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2021 (10) TMI 401 - AT - Income TaxValidity of assessment u/s 153C - Non recording of valid satisfaction - HELD THAT - As statutory provision i.e. sec. 153C as on the date of search on 11.3.2010 as well as the satisfaction note dated 11.11.2011 and the corresponding material; found or seized during the course of search is belongs or belong to a person other than the person referred to in sec.153A , whereas the Assessing Officer's satisfaction note herein had only recorded that the same relates to Sri Goruganti Damodar Rao (the assessee). We make it clear that the legislative amendment vide the Finance Act, 2015 w.e.f. 1.6.2000 only stipulate that the impugned statutory provision comes into play even in case the specified material; found or seized during the search also pertain or pertains to or relates to . The Assessing Officer hereinabove clearly fell into error in not arriving at the impugned satisfaction in the prescribed manner therefore. CIT-DR's next vehement contention during the course of hearing is that all the foregoing statutory expressions carry one and the same implication, although the grammatical expression employed herein may vary from case to case not acceptable as in light of judgment in CWT vs. B. Chatterjee 1976 (4) TMI 1 - SUPREME COURT and Late Nawab Sir Mir Osman Ali Khan 1986 (10) TMI 2 - SUPREME COURT that the clinching expression belongs carries the rightful sense of ownership. We therefore adopt stricter interpretation as per the Commissioner of Customs vs. Dilip Kumar Co 2018 (7) TMI 1826 - SUPREME COURT and hold that as the Assessing Officer's impugned assessment is not based on a valid satisfaction note and therefore, the CIT(A)'s order quashing the same deserves to be upheld. - Decided against revenue.
Issues Involved:
1. Validity of satisfaction note under Section 153C of the Income Tax Act, 1961. 2. Compliance with mandatory requirements for initiating proceedings under Section 153C. 3. Interpretation of statutory expressions "belongs" versus "relates to" in the context of Section 153C. Detailed Analysis: Issue 1: Validity of satisfaction note under Section 153C of the Income Tax Act, 1961. The primary issue in this case was whether the satisfaction note recorded by the Assessing Officer (AO) was valid under Section 153C of the Income Tax Act, 1961. The CIT(A) quashed the assessment proceedings on the grounds that the AO did not record proper satisfaction that the seized documents belonged to the assessee. The AO's satisfaction note merely stated that certain seized documents "relate to" the assessee, without explicitly stating that these documents "belong to" the assessee. This distinction is crucial as per the legal requirements under Section 153C, which mandates that the AO must be satisfied that the seized documents belong to a person other than the one referred to in Section 153A. Issue 2: Compliance with mandatory requirements for initiating proceedings under Section 153C. The CIT(A) and the Tribunal both emphasized that the mandatory requirement of recording satisfaction by the AO was not met. The CIT(A) referred to a similar case involving Aashi Plywood Industries, where it was held that the AO failed to record proper satisfaction. The Tribunal upheld this view, citing the jurisdictional High Court's decision in Shetty Pharmaceuticals & Biologicals Ltd., which mandates that the satisfaction of the AO is a pre-condition for invoking jurisdiction under Section 153C. The Tribunal found that the AO's satisfaction note did not comply with this requirement, as it did not explicitly state that the seized documents "belong to" the assessee. Issue 3: Interpretation of statutory expressions "belongs" versus "relates to" in the context of Section 153C. The Tribunal discussed the interpretation of the statutory expressions "belongs" and "relates to" in the context of Section 153C. The Tribunal referred to the Supreme Court's judgments in CWT vs. B. Chatterjee and Late Nawab Sir Mir Osman Ali Khan, which clarified that the term "belongs" implies ownership. The Tribunal adopted a stricter interpretation, as per the Supreme Court's decision in Commissioner of Customs vs. Dilip Kumar & Co., and held that the AO's satisfaction note, which used the term "relates to" instead of "belongs to," was not valid under Section 153C. The legislative amendment via the Finance Act, 2015, which allowed the use of terms like "pertains to" or "relates to," was not applicable retroactively to the case at hand. Conclusion: The Tribunal concluded that the AO's assessment was not based on a valid satisfaction note, thereby upholding the CIT(A)'s order quashing the assessment proceedings. The Tribunal dismissed the Revenue's appeal, reinforcing the necessity for strict compliance with the statutory requirements under Section 153C. Order: The Tribunal dismissed the Revenue's appeal, affirming that the assessment proceedings under Section 153C were invalid due to the lack of a proper satisfaction note. The order was pronounced in the open court on 29th September 2021.
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