2019 (9) TMI 950 - AT - Income Tax

Rectification u/s 254(2) - Assessment u/s 153C - non considering admission of additional ground - HELD THAT - There was not a word uttered by the learned AR during the course of original hearing of the appeals inviting our attention to the evidence required to consider the additional ground by the Tribunal. Rather as noted by the Tribunal in its order, the assessee only argued on the point of admission of additional ground. Since the production of additional evidence required by the assessee as additional ground is directly linked to the examination of the original records by the Tribunal, the Tribunal considered the additional ground and observed that the additional ground cannot be admitted in the absence of bringing on record the additional evidence pertains to recording satisfaction so as to issue notice u/s 153A. Tribunal considered every material fact, for and against the assessee, with due care and given a finding that the additional ground could not be admitted at that stage. Therefore, the factual conclusion drawn by the Tribunal are not open to review by way of application u/s 254(2) of the I.T.Act. If the assessee wants to challenge the conclusion or finding given by the Tribunal on rejection of the additional ground, which is not supported by any evidence on record, the remedy lies to the assessee elsewhere. Order of the Tribunal could be challenged as it considered all relevant details minutely and drew necessary factual inferences in a fair, reasonable and impartial manner. We, therefore, see no reason to entertain the miscellaneous applications, as there is no mistake apparent on record within the meaning of section 254 - miscellaneous applications filed by the assessee are dismissed.

Issues Involved:
1. Admission of additional ground by the Tribunal.
2. Validity of the assessment under section 153A read with section 153C of the Income Tax Act.
3. Recording of satisfaction by the Assessing Officer (AO) under section 153C.
4. Procedural requirements and timing for recording satisfaction under section 153C.
5. Jurisdictional issues and the role of the Tribunal in admitting new grounds.

Issue-Wise Detailed Analysis:

1. Admission of Additional Ground by the Tribunal:
The assessee filed a miscellaneous application under section 254(2) of the Income Tax Act against the Tribunal's order dated 10.04.2019, which refused to admit an additional ground. The additional ground contended that the Assessing Officer (AO) failed to record satisfaction as mandated under section 153C, thus invalidating the assessment under section 153A read with section 153C. The Tribunal held that the additional ground could not be admitted as it was not raised before the lower authorities and required investigation of facts not on record. The Tribunal emphasized that it is within its discretion to admit new grounds, and in this case, the assessee failed to bring necessary facts on record to support the additional ground.

2. Validity of the Assessment under Section 153A read with Section 153C:
The Tribunal examined the procedural aspects of sections 153A and 153C. Section 153A pertains to assessments following a search or requisition, while section 153C deals with assessments of persons other than the searched person. The Tribunal noted that the AO issued notices under section 153A(a) read with section 153C to the assessee after a search revealed undisclosed income. The Tribunal found that the conditions for invoking section 153C were prima facie satisfied, as the search revealed that the assessee received income not previously disclosed.

3. Recording of Satisfaction by the AO under Section 153C:
The Tribunal emphasized that recording satisfaction is a sine qua non for initiating proceedings under section 153C. The satisfaction note must demonstrate that the seized documents or assets belong to a person other than the searched person. The Tribunal cited the Supreme Court's decision in CIT vs. Calcutta Knitwears, which held that the satisfaction note could be prepared at the time of initiating proceedings, during the assessment proceedings, or immediately after completing the assessment under section 153A. The Tribunal found that the AO's satisfaction was recorded in this case, fulfilling the requirement for invoking section 153C.

4. Procedural Requirements and Timing for Recording Satisfaction under Section 153C:
The Tribunal clarified that the satisfaction note must be recorded by the AO who initiated proceedings under section 153A before transmitting the record to the AO having jurisdiction over the other person. The Tribunal reiterated that the satisfaction note could be prepared at various stages but must be done before completing the assessment under section 153A. The Tribunal found that the AO followed the procedural requirements in this case, as the satisfaction note was prepared and the necessary notices were issued.

5. Jurisdictional Issues and the Role of the Tribunal in Admitting New Grounds:
The Tribunal discussed the jurisdictional issue raised by the assessee, stating that the additional ground pertained to the assumption of jurisdiction under section 153C. The Tribunal held that the additional ground could not be admitted as it required investigation of facts not on record and was not raised before the lower authorities. The Tribunal emphasized that it is within its discretion to admit new grounds, and in this case, the assessee failed to provide necessary evidence to support the additional ground. The Tribunal also noted that the assessee could not rely on internal departmental records without making a formal request to obtain them.

Conclusion:
The Tribunal dismissed the miscellaneous applications filed by the assessee, holding that there was no mistake apparent on record within the meaning of section 254 of the Income Tax Act. The Tribunal found that the assessee failed to bring necessary facts on record to support the additional ground and that the AO followed the procedural requirements for invoking section 153C. The Tribunal emphasized that its decision must be read as a whole and not in a piecemeal manner, and found no reason to interfere with its earlier order.

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