2016 (8) TMI 731 - AT - Income Tax

Validity of proceedings u/s. 153C - Held that - In the instant case, the AO has categorically recorded that during the course of search, the seized material relating to the assessee was found. Therefore, it cannot be said that no incriminating material was found during the course of search to initiate proceedings u/s. 153C of the Act. During the course of hearing, the ld. counsel for the assessee could not establish that there is no relevant incriminating material available before the AO on the basis of which the impugned additions on account of interest received on refund of income-tax was made. Therefore find that there was sufficient incriminating material available before the AO to initiate proceedings u/s. 153C of the Act and since the assessee has not offered the income received on interest on refund of income-tax to tax, the AO has rightly made the addition which was later on confirmed by the CIT(Appeals) - Decided against assessee.

Issues Involved:
1. Legality of the assessment under Section 153C.
2. Jurisdiction of the Assessing Officer (AO) to assess the appellant.
3. Validity of the search conducted and the subsequent proceedings.
4. Requirement and furnishing of satisfaction note by the AO.
5. Presence of incriminating material for initiating proceedings under Section 153C.
6. Addition of interest received under Section 244A.
7. Levy of interest under Sections 234A, 234B, and 234C.
8. Credit for TDS, Advance-tax, and taxes paid under Section 140A.

Detailed Analysis:

1. Legality of the Assessment under Section 153C:
The appellant challenged the assessment under Section 153C of the Income-tax Act, arguing it was unauthorized and misconceived. The appellant cited the absence of any asset or document belonging to them being seized during the search, which is a mandatory requirement for invoking Section 153C. The tribunal found that the AO had initiated proceedings under Section 153C based on the receipt of seized material on 2.5.2011, and the relevant assessment years were from 2011-12 to 2006-07. Therefore, the assessment for the year 2005-06 was quashed as it was beyond the jurisdiction of the AO.

2. Jurisdiction of the Assessing Officer (AO):
The appellant argued that the AO did not have jurisdiction to frame the assessment for the assessment year 2005-06. The tribunal agreed, stating that the AO's jurisdiction was limited to the six assessment years preceding the assessment year relevant to the previous year in which the search was conducted. Since the search was conducted on 2.5.2010, the AO could only assess up to the year 2006-07.

3. Validity of the Search Conducted and Subsequent Proceedings:
The appellant contended that the search conducted at Prathibha Jewellery House was ultra-vires the provisions of Section 132(1)(a), (b), and (c) of the Act. However, the tribunal upheld the validity of the search and the subsequent proceedings, stating that the AO had jurisdiction to frame the assessment based on the seized material received.

4. Requirement and Furnishing of Satisfaction Note by the AO:
The appellant argued that the AO did not furnish the basis or reasons for the satisfaction derived to exercise jurisdiction under Section 153C. The tribunal clarified that the Revenue is not obligated to supply a copy of the satisfaction note to the assessee. The tribunal found that satisfaction was recorded by the AO having jurisdiction over the searched person, and there was no infirmity in the initiation of proceedings under Section 153C.

5. Presence of Incriminating Material for Initiating Proceedings under Section 153C:
The appellant claimed that no incriminating material was found regarding the interest on the refund of income tax received by them. The tribunal noted that the AO had recorded that books of account and documents seized during the search contained information about the interest on the refund of income tax. The tribunal held that there was sufficient incriminating material to initiate proceedings under Section 153C.

6. Addition of Interest Received under Section 244A:
The appellant contested the addition of ?5,23,985/- as interest received under Section 244A, arguing that the interest on the refund is not income liable to tax. The tribunal upheld the addition, stating that the interest on the refund of income tax was part of the incriminating material found during the search, and the appellant had not offered this interest to tax.

7. Levy of Interest under Sections 234A, 234B, and 234C:
The appellant denied liability to be charged interest under Sections 234A, 234B, and 234C. The tribunal did not find merit in the appellant's arguments and upheld the levy of interest as it is compensatory in nature.

8. Credit for TDS, Advance-tax, and Taxes Paid under Section 140A:
The appellant argued that the AO should have given credit for TDS, Advance-tax, and taxes paid under Section 140A before calculating the interest under Sections 234A, 234B, and 234C. The tribunal did not specifically address this issue, implying that the AO's calculation was upheld.

Conclusion:
The tribunal allowed ITA No.117/Bang/2016, quashing the assessment for the year 2005-06 due to lack of jurisdiction. All other appeals were dismissed, upholding the AO's actions and the additions made. The judgment emphasized the correct application of Sections 153A and 153C, the necessity of recording satisfaction by the AO, and the validity of the search and subsequent assessment proceedings.

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