2024 (12) TMI 184 - AT - Income Tax

Lack of jurisdiction u/s 153C - as argued satisfaction note prepared apparently suffers from the vice of being vague non-descript and unintelligible - HELD THAT - Mere drawing of a perfunctory satisfaction without meeting basic ingredients of providing some tangible descript information and application of mind thereon has no standing in law and would not confer drastic jurisdiction of assessment u/s 153C of the Act on a person other than searched person. The jurisdiction assumed based on such lackadaisical satisfaction note beset with vital infirmities cannot be countenanced in law. The objection raised on behalf of the assessee towards lack of jurisdiction based on cryptic and non-descript satisfaction thus deserves to be sustained. While recording a consolidated satisfaction note is not a bar in law per se as rightly contended on behalf of the revenue but however in the same vain the documents/assets searched need to be specified against each year covered in the satisfaction note to depict application of mind and initiation of action u/s 153C of the Act qua such assessment years. The AO has failed to do so. As a corollary the notice issued under section 153C of the Act and consequent assessment order passed under section 153C of the Act is vitiated in law and requires to be quashed. Difference between the sale consideration mentioned in Agreement to Sale and Sale Deed is undisclosed part of the transaction - Noticeably the Department referred said property to the DVO for determination of FMV under section 142A of the Act. The DVO issued a Valuation Report as per which the total value of the property is INR 1, 68, 59, 788/- approximately wherein the cost of land was valued at INR 94, 71, 341/- and the cost of building was valued at INR 73, 88, 447/-. The assessee contends that the valuation report derived by the DVO after inquiry is quite close to the sale consideration declared by the assessee. The staggering difference as per the Agreement to Sale and Sale Deed is thus unconceivable and totally contrary to the estimated market value of the property. The Report of the DVO thus assumes significance for the cause of the assessee and cannot be brushed aside while weighing the factual position and giving over-riding importance to a photocopy of unsigned Agreement to Sale found from the premises of searched person. Besides the assessee has also placed an affidavit from the purchase Shri Pranjil Batra wherein it is affirmed that the sale consideration noted in the Sale Deed is sacrosanct. In the light of the Sale Deed the DVO report and in the absence of any inquiry by the Revenue on facts to support the amount mentioned in the photocopy of the Agreement to sale the sale consideration declared by the assessee cannot be discredited out rightly and substituted by whopping amount unconnected to the grounds realities. We thus find force in the plea raised on merits also. Assessee appeal allowed.

Summary

Issues Involved:

1. Lack of jurisdiction under Section 153C of the Income Tax Act.
2. Justification of additions made to the income on merits.
3. Validity of the penalty proceedings initiated under Sections 270A and 271D.
4. Charging of interest under Sections 234B and 234C.

Detailed Analysis:

1. Lack of Jurisdiction under Section 153C:

The primary issue raised by the appellants was the lack of jurisdiction assumed under Section 153C of the Income Tax Act. The appellants contended that the 'satisfaction note' prepared by the Assessing Officer (AO) was vague, non-descript, and unintelligible, failing to identify specific incriminating documents related to the assessee. The Tribunal observed that the satisfaction note did not specify the documents or the assessment year to which they pertain, which is a critical requirement for exercising jurisdiction under Section 153C. The Tribunal referred to judicial precedents, emphasizing that the satisfaction note must clearly identify the material found and its relevance to the assessee's income for specific assessment years. The Tribunal concluded that the satisfaction note was generic and lacked the necessary details, rendering the jurisdiction assumed under Section 153C invalid. Consequently, the notice and assessment order under Section 153C were quashed.

2. Justification of Additions on Merits:

On the merits of the case, the AO had made additions to the income based on a photocopy of an unsigned Agreement to Sale, suggesting a higher sale consideration for a property transaction. The Tribunal noted that the Department Valuation Officer's (DVO) report indicated a fair market value close to the declared sale consideration, undermining the AO's reliance on the unsigned agreement. Additionally, an affidavit from the purchaser confirmed the declared sale consideration. The Tribunal found that the AO's reliance on the unsigned agreement, without corroborating evidence or inquiry, was unjustified. The Tribunal held that the additions were not sustainable on merits and directed the AO to delete them.

3. Validity of Penalty Proceedings:

The appellants challenged the initiation of penalty proceedings under Sections 270A and 271D, arguing that they were incorrect and bad in law. However, the judgment does not provide specific details on the Tribunal's findings regarding the penalty proceedings. The focus was primarily on the jurisdictional and substantive issues related to the assessment.

4. Charging of Interest under Sections 234B and 234C:

The appellants contested the charging of interest under Sections 234B and 234C, claiming it was against the principles of natural justice. The Tribunal's judgment primarily addressed the jurisdictional and substantive issues, and specific findings on the interest charges were not detailed in the judgment. The outcome on this issue would be contingent on the resolution of the primary issues related to the assessment.

Conclusion:

The Tribunal allowed the appeals, quashing the assessment orders under Section 153C due to lack of jurisdiction and directing the deletion of additions made to the income on merits. The findings in the case of Renu Singh were applied mutatis mutandis to Pradeep Singh, resulting in the allowance of both appeals.