2014 (11) TMI 1044 - AT - Income Tax

Tribunal quashes proceedings and assessment orders due to lack of jurisdiction. Assessee's other grounds not considered.

Nageshwar Investment Ltd. Versus DCIT Central Circle-12, Jhandewalan,

The Tribunal allowed the appeals, quashing the initiation of proceedings and the assessment orders under Section 153C due to lack of jurisdiction. The ... Validity of assessment u/s 153C - absence of satisfaction note - Held that:- In the light of the order of the co-ordinate bench in the case of M/s. V.K. Fiscal Services Pvt. Ltd (2013 (11) TMI 1589 - ITAT DELHI) and Pepsico India Holiday (P) Ltd (2014 (8) TMI 898 - DELHI HIGH COURT), we hold that the AO lacks jurisdiction to initiate the 153C proceeding against the assessee and therefore the issuance of notice itself is null and void and therefore quashed. Consequently the impugned assessment order u/s 153C is also a nullity. - Decided in favour of assessee Issues Involved:1. Jurisdiction of the AO under Section 153C of the Income Tax Act.2. Validity of the assessment orders under Section 153C/143(3) of the Act.3. Addition of unsecured loans as unexplained cash credits under Section 68 of the Act.4. Levy of interest under Section 234B of the Act.5. Condonation of delay in filing the appeal.Issue-wise Detailed Analysis:1. Jurisdiction of the AO under Section 153C of the Income Tax Act:The assessee challenged the jurisdiction of the AO under Section 153C, arguing that the assessments were not based on any material found or seized during the search. The Tribunal noted the satisfaction note recorded by the AO, which indicated that various papers belonging to the assessee were found during the search on Rajdarbar Group. The Tribunal referred to a similar case (M/s. V.K. Fiscal Services Pvt. Ltd.) where an identical satisfaction note by the same AO was quashed. The Tribunal found that the satisfaction note did not establish that the documents did not belong to the searched person, thus failing to meet the requirements of Section 153C. Consequently, the Tribunal held that the AO lacked jurisdiction to initiate proceedings under Section 153C, rendering the issuance of notice and subsequent assessment orders null and void.2. Validity of the assessment orders under Section 153C/143(3) of the Act:The Tribunal quashed the assessment orders for the Assessment Years 2005-06 to 2008-09 on the grounds that the initiation of proceedings under Section 153C was invalid. The Tribunal emphasized that the assessments were based on an erroneous satisfaction note and lacked jurisdiction, making the assessment orders a nullity.3. Addition of unsecured loans as unexplained cash credits under Section 68 of the Act:The AO added unsecured loans to the assessee's income as unexplained cash credits under Section 68, citing the assessee's failure to provide confirmations and complete addresses of the creditors. The Tribunal did not adjudicate this issue as it quashed the initiation of proceedings under Section 153C, making the assessment orders null and void.4. Levy of interest under Section 234B of the Act:The assessee contested the levy of interest under Section 234B. However, the Tribunal did not address this issue separately due to the quashing of the assessment orders.5. Condonation of delay in filing the appeal:The Tribunal condoned the delay of 28 days in filing the appeal, accepting the assessee's explanation that the delay was due to the illness of the CA's wife. The Tribunal emphasized the interest of substantial justice in condoning the delay.Conclusion:The Tribunal allowed the appeals, quashing the initiation of proceedings and the assessment orders under Section 153C due to lack of jurisdiction. The other grounds raised by the assessee were not adjudicated as they became academic following the quashing of the assessment orders.