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2018 (2) TMI 1148 - AT - Income TaxValidity of assessment u/s 153A r.w.s 153C - non recording of satisfaction by the AO of the searched person at the time of forwarding the seized materials to the AO - Held that - As no satisfaction has been recorded by the AO of the searched party, which is apparent from the finding given by the CIT(A) in his order that satisfaction is presumed and automatic when the seized papers are forwarded to the AO of the third party. In view of this we are quashing the proceedings under Section 153C of the Act and consequent assessment framed. See Commissioner of Income Tax, Kolkata Versus Veerprabhu Marketing Limited 2016 (8) TMI 813 - CALCUTTA HIGH COURT - Decided in favour of assessee
Issues Involved:
1. Validity of notice issued under Section 153A read with Section 153C of the Income Tax Act. 2. Non-recording of satisfaction by the Assessing Officer (AO) of the searched person. 3. Additions made on account of unexplained investment, unexplained cash credit, deemed dividend under Section 2(22)(e), estimation of business income, and disallowance of interest under Section 36(1)(iii). Issue-wise Detailed Analysis: 1. Validity of Notice under Section 153A read with Section 153C: The assessee contested the legality of the notice issued under Section 153A read with Section 153C, arguing that the assessment year 2003-04 does not fall within the purview of Section 153C. The tribunal examined whether the AO of the searched person had recorded satisfaction before forwarding the seized documents to the AO of the assessee. The CIT(A) presumed satisfaction was automatic upon forwarding the documents, but the tribunal found no express satisfaction recorded by the AO of the searched party. Consequently, the tribunal quashed the proceedings under Section 153C and the subsequent assessment. 2. Non-recording of Satisfaction by AO of the Searched Person: The tribunal emphasized the necessity of recording satisfaction by the AO of the searched person as per the provisions of Section 153C. The CIT(A) inferred satisfaction from the act of forwarding documents, but the tribunal found this insufficient. Citing various judicial precedents, the tribunal held that the absence of recorded satisfaction invalidated the proceedings under Section 153C. 3. Additions Made on Various Grounds: - Unexplained Investment: The tribunal did not adjudicate on the merits of the addition of ?4,00,000 on account of alleged unexplained investment made in Bhatia International Ltd. due to the quashing of the assessment proceedings. - Unexplained Cash Credit: Similarly, the addition of ?3,33,495 on account of unexplained cash credit was not addressed on merits. - Deemed Dividend under Section 2(22)(e): The addition of ?2,71,200 under Section 2(22)(e) was also not adjudicated. - Estimation of Business Income: The estimation of business income at ?20,34,597 was not considered due to the quashing of the assessment. - Disallowance of Interest under Section 36(1)(iii): The disallowance of interest amounting to ?1,64,140 under Section 36(1)(iii) was not addressed. Conclusion: The tribunal quashed the proceedings under Section 153C and the consequent assessments for all the assessment years involved (2003-04 to 2006-07) due to the non-recording of satisfaction by the AO of the searched person. As a result, the other legal issues and merits of the additions were not adjudicated. All appeals filed by the assessee were allowed.
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