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2020 (1) TMI 918 - AT - Income TaxAssessment u/s 153C - non recording of satisfaction by AO - HELD THAT - Satisfaction note of the learned Assessing Officer, having analysed it in the light of the submissions made by the assessee, Ld. CIT(A), as a matter of fact, found that the learned Assessing Officer mentioned that during the course of search at the premises of various persons of the Raj Durbar group, various papers were found and seized, no search was conducted against the assessee company. Further, there is no mention of the contents or details of any document as to how certain documents mentioned therein belong to or related to , the assessee company; that the assessment order also does not give support to the said recitals inasmuch as there is no reference of any seized material belonging to or even relating to the assessee company leave aside any incriminating material relevant to assessment under section 153C of the Act/153A of the Act; and that in the light of the judgement of the Hon ble High Court of Delhi in the case of PepsiCo India ( 2014 (8) TMI 898 - DELHI HIGH COURT Pepsi Foods 2014 (8) TMI 425 - DELHI HIGH COURT the satisfaction recorded by the learned Assessing Officer is grossly deficient and it does not fulfil the legal requirements to assume the jurisdiction under section 153C of the Act. No illegality or irregularity committed by the Ld. CIT(A) in holding that for the assessment year 2009-10 also the Assessing Officer should have recorded satisfaction and after issuing notice under section 153C of the Act should have framed the assessment, and the procedural lapse in this matter goes to the root of the matter and vitiates the proceedings. - Decided against revenue
Issues Involved:
1. Validity of proceedings under section 153C of the Income Tax Act. 2. Requirement of incriminating material for additions under section 153C. 3. Satisfaction note and its sufficiency for assuming jurisdiction under section 153C. 4. Procedural lapses in assessment for the year 2009-10. Detailed Analysis: 1. Validity of Proceedings under Section 153C: The Revenue challenged the orders quashing the assessments under section 153C for the assessment years 2007-08 and 2008-09. The Tribunal noted that the Assessing Officer (AO) did not refer to any seized material "belonging to" or "relating to" the assessee company, which is a prerequisite for proceedings under section 153C. The AO relied on the regular books of accounts, which were already part of the original returns filed under section 139. The Tribunal upheld the CIT(A)'s decision, citing the Delhi High Court's rulings in CIT vs. Kabul Chawla and PepsiCo India Holdings Private Limited, which mandate that proceedings under section 153C require seized documents to belong to the assessee. 2. Requirement of Incriminating Material: The Revenue argued that additions under section 153C need not be based solely on incriminating material. However, the Tribunal reiterated that in the absence of any incriminating material, as established by the High Court in various cases, the assumption of jurisdiction under section 153C is invalid. The Tribunal emphasized that the AO's reliance on regular books of accounts, which were not seized during the search, does not fulfill the requirements for section 153C proceedings. 3. Satisfaction Note and Its Sufficiency: The Tribunal examined the satisfaction note recorded by the AO and found it grossly deficient. The AO failed to specify how the seized documents "belonged to" or "related to" the assessee company. The Tribunal referenced multiple decisions, including those of the Delhi High Court in PepsiCo India Holdings and Pepsi Foods, which highlight the necessity of a clear and specific satisfaction note for valid jurisdiction under section 153C. The Tribunal concluded that the satisfaction note in this case did not meet the legal standards required. 4. Procedural Lapses in Assessment for the Year 2009-10: For the assessment year 2009-10, the Tribunal noted that the AO resumed jurisdiction on 10/3/2010, but did not record the necessary satisfaction or issue a notice under section 153C. Instead, the AO issued a notice under section 143(2) and completed the assessment under section 143(3). The Tribunal upheld the CIT(A)'s observation that the AO should have followed the procedure under section 153C, as the pending assessment proceedings abated upon the AO assuming jurisdiction. The Tribunal cited the Delhi High Court's decision in SSP Aviation Ltd vs. DCIT, which mandates that the AO must record satisfaction and issue notice under section 153C when assuming jurisdiction over seized documents. Conclusion: The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s orders quashing the assessments under section 153C for the assessment years 2007-08, 2008-09, and 2009-10. The Tribunal emphasized the necessity of incriminating material, a specific satisfaction note, and adherence to procedural requirements for valid proceedings under section 153C. The judgments of the Delhi High Court in related cases were instrumental in the Tribunal's decision.
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