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2024 (8) TMI 515 - AT - Income TaxValidity of Assessment u/s 153C - absence of valid satisfaction recorded by the AO before initiating assessment as per special provision (in cases of assessment to be framed where search took place) - HELD THAT - Perusal of the satisfaction note not reveal that the AO has made any averment as to his satisfaction that any money, bullion, jewellery or other valuable articles belongs to assessee or things or books of account or documents seized pertains/relates to the assessee which is the jurisdictional fact required to be made by AO in order to usurp jurisdiction u/s 153C which is clearly absent in this case and therefore on this legal issue itself the assessee has to succeed and we hold that AO did not record valid satisfaction before issuing notice to assessee u/s 153C dated 09.12.2009. Therefore, AO did not had requisite jurisdiction to issue notice to assessee u/s 153C of the Act dated 09.12.2009. Therefore, subsequent framing of assessment order u/s 153C/143(3) of the Act is null in the eyes of law. Thus in the light of the Hon ble Supreme Court decision in the Super Mall Pvt Ltd. 2020 (3) TMI 361 - SUPREME COURT AO having not recorded valid satisfaction note in the case of the other person /assessee in this case as required by section 153C of the Act, we find that the AO lacked jurisdiction to frame assessment u/s 153C/143(3) of the Act and therefore assessment framed by him for AY 2008-09 and 2009-10 are held to be without jurisdiction and therefore quashed. Penalties levied under 271AAA pursuant to the quantum assessment framed u/s 153C - Since the foundation for the levy of penalty u/s 271AAA of the Act has been removed, the penalty also falls because the case of the assessee is squarely covered by the legal maxim Sublato fundamental Credit opus meaning in case foundation is removed, the super-structure falls. In Badarimath V/s Tamilnadu 2000 (9) TMI 1044 - SUPREME COURT it was held by Hon ble Supreme Court that once the basis of proceedings is gone, all consequential order acts would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings - penalties levied under 271AAA of the Act are also without jurisdiction and consequently quashed. Appeals of the assessee are allowed
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) under Section 153C/143(3) of the Income Tax Act, 1961. 2. Validity of the satisfaction note recorded by the AO. 3. Approval under Section 153D without application of mind. 4. Issuance of notice under Section 143(2). 5. Penalty under Section 271AAA. Detailed Analysis: 1. Jurisdiction of the Assessing Officer (AO) under Section 153C/143(3) of the Income Tax Act, 1961: The assessee challenged the jurisdiction of the AO to frame the assessment under Section 153C/143(3) of the Act for AY 2008-09 and AY 2009-10, arguing that the AO did not form the requisite satisfaction as required under Section 153C. The AO admitted that there was no satisfaction note as such in this case under Section 153C and attempted to justify it by stating that recording of satisfaction was only required from 01-10-2014. However, the Tribunal noted that the requirement to record satisfaction was always a part of the law and was reiterated by the Finance Act, 2014. Therefore, the AO's action of issuing notice under Section 153C without valid satisfaction was deemed invalid and null in the eyes of law. 2. Validity of the satisfaction note recorded by the AO: The Tribunal examined the satisfaction note dated 08.12.2009 and found that it did not convey the forming of satisfaction as required under Section 153C. The AO's noting merely stated that the case falls under the provisions of Section 153C without referring to any incriminating material belonging/pertaining/relating to the assessee. The Tribunal held that this did not meet the requirement of valid satisfaction as mandated by the Supreme Court in the case of M/s Super Malls Pvt Ltd. v/s Pr. CIT-8 New Delhi [(2020) 423 ITR 281 (SC)]. Therefore, the AO did not have the requisite jurisdiction to issue notice under Section 153C, and the subsequent framing of the assessment order under Section 153C/143(3) was null and void. 3. Approval under Section 153D without application of mind: The assessee contended that the approval accorded by the JCIT under Section 153D was without application of mind and hence the assessment was null and void. The Tribunal noted that there is no requirement for granting any opportunity of hearing to the assessee before approval under Section 153D, as per the Act. The Tribunal also observed that the Addl. CIT or the Range head is involved at every stage of assessment of search cases, and the approval under Section 153D is the culmination of the entire process. Therefore, the question of application of mind of Addl. CIT before granting approval was not a pertinent issue so far as the validity of the assessment order was concerned. 4. Issuance of notice under Section 143(2): The assessee argued that the assessment order was not valid due to the absence of notice under Section 143(2). The Tribunal held that the issue of notice under Section 143(2) is not mandatory in the case of search assessments under Section 153A/153C. The Tribunal relied on various decisions, including Suman Lata Bansal [ITA No. 525 to 530/M/2008 dtd 25.05.2015(TM)], Tasem Singla vs DCIT [385 ITR 138 (P&H)], and Ashok Chaddha [20 taxmann.com 387(Del.)], to support this view. 5. Penalty under Section 271AAA: The Tribunal noted that the penalties under Section 271AAA were levied pursuant to the quantum assessment framed under Section 153C. Since the foundation for the levy of penalty under Section 271AAA was removed, the penalty also fell. The Tribunal applied the legal maxim "Sublato fundamental Credit opus," meaning that if the foundation is removed, the superstructure falls. Consequently, the penalties levied under Section 271AAA were also quashed. Conclusion: The Tribunal allowed the appeals of the assessee and dismissed the appeal of the revenue, holding that the AO did not have the requisite jurisdiction to issue notice under Section 153C and the subsequent framing of the assessment order was null and void. The penalties levied under Section 271AAA were also quashed.
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