2024 (5) TMI 840 - AT - Income Tax

Assessment made u/s 144 r.w.s. 142(1) OR 153C - recording of a satisfaction that the assets/documents seized belong to a person other than the person searched - HELD THAT -As relying on Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT and RRJ Securities Ltd 2015 (11) TMI 19 - DELHI HIGH COURT assessments made for A.Y. 2012-13 u/s 144 r.w.s. 142(1), consequent to the satisfaction note recorded ought to have been made u/s 153C of the Income Tax Act, 1961. Since, the provisions of Section 153C have not been invoked and since, the proceedings u/s 153C have not been initiated, the assessment made u/s 144 r.w.s. 142(1) is treated as void ab initio.

Issues Involved:
1. Unlawful initiation of proceedings u/s 153C of the Income Tax Act, 1961.
2. Determination of the residency status of the assessee company u/s 6(3)(ii) of the I.T. Act.
3. Ignoring underlying assets and sources of revenue of overseas companies.
4. Ignoring substantial evidence of control and management by individuals to avoid taxability.
5. Ignoring provisions of section 9(1) of the I.T. Act regarding revenue earned from assets in India.
6. Deleting the addition of Rs.145,90,23,346/- made by the Assessing Officer.

Summary:

Issue 1: Unlawful initiation of proceedings u/s 153C of the Income Tax Act, 1961.
The Tribunal held that the Assessments made for A.Y. 2012-13 u/s 144 r.w.s. 142(1), consequent to the satisfaction note recorded on 18.11.2013 (A.Y. 2014-15), ought to have been made u/s 153C of the Income Tax Act, 1961. Since the provisions of Section 153C were not invoked, the assessment made u/s 144 r.w.s. 142(1) is treated as void ab initio.

Issue 2: Determination of the residency status of the assessee company u/s 6(3)(ii) of the I.T. Act.
The Ld. CIT(A) held that the assessee company is not a resident in terms of provisions u/s 6(3)(ii) of the I.T. Act for tax liability purposes. The Revenue argued that control and management of the assessee company is situated wholly in India based on seized documents/emails and statements.

Issue 3: Ignoring underlying assets and sources of revenue of overseas companies.
The Revenue contended that the Ld. CIT(A) ignored the fact that the underlying assets and sources of revenue of all the overseas companies are the Indian Companies.

Issue 4: Ignoring substantial evidence of control and management by individuals to avoid taxability.
The Revenue argued that the Ld. CIT(A) ignored substantial evidence such as seized material, emails, and shareholding patterns showing that the ultimate control and management of Indian and overseas companies lies with specific individuals, who created corporate veils to avoid taxability in India.

Issue 5: Ignoring provisions of section 9(1) of the I.T. Act regarding revenue earned from assets in India.
The Revenue claimed that the Ld. CIT(A) ignored the provisions of section 9(1) of the I.T. Act as the revenue has been earned because of underlying assets of the assessee wholly and totally situated in India.

Issue 6: Deleting the addition of Rs.145,90,23,346/- made by the Assessing Officer.
The Ld. CIT(A) deleted the addition of Rs.145,90,23,346/- made by the Assessing Officer against nil income.

Conclusion:
The Tribunal, guided by the judgments of the Hon'ble Jurisdictional High Court of Delhi and the Hon'ble Supreme Court, concluded that the assessments made u/s 144 r.w.s. 142(1) for A.Y. 2012-13 are void ab initio due to non-invocation of provisions u/s 153C. Consequently, the Cross Objection of the assessee is allowed, and the appeal of the revenue is dismissed.

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