2016 (6) TMI 1472 - AT - Income Tax

Assessment u/s 153A - mandation of recording satisfaction - unaccounted cash receipts - Whether the seized document does not belong to the assessee? - As primarily argued mandatory satisfaction note, which is to be recorded by the A.O. of the searched party during the course of the assessment proceedings of the search party for assuming jurisdiction u/s 153C by the A.O. of the assessee, was not recorded - HELD THAT - As DR could not controvert the factual submissions of the assessee. He could not produce proof to demonstrate that the satisfaction has been recorded by the A.O. of the searched party. A.O. who is having the jurisdiction of the searched party, has admittedly not recorded satisfaction note, as mandated by law enabling the A.O. of the assessee to assume jurisdiction u/s 153C - we quash the assessment orders for AY 2007-08 and 2008-09 and dismiss all the appeals filed by the Revenue. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of additions made under Section 153A based on a seized document from a third party.
2. Interpretation of Sections 153A, 132(4A), and 292C of the Income Tax Act, 1961.
3. Requirement of satisfaction recording under Section 153C.
4. Jurisdictional validity of the assessment proceedings.

Detailed Analysis:

1. Legality of Additions Based on Seized Document from a Third Party:
The primary issue revolves around the additions made to the assessee's income based on a seized document (Annexure A-1) found from the possession of a third party, Sh. Sanjeev Mahajan. The document allegedly detailed unaccounted cash payments made by Sh. Sanjeev Mahajan to Sh. Ram Mehar Garg (the assessee) against the sale of property referred to as the Hotel in City Mart project. The assessee contested that no incriminating document or material was found or seized from their possession during the search, and thus, the additions were unjustified.

2. Interpretation of Sections 153A, 132(4A), and 292C:
The department argued that the CIT (A) erred in deleting the additions by holding that the seized document did not belong to the assessee. They contended that the CIT (A) misinterpreted the provisions of Section 153A read with Sections 132(4A) and 292C, which presume the correctness of documents found during a search. However, the CIT (A) had deleted the additions on the ground that the AO could not demonstrate that the seized document belonged to the assessee.

3. Requirement of Satisfaction Recording Under Section 153C:
A significant legal contention was that the proceedings under Section 153A were not legally tenable as there was no reference to any seized document found from the possession of the assessee or belonging to the assessee. The assessee argued that no satisfaction was recorded under Section 153C by the AO having jurisdiction over Sh. Sanjeev Mahajan. The Tribunal found that the AO did not record the mandatory satisfaction note required to assume jurisdiction under Section 153C. The Tribunal cited the Hon'ble Jurisdictional High Court's judgment in the case of P.R.CIT-Central II vs. Aakash Arogya Mandir P.Ltd., which emphasized the necessity of recording satisfaction by the AO of the searched party.

4. Jurisdictional Validity of the Assessment Proceedings:
The Tribunal quashed the assessment orders for AY 2007-08 and 2008-09, dismissing all the appeals filed by the Revenue. The Tribunal held that the entire assessment proceedings were based on the seized annexure A-1, which was not demonstrated to belong to the assessee. Consequently, the Tribunal found no reason to interfere with the findings of the CIT (A) for AY 2009-10 and dismissed the department's appeal for that year as well.

Conclusion:
The Tribunal allowed the Cross Objections of the assessee and dismissed all the Revenue appeals, concluding that the additions made were not legally tenable due to the lack of proper satisfaction recording and the absence of incriminating documents directly linked to the assessee. The order was pronounced in the open court on 30.06.2016.