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2022 (4) TMI 546 - AT - Income TaxValidity of Assessment u/s 153C - whether AO of the searched person has not recorded satisfaction note that the books of accounts/material belongs to the assessee ? - Whether seizure of incriminating material is not a pre-condition for assumption of jurisdiction u/s.153C? - HELD THAT - From a bare reading of the provisions of sec.153C it is crystal clear that the condition precedent for issue of notice u/s 153C is that money bullion jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such person. If this requirement is not satisfied recourse cannot be had to the provisions of sec.153C. Unless revenue establishes that the assessee is the owner of the seized documents provisions of sec.153C cannot be invoked. Even the Hon ble Delhi High Court as well as the Hon ble Gujarat High Courts held that merely because there is a reference to the name of the assessee in the seized documents it does not mean that the assessee is the owner of those documents. In the satisfactory note recorded by the AO there should be something to indicate that the searched person had disclaimed those documents and therefore AO of the searched person reached a conclusion or satisfaction that the documents do not belong to the searched person but other third person. The High Courts even went to the extent of holding that possession of documents and possession of photo copies of documents are two separate things. It may be quite possible that photo copies may be belonging to the searched person and whereas the original may be owned by some other person. In the present case satisfaction note recorded by the AO there was no mention that he was satisfied about the undisclosed income belonging to the assessee on the basis of seized material as held by the Supreme Court in the case of Super Malls Pvt. Ltd. 2020 (3) TMI 361 - SUPREME COURT in terms of section 153C of the Act that where the AO of the searched person and the third person is the same it is sufficient by the AO to record in the satisfaction note that the documents seized from the searched person belonged to other person and there is no requirement of transmitting documents so seized from searched person. There is no satisfaction recorded by the AO of the searched person to indicate that the searched person had disclaimed the seized document as it belonged to him before reaching the conclusion/satisfaction that document did not belong to searched person but to other third person i.e. the present assessee. More so in the present case it is also brought on record by the assessee that the impugned addition was already subject matter of assessment in the case of Sri B. Sreeramulu and the expenditure relating to assessee s marriage has been disclosed in his capital account for the period ending 31.3.2010 copy of which is kept on record filed before this Tribunal on 3.3.2022. Hence on the basis of the above order sheet entry the assessment of present assessee has been reopened so as to frame the assessment u/s. 143(3) r.w.s. 153C. AO who searched the premises of B. Nagendra on whose case warrant u/s. 132 was issued has not recorded his satisfaction that documents found in the course of search of the premises of present assessee viz. T.H. Suresh Babu belonged to present assessee and AO has not recorded his satisfaction in his order sheet entry to this effect. As such the mandatory requirement u/s. 153C of the Act in the facts and circumstances of the case have not been complied with. The satisfaction note in the form of order sheet entry by the AO of Sri B. Nagendra who was searched has not recorded the finding that the document seized belonged to Shri T.H. Suresh Babu. Being so the requirement of section 153C of the Act has not been fulfilled. On these facts we are in clear agreement with the view taken by the CIT(Appeals) in quashing the assessment framed u/s. 143(3) r.w.s. 153C of the Act and accordingly uphold the order of the ld. CIT(Appeals). The grounds taken by the revenue are dismissed.
Issues Involved:
1. Validity of notice under section 153C. 2. Basis for additions made during assessment. 3. Permissibility of raising new contentions before the CIT(A). Issue-wise Detailed Analysis: 1. Validity of Notice under Section 153C: The primary issue in this appeal was whether the action of the Assessing Officer (AO) in assuming jurisdiction under section 153C of the Income Tax Act was valid. The revenue contended that the notice under section 153C was issued based on the satisfaction recorded by the AO of the searched person, who was also the AO of the assessee. The AO must be satisfied that the seized documents belonged to a person other than the searched person. The revenue relied on several judgments, including the Supreme Court’s decision in Super Malls Pvt. Ltd. v. Pr. CIT, which held that if the AO of the searched person and the third person is the same, it is sufficient to record in the satisfaction note that the documents seized from the searched person belonged to the other person. The Tribunal, however, noted that the satisfaction note recorded by the AO did not explicitly state that the seized documents belonged to the assessee. The Tribunal cited the Delhi High Court's decision in Pepsi Foods Pvt. Ltd., which emphasized that the AO must rebut the presumption that the documents belonged to the searched person and clearly state that they belong to another person. The Tribunal found that the satisfaction note did not meet this requirement and thus held that the mandatory requirement under section 153C was not fulfilled. Consequently, the Tribunal upheld the CIT(A)’s decision to quash the assessment framed under section 143(3) read with section 153C. 2. Basis for Additions Made During Assessment: The AO made several additions to the assessee’s income based on unexplained expenditure in marriage, cash credits, and unexplained gifts. The CIT(A) observed that these additions were not based on any seized documents but were estimated on the basis of enquiries conducted under section 133A(5). The Tribunal noted that the CIT(A) had recorded a categorical finding that the additions were not based on any incriminating material found during the search. The Tribunal cited the decision in Sree Lakshmi Venkateshwara Minerals, which held that additions not based on any incriminating material found during the search are not sustainable. Thus, the Tribunal agreed with the CIT(A) that the additions were unjustified and unsustainable. 3. Permissibility of Raising New Contentions Before the CIT(A): The revenue argued that the assessee raised contentions regarding the validity of the proceedings before the CIT(A), which were not permissible as they had not been raised before the AO. The Tribunal did not specifically address this issue in detail but focused on the validity of the notice under section 153C and the basis for the additions made. The Tribunal’s decision to uphold the CIT(A)’s order effectively dismissed the revenue’s contention on this point. Conclusion: The Tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s decision to quash the assessment framed under section 143(3) read with section 153C due to the lack of proper satisfaction recorded by the AO and the absence of incriminating material to justify the additions made. The Tribunal emphasized the need for clear satisfaction that the seized documents belonged to the assessee and not the searched person, as required under section 153C.
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