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2022 (11) TMI 1060 - AT - Income TaxRevision u/s 263 by PCIT - second round the assessee during the course of appellate proceedings before the ld. CIT(A) - Additional ground admitted by the ld. CIT(A) - assessment framed u/s. 153C/263/143(3) - CIT(A) raised the additional ground challenging the exercising of the jurisdiction by the ld. AO u/s. 153C of the Act for initiating the proceedings without prior recording a satisfaction note , which was a pre-condition to invoke the jurisdiction u/s. 153C - HELD THAT - We find that in the case of Peerless General Finance Investment Co. Ltd. 2007 (12) TMI 309 - ITAT KOLKATA this Tribunal has held that jurisdictional issue, which is relating to validity of assessment order can be raised in the second round of litigation even if the same was not raised in the first round of proceeding - Also see case of Inventors Industrial Corporation Ltd 1991 (4) TMI 70 - BOMBAY HIGH COURT We find force in the submissions of the ld. Counsel for the assessee and fail to find any merit in the grounds raised by the revenue that the ld. CIT(A) erred in admitting and adjudicating the legal ground challenging the validity of proceeding carried out u/s. 153C of the Act. CIT(A) has quashed the assessment order u/s. 153C of the Act on the ground that the ld. AO failed to record the satisfaction note - The pre-condition for carrying out proceedings u/s. 153C is that if the ld. AO of the searched person and the ld.AO of the other person in whose name incriminating material is found are different, then firstly satisfaction note is prepared by the ld. AO of the searched person mentioning the details of search material not belonging to the searched person but belonging to the other person . Such satisfaction note along with seized material is passed over to the ld. AO of other person . Thereafter, the ld.AO of the other person is again required to prepare the satisfaction note stating that such seized material belongs to other person , who is under his jurisdiction. In the instant case before initiation of proceeding u/s. 153C of the Act the ld. AO has not prepared the satisfaction note. This fact has been admitted by the revenue authorities before us also. Circular No. 24/2015 dt. 31-12-2015 issued by the Central Board of Direct Taxes (CBDT) which has been issued after following the judgment of the Hon ble Supreme Court in the case of M/s. Calcutta Knitwears (supra) 2014 (4) TMI 33 - SUPREME COURT and also considering the consistent view taken by various Hon ble Courts, we find that the ld. CIT(A) has rightly applied the ratio laid down by the Hon ble Apex Court as well as CBDT Circular No. 24 of 2015 dated 31-12-2015 to hold that proceeding u/s. 153C r.w.s 143(3) are void and ab initio . Since the same was carried out without recording satisfaction by the ld. AO, no interference is called for in the findings of the ld. CIT(A). Thus, all the grounds raised by the revenue in both the appeals are dismissed.
Issues Involved:
1. Validity of assessment order passed under sections 153C/263/143(3) of the Income-tax Act, 1961. 2. Admissibility of additional ground challenging jurisdictional decisions. 3. Deletion of additions made in the assessment orders. 4. Validity of assessment proceedings under section 153C without a satisfaction note. 5. Jurisdiction to raise legal issues in the second round of assessment proceedings. Analysis: Issue 1: Validity of assessment order passed under sections 153C/263/143(3) of the Income-tax Act, 1961: The Appellate Tribunal adjudicated on the appeals directed against separate orders passed by the Commissioner of Income-tax, Appeals for the assessment years 2007-08 and 2010-11. The Tribunal noted that the assessment order was set aside by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Act. The subsequent assessment proceedings resulted in certain additions. The appeal challenged the quashing of the assessment orders. The Tribunal upheld the CIT(A)'s decision to quash the assessment order under section 153C/263/143(3) of the Act as invalid and bad in law, based on the absence of a satisfaction note by the Assessing Officer (AO) before initiating proceedings. Issue 2: Admissibility of additional ground challenging jurisdictional decisions: The revenue contested the admission of additional grounds challenging jurisdictional decisions by the CIT(A). The Tribunal referred to precedents allowing the raising of jurisdictional issues in the second round of litigation. Citing relevant judgments, the Tribunal permitted the assessee to challenge the validity of the order in the second round of proceedings. Consequently, the Tribunal found no merit in the revenue's argument against admitting and adjudicating the legal grounds challenging the validity of proceedings under section 153C of the Act. Issue 3: Deletion of additions made in the assessment orders: The Tribunal dismissed the revenue's appeal against the CIT(A)'s decision to delete all additions made by the AO in the original and impugned assessment orders under section 143(3) and 263/143(3) of the Income Tax Act, 1961. Issue 4: Validity of assessment proceedings under section 153C without a satisfaction note: The Tribunal emphasized the necessity of a satisfaction note before initiating proceedings under section 153C of the Act. It noted the failure of the AO to record a satisfaction note regarding incriminating material found during the search, leading to the quashing of the assessment order. The Tribunal upheld the CIT(A)'s decision based on the CBDT Circular No. 24 of 2015 and the Supreme Court's judgment in M/s. Calcutta Knitwears case, affirming the proceedings as void and ab initio. Issue 5: Jurisdiction to raise legal issues in the second round of assessment proceedings: The Tribunal supported the assessee's right to challenge legal issues, including jurisdictional matters, in the second round of proceedings, citing relevant judgments and legal principles. It dismissed the revenue's arguments against the CIT(A)'s decision to admit and consider the additional grounds raised by the assessee. In conclusion, the Tribunal dismissed both revenue's appeals, upholding the CIT(A)'s decisions based on legal principles, precedents, and the requirements of the Income Tax Act, 1961.
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