2017 (3) TMI 688 - AT - Income Tax

Assessment u/s 153C - Held that - The person searched has not recorded any satisfaction that the income relatable to the seized material belongs to the assessees herein. Therefore, the assessments are quashed - Decided in favour of assessee

Summary

Issues:
1. Assessment made under section 143(3) r.w.s. 153C of the IT Act.
2. Challenge to the jurisdiction of the Assessing Officer invoking section 153C for A.Y 2003-04.
3. Consideration of fair market values for computation of long term capital gain.
4. Validity of invoking section 153C without recording satisfaction by the Assessing Officer.
5. Addition to income without incriminating material found during search.

Analysis:

Issue 1: Assessment under section 143(3) r.w.s. 153C of the IT Act
The assessee appealed against the order of the CIT (A) upholding the assessment made by the AO under section 143(3) r.w.s. 153C of the IT Act for A.Y. 2008-09. The appeal challenged the assessment on various grounds, including errors in law and facts, consideration of fair market values, and the addition towards long term capital gain. The Tribunal found that assessments in this case and similar cases were based on the same search operation, leading to the quashing of the assessment proceedings due to lack of satisfaction by the Assessing Officer that the income belonged to the assessee.

Issue 2: Challenge to jurisdiction under section 153C for A.Y 2003-04
Additional grounds of appeal were filed challenging the jurisdiction of the AO invoking section 153C for A.Y 2003-04 without recorded satisfaction. The Tribunal considered the legal requirements for invoking section 153C, emphasizing the need for satisfaction by the Assessing Officer that the seized material pertains to the assessee. Citing relevant case law, the Tribunal quashed the assessment proceedings due to the absence of recorded satisfaction by the AO.

Issue 3: Consideration of fair market values for computation of long term capital gain
The appeal also contested the consideration of fair market values instead of sale proceeds for computing long term capital gain. The Tribunal did not delve into this issue as the assessments were quashed based on jurisdictional grounds, rendering further discussion on the merits unnecessary.

Issue 4: Validity of invoking section 153C without recorded satisfaction
The Tribunal highlighted the importance of the Assessing Officer recording satisfaction that the seized material belongs to the assessee before invoking section 153C. Failure to meet this requirement led to the quashing of the assessment proceedings in line with relevant legal precedents and the judgment of the jurisdictional High Court.

Issue 5: Addition to income without incriminating material found during search
The Tribunal emphasized that no addition could be made to the income under section 143(3) r.w.s. 153C without incriminating material found during the search. The absence of recorded satisfaction by the AO regarding the seized material belonging to the assessee led to the quashing of the assessments, aligning with established legal principles.

In conclusion, the Tribunal partly allowed the assessee's appeal based on jurisdictional issues and quashed the assessment proceedings due to the lack of satisfaction recorded by the Assessing Officer regarding the seized material's connection to the assessee. The judgment emphasized the legal requirements for invoking section 153C and the significance of incriminating material in assessment proceedings.