2022 (3) TMI 79 - AT - Income Tax

Assessment u/s 153C - reasons for issuance of notice was that assessee had given unsecured loan to one party - mandation of recording satisfaction note - HELD THAT - We find that CIT(A) after considering the submissions of the assessee, remand the report from the AO and assessee s reply to the remand report has given a finding that the satisfaction note, the basis on which the proceedings u/s 153C against the assessee were initiated, was on the basis of the investment made by assessee in M/s. Golf Link Hospitality Pvt. Ltd. He has given a finding that AO had noted in the satisfaction note that assessee had invested ₹ 45,00,000/- each in A.Y. 2011-12 2012-13 but the factual position was that investment exist only in A.Y. 2011-12 and thus there was no satisfaction of the AO for other year than 2012-13 u/s 153C . Even for A.Y. 2011-12, the satisfaction recorded were not based on incriminating document found as a result of search, all the additions made by the AO were either of the items reflected in the Balance Sheet or Profit and Loss account of the assessee. He has further noted that no addition was made by AO on the basis of any incriminating material found and the addition made by AO did not co-relate with satisfaction noted by him. He thereafter relying on the decision of Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT held the notice issued u/s 153C of the Act to be void ab initio invalid and legal not sustainable and therefore annulled the assessment order. Grounds of Revenue are dismissed.

Summary

Issues:
Appeals by Revenue and cross objection by assessee against the order of CIT(A) for AY 2011-12 & 2014-15.

Analysis:
1. The appeals and cross objection raised identical issues. The AO initiated proceedings under section 153C of the Income Tax Act based on a search operation revealing unsecured loans, share application money, and share capital transactions. The CIT(A) granted partial relief to the assessee for AY 2009-10 to 2014-15.

2. The Revenue challenged the CIT(A)'s order on various grounds, including the absence of incriminating material for issuing notices under section 153C. The CIT(A) held that the seized balance sheet of Golf Link Hospitality Pvt. Ltd. did not constitute incriminating material, leading to disputes over the nature of the transactions and the validity of the notice issued.

3. The Revenue contended that the CIT(A) erred in quashing the assessment order, arguing that the share capital received by the assessee was suspicious due to alleged rotation of funds through bogus entities. The CIT(A) disagreed, emphasizing the lack of incriminating material and following the Supreme Court's precedent in a similar case.

4. After considering submissions, the CIT(A) found discrepancies in the AO's satisfaction note regarding the investment made by the assessee. The CIT(A) concluded that the notice issued under section 153C was invalid due to the absence of incriminating documents and annulled the assessment order based on the Sinhgad Technical Education Society case.

5. The Tribunal dismissed the Revenue's appeals for both AYs 2011-12 and 2014-15, as the issues were identical and the CIT(A)'s decision was upheld. Consequently, the Cross Objections of the assessee were also dismissed. The Tribunal found no reason to interfere with the CIT(A)'s order, as the Revenue failed to demonstrate any flaws in the findings or present contradictory legal precedents.

This detailed analysis covers the key issues raised in the legal judgment, highlighting the arguments presented by both parties and the Tribunal's decision based on the interpretation of relevant provisions of the Income Tax Act and judicial precedents.