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2018 (3) TMI 1512 - AT - Income TaxAssessment u/s 153C - non satisfaction recorded by AO - Held that - We are of the view that the satisfaction in the case is not recorded by the AO of the searched party, which is a pre-condition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed u/s 153C read with Section u/s 143(3) of the Act is bad in law and hence, quashed. The jurisdictional issue of the assessee s cross objection is allowed.
Issues Involved:
1. Assumption of jurisdiction for issuing notice and framing block assessment under section 158BD read with section 143(3) of the Income Tax Act, 1961. 2. Merits of the addition of ?32,75,525 as undisclosed income. Detailed Analysis: 1. Assumption of Jurisdiction: The primary issue raised by the assessee was the legality of the assessment order, questioning the assumption of jurisdiction for issuing notice and framing block assessment under section 158BD read with section 143(3) of the Income Tax Act, 1961. The assessee contended that the conditions to invoke section 158BD did not exist, making the assessment order illegal, bad in law, and void ab initio. The Tribunal noted that the search and seizure operation was conducted on the premises of Keystone Realtors Pvt. Ltd and its group companies, including Credence Properties Developers Pvt. Ltd (CPDPL). During the search, evidence was found indicating undisclosed income. The AO assessed the assessee's share of this undisclosed income based on information received from the DCIT Central Circle-10, Mumbai. The CIT(A) deleted the addition on merits, but the assessee raised a cross objection regarding the jurisdictional issue, arguing that no satisfaction was recorded by the AO of the search person, making the block assessment invalid. The Tribunal examined the procedural compliance and found that the department failed to produce the seized material and the satisfaction note, despite multiple opportunities provided. The Tribunal referred to the Supreme Court's judgment in CIT vs. Calcutta Knitwears (2014) 362 ITR 673 (SC), which mandates that the AO of the person searched must record satisfaction before handing over documents to the AO of the 'other person.' The Tribunal also cited the CBDT Circular No. 24/2015, which clarifies this requirement even if the AO of the searched person and the 'other person' is the same. The Tribunal concluded that no satisfaction was recorded by the AO of the searched party, and hence, the assessment framed under section 153C read with section 143(3) was bad in law. The jurisdictional issue raised by the assessee was allowed, and the block assessment was quashed. 2. Merits of the Addition: The CIT(A) had deleted the addition of ?32,75,525 on merits, observing that the AO relied on papers found during the search indicating alleged on-money transactions. However, there was no evidence or confirmation of payment to the appellant. The AO failed to question Mr. Boman Irani, the director of CPDPL, regarding the payment of on-money to the appellant. The CIT(A) noted discrepancies and lack of evidence in the AO's findings, leading to the deletion of the addition. Since the Tribunal quashed the block assessment on jurisdictional grounds, the merits of the case raised in the Revenue's appeal became academic and required no adjudication. Conclusion: The Tribunal allowed the assessee's cross objection on the jurisdictional issue, quashing the block assessment. Consequently, the Revenue's appeal on the merits of the addition was dismissed as academic. The order was pronounced in the open court on 16-03-2018.
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