2016 (6) TMI 83 - AT - Income Tax

Validity of assessment u/s 153C - Satisfaction note for proceedings u/s. 153C - Held that - Exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out. On the other hand, the Assessing Officer recorded the satisfaction in the case of such other person which does not satisfy the condition of assuming jurisdiction under Section 153C. Therefore, the above satisfaction note cannot be said to be a valid satisfaction note within the meaning of Section 153C. Jurisdiction under Section 153C has been assumed only on the basis that during the course of search of one of the persons of. It is not in dispute that the assessee had filed the return for AY 2004-05 alongwith the original copy of the audited profit & loss account and balance sheet. Search had taken place on 31.07.2008 while the return of income alongwith the original profit & loss account and balance sheet was already filed more than three and a half years before the date of search. In the remand report dated 23.07.2010, the Assessing Officer has also not disputed the above fact but he tried to justify action under Section 153C on the ground that for issue of notice under Section 153C, it is not necessary that the document found and seized should be of incriminating nature. Therefore, we hold that the underlying condition for invoking the jurisdiction under Section 153C is not satisfied in the case of the assessee. - Decided in favour of assessee

Summary

Issues:
Challenge to the legality and jurisdiction of notice issued under section 153C and assessment order passed under sections 153C/143(3).

Analysis:
The case involved an appeal against the order passed by CIT (A) XXXI, New Delhi, where the main ground challenged was the legality and jurisdiction of the notice issued under section 153C and the subsequent assessment order. The satisfaction note for proceedings under section 153C was recorded on 23/07/2010 after a search operation conducted on a group of cases. The appellant argued that the search took place at premises not belonging to them, and they had filed their return declaring income accordingly. The appellant cited various case laws supporting their stance, emphasizing that the Assessing Officer did not have jurisdiction to initiate proceedings under section 153C. The respondent failed to distinguish the judgments and clarify whether the Assessing Officer for the search party had recorded satisfaction.

The tribunal analyzed section 153C of the Income-tax Act, which allows action against a person other than the one searched if the Assessing Officer is satisfied that the seized items belong to that person. The basic condition of recording satisfaction and handing over seized items to the Assessing Officer of the other person must be met. However, in this case, the satisfaction note did not specify the person in whose case it was recorded, the name of the Assessing Officer, or details of the premises searched. The tribunal concluded that the satisfaction note was recorded by the Assessing Officer of the assessee, which did not fulfill the requirements of section 153C. Additionally, jurisdiction under section 153C was assumed based on a document filed years before the search, which did not meet the conditions for invoking section 153C.

The tribunal quashed the assessment order due to the lack of jurisdiction under section 153C, rendering the additional grounds challenged by the appellant irrelevant. As a result, the appeal was allowed, and the order was pronounced on 10th May 2016.