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2021 (7) TMI 623 - AT - Income TaxAssessment u/s 153C - whether there was a material belonging to the assessee that authorise the AO to record a satisfaction note for taking cognizance of section 153C? - HELD THAT - AO has made reference to the statement of Shri Sargam Gupta under section 131(1A) of the Act. His statement was recorded twice. First statement was recorded on 24.3.2014. It could be termed pre-search statement, and second statement was recorded on 13.5.2014. Copies of both these statements are available on page no.23 to 26 and 41 to 46 - CIT(A) while evaluating the evidence for the purpose of arriving at a conclusion, whether a judicial mind can reach on a satisfaction on the basis of the above material for taking action against the assessee under section 153C and make reference to the statement of Shri Sargam Gupta recorded under section 131(1A) on 13.5.2014. It is pertinent to note that this statement cannot be referred for taking cognizance against the assessee. Section 153C contemplates documents seized or requisitioned during the search. It does not talk of information. Otherwise also a statement under section 131 dated 13.5.2014 was not recorded during the course of search; it is after the conclusion of the search. Statement recorded on 24.3.2014 is concerned, it is a presearch statement i.e. before the commencement of search, and in this statement the investigating officer has no where asked any such question, because upto that stage, documents were not discovered i.e. Annexure A/1 and Annexure-A/2. Therefore, Shri Sargam Gupta could not be asked to explain this. These documents were put to him in the statement under section 132(4). We have taken cognizance of that part of the statement. As observed that statement recorded under section 131(1A) of the Act after conclusion of the search i.e. on 13.5.2014 is concerned, this can be an information for evaluating whether any income has escaped assessment or under section 147 for reopening of the assessment; but for taking action under section 153C this statement cannot be used. A perusal of the satisfaction note extracted(supra) would indicate that the AO has vaguly made reference of statement under section 131(1A) of the Act, but he has not referred which statement i.e. pre-search statement or consequent to the conclusion of the search. There are three paragraphs in this note; in the first para, he made reference of the facts, and in the second para he wrote that books of the accounts belonging to the assessee of the alleged seizure referred by the AO be construed as books of accounts belonging to the assessee. These documents do not contain names; even page no.3 of Annexure A/2 did not reflect to whom cash was given. There is no reference to this page. Therefore, on the basis of these documents, adjudicating authority could not goad to reach any firm conclusion that these documents belonging to the assessee - on a detailed analysis of the evidence available on record, we are satisfied that there is no material with the Revenue to form a belief that action under section 153C is required to be taken against the assessee in these two assessment years. Thus, preliminary issue is decided in favour of the assessee in both these assessment years, and it is held that the AO has erred in assuming jurisdiction under section 153C against the assessee in the Asstt.Year 2012-13 and 2013-14. The assessment orders on preliminary issue are quashed in these years. Best judgment assessment - A.Y.2014-15 - AO did not issue any notice under section 143(2), and passed ex parte assessment order under section 144 - HELD THAT - Best judgment could be passed in case if any person fails to make a return required under sub-section (1) of section 139 of the Act, and has not made a return or revised return under sub-section (4) or 5 of section 139. Similarly, he fails to comply with all the terms of the notice issued under section 142(1) of the Act. In the present case, the Act talk of return filed under section 139(1) and 139(4) or revised return under subsection (5). Similarly, it talks of conditions contemplated in sub-section (1) of section 142 of the Act. In the present case, the AO failed to issue notice under section 143(2) of the Income Tax Act in the Asstt.Year 2014-15, and therefore, respectfully following the decision of the Hon ble Supreme Court in the case of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT and case of CIT Vs. Sukhini P. Modi 2014 (11) TMI 50 - GUJARAT HIGH COURT we are of the view that the assessment order is not sustainable, accordingly it is quashed.
Issues Involved:
1. Assumption of jurisdiction under section 153C of the Income Tax Act, 1961. 2. Validity of additions made by the Assessing Officer (AO) based on seized documents. 3. Procedural correctness in issuing notices under sections 142(1) and 143(2) of the Income Tax Act. Detailed Analysis: 1. Assumption of Jurisdiction under Section 153C: The primary issue was whether the AO correctly assumed jurisdiction under section 153C. The assessee argued that the documents seized did not belong to them, and thus, the jurisdiction was wrongly assumed. The AO relied on statements recorded under sections 132(4) and 131(1A) and certain seized documents (Annexure A/1 and A/2) to assume jurisdiction. However, the tribunal noted that these documents did not explicitly belong to the assessee, and the statements did not conclusively link the documents to the assessee. The tribunal emphasized that for the pre-amendment period (before 1-6-2015), the documents must "belong" to the assessee, not merely "pertain to" or "relate to" them. Consequently, the tribunal found that the AO erred in assuming jurisdiction under section 153C for the assessment years 2012-13 and 2013-14. 2. Validity of Additions Based on Seized Documents: The assessee contested the additions made by the AO, arguing that the business had not commenced, and thus, the transactions noted in the seized documents were not attributable to them. The tribunal found that the AO and CIT(A) did not provide sufficient evidence to establish that the seized documents belonged to the assessee. The tribunal quashed the assessment orders for the years 2012-13 and 2013-14 on this preliminary issue, rendering the additions invalid. 3. Procedural Correctness in Issuing Notices: For the assessment year 2014-15, the tribunal examined whether the AO followed the correct procedure in issuing notices under sections 142(1) and 143(2). The tribunal found that the AO issued a notice under section 142(1) without specifically directing the assessee to file a return within a given period. The return filed by the assessee under section 139(4) was not followed by a notice under section 143(2), which is mandatory for scrutinizing the return. The tribunal cited precedents, including the Supreme Court's decision in CIT vs. Hotel Blue Moon, to emphasize that the absence of a notice under section 143(2) invalidated the assessment. Consequently, the tribunal quashed the assessment order for the year 2014-15 as well. Conclusion: The tribunal allowed the assessee's appeals for the assessment years 2012-13 and 2013-14, quashing the assessment orders due to the incorrect assumption of jurisdiction under section 153C. For the assessment year 2014-15, the tribunal quashed the assessment order due to procedural lapses in issuing notices under sections 142(1) and 143(2). The tribunal dismissed the Revenue's appeal, upholding the findings in favor of the assessee.
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