2017 (3) TMI 108 - HC - Income Tax

Satisfaction Note u/s. 153C - assessment of third party - cash found during search - Held that - In the present case too Jatinder Pal Singh was one of the Directors of the assessee. In the course of the search of his residential and other premises, he clearly stated that some cash seized in those premises belonged to the assesse. For the purposes of Section 153C, the satisfaction of the AO recorded was, in this Court s opinion sufficient. Like in Super Malls 2016 (11) TMI 1370 - DELHI HIGH COURT the AO considered the totality of the statement to conclude - undoubtedly facially, that the cash seized belonged to the third party, i.e., the assesse in the present case. Such statement also constitutes as material because it is made in the course of the search under Section 132 (4) and is also in consonance with the ruling of this Court in Dayawanti (2016 (11) TMI 211 - DELHI HIGH COURT ). - Decided in favour of revenue

Summary

Issues:
1. Compliance with Section 153C of the Income Tax Act, 1961.
2. Determination of material belonging to the assessee.
3. Validity of the satisfaction note recorded by the Assessing Officer.

Compliance with Section 153C of the Income Tax Act, 1961:
The case involved a dispute regarding the compliance with Section 153C of the Income Tax Act, 1961. The ITAT had held that the satisfaction recorded under Section 153C was not in accordance with the provisions of the Act. The material discovered during the search did not seem to belong to the assessee/respondent. The CIT (A) upheld the final assessment, but the ITAT sided with the assessee, citing a defective notice under Section 153C due to the absence of a satisfaction note by the Assessing Officer and the lack of evidence showing that the seized material belonged to the assessee.

Determination of material belonging to the assessee:
The dispute also revolved around the determination of whether the material discovered during the search belonged to the assessee. The Revenue argued that the satisfaction note was valid, referring to a similar case where the AO had jurisdiction over both the assessee and the searched person, thus justifying the notice under Section 153C. The Revenue also pointed out a statement by one of the Directors indicating that the seized cash belonged to the assessee. In contrast, the respondents relied on previous judgments to argue that there was no proper satisfaction recorded under Section 153C.

Validity of the satisfaction note recorded by the Assessing Officer:
The Assessing Officer's satisfaction note under Section 153C was a crucial point of contention. The note detailed the cash seized during the search and the statement of the Director indicating ownership of the cash. The AO concluded that the seized cash belonged to the assessee based on the Director's statement. The Court found this sufficient for the purposes of Section 153C, emphasizing the importance of considering the totality of the statement to determine ownership. The Court referenced previous cases to support its decision and ultimately ruled in favor of the Revenue, setting aside the ITAT's order and directing a review of the assessee's appeal on its merits.

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