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2015 (12) TMI 1115 - AT - Income TaxValidity of assessment u/s 153C - Held that - No satisfaction has been recorded in the case of searched person and the satisfaction, if any, recorded in the case of other person will not cure the defect because it is necessary that the satisfaction must be recorded by the AO of the searched person and thereafter the documents are to be handed over to the AO of other person and this position will not alter even if the AO for the searched person and the other person i.e. the assessee is the same. Thus we quash the assessment framed by the AO. As the assessment itself is quashed, no findings have been given on other issues raised by the assessee on merit. - Decided in favour of assessee
Issues Involved:
1. Validity of notice issued under Section 153C of the Income Tax Act, 1961. 2. Jurisdiction of the Assessing Officer (AO) in framing the assessment under Section 153C. 3. Confirmation of income assessed instead of the loss declared by the assessee. 4. Non-allowance of set-off of losses claimed by the assessee. 5. Addition of unexplained expenditure under Section 69C. 6. Non-allowance of deduction of certain expenses. 7. Charging of interest under Section 234B of the Income Tax Act, 1961. Detailed Analysis: 1. Validity of Notice Issued Under Section 153C: The primary contention was that the notice issued under Section 153C was illegal and without jurisdiction. The assessee argued that the AO did not comply with the provisions of Section 153C, which requires the AO of the searched person to be satisfied that the documents seized belong to another person. The assessee cited the case of Pepsi Foods India Pvt. Ltd. Vs ACIT, emphasizing that the satisfaction must be recorded by the AO of the searched person, even if the AO for both the searched person and the other person is the same. The Tribunal found that the satisfaction note was recorded by the AO in his capacity as the AO of the assessee and not as the AO of the searched person. This was evident from the order sheet entries and the satisfaction note itself. Consequently, the Tribunal concluded that the notice under Section 153C was invalid, and the assessment framed on its basis was quashed. 2. Jurisdiction of the AO in Framing the Assessment Under Section 153C: The Tribunal observed that the AO of the searched person must first be satisfied that the documents seized belong to another person and then hand over those documents to the AO of the other person. This satisfaction must be recorded by the AO of the searched person. In this case, the AO did not record such satisfaction in the case of the searched person, rendering the proceedings under Section 153C invalid. 3. Confirmation of Income Assessed Instead of the Loss Declared by the Assessee: The assessee had declared a loss in its return of income, but the AO completed the assessment at a substantial income. However, since the Tribunal quashed the assessment itself, it did not delve into the merits of this issue. 4. Non-Allowance of Set-Off of Losses Claimed by the Assessee: The AO did not allow the set-off of losses claimed by the assessee. Again, as the assessment was quashed, the Tribunal did not address this issue on merits. 5. Addition of Unexplained Expenditure Under Section 69C: The AO made an addition on account of unexplained expenditure under Section 69C. The Tribunal, having quashed the assessment, did not provide findings on this issue. 6. Non-Allowance of Deduction of Certain Expenses: The AO did not allow the deduction of certain expenses claimed by the assessee. The Tribunal did not address this issue due to the quashing of the assessment. 7. Charging of Interest Under Section 234B: The AO charged interest under Section 234B. The Tribunal did not provide findings on this issue as the assessment was quashed. Conclusion: The Tribunal allowed the appeals of the assessee, quashing the assessments framed under Section 153C due to the invalidity of the notice and lack of proper jurisdictional satisfaction by the AO of the searched person. Consequently, the Tribunal did not address the other issues raised on merits.
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