2018 (2) TMI 1202 - AT - Income Tax

Validity of proceedings invoked u/s 153C - no satisfaction note was recorded - notice without sanction of law - Held that - AO of searched person as a jurisdictional requirement must record his satisfaction that incriminating material found as a result of search belongs to assessee herein. In this regard we take note of the plea of the assessee that no satisfaction note has been found recorded by the AO of the searched person to show that any money bullion jewelery or other valuablearticles or things or books of accounts or documents seized etc. belongs to the assessee-company which has any bearing on the determination of total income of assessee herein. It goes without saying that substantive action under s.153C is not permissible for an empty cause without corroboration of incriminating material. Thus it is obvious that Revenue has grossly failed to substantiate legal foundation of action undertaken by invoking s.153C and further failed to controvert any of the aforesaid formidable pleas raised on behalf of the assessee in support of its cross-objection - Decided in favour of assessee.

Summary

Issues:
Validity of proceedings under section 153C of the Income Tax Act.

Analysis:
The appeals were filed by the Revenue against orders of the Commissioner of Income Tax(Appeals) for Assessment Years (AYs) 2005-06 & 2006-07. The assessee challenged the validity of proceedings under section 153C of the Act, asserting that the assumption of jurisdiction was void ab initio. The assessee contended that no incriminating material was found for invoking section 153C, and no satisfaction note was recorded by the Assessing Officer of the searched party. The assessee highlighted that the identity of the searched person was vague, and no specific details were available to support the notice issued under section 153C. The assessee also pointed out that the assessment order passed under section 153C lacked statutory approval and referred to relevant case laws to support their arguments.

The Revenue, on the other hand, relied on the orders of the authorities below. The main issue for determination was the validity of the assessment order passed under section 153C alleging lack of jurisdiction by the assessee. The assessee argued that the action under section 153C was based on a search initiated in 'Asian group of cases,' which was a generic and vague term. The inspection report revealed a lack of specific information about the searched person, raising concerns about the validity of the proceedings. Additionally, the assessee emphasized the absence of incriminating material belonging to the assessee-company seized during the search, further weakening the Revenue's case. The assessee also highlighted the jurisdictional requirement for the AO of the searched person to record satisfaction that the incriminating material found belongs to the assessee, which was not fulfilled in this case.

Ultimately, the Tribunal found merit in the assessee's arguments and concluded that the Revenue failed to substantiate the legal foundation for invoking section 153C. The Tribunal held that the prerequisites for invoking jurisdiction under section 153C were not satisfied, rendering the notice issued under section 153C void ab initio. As a result, the proceedings and assessment based on the illegal notice were declared null and void. Consequently, the Tribunal allowed the Cross Objections filed by the assessee for AYs 2005-06 & 2006-07, while dismissing the appeals of the Revenue for the same assessment years.