2023 (4) TMI 1055 - HC - Income Tax

Assessment u/s 153C - Whether no satisfaction was recorded by the AO of the searched person? - HELD THAT - As it is an admitted position that the satisfaction note was not recorded by the Assessing Officer of the searched person and thus, the Income Tax Appellate Tribunal passed an order quashing the assessment on account of lack of jurisdiction to proceed against the respondent / assessee under Section 153-C of the Act. The said order does not suffer from any infirmities but the Tribunal has rightly quashed the assessment on account of lack of jurisdiction. These are the contentions that have been made by the learned counsel for the respondent / assessee. Therefore, the learned counsel for the respondent / assessee prays for dismissal of this appeal preferred by the appellant / Revenue. For the purpose of Section 158-BD of the Act, a satisfaction note is a sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person - See Commissioner of Income Tax-III vs. Calcutta Knitwares, Ludhiana 2014 (4) TMI 33 - SUPREME COURT Thus notice issued by the AO under Section 153-C of the IT Act deserves to be quashed and accordingly had proceeded to quash the assessment orders framed by the Assessing Officer under Section 153-C read with Section 143(3) of the Income Tax Act. Accordingly, the additional ground was allowed in all the seven years. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment year considered as the year of search under Section 153C.
2. Satisfaction requirement by the Assessing Officer for initiating proceedings under Section 153C.
3. Applicability of conditions under Section 153C for the assessment year 2011-12.

Issue-wise Comprehensive Details:

1. Validity of the assessment year considered as the year of search under Section 153C:
The Tribunal held that the assessment year relevant to the financial year in which the satisfaction note is recorded under Section 153C should be considered as the year of search. The Tribunal relied on the judgment of the Delhi High Court in the case of CIT vs. RRJ Securities Ltd., which stated that the six assessment years for which assessments could be made under Section 153C should be construed with reference to the date of handing over of assets/documents to the AO of the assessee. The Tribunal quashed the assessments for the years 2005-06 to 2010-11 and the assessment for 2011-12 on the ground of lack of jurisdiction due to the absence of a valid satisfaction note.

2. Satisfaction requirement by the Assessing Officer for initiating proceedings under Section 153C:
The Tribunal emphasized that the recording of satisfaction by the AO of the searched person is a mandatory requirement before issuing a notice under Section 153C. The Tribunal quashed the assessment orders as it found that no satisfaction was recorded by the AO of the searched person. The Tribunal followed the judgments of the Allahabad High Court in CIT vs. Gopi Apartment and the Supreme Court in CIT vs. Calcutta Knitwears, which held that the satisfaction note is a sine qua non and must be prepared by the AO before transmitting the records to the AO having jurisdiction over the other person.

3. Applicability of conditions under Section 153C for the assessment year 2011-12:
The Tribunal held that the assessment for the year 2011-12, being the year of search, could not be quashed on the basis that satisfaction as required under Section 153C was not recorded by the AO of the searched person. The Tribunal dismissed the Revenue's contention that the assessment for 2011-12 should be upheld despite the absence of a satisfaction note. The Tribunal relied on the judgment of the Delhi High Court in CIT vs. RRJ Securities Ltd., which was upheld by the Supreme Court, confirming that the six assessment years should be counted from the date of handing over the documents.

Conclusion:
The Tribunal's decision to quash the assessments for the years 2005-06 to 2010-11 and the assessment for 2011-12 was based on the absence of a valid satisfaction note as required under Section 153C. The Tribunal's reliance on the judgments of the Delhi High Court and the Supreme Court was upheld, confirming that the six assessment years should be counted from the date of handing over the documents. The appeal by the Revenue was dismissed, and the orders of the Tribunal were confirmed.