2012 (8) TMI 497 - HC - Income Tax

Assessment framed u/s 153A in case of search based on evidence gathered in the course of search of another assessee for AY 2003-04 to 2008-09 - assessment framed u/s 144 for AY 2009-10 - assessee contesting assessments u/s 144 on ground that Section 153A or Section 153C has no application on assessment for the AY 2009-10 - assessment u/s 153A(1) on the ground of non-recording of satisfaction by AO who conducted search - Held that - Best judgment assessment u/s 144 was for failure of the assessee to file return for the said AY and its validity is not in any way affected just on ground that AO by mistake has quoted Sections namely Sections 153C and 153A wherein it is also stated that the said assessment is made u/s 144. Assessment is one made exclusively u/s 144 after issuing notice to the assessee. Transfer of recovered books of accounts, evidence or materials is only a procedural formality to be complied with by the AO who searched an assessee and recovered materials pertaining to another assessee, and the AO who takes up assessment u/s 153C against the latter will have full jurisdiction to appreciate evidentiary value of the books of accounts or materials or goods received from the other officer and proceed to make assessment in his own way. Therefore, satisfaction is not required to be recorded by the AO, who conducted the search before transferring materials found belonging to another assessee - Decided against assessee

Summary

Issues:
1. Validity of assessment for the assessment year 2009-10 under Section 144 read with Sections 153C and 153A of the Income Tax Act.
2. Challenge against assessments completed for the six assessment years from 2003-04 to 2008-09 under Section 153C read with Section 153A(1).

Issue 1: Validity of assessment for the assessment year 2009-10:
The appellant contested the assessment for the assessment year 2009-10, arguing that Section 153C read with Section 153A only applies to six preceding assessment years. However, the assessment for 2009-10 was made under Section 144 due to the appellant's failure to file a return. The court noted that the best judgment assessment for 2009-10 was valid under Section 144, despite mentioning Sections 153C and 153A, as the Assessing Officer had jurisdiction over the appellant. The appellant's right to appeal before the CIT (Appeals) on merit was emphasized, as the assessments were not considered on merit by the court.

Issue 2: Challenge against assessments for the six assessment years:
The appellant challenged the assessments for the six years from 2003-04 to 2008-09 under Section 153C read with Section 153A(1), claiming that the Assessing Officer at Mangalore did not record satisfaction before transferring files. The court clarified that under Section 153C, the transfer of materials to another Assessing Officer is based on whether they relate to another assessee, not necessarily proving undisclosed income. The court held that the Assessing Officer at Mangalore correctly transferred the files to the appellant's Assessing Officer at Kozhikode, who then completed the assessments. The appellant's argument that satisfaction was required to be recorded before transfer was rejected, emphasizing that the appellant's regular Assessing Officer was best suited to assess based on familiarity with the appellant's transactions and income.

In conclusion, the court dismissed the Writ Appeals as lacking merit, granting the appellant one month to file appeals. The court directed that payments made under interim orders should be considered in future applications for interim relief. The dismissal was accompanied by the provision of limited relief to the appellant for further appeal processes.