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2017 (3) TMI 136 - AT - Income TaxValidity of Assessing Officer s assumption of jurisdiction u/s 153A - non recording of satisfaction notes - Held that - We drew support from the clarifications issued by CBDT in its circular No. 25/2015 dated 31.12.2015 which is binding on Revenue to withdraw and not press such cases, as in the case on hand, where the AOs concerned, i.e. transferor and transferee have not recorded satisfaction note for proper assumption of jurisdiction for issue of notice under section 153C. In this view of the factual and legal matrix of this case, we hold that since the AOs concerned (i.e. transferor/transferee AOs) have not recorded any satisfaction notes for proper assumption of jurisdiction for issue of notices under section 153 the said notices issued under section 153C of the Act are held to be invalid - Decided in favour of assessee.
Issues Involved:
1. Validity of notice issued under Section 153C of the Income Tax Act. 2. Validity of assessment made under Section 153C of the Act. 3. Estimation of unaccounted sales and gross profit. 4. Levy of interest under Sections 234A, 234B, 234C, and 234D of the Act. Detailed Analysis: 1. Validity of Notice Issued Under Section 153C: The assessee challenged the validity of the Assessing Officer’s (AO) assumption of jurisdiction by issuing a notice under Section 153C of the Income Tax Act, 1961, and the consequent passing of orders of assessment under Section 143(3) read with Section 153C. The AO initiated proceedings based on a survey conducted under Section 133A at the assessee’s premises, not a search under Section 132. The AO failed to record satisfaction that the documents found belonged to the assessee, which is a prerequisite for assuming jurisdiction under Section 153C. The Tribunal noted that the Revenue could not produce any record to show that the AO recorded such satisfaction. The Tribunal relied on judicial pronouncements and CBDT Circular No. 24/2015, which mandates recording a satisfaction note even if the AO of the searched person and the other person is the same. Consequently, the Tribunal held that the assumption of jurisdiction under Section 153C was invalid, rendering the notices and subsequent assessments invalid and bad in law. 2. Validity of Assessment Made Under Section 153C: The Tribunal found that the assessments for the years 2005-06 and 2006-07 were based on documents found during a survey under Section 133A, not a search under Section 132. The AO did not record any satisfaction note, which is necessary for assuming jurisdiction under Section 153C. The Tribunal emphasized that the AO’s failure to record satisfaction notes invalidated the assumption of jurisdiction, making the assessments for these years bad in law. The Tribunal relied on the Hon'ble Bombay High Court’s decision in DIT vs. Ingram Micro (India) Exports (P) Ltd. and the ITAT Delhi Bench’s decision in Narsi Creations vs. DCIT, which held that the recording of satisfaction is essential for assuming jurisdiction under Section 153C. 3. Estimation of Unaccounted Sales and Gross Profit: The assessee contested the estimation of unaccounted sales and gross profit. For A.Y. 2005-06, the CIT(A) upheld the estimation of unaccounted sales at ?43,06,287 out of ?1,09,37,871 and the addition of ?6,54,030 towards gross profit. For A.Y. 2006-07, the CIT(A) adopted a gross profit rate of 15.74% on unaccounted sales of ?1,72,23,006, resulting in an addition of ?27,10,901. However, since the Tribunal invalidated the assessments due to the improper assumption of jurisdiction under Section 153C, these issues became academic and were not adjudicated. 4. Levy of Interest Under Sections 234A, 234B, 234C, and 234D: The assessee also challenged the levy of interest under Sections 234A, 234B, 234C, and 234D. However, given the Tribunal’s decision to cancel the assessments due to the invalid assumption of jurisdiction under Section 153C, the issue of interest levy became academic and was not adjudicated. Conclusion: The Tribunal allowed the assessee’s appeals for A.Y. 2005-06 and 2006-07, holding that the assumption of jurisdiction under Section 153C was invalid due to the AO’s failure to record satisfaction notes. Consequently, the assessments for these years were deemed bad in law and were canceled. The issues regarding the estimation of unaccounted sales, gross profit, and levy of interest were rendered academic and were not adjudicated.
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