2022 (11) TMI 202 - AT - Income Tax

Assessment u/s 153A - As a consequence to the search, various documents had been found and seized - HELD THAT - As admitted fact that DB-06 relates to the documents impounded in the course of search on Debabrata Behera. In documents found in the course of searched person is found to relate to any person other than the searched person, there is compulsory requirement under the law to record satisfaction in the file of the searched person by the AO of the searched person. Clearly, no satisfaction has been recorded in the case of Debabrata Behera to show that the said impounded document DB-06 or any part thereof relate to the assessee herein. This being so, on this ground alone, we are of the view that said evidence cannot be used against the assessee. If DB-06 is removed, then the very foundation of the AO for raising the allegation of suppression of sales would also go. This being so, in the absence of valid recording of satisfaction, for the purpose of using DB-06, the assessment as done in the case of the assessee stands quashed. The assessment is made herein u/s.153A. If the evidence in the form DB-06 impounded in the course of search of Debabrata Behera is to be considered, then obviously, the assessment could not have been done u/s 153A of the Act, but u/s.153C even that has not been done in the present case. Consequently, even on this ground also, the present assessment is invalid and same is quashed.

Summary

Issues:
1. Validity of assessment u/s.153A based on impounded documents.
2. Consideration of impounded documents in assessment without satisfaction recorded.
3. Quashing of assessment and cross objections.
4. Levy of penalty u/s.271(1)(b) for noncompliance and noncooperation.

Issue 1: Validity of assessment u/s.153A based on impounded documents:
The appeal by the revenue challenges the order of the ld CIT(A)-1 for the assessment year 2008-09. The ld CIT DR argued that the assessment was completed under section 144 due to lack of cooperation from the assessee during assessment proceedings. The Assessing Officer relied on documents to allege suppression of sales, adopting turnover from ROC filings and sale prices from NCDEX. The ld CIT(A) considered the 44AB report and rejected the documents marked as DB-06, leading to a violation of Rule 46A according to the revenue. The ld AR contended that the ld CIT(A) deleted the addition after considering two remand reports.

Issue 2: Consideration of impounded documents in assessment without satisfaction recorded:
The ld CIT(A) discarded document DB-06, impounded in another search, arguing it did not relate to the assessee. The ld CIT DR maintained that documents from related searches, even if illegally obtained, can be used as evidence in assessments. The ld AR emphasized that DB-06 had no connection to the assessee, and the AO failed to establish any link. The Tribunal noted that no satisfaction was recorded in the searched person's file, rendering the evidence inadmissible against the assessee. The assessment under section 153A was deemed invalid for using impounded documents without following due procedure.

Issue 3: Quashing of assessment and cross objections:
The Tribunal upheld the ld CIT(A)'s decision, quashing the assessment due to the inadmissible evidence. The cross objections filed by the assessee were allowed, leading to the dismissal of the revenue's appeal. The Tribunal highlighted that the assessment under section 153A was flawed, warranting its annulment.

Issue 4: Levy of penalty u/s.271(1)(b) for noncompliance and noncooperation:
The appeals by the assessee challenged the penalty imposed under section 271(1)(b) for the assessment years 2008-09 and 2009-10. The ld AR argued for the penalty's deletion following the quashing of assessments. The ld CIT DR justified the penalty for noncompliance and noncooperation during assessment. The Tribunal ruled in favor of the assessee, deleting the penalties as the foundation for their imposition was invalidated by the quashed assessments.

In conclusion, the Tribunal's judgment addressed the issues of the validity of assessment under section 153A, the consideration of impounded documents without proper procedure, the quashing of assessment and cross objections, and the levy of penalties for noncompliance and noncooperation, ultimately ruling in favor of the assessee and dismissing the revenue's appeal.