2019 (2) TMI 453 - HC - Income Tax

Validity of assessment proceedings u/s 153-C - Jurisdiction - unearth of undisclosed income during search and seizure proceedings - Recording of satisfaction by the AO before initiating proceedings - Held that - Merely stating that the case is covered under Section 153-C of the Act and the case has been notified under Section 153 of the Act would not be suffice and the same cannot be construed as the satisfaction recorded under Section 153-C of the Act. On the other hand, the said note would disclose that it is only a note prepared for initiating proceedings under Section 153-C of the Act. The same, neither has any heading/title, to indicate it as a satisfaction recorded nor the contents suggests the satisfaction of the Assessing Officer. Hence, the said note is incomplete in as much as the satisfaction of the Assessing Officer as required under Section 153-C of the Act. On this ground alone, the proceedings initiated by the revenue cannot be sustained. The aforesaid aspect goes to the root of the matter. Further proceedings initiated under Section 153-C of the Act are without jurisdiction and can be held to be vitiated in law. In such circumstances, there is no bar for the writ Court to entertain the writ petition dehors the alternative remedy of appeal available under the Act. Proceedings quashed - Decided in favor of assessee.

Summary

Issues:
Challenging validity of proceedings under Section 153-C of the Income Tax Act, 1961 and assessment order dated 31/12/2010 for the assessment year 2008-09.

Analysis:
The petitioner contested the initiation of proceedings under Section 153-C of the Act, arguing lack of jurisdiction and vitiating factors in subsequent assessment orders. The counsel referenced relevant case law, emphasizing the necessity of satisfying conditions under Section 153-C for assessing income of a person other than the searched individual. The counsel highlighted the importance of recording satisfaction notes by the Assessing Officer before transmitting records to the jurisdictional officer for assessment.

The respondent's counsel justified the proceedings, citing centralized files post-search and a satisfaction note purportedly fulfilling Section 153-C requirements. The respondent argued that the writ petition was not maintainable due to the availability of an alternative appeal remedy.

The court examined the submissions and referred to Section 153-C of the Act and the interpretation by the Hon'ble Apex Court in a related case. It reiterated the significance of the Assessing Officer's satisfaction note before initiating proceedings under Section 153-C. The court outlined the essential ingredients for Section 153-C compliance, emphasizing the necessity of a proper satisfaction report by the Assessing Officer of the searched person.

The court found the satisfaction note provided by the revenue to be inadequate, lacking explicit confirmation of compliance with Section 153-C requirements. It concluded that the proceedings under Section 153-C were without jurisdiction and therefore set aside the impugned notices and assessment orders. The court clarified that despite the availability of appeal, the writ jurisdiction could be invoked due to the procedural irregularities observed.

In conclusion, the court allowed the writ petitions, nullified the notices and assessment orders, but granted the revenue the liberty to pursue appropriate proceedings within the legal framework if permissible.