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2016 (11) TMI 875 - AT - Income TaxValidity of assessment under Section 153C - non approval from Joint Commissioner of Income Tax as prescribed u/s 153D - Held that - These appeals were filed on 04/02/2013 and the Bench has asked DR to produce copy of approval from Joint Commissioner of Income Tax as prescribed u/s 153D. The department was also asked to confirm as to whether u/s 153C notice or u/s 143(2) notice was issued. However, nothing came from the department. On 24/02/2016 hearing was adjourned at the request of the CIT DR and it was also mentioned that last opportunity was given to the department and cases were adjourned on 09/03/2016. Again on 09/03/2016 at the request of the CIT DR cases were adjourned to 18/04/2016 as last chance. Again on 09/05/2016 hearing was adjourned at the request of CIT DR. However, none of the evidence as asked by the Bench was supplied. Under these circumstances, we do not find any merit in the order passed under Section 153C without having approval from Joint Commissioner of Income Tax as prescribed u/s 153D. No evidence of any satisfaction have been recorded was brought to our notice. Even it was also not shown whether any notice u/s 143 (2) was issued. Accordingly, we set aside the order passed by the lower authorities and the appeals of the assessee are allowed.
Issues Involved:
1. Validity of assessment under Section 143(3) read with Section 153C without the assessee filing a return of income. 2. Requirement of approval from the Joint Commissioner of Income Tax (JCIT) under Section 153D. 3. Service of notice under Sections 153C, 143(2), and 142(1). 4. Validity of notice service on a non-principal officer. 5. Issuance of multiple notices under Section 153C. 6. Requirement of a satisfaction report from the AO of the person searched. 7. Compliance with judicial precedents on recording satisfaction. 8. Recording of satisfaction by the AO of the person searched. 9. Validity of proceedings under Section 153C based on substantive additions in another case. 10. Additions made despite protective assessment instructions. 11. Transfer of case without proper communication. 12. Non-response to queries in the notice under Section 153C. 13. Time-barred assessment under Section 153C. 14. Delay in serving the assessment order. 15. Disclosure of share application money during regular assessment. 16. Additions based on previously assessed items. Detailed Analysis: 1. Validity of Assessment under Section 143(3) read with Section 153C: The assessee argued that the assessment under Section 143(3) read with Section 153C was invalid because no return of income was filed by the assessee, and thus, the assessment should have been made under Section 144. The Tribunal noted the assessee's contention that the AO erred in passing the order under Section 143(3) without considering the comprehensive scheme of assessment. 2. Requirement of Approval from JCIT under Section 153D: The assessee contended that the AO erred in passing the assessment order without obtaining prior approval from the JCIT as required under Section 153D. The Tribunal found that no such approval was mentioned in the assessment order, and the department failed to provide proof of such approval despite multiple RTI applications and requests from the Bench. 3. Service of Notice under Sections 153C, 143(2), and 142(1): The assessee argued that the assessment order was passed without service of notices under Sections 153C, 143(2), and 142(1). The Tribunal noted that the CIT(A) admitted the statement of facts regarding non-service of notice and found no such notice in the case record. 4. Validity of Notice Service on a Non-Principal Officer: The assessee contended that the notice dated 7-12-2010 was served on an individual who was neither a director nor a principal officer of the company. The Tribunal observed that the CIT(A) found the notice was served on a person not authorized to receive it, thus rendering the service invalid. 5. Issuance of Multiple Notices under Section 153C: The assessee argued that if a notice under Section 153C was served on 15-12-2009, no subsequent notice could be issued on 7-12-2010. The Tribunal noted that no reminder or proceedings for non-compliance of the initial notice were initiated, and the subsequent notice was issued within a period shorter than the usual 30 days allowed for filing a return. 6. Requirement of a Satisfaction Report from the AO of the Person Searched: The assessee argued that proceedings under Section 153C could only be initiated upon receipt of a satisfaction report from the AO of the person searched. The Tribunal found that no such satisfaction report was provided or recorded, and the CIT(A) erred in holding that recording satisfaction was not required. 7. Compliance with Judicial Precedents on Recording Satisfaction: The Tribunal referred to the Supreme Court's decision in Manish Maheshwari and other High Court judgments, which mandate recording satisfaction by the AO of the searched person. The Tribunal found that the CIT(A) failed to comply with these judicial precedents. 8. Recording of Satisfaction by the AO of the Person Searched: The Tribunal emphasized that recording satisfaction before proceeding under Section 153C is mandatory, as per the Supreme Court's guidelines and CBDT Circular No. 24/15. The Tribunal found that such satisfaction was not recorded in this case. 9. Validity of Proceedings under Section 153C Based on Substantive Additions in Another Case: The assessee argued that the AO of the searched person made substantive additions in another case and instructed only protective assessment for the assessee. The Tribunal noted that the AO of the person searched was satisfied that the income belonged to the searched person, not the assessee, thus invalidating the proceedings under Section 153C. 10. Additions Made Despite Protective Assessment Instructions: The Tribunal found that the AO erred in making additions in the assessee's hands despite instructions for protective assessment, as the substantive additions were already made in the searched person's case. 11. Transfer of Case Without Proper Communication: The assessee contended that the case was transferred from ITO 6(3)(2) to ACIT 6(3) without proper communication. The Tribunal noted that the order of transfer was not served on the assessee, and the reason for transfer was invalid. 12. Non-Response to Queries in the Notice under Section 153C: The Tribunal observed that the standard form of notice under Section 153C does not contain any queries but requires filing a return within a stipulated period. Since no notice was served, the question of filing a return did not arise. 13. Time-Barred Assessment under Section 153C: The assessee argued that the assessment was time-barred as it was completed after the statutory period. The Tribunal found that the assessment order was passed beyond the prescribed time limit under Section 153B. 14. Delay in Serving the Assessment Order: The Tribunal noted that the assessment order was served on the assessee after a delay of 75 days, with no record justifying the delayed service. 15. Disclosure of Share Application Money During Regular Assessment: The assessee argued that the share application money was fully disclosed during the regular scrutiny assessment, and the AO accepted the details after detailed inquiries. The Tribunal found that the original scrutiny assessment had reached finality. 16. Additions Based on Previously Assessed Items: The Tribunal held that Section 153C does not authorize a de novo assessment and that additions must be confined to search material. Since no new documents were seized during the search, the additions based on previously assessed items were invalid. Conclusion: The Tribunal set aside the orders passed by the lower authorities, finding that the assessment under Section 153C was invalid due to the lack of approval from the JCIT, non-recording of satisfaction, improper service of notices, and other procedural lapses. All appeals of the assessee were allowed.
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