2018 (11) TMI 1948 - AT - Income Tax

Validity of assessment order passed u/s 144 r.w.s. 153C - as argued no proper satisfaction was recorded before issuing the said notice - HELD THAT - Since the assessment order is silent about recording of satisfaction or handing over of satisfaction note by the AO of searched person to the AO of assessee, then it was incumbent upon the Department to prove its case of having jurisdiction under section 153C of the Act i.e. to produce satisfaction note of the AO incharge of the searched person, pursuant to which documents were handed over to the AO of assessee and proceedings were initiated under section 153C of the Act. Despite several opportunities being allowed to Revenue, satisfaction note and the assessment records could not be produced, though efforts were made but on the ground that records are very old, the same cannot be produced. But this cannot be taken as ground for allowing the claim of Department. The onus was upon the Revenue to prove its case that proper satisfaction was recorded by the AO incharge of the searched person before handing over the documents to the Assessing Officer of the assessee and for non production of such satisfaction note and non mentioning of satisfaction note in the assessment order, vitiates the assessment order passed in the case of assessee under section 143(3) r.w.s. 153C of the Act. Hence, the same is held to be invalid and bad in law. Appeal of assessee allowed.

Summary

Issues:
Challenge to jurisdiction under section 153C of the Income-tax Act, 1961 based on lack of proper satisfaction recorded before issuing the notice.

Detailed Analysis:

Issue 1: Challenge to Jurisdiction under Section 153C
The appeal filed by the assessee contested the order passed under section 144 r.w.s. 153C of the Act, challenging the notice issued under section 153C on the grounds of lack of proper satisfaction recorded. The additional grounds of appeal raised by the assessee questioned the validity of the notice and subsequent assessment order under section 144 r.w.s. 153C, emphasizing the absence of proper satisfaction recorded by the Assessing Officer of the searched person. The jurisdictional issue raised by the assessee was admitted for adjudication, being a question of law without requiring factual verification.

Issue 2: Procedural Delays and Inability to Produce Records
The assessment proceedings initiated under section 153C were based on a search conducted on another group, leading to the transfer of seized documents to the Assessing Officer of the assessee. Despite multiple opportunities granted, the Department failed to produce the satisfaction note and assessment records, citing the age of the records as a hindrance. The inability to provide crucial documents, including the satisfaction note, raised doubts on the validity of the assessment order.

Judgment
The Tribunal scrutinized the assessment proceedings and the provisions of section 153C, emphasizing the necessity of recording satisfaction by the Assessing Officer of the searched person before transferring documents to the Assessing Officer of the other person. The absence of recorded satisfaction, coupled with the Department's failure to produce essential records, rendered the assessment order invalid and legally flawed. The onus was on the Revenue to establish proper satisfaction, which was not met due to the non-production of crucial documents. Consequently, the additional grounds of appeal challenging jurisdiction were upheld, rendering other grounds on merits irrelevant. The appeal of the assessee was allowed based on the invalidity of the assessment order under section 143(3) r.w.s. 153C.

In conclusion, the Tribunal's decision highlighted the significance of procedural compliance and the necessity of fulfilling jurisdictional requirements under the Income-tax Act for valid assessment proceedings.