2019 (2) TMI 1529 - AT - Income Tax

Assessment u/s 153C - absence of satisfaction note - approval of Joint Commissioner u/s 153D - non-compliance of mandatory requirements - HELD THAT - In the facts of the present case, A perusal of the letter written by the Assessing Officer show that the satisfaction note required u/s 153C of the Act and also the approval required u/s 153D of the Act are not available in the case of records of the assessee. Further, the Assessing Officer has also made enquires with the office of Additional CIT and they have also informed that they are not able to trace the satisfaction note and approval granted u/s 153D of the Act. In view of the legal position the impugned assessment order passed by the AO without obtaining prior approval from the Joint Commissioner of Income Tax is null and void and is liable to be quashed. Sunrise Finlease (P.) Ltd. 2017 (12) TMI 674 - GUJARAT HIGH COURT followed.- Decided in favour of assessee.

Issues Involved:

1. Validity of assessment under section 143(3) read with section 153C of the Income Tax Act, 1961.
2. Non-fulfillment of pre-conditions for initiation and completion of assessment under section 153C.
3. Lack of satisfaction note as required under section 153C.
4. Jurisdiction of AO to frame assessment under section 153C.
5. Absence of necessary approval under section 153D.
6. Denial of application of income amounting to ?69.50 crores.
7. Procedural lapses in issuing show-cause notice and calling for details.

Detailed Analysis:

1. Validity of Assessment under Section 143(3) read with Section 153C:

The appellant contested the validity of the assessment order passed by the AO under section 143(3) read with section 153C of the Act. The appellant argued that the necessary pre-conditions for initiating and completing an assessment under section 153C were not met. Specifically, the appellant highlighted the absence of a satisfaction note and the lack of jurisdiction of the AO to frame the assessment under section 153C.

2. Non-fulfillment of Pre-conditions for Initiation and Completion of Assessment under Section 153C:

The appellant argued that the pre-conditions for initiating and completing an assessment under section 153C were not fulfilled. It was contended that no satisfaction as contemplated under section 153C was recorded by the AO. Furthermore, the documents on which the assessment was based did not belong to the appellant, thereby questioning the jurisdiction of the AO to frame the assessment under section 153C.

3. Lack of Satisfaction Note as Required under Section 153C:

The appellant emphasized that no satisfaction note, as required under section 153C, was recorded by the AO. This lack of a satisfaction note was a significant point of contention, as it is a mandatory requirement for initiating proceedings under section 153C.

4. Jurisdiction of AO to Frame Assessment under Section 153C:

The appellant argued that the AO lacked the jurisdiction to frame the assessment under section 153C. This argument was based on the absence of the satisfaction note and the fact that the documents relied upon did not belong to the appellant.

5. Absence of Necessary Approval under Section 153D:

The appellant contended that the assessment order was unsustainable as it was passed without obtaining the necessary approval under section 153D of the Act. The Tribunal noted that the AO's letter indicated that the satisfaction note and the approval required under section 153D were not available in the case records. Efforts to trace these documents were unsuccessful, leading to the conclusion that the assessment order was passed without the required approval.

6. Denial of Application of Income Amounting to ?69.50 Crores:

The appellant contested the denial of the application of income amounting to ?69.50 crores, which was treated as additional project WIP cost. The appellant argued that no specific show-cause notice was issued by the AO calling for details of the above application of income. Additionally, no specific details regarding the claim were called for by the AO or the CIT(A) during the assessment or appellate proceedings.

7. Procedural Lapses in Issuing Show-cause Notice and Calling for Details:

The appellant pointed out procedural lapses, including the failure to issue a specific show-cause notice and the lack of requests for specific details regarding the claimed expenditure. The appellant argued that the denial of the application of income was in contravention of settled judicial positions and ignored the nature of the expenditure.

Conclusion:

The Tribunal quashed the assessment order on the grounds that it was passed without obtaining the necessary prior approval from the Joint Commissioner as mandated by section 153D. The Tribunal referenced similar cases and legal precedents to support its decision. Consequently, the appeal filed by the assessee was allowed, and the orders passed by the tax authorities were quashed. The Tribunal did not find it necessary to address other legal issues or grounds on merits due to the quashing of the assessment order based on the primary legal issue.

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