2025 (2) TMI 701 - AT - Income Tax

Assessment framed u/s 153C r.w.s. 153A - relevant assessment years - HELD THAT - AO of the assessee has recorded the satisfaction note on 25.09.2018. As per the provisions of section 153C r.w.s. 153A relevant search assessment year for the other person is the assessment year in which this satisfaction note is recorded. Accordingly the relevant search assessment year for the assessee is AY 2019-20. Accordingly the assessment years under consideration i.e. AYs 2011-12 2012-13 are outside the jurisdiction of revision proceedings u/s 153A r.w.s. 153C of the Act. Accordingly assessment orders based u/s 153A(1)(b) of the Act is accordingly quashed. Validity of the satisfaction note recorded by the AO for initiating proceedings u/s 153C - HELD THAT - Satisfaction recorded by the AO for the block period for AYs 2011-12 to 2017-18 to initiate the proceedings u/s 153C of the Act through which it was sought to be reopened which could ultimately be said to be unexplained addition thereon could be made. We also hold that it is undisputed fact that these documents did not establish correlation document-wise with these assessment years under consideration. The very essential element for invoking the provisions of section 153C is therefore found to be not present in the impugned satisfaction note prepared by the AO. Accordingly ground raised by the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in the judgment include:

Whether the assumption of jurisdiction under Section 153C of the Income Tax Act, 1961, was valid for the assessment years (AYs) 2011-12 to 2013-14 and 2015-16 to 2017-18.
Whether the assessment orders for AYs 2011-12 and 2012-13 were outside the jurisdiction of revision proceedings under Section 153A read with Section 153C.
The validity of the satisfaction note recorded by the Assessing Officer (AO) for initiating proceedings under Section 153C.
Whether the addition made by applying a 1% rate on alleged income from commission was justified.
The requirement of valid approval under Section 153D for the assessment orders.

ISSUE-WISE DETAILED ANALYSIS

Assumption of Jurisdiction under Section 153C

Legal Framework: Section 153C of the Income Tax Act pertains to the assessment of income in cases where documents or assets seized during a search pertain to a person other than the one searched.
Court's Interpretation: The Tribunal noted that the satisfaction note for AYs 2011-12 and 2012-13 was recorded on 25.09.2018, making the relevant search assessment year AY 2019-20. Thus, these years were outside the jurisdiction under Section 153A read with Section 153C.
Conclusion: The Tribunal quashed the assessment orders for AYs 2011-12 and 2012-13, allowing the appeals for these years.

Validity of Satisfaction Note

Legal Framework: A satisfaction note is crucial for initiating proceedings under Section 153C. It must demonstrate a clear link between the seized material and the assessee's income for specific assessment years.
Court's Interpretation: The Tribunal found the satisfaction note for the block period AYs 2011-12 to 2017-18 to be vague and lacking specific details correlating the seized material with the assessee's income for each year.
Precedents: The Tribunal referenced decisions like CIT vs. Sinhgad Technical Education Society and Sakham Commodities Ltd. vs. ITO, emphasizing the necessity for a detailed satisfaction note.
Conclusion: The Tribunal held that the satisfaction note was invalid, leading to the quashing of proceedings under Section 153C for the relevant years.

Addition of Income from Commission

Legal Framework: The addition was made by applying a 1% rate on total credits and debits in the bank statement, representing alleged income from commission.
Court's Interpretation: The Tribunal did not provide a detailed analysis on this issue, as the primary focus was on jurisdictional matters.
Conclusion: The Tribunal did not adjudicate on the merits of this addition due to the jurisdictional findings.

Approval under Section 153D

Legal Framework: Section 153D requires prior approval for assessment orders under Section 153C.
Court's Interpretation: The Tribunal did not address this issue explicitly, as the jurisdictional defects rendered the assessment orders invalid.
Conclusion: The Tribunal did not adjudicate this issue due to the quashing of the assessment orders on jurisdictional grounds.

SIGNIFICANT HOLDINGS

The Tribunal emphasized the necessity of a detailed and specific satisfaction note for proceedings under Section 153C, aligning with precedents set by higher courts.
It was held that assessment orders for AYs 2011-12 and 2012-13 were outside the jurisdiction of Section 153A read with Section 153C due to the timing of the satisfaction note.
The Tribunal quashed the proceedings under Section 153C for the relevant years due to the invalid satisfaction note.
The appeals for AYs 2011-12 to 2013-14 and 2015-16 to 2017-18 were partly allowed, primarily on jurisdictional grounds.

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