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2017 (4) TMI 234 - AT - Income TaxValidity of assessment u/s 153C - No satisfaction not found - lack of validity of jurisdiction assumed - Held that - Recording of requisite satisfaction in the case of a searched party is a sine qua non for assuming jurisdiction for the issue of notice u/s 153C even if the AO of the searched person and the assessee are same. It is abundantly clear from the records in the case of the searched person that there is no requisite satisfaction granting the AO jurisdiction for issuing notice to the assessee u/s 153C of the I.T. Act. No satisfaction note whatsoever is found in the case of the searched person namely M/s Artefact Projects Ltd. In absence of any satisfaction note in the case of M/s Artefact Projects Ltd. that any seized material belonging to the assessee has been found which is incriminating in nature which is to be handed over to the AO of the assessee the jurisdiction assumed in this case is illegal and the same deserves to be quashed. Accordingly in the background of the aforesaid discussion and precedent in our considered opinion the assessee deserve to succeed on this account and the assessments are liable to be quashed on account of lack of validity of jurisdiction. Accordingly we set aside the orders of the learned CIT(Appeals) on this aspect of jurisdiction and quash the assessments by holding that requisite satisfaction was not recorded before issue of notice u/s 153C. - Decided in favour of assessee
Issues Involved:
1. Validity of the notice issued under Section 153C of the Income Tax Act, 1961. 2. Legality of the jurisdiction assumed by the Assessing Officer (AO) under Section 153C. 3. Merits of the additions made by the AO based on seized documents. Issue-Wise Detailed Analysis: 1. Validity of the Notice Issued Under Section 153C: The assessee challenged the validity of the notice issued under Section 153C, arguing that the notice was illegal, invalid, and bad in law. The AO had issued the notice based on documents seized during a search at the premises of M/s Artefact Projects Ltd., which were believed to be related to the assessee. The AO justified the notice by stating that it was issued after recording proper satisfaction that the proceedings under Section 153C were warranted. 2. Legality of the Jurisdiction Assumed by the AO Under Section 153C: The assessee contended that the AO did not record the necessary satisfaction as required under Section 153C before initiating proceedings. The CIT(Appeals) examined the case records and the satisfaction note recorded by the AO, which indicated that the seized documents belonged to the assessee. However, the Tribunal found that no satisfaction note was recorded in the case of the searched person, i.e., M/s Artefact Projects Ltd., which is a prerequisite for assuming jurisdiction under Section 153C. The Tribunal emphasized that recording satisfaction in the case of the searched person is essential, even if the AO of the searched person and the assessee are the same. The absence of such satisfaction denuded the legality of the jurisdiction, leading to the quashing of the assessments. 3. Merits of the Additions Made by the AO Based on Seized Documents: The AO made additions to the assessee's income based on seized documents, which allegedly indicated unrecorded payments from M/s Ashoka Buildcon Ltd. The CIT(Appeals) found that the additions were based on inferences and not supported by legal evidence, leading to the deletion of the additions on merits. The Tribunal, however, did not engage in adjudicating the merits of the additions, as the primary issue of jurisdiction was resolved in favor of the assessee. The Tribunal noted that since the jurisdiction was invalid, the merits of the additions became a matter of academic interest. Conclusion: The Tribunal allowed the assessee's appeals, quashing the assessments due to the lack of valid jurisdiction, and dismissed the Revenue's appeals as infructuous. The Tribunal's decision emphasized the necessity of recording proper satisfaction in the case of the searched person before initiating proceedings under Section 153C, as mandated by the CBDT Circular No. 24/2015 and various judicial precedents.
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