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2015 (2) TMI 160 - AT - Income TaxValidity of assessment framed u/s 153C - Held that - The documents seized during the course of search and seizure proceedings from the Rajdarbar Group have been referred as relating to the assessee, in the satisfaction note recorded by the AO while initiating the proceedings u/s 153C of the Act against the assessee. Finding a reference in the satisfaction note recorded by the AO for initiation of proceedings u/s 153C of the Act against the assessee are certificate of incorporation, e-filing receipt, Form No.-18, Form No.-35 In view of the ratio laid down in the above discussed decisions of Hon ble High Court in the cases of Pepsico India Holdings Pvt. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT) and Pepsi Foods Pvt. Ltd. (2014 (8) TMI 425 - DELHI HIGH COURT) the satisfaction of the AO that the said documents belong to the assessee is condition precedent to initiate proceedings u/s 153C of the Act. In absence of such finding by the AO, the notice issued u/s 153C in the present case is held invalid. Besides there was no incriminating material found during the course of search and the assessment was not pending or abated to justify the assessment framed u/s 153A r.w.s 153C as well as section 143(3) of the Act against the assessee. The assessment in the question framed in furtherance to the said invalid notice and in absence of incriminating material is thus held as void and the same is quashed as such. - Decided in favour of the assessee.
Issues Involved:
1. Validity of assessment framed under section 153C read with section 143(3) of the Income Tax Act. 2. Deletion of addition of Rs. 68,00,000 out of Rs. 1,25,00,000 made by the AO under section 68 on account of unexplained share application money. 3. Disallowance of Rs. 34,61,585 on account of short-term capital loss on the sale of land situated at Rajokri, Delhi. 4. Condonation of delay in filing the cross-objection by the assessee. Issue-wise Detailed Analysis: 1. Validity of Assessment Framed under Section 153C read with Section 143(3) of the Income Tax Act: The core issue was the validity of the assessment framed under section 153C. The assessee argued that the assessment was invalid as it was not based on any incriminating material found during the search. The Tribunal noted that the documents seized during the search were referred to as "relating to" the assessee, not "belonging to" the assessee. The Tribunal relied on the Delhi High Court decisions in Pepsico India Holdings Pvt. Ltd. and Pepsi Foods Pvt. Ltd., which clarified that for section 153C to apply, the documents must "belong to" the assessee. The Tribunal found that the AO's satisfaction note did not meet this requirement, rendering the notice under section 153C invalid. Consequently, the assessment framed based on this invalid notice was quashed. 2. Deletion of Addition of Rs. 68,00,000 out of Rs. 1,25,00,000 made by the AO under Section 68: The AO had made an addition of Rs. 1,25,00,000 under section 68, doubting the genuineness of the share application money received by the assessee. The CIT(A) deleted Rs. 68,00,000 of this addition, which the Revenue contested. However, since the Tribunal quashed the entire assessment as void, this issue became infructuous and was not adjudicated further. 3. Disallowance of Rs. 34,61,585 on Account of Short-Term Capital Loss on Sale of Land: The AO disallowed the assessee's claim of a short-term capital loss of Rs. 34,61,585 on the sale of land, which the CIT(A) upheld. The assessee contested this disallowance. However, similar to the previous issue, with the assessment being declared void, this issue also became infructuous and was not adjudicated further. 4. Condonation of Delay in Filing the Cross-Objection by the Assessee: The assessee filed a cross-objection with an 8-day delay, citing inadvertence on the part of the CA's office. The Tribunal, considering the explanation and precedents cited, found no malafide intent behind the delay and condoned it, allowing the cross-objection to be heard on merits. Conclusion: The Tribunal allowed the cross-objection filed by the assessee, quashing the assessment framed under section 153C read with section 143(3) as void due to the invalidity of the notice under section 153C. Consequently, the issues regarding the additions and disallowances became infructuous, and the Revenue's appeal was dismissed. The order was pronounced in the open court on January 6, 2015.
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