2016 (8) TMI 1230 - AT - Income Tax

Assessment orders invalidated for lack of recorded satisfaction under Section 153C

Shri Harminder Singh Sodhi Versus The DCIT, Central Circle-1, Chandigarh

Shri Harminder Singh Sodhi Versus The DCIT, Central Circle-1, Chandigarh - Tmi Issues Involved:1. Validity of the assessment orders under Section 153C.2. Recording of satisfaction by the Assessing Officer of the searched person.3. Jurisdictional compliance under Section 153C.4. Legality of the additions made under Section 153C read with Section 143(3).Issue-wise Detailed Analysis:1. Validity of the assessment orders under Section 153C:The primary issue revolves around whether the assessment orders passed under Section 153C were valid. The assessee argued that the Assessing Officer (AO) of the searched person did not record the required satisfaction under Section 153C before assuming jurisdiction over the assessee. The Tribunal found that no satisfaction note was recorded by the AO of the searched person, Shri P.L. Midha, which is a prerequisite for invoking Section 153C. The Tribunal concluded that the assumption of jurisdiction under Section 153C was invalid, rendering the assessment orders null and void.2. Recording of satisfaction by the Assessing Officer of the searched person:The Tribunal emphasized that for invoking Section 153C, the AO of the searched person must record satisfaction that the documents found during the search belong to a third person. In this case, the AO of Shri P.L. Midha did not record such satisfaction. The Tribunal referred to the RTI reply, which provided a satisfaction note recorded under Section 153C in the case of the assessee dated 26.08.2010, but no such note was recorded in the case of the searched person. This non-compliance with the mandatory requirement invalidated the jurisdiction assumed under Section 153C.3. Jurisdictional compliance under Section 153C:The Tribunal cited several judicial precedents, including the Hon'ble Supreme Court's decision in NTPC Ltd. v. CIT, to support the view that the recording of satisfaction is a jurisdictional requirement. The Tribunal also referred to the case of Shri Pawan Mangla v. DCIT, where it was held that the AO of the searched person must record satisfaction in the case records of the searched person. The Tribunal concluded that the failure to record satisfaction in the case of Shri P.L. Midha led to a lack of jurisdictional compliance under Section 153C.4. Legality of the additions made under Section 153C read with Section 143(3):Given the Tribunal's finding that the assumption of jurisdiction under Section 153C was invalid, all additions made in the assessment orders under Section 153C read with Section 143(3) were deleted. The Tribunal did not delve into the merits of the additions, as the jurisdictional issue was dispositive. The Tribunal quashed the assessment orders and set aside the orders of the authorities below, resulting in the appeals being allowed.Conclusion:The Tribunal allowed the assessee's appeals, holding that the assumption of jurisdiction under Section 153C was invalid due to the failure of the AO of the searched person to record the necessary satisfaction. Consequently, the assessment orders and the additions made therein were quashed. The Tribunal's decision was based on strict adherence to the procedural requirements under Section 153C, as interpreted by various judicial authorities.