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2021 (7) TMI 983 - AT - Income TaxAssessment u/s 153C - no order u/s.143(3) of the Act was passed - assessee submitted that proceedings u/s 153C of the Act can be initiated only if incriminating material is found in the case of a searched person belonging to the other person against whom proceedings u/s153C of the Act are sought to be initiated - HELD THAT - The assessment for the relevant AY was open assessment not having been concluded pursuant to the original return of income filed by the Assessee either by an order u/s.143(3) or by non issue of notice u/s.143(2) of the Act, within the time period prescribed for issue of such notice before the date of search. In this regard, we also notice that in the present case, the assessee filed return of income on 15.10.2007 and no order under section 143(3) of the Act was passed. The search in the case of Shri. N. Krishna based on which proceedings under section 153C of the Act were initiated against the assessee took place on 26.08.2008. The time limit for issue of notice under section 143(2) of the Act for Assessment Year 2007-08 was available to the AO till 30.09.2008. Since the search was conducted on 26.08.2008 in the case of Shri. N. Krishna, the proceedings against the assessee would not be hit by the proviso to section 153A of the Act and the proceedings can be initiated and additions can be made even in the absence of any incriminating material because such proceedings will be considered as abated proceedings in which scope of making additions will be much greater. The issue with regard to validity of initiation of proceedings under section 153C of the Act has to be held in favour of the Revenue.
Issues Involved:
1. Validity of proceedings initiated under section 153C of the Income Tax Act. 2. Whether the sum of ?2.44 Crores is assessable as income in the hands of the assessee. Issue-wise Detailed Analysis: 1. Validity of proceedings initiated under section 153C of the Income Tax Act: The primary issue under consideration is the validity of the proceedings initiated under section 153C of the Income Tax Act. The Tribunal examined whether the necessary satisfaction was recorded by the Assessing Officer (AO) before initiating such proceedings. The Tribunal referred to the Hon'ble High Court's order and the decision in the case of M/s. Arihant Aluminum Corporation Ltd. vs. ACIT, which emphasized the requirement for the AO to record satisfaction that the seized documents belong to a person other than the one searched. The Department produced the satisfaction note, and the Tribunal noted that the AO of the searched person and the AO of the assessee were the same. Citing the Supreme Court's decision in Super Malls Pvt. Ltd. vs. CIT, the Tribunal concluded that the satisfaction note recorded by the AO was sufficient for initiating proceedings under section 153C. The Tribunal clarified that the satisfaction note must indicate that the seized documents belong to the assessee, which was adequately done in this case. The Tribunal also addressed the assessee's argument that the satisfaction note did not disclose how the material found during the search belonged to the assessee. The Tribunal found this argument beyond the scope of the present proceedings, as the High Court had remanded the case solely to examine the existence of satisfaction for initiating proceedings under section 153C. The Tribunal further referred to the decision in IBC Knowledge Park Pvt. Ltd., which required incriminating material for initiating proceedings under section 153C. However, the Tribunal differentiated between the initiation of proceedings and making additions based on seized documents. It concluded that while incriminating material is necessary for making additions, it is not required for initiating proceedings under section 153C. 2. Whether the sum of ?2.44 Crores is assessable as income in the hands of the assessee: The second issue was whether the sum of ?2.44 Crores received by the assessee from Shri. D. K. Sharma was assessable as income. The Revenue contended that this amount was part of the sale consideration for the land sold to M/s. Sobha Developers Ltd. The assessee argued that the amount was for settling disputes and litigation related to the property and not income. Initially, the AO assessed the sum of ?2.44 Crores as income, but the CIT(A) deleted the addition. The Tribunal, in its earlier order, reversed the CIT(A)'s decision and restored the AO's assessment. The High Court remanded the case to the Tribunal to reconsider the existence of satisfaction for initiating proceedings under section 153C. Upon review, the Tribunal upheld the AO's satisfaction note and concluded that the proceedings under section 153C were valid. Consequently, the Tribunal maintained that the sum of ?2.44 Crores was assessable as income in the hands of the assessee. Conclusion: The Tribunal decided in favor of the Revenue, holding that the proceedings under section 153C were validly initiated based on the satisfaction note recorded by the AO. The Tribunal also upheld the assessment of ?2.44 Crores as income in the hands of the assessee. The appeal by the assessee was dismissed.
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