2024 (12) TMI 384 - AT - Income Tax

Validity of proceedings initiated u/s 153C - search proceedings were initiated in the case of Sushen Mohan Gupta and others u/s 131 and subsequently a survey action u/s 133A was initiated in the case of the assessee - HELD THAT - Based on various informations available on record, the case of the assessee was initiated u/s 153C of the Act relying on various documents found in the case of Sushen Mohan Gupta and others. Based on the date of search initiated in the case of Sushen Mohan Gupta and others, the proceedings were initiated in the case of the assessee. However, as per the record, we noticed that satisfaction note was recorded by the Assessing Officer of the assessee only on 30.09.2021. Based on the date of satisfaction, the relevant assessment year for the assessee is AY 2022-23. Therefore, the date of search relevant for the assessee is only AY 2022-23, the AYs 2014-15 and 2015-16 are outside the provisions of section 153C of the Act. Therefore, it is a settled position of law relevant for assessment year under consideration. Mandation of recording satisfaction - AYs 2016-17 to 2020-21 - We observed that the satisfaction recorded under section 153C is recorded without there being any reference to any specific assessment year and most of the informations were based on survey proceedings carried out in the case of the assessee. Further there is no reference to any seized material which may have bearing on the determination of total income of the assessee relevant assessment year-wise. The statutory requirement requires the AO to record the satisfaction based on the particular seized material considered as incriminating material and records satisfaction having bearing on the other person as well as relating to relevant assessment year for the purpose of revision of income of the relevant assessment years. AO has not recorded the satisfaction as per rule of law. See Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT as held Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to have a bearing on the determination of the total income for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs years immediately preceding the assessment correlatable to the search year or the relevant assessment year as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents. Assessee appeal allowed.

Issues Involved:

1. Validity of proceedings initiated under Section 153C of the Income Tax Act.
2. Jurisdictional challenges related to the assessment years.
3. Legality of the satisfaction note recorded by the Assessing Officer.
4. Additions made by the Assessing Officer on account of facilitation fees and event management income.
5. Compliance with procedural requirements and principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Under Section 153C:

The assessee challenged the proceedings initiated under Section 153C of the Income Tax Act, arguing that they were without jurisdiction and not in compliance with legal requirements. The tribunal noted that the satisfaction note recorded by the Assessing Officer was crucial for initiating proceedings under Section 153C. It was observed that the satisfaction note lacked specific reference to any assessment year and was based largely on survey proceedings rather than incriminating material found during the search. The tribunal relied on precedents, including the Supreme Court's decision in Sinhgad Technical Education Society, which emphasized that satisfaction notes must be specific to assessment years and based on incriminating material. Consequently, the tribunal quashed the proceedings for certain assessment years.

2. Jurisdictional Challenges Related to Assessment Years:

The tribunal examined the jurisdictional validity of the assessment years 2014-15 and 2015-16. It was determined that these years were outside the scope of Section 153C, as the relevant assessment year for the assessee was AY 2022-23, based on the date of satisfaction recorded by the Assessing Officer. The tribunal referred to the decision in Raja Varshney vs. DCIT, which supported the assessee's contention that the assessment years in question were beyond the permissible period for revision under Section 153C. As a result, the tribunal quashed the assessments for AYs 2014-15 and 2015-16.

3. Legality of the Satisfaction Note:

The satisfaction note, recorded as a single consolidated document, was scrutinized for its compliance with statutory requirements. The tribunal found that the satisfaction note failed to provide a year-wise analysis of incriminating material, which is essential for proceedings under Section 153C. The tribunal highlighted the necessity of a detailed satisfaction note, as per the Supreme Court's ruling, which should demonstrate the material's bearing on the determination of total income for specific assessment years. The tribunal concluded that the satisfaction note was legally inadequate, leading to the quashing of assessments for AYs 2016-17 to 2020-21.

4. Additions Made by the Assessing Officer:

The assessee contested the additions made by the Assessing Officer, which included facilitation fees and event management income. The tribunal did not delve into the merits of these additions, as the jurisdictional issues were decisive in quashing the assessments. The tribunal emphasized that without a valid jurisdictional foundation, the additions could not be sustained.

5. Compliance with Procedural Requirements and Principles of Natural Justice:

The assessee argued that the CIT(A) erred in passing an ex-parte order without providing a proper opportunity for a hearing. The tribunal acknowledged the procedural lapses and emphasized the importance of adhering to principles of natural justice. However, since the assessments were quashed on jurisdictional grounds, the tribunal did not further address the procedural aspects.

Conclusion:

The tribunal allowed the appeals filed by the assessee for AYs 2014-15 to 2020-21, primarily due to jurisdictional deficiencies and inadequacies in the satisfaction note. The tribunal's decision was based on established legal principles and precedents, ensuring compliance with statutory requirements for proceedings under Section 153C.

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