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2018 (2) TMI 434 - AT - Income TaxAssessment u/s 153C - Unexplained purchase u/s. 69C - satisfaction note eligibility - Held that - No reason to accept the contention of the assessee that the said satisfaction note was recorded in the case of assessee and not in the case of person searched as required by law. Besides, no specific ground has been has been raised in the cross objection on the satisfaction note in particular. Accordingly, this issue is decided against the assessee and we find no justification to disturb the findings reached by the ld. CIT(A) on this count. Assessment barred by limitation - Held that - The assessments made by the Assessing Officer u/s. 153C of the Act for A.Yrs. 2003-04 and 2004-05 are beyond the scope of section 153C and the same being void ab initio deserve to be quashed. Accordingly, the cross objections of the assessee for A.Yrs. 2003-04 and 2004-05 deserve to be allowed on this legal issue only and since the assessments for these years are held as void, the appeals of the Revenue for these years deserve to fail. See CIT Versus RRJ Securities Ltd. And Vica-Versa 2015 (11) TMI 19 - DELHI HIGH COURT Also remit the issue of additions on merits back to the file of the Assessing Officer to decide the same afresh in the light of directions/observations given by ITAT, Bench B in the case of DCIT vs. M/s. Devi Dayal Petro Chemicals Pvt. Ltd 2014 (10) TMI 216 - ITAT DELHI wherein held AO will first verify the years to which the seized documents belonged - There would be no justification for continuation of the proceedings under Section 153C to which the seized documents do not belong. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the AO will drop the proceedings initiated u/s 153C
Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act. 2. Deletion of addition on account of unexplained purchases under Section 69C. 3. Deletion of addition on account of disallowance of expenditure. 4. Limitation period for assessment under Section 153C. 5. Jurisdiction of the Assessing Officer (AO) in initiating proceedings. 6. Verification of transactions reflected in seized documents. Detailed Analysis: 1. Validity of Proceedings under Section 153C: The assessee challenged the validity of the proceedings under Section 153C, arguing that no satisfaction was recorded by the AO of the searched person. The tribunal noted that the satisfaction note was recorded by the AO who was also the jurisdictional AO of the searched person. The tribunal referred to the judgment of the Hon’ble Delhi High Court in *Pr. CIT vs. Instronics Ltd.*, which upheld the validity of such satisfaction notes. Consequently, the tribunal found no merit in the assessee's contention and upheld the validity of the proceedings under Section 153C. 2. Deletion of Addition on Account of Unexplained Purchases under Section 69C: The AO had disallowed cash purchases amounting to ?32,91,900 as unverifiable and bogus, treating them as unaccounted expenditure under Section 69C. The CIT(A) deleted this addition, directing the AO to work out the peak from the entries in the cash book. The tribunal, following the precedent set in the case of *DCIT vs. M/s. Devi Dayal Petrochemicals Pvt. Ltd.*, remitted the issue back to the AO for re-examination, directing the AO to verify whether the transactions were duly accounted for in the books of accounts. 3. Deletion of Addition on Account of Disallowance of Expenditure: The AO had disallowed 100% of the expenses claimed by the assessee in the profit and loss account as unverifiable. The CIT(A) deleted this addition as well. The tribunal, consistent with its decision on unexplained purchases, remitted this issue back to the AO for fresh examination, following the same directions as for unexplained purchases. 4. Limitation Period for Assessment under Section 153C: The assessee contended that the assessments for AYs 2003-04 and 2004-05 were barred by limitation. The tribunal referred to the decision of the Hon’ble Delhi High Court in *CIT vs. RRJ Securities Ltd.*, which held that the six assessment years for which assessments could be made under Section 153C should be reckoned from the date of recording of satisfaction. Since the satisfaction was recorded in September 2010, the tribunal concluded that AYs 2003-04 and 2004-05 were beyond the six-year period and thus, the assessments for these years were void ab initio. 5. Jurisdiction of the Assessing Officer: The tribunal examined the jurisdictional issue and found that the AO had the requisite jurisdiction to initiate proceedings under Section 153C, as the satisfaction note was recorded by the AO of the searched person, who was also the AO of the assessee. 6. Verification of Transactions Reflected in Seized Documents: The tribunal directed the AO to verify whether the transactions reflected in the seized documents were duly accounted for in the books of accounts. If the transactions were accounted for, the AO was instructed to drop the proceedings. If not, the AO was to continue with the assessment as per law. Conclusion: The tribunal dismissed the appeals of the Revenue for AYs 2003-04 and 2004-05 and allowed the cross objections of the assessee for these years. For the remaining assessment years (2005-06 to 2008-09), the tribunal remitted the issues back to the AO for fresh examination, directing the AO to verify the transactions in light of the directions provided. The tribunal's order emphasized adherence to the principles laid down in previous judicial decisions and statutory provisions.
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