2019 (10) TMI 120 - AT - Income Tax

Assessment u/s 153C read with Section 143(3) - Undisclosed receipts noted on seized documents found during the course of search and seizure action under section 132 - HELD THAT - Recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person' to acquire jurisdiction. Unless such jurisdictional condition is satisfied, there can be no question of making assessment or reassessment of the 'other person.' The satisfaction in this case is not recorded by the AO of the searched party, which is a pre-condition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed under section 153C read with Section 143(3) of the Act is bad in law and hence, quashed. - Decided in favour of assessee

Issues Involved:
1. Deletion of addition on account of undisclosed receipts noted on seized documents.
2. Justification of reliance on judicial pronouncement of the Apex Court.
3. Validity of notice under section 153C of the Income Tax Act due to lack of recorded satisfaction by the Assessing Officer.

Detailed Analysis:

1. Deletion of Addition on Account of Undisclosed Receipts:
The primary issue in these appeals pertains to the deletion of an addition amounting to ?29,06,00,000/- made by the Assessing Officer (AO) based on undisclosed receipts noted on documents seized during a search and seizure action under section 132 of the Income Tax Act. The Revenue contended that the documents were prepared by the director himself, lending credence to their importance for assessment proceedings under section 292C of the Act. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, holding that the seized documents were not incriminating since the receipts were recorded in the regular books of account. The Tribunal upheld this view, noting that the entries matched the audited financial statements and were not of an incriminating nature.

2. Justification of Reliance on Judicial Pronouncement of the Apex Court:
The Revenue also challenged the CIT(A)'s reliance on the Supreme Court's decision in Parimistti Seetharamamma vs. CIT, arguing that the facts of that case were not identical to the present case. However, the Tribunal found that the CIT(A) correctly applied the principles from the cited case, as the nature of the evidence and the procedure for handling such documents were relevant and applicable.

3. Validity of Notice under Section 153C:
A significant issue raised was the validity of the notice under section 153C of the Act. The assessee argued that the requisite satisfaction, as contemplated under section 153C, was not recorded by the AO of the person searched before initiating proceedings against the assessee. The Tribunal examined the Right to Information (RTI) response, which confirmed that no satisfaction note was available on record. The Tribunal referred to the Supreme Court's decision in CIT vs. Calcutta Knitwears, which mandates that the AO of the person searched must record satisfaction that the seized documents belong to another person before handing them over to the AO of that other person. The Tribunal also cited the CBDT Circular No. 24/2015, which clarified that even if the AO of the searched person and the other person is the same, the satisfaction must still be recorded. The Tribunal concluded that the absence of a recorded satisfaction note rendered the assessments under section 153C read with section 143(3) invalid and bad in law.

Conclusion:
The Tribunal quashed the assessments for all the relevant assessment years (2008-09 to 2011-12) due to the lack of recorded satisfaction by the AO of the searched party, which is a pre-condition for invoking jurisdiction under section 153C. Consequently, all the appeals of the Revenue were dismissed. The order was pronounced in the open court on 03.09.2019.

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