2022 (10) TMI 720 - AT - Income Tax

Validity of assessment u/s 153C - Whether incriminating material during the course of search and the assessment is not made based on any seized material ? - HELD THAT - Revenue had submitted before us that the provision of sec 153A cannot be invoked in the present case as the warrant of authorization had not been issued against the assessee before us. In view of the above, we find the contention of the ld.AR that the right recourse was to exercise power u/s 153A is not sustainable. The decision of the Hon ble Supreme Court in the case of Tapan Kumar Datta 2018 (4) TMI 1375 - SUPREME COURT is applicable to the facts of the case. The proceeding u/s 153A cannot be invoked in the present case, now we have to examine whether the Assessing Officer was correct in invoking the provisions of sec 153C or not. As mentioned herein above, the recording of satisfaction by the Assessing Officer of the searched person or of the other persons (Assessee) is essential in view of the specific mandate provided u/s 153C - As decided the issue in the case of Super Mall (P) Ltd 2020 (3) TMI 361 - SUPREME COURT has held that if the Assessing Officer of the searched person and of the other person is same, then recording of satisfaction in the file of one of the persons will not make any difference. The relevant paragraph of the above said judgement had already been reproduced elsewhere. Admittedly, the Tribunal had directed the Revenue to file the copy of the satisfaction note, if any, available in the case record of the assessee to show that the assessment proceedings u/s 153C were initiated after due recording of the satisfaction. On the last date of hearing i.e. on 4.10.2022 the Tribunal had again reiterated its earlier direction. The revenue is not in a position to trace the satisfaction note as of now as the record is not traceable and may be available with the office(s) of the Revenue. We hold additional ground raised by the assessee is admitted. The matter is remanded back to the file of the learned CIT (A) with a direction to decide the additional ground after collecting the documents/record from the offices of the Assessing Officer/Investigation/Central Circle in accordance with law after affording opportunity of being heard to the assessee. Appeals allowed for statistical purposes.

Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act.
2. Addition of income from other sources claimed as agricultural income.
3. Treatment of cash deposits as unexplained income.
4. Recording of satisfaction by the Assessing Officer before issuing notice under Section 153C.
5. Admission of additional grounds and evidence.

Detailed Analysis:

1. Validity of Proceedings under Section 153C:
The assessee contested the validity of the proceedings under Section 153C, arguing that the additions were not based on any incriminating material but on inquiries conducted on the entries in the regularly maintained books of account. The Tribunal noted that Section 153C requires the recording of satisfaction by the Assessing Officer of the searched person or the other person (assessee). The Tribunal emphasized that the Hon'ble Supreme Court in the case of Super Mall (P) Ltd. held that if the Assessing Officer of the searched person and the other person is the same, then the recording of satisfaction in one file suffices. The Tribunal directed the Revenue to present the satisfaction note, which was not traceable. Consequently, the Tribunal remanded the matter back to the CIT (A) to decide the additional ground after collecting the necessary documents.

2. Addition of Income from Other Sources Claimed as Agricultural Income:
The assessee challenged the addition of Rs.36,02,098 as income from other sources, which was claimed as agricultural income. The Tribunal did not provide a specific ruling on this issue in the order, focusing instead on the procedural aspects of the case under Section 153C.

3. Treatment of Cash Deposits as Unexplained Income:
The assessee argued against the treatment of entire cash deposits into the bank as unexplained income, totaling Rs.1,08,77,048, without considering the withdrawals made available for redeposit. The Tribunal did not delve into the merits of this issue, as the primary focus was on the procedural validity of the proceedings under Section 153C.

4. Recording of Satisfaction by the Assessing Officer:
The Tribunal highlighted the necessity of recording satisfaction by the Assessing Officer before initiating proceedings under Section 153C. The Revenue failed to produce the satisfaction note, which was crucial for validating the proceedings. The Tribunal remanded the matter to the CIT (A) to verify the existence of the satisfaction note and decide accordingly.

5. Admission of Additional Grounds and Evidence:
The assessee sought to admit additional grounds regarding the recording of satisfaction by the Assessing Officer, which were not raised before the lower authorities. The Tribunal admitted the additional grounds, emphasizing their legal nature and the absence of fresh investigation of facts. The Tribunal directed the CIT (A) to consider the additional evidence, including the cross-examination records and the warrant of authorization, essential for a just adjudication.

Separate Judgments Delivered:
The Tribunal upheld the order of the CIT (A) for the Assessment Year 2013-14, dismissing the appeal of the assessee for that year. For the Assessment Years 2007-08 to 2012-13, the Tribunal allowed the appeals for statistical purposes, remanding the matters back to the CIT (A).

Conclusion:
The Tribunal's judgment primarily focused on the procedural validity of the proceedings under Section 153C, emphasizing the necessity of recording satisfaction by the Assessing Officer. The matters were remanded to the CIT (A) for further verification and decision, while the appeal for the Assessment Year 2013-14 was dismissed.

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