2016 (5) TMI 962 - AT - Income Tax

Correctness of assessment made u/s. 153A r.w.s. 153C - Held that - On pertinently questioned about the satisfaction of the Assessing Officer in the case of searched person i.e. Garden Group of Surat, revenue is unable to point out any such satisfaction of Assessing Officer in case of Garden Group. It had been emphatically argued before us that the Assessing Officer is the same person, such satisfaction when recorded in case of the present assessee should be considered and construed as a due compliance under the provisions and there would not be any occasion to hand over the materials to himself being the very officer. However, the vital and mandatory requirement of recording the satisfaction u/s. 153C is concerned, such satisfaction is absent as far as Garden Group of Surat is concerned in whose case searched u/s. 132 of the Act has been carried out by the Department. As such an essential requirement prior to initiate the proceedings u/s. 153C has not been fulfilled. It would be appropriate and as per the ratio laid down in case of Assistant Commissioner of Income-tax v. A.R. Enterprises reported in (2013 (1) TMI 345 - SUPREME COURT ) to quash the notice issued against the assessee and the assessment order passed pursuant thereto. As the order of the First Appellate Authority is not in consonance with the law laid down by the Hon ble Supreme Court (supra), we set aside the same and quash the assessment order.

Summary

Issues:
Validity of assessment under section 153A r.w.s. 153C of the Income Tax Act.

Analysis:
The appellant challenged the validity of the assessment order made under section 153A r.w.s. 153C of the Act, claiming that the proceedings initiated by the Assessing Officer were erroneous. The search action under section 132 revealed incriminating material, leading to the issuance of a notice under section 153C to the appellant. The appellant contended that the satisfaction of the Assessing Officer was not recorded before issuing the notice, rendering the assessment order invalid. However, the CIT(A) upheld the validity of the proceedings, stating that the addition was based on incriminating entries found during the search, fulfilling the requirements of section 153C. The appellant relied on a High Court decision, but no distinguishing decision was presented by the revenue. The Tribunal considered the facts and relevant legal provisions, emphasizing the necessity of the Assessing Officer recording satisfaction before initiating proceedings under section 153C.

The Tribunal referred to the Supreme Court's decision in Manish Maheshwari case, highlighting the conditions precedent for invoking block assessment under section 158BD. The law mandates that the Assessing Officer must record satisfaction that undisclosed income belongs to a person not searched, and the seized documents must be handed over to the Assessing Officer having jurisdiction over that person. In the present case, the Tribunal found that the satisfaction was recorded only in the appellant's case, not in the case of the searched Garden Group of Surat. As this essential requirement was not fulfilled, the Tribunal quashed the notice and the subsequent assessment order, following the Supreme Court's precedent. Consequently, the Tribunal allowed the appeal, setting aside the First Appellate Authority's decision and quashing the assessment order.

In conclusion, the Tribunal's detailed analysis focused on the legal requirements for invoking block assessment under sections 153C and 158BD of the Income Tax Act. Emphasizing the necessity of the Assessing Officer's satisfaction and proper handover of seized documents, the Tribunal found the assessment order invalid due to the absence of satisfaction in the case of the searched entity. By adhering to the legal principles established by the Supreme Court, the Tribunal quashed the assessment order, thereby allowing the appellant's appeal.