invalidity of the satisfaction note and the improper assumption of jurisdiction under Section 153C. The Tribunal upheld the CIT(A)'s decision to quash the reassessment orders based on the invalid satisfaction note and the lack of evidence that the documents belonged to the assessee. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the satisfaction note was invalid and that the documents did not belong to the assessee. Consequently, the reassessment orders under Section 153C were quashed. The Tribunal emphasized the importance of proper satisfaction notes and adherence to the principles of natural justice in reassessment proceedings.
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