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2018 (12) TMI 1074 - AT - Income TaxValidity of initiation of proceedings u/s 153C - addition u/s 69D - no record of satisfaction note issued by the AO - Held that - As the revenue authorities have failed to place on record the satisfaction note issued by the Assessing Officer of the searched person in favour of the Assessing Officer having jurisdiction of the other person i.e. the assessee in this case, the proceedings initiated u/s 153C of the Act for Assessment Year 2008-09 and 2009-10 in the case of the assessee needs to be quashed. We accordingly allow this common legal issue in the favour of the assessee challenging the validity of initiation of assessment proceedings u/s 153C of the Act. - Decided in favour of assessee.
Issues Involved:
1. Validity of initiation of proceedings under Section 153C of the Income Tax Act. 2. Maintenance of additions made under Section 69D of the Income Tax Act. Detailed Analysis: 1. Validity of Initiation of Proceedings under Section 153C: - Assessee's Argument: The assessee argued that the initiation of proceedings under Section 153C was invalid due to the absence of a satisfaction note by the Assessing Officer (A.O.) of the searched person. The assessee relied on the judgment of the Hon’ble High Court of Delhi in the case of Pepsico India Holding P. Ltd V. ACIT and the Hon’ble Apex Court in CIT Vs Calcutta Knitwears, along with CBDT Circular No.24/2015. - Revenue's Argument: The Departmental Representative supported the findings of the CIT(A) but could not provide the satisfaction note recorded by the A.O. of the searched person. - Tribunal's Findings: The Tribunal noted that the precondition for initiating proceedings under Section 153C is the recording of satisfaction by the A.O. of the searched person. The Tribunal found that no such satisfaction note was recorded, which is a mandatory requirement as per the judgments and CBDT Circular mentioned. The Tribunal cited the principles laid out in Pepsico India Holding P. Ltd V. ACIT, emphasizing that the A.O. must be satisfied that the seized material does not belong to the searched person before invoking Section 153C. - Conclusion: The Tribunal concluded that the proceedings initiated under Section 153C were void ab initio due to the absence of a proper satisfaction note. Therefore, the initiation of assessment proceedings under Section 153C for Assessment Years 2008-09 and 2009-10 was quashed. 2. Maintenance of Additions under Section 69D: - Assessee's Argument: The assessee contended that the additions made under Section 69D were illegal and should be deleted. - Tribunal's Findings: Since the Tribunal had already quashed the proceedings initiated under Section 153C, the grounds challenging the additions under Section 69D became infructuous and academic in nature. - Conclusion: The Tribunal did not adjudicate the grounds related to Section 69D as the assessment orders themselves were quashed. Final Judgment: - The appeals for both Assessment Years 2008-09 and 2009-10 were allowed in favor of the assessee. - The initiation of proceedings under Section 153C was declared invalid and quashed. - The grounds related to the additions under Section 69D were rendered infructuous due to the quashing of the assessment orders. Order Pronouncement: The order was pronounced in the open Court on 18.12.2018.
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