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2016 (8) TMI 45 - AT - Income TaxValidity of assessment u/s 153C - necessity of satisfaction note for initiating the action - Held that - As it is apparent that the CIT (Appeals) has reproduced the reasons recorded/satisfaction note for initiating the action under Section 153C of the Act however, it is not clear whether the satisfaction was recorded in the assessment proceedings of the searched person or it was recorded by the Assessing Officer at the time of initiating the proceedings under Section 153C of the Act. As we have discussed in foregoing paras that recording of satisfaction by the Assessing Officer of the searched person either during the assessment proceedings or just on completion of the assessment proceedings of the searched person is a mandatory requirement before handing over the seized material for initiating the proceedings under Section 153C of the Act. Neither the CIT (Appeals) has given any finding about the stage and assessment proceedings in which the alleged satisfaction is recorded nor any record has been produced before us to ascertain the correct factual position of the satisfaction recorded by the Assessing Officer. Accordingly, in the facts and circumstances of the case, we set side this issue to the record of the CIT (Appeals) for deciding the same by giving a detailed factual finding as well as the validity of assessment under Section 153C of the Act to the extent of the enhancement of assessment made by the CIT (Appeals). Since the jurisdictional issue has been set aside to the record of the CIT (Appeals) for fresh adjudication, therefore the other issues raised by the assessee are kept open.
Issues Involved:
1. Validity of assessment under Section 153C of the Income Tax Act. 2. Enhancement of assessment by the Commissioner of Income Tax (Appeals) (CIT-A). 3. Jurisdictional prerequisites for initiating proceedings under Section 153C. 4. Levy of interest under Sections 234A, 234B, and 234C of the Act. Detailed Analysis: 1. Validity of Assessment under Section 153C: The primary issue raised by the assessee was the validity of the assessment under Section 153C of the Income Tax Act. The assessee argued that the mandatory conditions for initiating proceedings under Section 153C were not met, specifically the requirement for the Assessing Officer to record satisfaction that undisclosed income belongs to a person other than the one searched. The assessee relied on the judgments of the Hon'ble Supreme Court in CIT Vs. Calcutta Knitwears and the Hon'ble Delhi High Court in CIT Vs. RRJ Securities Ltd., which emphasize the necessity of recording such satisfaction. The Tribunal noted that the CIT (Appeals) had reproduced the satisfaction note but failed to clarify in whose assessment record the satisfaction was recorded. Consequently, the Tribunal set aside this issue to the CIT (Appeals) for a detailed factual finding on the validity of the assessment under Section 153C. 2. Enhancement of Assessment by CIT-A: The assessee contested the enhancement of the assessment by the CIT (Appeals), who determined the income at ?1,11,22,908 as opposed to the revised return of ?53,40,927. The Tribunal noted that the CIT (Appeals) had enhanced the assessment without proper justification and factual findings. Given the setting aside of the jurisdictional issue to the CIT (Appeals), the Tribunal also kept open the issue of enhancement for fresh adjudication. 3. Jurisdictional Prerequisites for Initiating Proceedings under Section 153C: The Tribunal emphasized that recording the satisfaction note is a mandatory condition before initiating proceedings under Section 153C. The satisfaction note must be prepared by the Assessing Officer of the searched person either during or immediately after the assessment proceedings. The Tribunal found that the CIT (Appeals) had not provided a clear finding on whether the satisfaction was recorded at the appropriate stage. Therefore, the Tribunal remanded this issue to the CIT (Appeals) for a detailed examination. 4. Levy of Interest under Sections 234A, 234B, and 234C: The assessee denied liability for interest under Sections 234A, 234B, and 234C, arguing that the computation of interest was not provided. The Tribunal did not specifically address this issue in detail, as the primary focus was on the jurisdictional and enhancement issues. However, it implied that this issue would also be reconsidered upon the fresh adjudication by the CIT (Appeals). Conclusion: The Tribunal partly allowed the appeal for statistical purposes, setting aside the jurisdictional issue and the enhancement of assessment to the CIT (Appeals) for fresh adjudication. The Tribunal emphasized the necessity of recording satisfaction before initiating proceedings under Section 153C and required the CIT (Appeals) to provide detailed factual findings on this matter. The other issues raised by the assessee were kept open for reconsideration.
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