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2018 (12) TMI 1063 - AT - Income TaxProceedings initiated u/s 153C - payment of cash against the property on behalf of the assessee-company over and above what is recorded in the sale deed - mandation of recording satisfaction - as per assessee no document belongs to the assessee were found and seized during the course of search and that no valid satisfaction have been recorded under section 153C in the case of the person searched - Held that - It is well settled law that recording of the satisfaction by the A.O. of the person searched is a condition precedent for initiating action under section 153C. In the present case, no satisfaction under section 153C have been recorded in case of the person searched i.e., Manish Mehta group of cases. The language of the satisfaction note reproduced above clearly show that it is recorded in the case of the assessee on 13.06.2011 and notice under section 153C have been issued on 14.06.2011 by ACIT, CC-3, New Delhi who has framed the assessment under section 153C in the case of the assessee. It is, therefore, clear that no satisfaction note as required by Law have been recorded in the case of the person searched i.e., Manish Mehta group of cases in whose case search have been conducted. The statement of Manish Mehta was recorded on 11.09.2009 after the search and was subjected to cross-examination on behalf of the assessee in which the assessee pointed-out several infirmities and inconsistencies because Manish Mehta was not connected with the seller M/s. Honest Estate Pvt. Ltd., and he denied meeting any of the Directors of the assessee-company. He has also stated that at no point of time he takes any cash from the Directors of the assessee-company. He has stated that cash was received from a local Agent whose name and address he does not remember. Further Manish Mehta retracted from his statement, therefore, such statement has no evidentiary value because the Revenue has failed to record statement of any of the Agent who have allegedly received any cash against the sale of the property. No evidence have been found on record to justify payment of cash against the property on behalf of the assessee-company over and above what is recorded in the sale deed. The person who has recorded BAHIs found during the course of search was not subjected to cross-examination on behalf of the assessee. Initiation of proceedings under section 153C is invalid and bad in law - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act. 2. Addition on merits based on alleged cash transactions. Detailed Analysis: 1. Validity of Proceedings under Section 153C: The primary issue in this case is the validity of the proceedings initiated under Section 153C of the Income Tax Act. The Assessee contended that the Assessing Officer (A.O.) erred in assuming jurisdiction under Section 153C by serving a vague and non-speaking notice, and that no incriminating material was seized in relation to the Assessee. The Assessee argued that no satisfaction had been recorded by the A.O. of the person searched, and no documents had been handed over by the A.O. of the person searched to the A.O. of the Assessee-company. The Tribunal noted that the satisfaction note under Section 153C was recorded in the case of the Assessee and not in the case of the person searched, which is a mandatory requirement. The Tribunal referred to various judicial precedents, including the decision of the Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT, which mandates that the satisfaction must be recorded by the A.O. of the person searched. The Tribunal also referred to the CBDT Circular No. 24/2015, which clarifies that even if the A.O. of the searched person and the other person is the same, a satisfaction note must be recorded in the file of the person searched. The Tribunal found that no such satisfaction note was recorded in the case of the person searched (Mahesh Mehta group of cases). The Tribunal also observed that the documents seized (BAHIs and sale deed) did not belong to the Assessee but to the vendor/seller. Therefore, the initiation of proceedings under Section 153C was held to be invalid and bad in law. 2. Addition on Merits Based on Alleged Cash Transactions: On the merits of the addition, the A.O. made an addition of ?3,55,91,000/- on account of alleged cash payment made by the Assessee to Mahesh Mehta group of companies for the purchase of a property. The A.O. also made an addition of ?3,55,910/- on account of 1% brokerage charges. The Assessee contended that no evidence was found to support the addition, and the statement of Mahesh Mehta was not admissible as it had no evidentiary value. The Tribunal noted that the statement of Mahesh Mehta was retracted, and he denied meeting any of the Directors of the Assessee-company. The Tribunal also observed that the person who authored the BAHIs was not produced for cross-examination. The Tribunal found that no incriminating material was seized during the search, and the A.O. failed to prove the payment of cash over and above what was recorded in the sale deed. The Tribunal referred to various judicial precedents, including the decision of the Hon'ble Delhi High Court in the case of Pepsico India Holdings Pvt. Ltd., which held that documents found in the possession of the seller do not belong to the purchaser. The Tribunal concluded that there was no justification for the addition made by the A.O. and deleted the entire addition. Conclusion: The Tribunal quashed the proceedings under Section 153C of the Income Tax Act and deleted the entire addition made by the A.O. The appeal of the Assessee was allowed, and the Orders of the authorities below were set aside.
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