2019 (2) TMI 155 - AT - Income Tax

Condonation of delay - delay of 2969 days - no satisfaction note was recorded by the AO at the time of issue of notice u/s.153C - Held that - In the present case, it is a case of the assessee that no satisfaction note was recorded by the AO at the time of issue of notice u/s.153C. Now, it is settled principle of law that recording of satisfaction by the AO at the time of issuance of notice u/s.153C is a sine qua non for getting jurisdiction over the seized documents. In case, a satisfaction note was not recorded, the AO would not get jurisdiction for the seized materials received by him. This position of law was explained by the Hon ble Apex Court in the context of provision of Sec.158BD of the Act in the case of CIT v. Calcutta Knitwears 2014 (4) TMI 33 - SUPREME COURT . The CBDT vide its Circular No.24/2015 dated 31.12.2015 accepted that the same position holds good even in the context of provisions of Sec.153C of Act. In the present case, the appellant had filed the copies of ordersheet entries of AO indicating that no satisfaction note was recorded by the Assessing Officer. Even the CIT(DR) also filed copies of the ordersheet entries, wherein, no satisfaction note was recorded. Therefore, this material conclusively established that the Assessing Officer has no jurisdiction to proceed against the appellant under the provisions of Sec.153C of the Act. Thus, in the interest of advancing substantial justice to the appellant, the delay of 2969 days can be condoned accordingly. Jurisdiction of AO u/s.153C - no satisfaction note was recorded by the AO as well as the Assessing Officer of searched person saying that the incriminating material belonging to the appellant were found during the course of search and seizure proceedings in the case of Shri D. Mayandi & others - Held that - We must mention here that though the Ld.CIT(DR) in his covering letter had stated that copy of the satisfaction note is furnished, in fact, what is furnished is only a copies of ordersheet entries of Assessing Officer which are same as furnished by the appellant. Therefore, keeping in view the CBDT Circular No.24/2015 dated 31.12.2015 and the judgment of the Hon ble Supreme Court in the case of Calcutta Knitwears, supra, in the absence of such satisfaction note recorded by the Assessing Officer, the Assessment Order passed is null and void ab initio and accordingly, we hold that the Assessment Orders passed cannot be sustained in the eyes of law. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 153C of the Income Tax Act.
2. Recording of satisfaction by the Assessing Officer.
3. Delay in filing appeals.
4. Merits of the additions made during assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 153C of the Income Tax Act:
The appellants contended that the Commissioner of Income Tax (Appeals) [CIT(A)] failed to recognize the lack of jurisdiction for the Assessing Officer (AO) in completing the assessments under Section 153C of the Act. The appellants argued that the additions made should relate to the satisfaction recorded by the AO for issuing notice under Section 153C, and there was no such recording. The CIT(A) should have appreciated that the assessment framed under Section 153C is ab initio void and untenable in law, especially when the satisfaction recorded was on jewellery seized during the search, and no addition was made in the assessment framed.

2. Recording of Satisfaction by the Assessing Officer:
The appellants emphasized that the recording of satisfaction by the AO as to the undisclosed nature of the incriminating material found in the search was paramount. The absence of such recording vitiates the assessment framed under Section 153C, making it null and void. The Tribunal noted that the appellant provided copies of the ordersheet entries of the AO obtained under the RTI Act, which indicated that no satisfaction note was recorded. This was corroborated by the CIT(DR), who also filed copies of the ordersheet entries showing no satisfaction note. The Tribunal held that the absence of a satisfaction note meant the AO had no jurisdiction to proceed under Section 153C, rendering the assessment orders null and void.

3. Delay in Filing Appeals:
There was a significant delay of 2969 days in filing the appeals. The appellants explained that the delay occurred due to wrong advice from their previous Chartered Accountant, who advised against filing further appeals. It was only after a proclamation notice for the sale of properties to realize taxes that the appellants sought advice from another Chartered Accountant, who advised filing the appeal. The Tribunal considered the principles laid down by the Supreme Court and other High Courts regarding the condonation of delay, emphasizing that technicalities should not impede substantial justice. The Tribunal condoned the delay, acknowledging that the appellants acted bona fide based on the mistaken legal advice of their previous counsel.

4. Merits of the Additions Made During Assessment:
The appellants contended that the CIT(A) failed to appreciate the lack of sufficient opportunity for the assessee and that the completion of assessment under Section 144 was unjustified. They argued that the additions for the assessment years 2001-02 to 2007-08 on account of income from plying of buses were estimated by the AO at 5% of gross collections, which was not justified. The CIT(A) confirmed the estimated addition of 3.5%, which the appellants argued should be deleted entirely. Additionally, the income from Jeyam Theatre and Amirtham Theatre for certain assessment years was added without rejecting the books maintained, making the additions outside the purview of Section 153C and untenable in law. However, since the Tribunal quashed the assessment orders on jurisdictional grounds, it did not find it necessary to address the merits of these contentions.

Conclusion:
The Tribunal allowed all the appeals filed by the assessees, quashing the assessment orders on the grounds of lack of jurisdiction due to the absence of a recorded satisfaction note by the AO under Section 153C. The delay in filing the appeals was condoned, and the Tribunal emphasized the importance of advancing substantial justice over technical considerations. The judgment was pronounced on January 23, 2019, in Chennai.

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