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2016 (11) TMI 1241 - AT - Income TaxAssessment u/s 153C - Held that - In the absence of any satisfaction recorded by the Assessing Officer of the searched person before initiating proceedings under section 153C of the Act against the assessee i.e. before handing over the documents relating to the assessee and starting the proceedings under section 153C of the Act, the assessment proceedings completed against the assessee under section 153C of the Act are invalid, hence, the same are held so. Accordingly, the assessment order passed under section 143(3) r.w.s. 153C of the Act does not stand and the same is annulled. - Decided in favour of assessee.
Issues Involved:
1. Jurisdictional issue against initiation of proceedings under section 153C of the Act. 2. Recording of satisfaction by the Assessing Officer before initiating proceedings under section 153C. 3. Validity of assessment orders under section 143(3) r.w.s. 153C. 4. Confirmation of additions in the hands of individual partners when assessments in the hands of partnership firms are annulled. Detailed Analysis: 1. Jurisdictional Issue Against Initiation of Proceedings Under Section 153C: The appeals in ITA Nos.1996/PN/2012, 1125/PN/2012, and 1126/PN/2012 raised the jurisdictional issue against the initiation of proceedings under section 153C of the Act. The assessee contended that the initiation of proceedings under section 153C was not in accordance with the provisions of the Act and without complying with the necessary requirements. Specifically, the assessee argued that no reasons were recorded for initiating the proceedings, and no satisfaction was recorded by the Assessing Officer in charge of the searched person before forwarding the documents to the Assessing Officer of the assessee. 2. Recording of Satisfaction by the Assessing Officer: The assessee emphasized that the satisfaction note is a sine qua non for initiating proceedings under section 153C, as laid down by the Hon’ble Supreme Court in CIT Vs. Calcutta Knitwears. The satisfaction must be recorded by the Assessing Officer of the searched person before handing over the documents to the Assessing Officer of the other person. The CBDT Circular No.24/2015 dated 31.12.2015 also mandates strict compliance with this requirement, even if the Assessing Officer of the searched person and the other person is the same. In the present case, the Assessing Officer admitted that no satisfaction note was recorded before initiating proceedings under section 153C. 3. Validity of Assessment Orders Under Section 143(3) r.w.s. 153C: The Tribunal found that the absence of a satisfaction note rendered the proceedings under section 153C invalid. Since the Assessing Officer failed to record the necessary satisfaction before initiating proceedings, the assessment orders under section 143(3) r.w.s. 153C were annulled. This applied to the cases of Om Properties & Developers and Aswani Associates for the respective assessment years. 4. Confirmation of Additions in the Hands of Individual Partners: In the cases of Rajkumar Aswani and Shrichand Aswani, the assessments were completed under section 143(3) r.w.s. 153A. The assessee argued that if the assessments in the hands of the partnership firms were annulled, the additions should be confirmed in the hands of the individual partners. The Tribunal agreed, confirming the additions in the hands of Rajkumar Aswani and Shrichand Aswani since no additions were made in the hands of the partnership firms. Conclusion: The appeals of the assessee in ITA Nos.1996/PN/2012, 1125/PN/2012, and 1126/PN/2012 were allowed, and the assessment orders under section 143(3) r.w.s. 153C were annulled due to the absence of a satisfaction note. The appeal of the Revenue in ITA No.1473/PN/2012 was dismissed as infructuous. The appeals of the assessee in ITA Nos.1123/PN/2012 and 1127/PN/2012 were dismissed, and the additions were confirmed in the hands of the individual partners.
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