2015 (4) TMI 91 - AT - Income Tax

Tribunal quashes assessments citing lack of jurisdiction under Section 153C, emphasizing need for recording satisfaction note

The Tribunal quashed the assessments for various assessment years due to lack of jurisdiction under Section 153C, as the required satisfaction note was ... Assessment under section 153A - absence of satisfaction note - Held that:- As relying on Pepsi Foods Pvt. Ltd. Versus. Assistant Commissioner of Income Tax [2014 (8) TMI 425 - DELHI HIGH COURT] since there was no ‘satisfaction Note’ by the AO of searched person prior to initiation of proceedings u/s 153C of the Act, the assessments concluded on the assessee u/s 153C of the Act r.w.s 153A of the Act lack jurisdiction and the same are hereby quashed. - Decided in favour of assessee. Issues Involved:1. Whether the CIT(A) was justified in deleting the disallowances of expenditure made by the AO.2. Whether the CIT(A) was justified in deleting the additions made on account of unexplained purchases under Section 69C of the Act.3. Whether the CIT(A) was justified in deleting the addition of Rs. 40,00,000 added by the AO on account of unexplained cash credit under Section 68 of the Act (for AY 2007-08).4. The validity of the initiation of proceedings under Section 153C of the Act.Issue-Wise Detailed Analysis:1. Deletion of Disallowances of Expenditure:The Revenue raised the issue of whether the CIT(A) was justified in deleting the disallowances of expenditure made by the AO. The Tribunal did not specifically adjudicate on this issue because it quashed the assessments on the grounds of lack of jurisdiction under Section 153C.2. Deletion of Additions on Account of Unexplained Purchases (Section 69C):Similarly, the Revenue questioned the deletion of additions made on account of unexplained purchases under Section 69C. However, this issue was also not adjudicated due to the Tribunal's decision to quash the assessments under Section 153C.3. Deletion of Addition on Account of Unexplained Cash Credit (Section 68) for AY 2007-08:For AY 2007-08, the Revenue additionally challenged the deletion of Rs. 40,00,000 added by the AO on account of unexplained cash credit under Section 68. This issue was also not addressed separately as the Tribunal quashed the assessments under Section 153C.4. Validity of Proceedings under Section 153C:The primary issue was the validity of the proceedings initiated under Section 153C of the Act. The Tribunal examined whether the required satisfaction was recorded by the AO in the files of the searched person prior to initiating proceedings under Section 153C.The Tribunal noted that the satisfaction note was not recorded in the files of the searched person, as required by law. The Tribunal relied on the judgment of the Hon'ble jurisdictional High Court in the case of Pepsico India Holding Pvt. Ltd v. ACIT, which emphasized the necessity of recording satisfaction by the AO of the searched person.The Tribunal referred to several previous orders of Coordinate Benches, which had consistently held that the absence of a satisfaction note in the files of the searched person invalidated the proceedings under Section 153C. Specifically, the Tribunal cited the cases of Tanvir Collections Pvt. Ltd v. ACIT, DCIT v. M/s. Aakash Arogya Mindir P. Ltd, and ACIT v. Inlay Marketing Pvt. Ltd.The Tribunal concluded that since the satisfaction note was not recorded by the AO of the searched person, the assessments under Section 153C lacked jurisdiction and were void ab initio. Consequently, the Tribunal quashed the assessments for all the relevant assessment years (2003-04 to 2008-09).Conclusion:The Tribunal allowed the assessee's cross-objections regarding the invalidity of proceedings under Section 153C and quashed the assessments for the relevant years. As a result, the grounds raised by the Revenue concerning the merits of the case were not adjudicated, and the Revenue's appeals were dismissed as infructuous. The decision was pronounced in the open Court on 25th February 2015.