2017 (6) TMI 174 - AT - Income Tax

Tribunal quashes assessments for lack of satisfaction note, emphasizes procedural compliance. Cross objections allowed.

ACIT, Central Circle-21, New Delhi Versus M/s. JMSW Infracon Pvt. Ltd., (Formerly Known as M/s. ANG Corporate Consultants Pvt. Ltd.) And Vice-Versa

The tribunal quashed the assessments due to the lack of a proper satisfaction note recorded by the Assessing Officer (AO) of the searched person as ... Validity of assessment completed under section 153C - satisfaction note was not recorded by the Assessing Officer in the capacity of Assessing Officer of searched person - Held that:- Assessing Officer has recorded that in terms of provision of section 153C of the Act, notices are hereby issued u/s 153C for AY 2003-04 to 2008- 09 in the case of M/s. ANG Corporate Consultant Private Limited (old name of the assessee). Since notice under section 153C of the Act is always issued by the Assessing Officer of the other person and not by the Assessing Officer of the searched person, the sentence that “notices are hereby issued” indicate that the above satisfaction note has been recorded by the DCIT Central circle 17, New Delhi in the capacity of the Assessing Officer of other person. The heading of this satisfaction note also supports this view. The above fact coupled with the fact of non-availability of satisfaction note on the record of the searched persons, Sh. BK Dhingra and Smt. Poonam Dhingra led us towards the conclusion that the satisfaction note was not recorded by the DCIT, Central circle 17, New Delhi, in the capacity of a Assessing Officer of searched person, which is one of the essential requirement for invoking jurisdiction under section 153C of the Act and in absence of which proceedings initiated under section 153C of the Act are not validly initiated. Accordingly, we quash those proceedings. - Decided in favour of assessee. Issues Involved:1. Validity of proceedings under section 153C of the Income Tax Act.2. Delay in filing cross objections by the assessee.3. Merits of additions and disallowances made by the Assessing Officer.Detailed Analysis:1. Validity of Proceedings under Section 153C:The primary issue was whether the satisfaction note required under section 153C was recorded by the correct Assessing Officer (AO). According to section 153C, the AO of the searched person must record satisfaction that any seized documents belong to another person before handing them over to the AO of that other person. The tribunal noted that the satisfaction note in this case was recorded by the AO of the assessee and not by the AO of the searched person, which is a mandatory requirement. The tribunal emphasized that this procedural requirement is critical and not a mere technicality. The tribunal referred to the Supreme Court's judgment in CIT Vs. Calcutta Knitwears, which mandates that the satisfaction note must be prepared by the AO of the searched person. The tribunal concluded that the lack of proper satisfaction note invalidated the proceedings under section 153C, leading to the quashing of the assessments.2. Delay in Filing Cross Objections by the Assessee:The Revenue objected to the cross objections filed by the assessee on the grounds that they were time-barred. The tribunal examined the timeline of events and found that the cross objections were filed within the limitation period prescribed under section 253(4) of the Income Tax Act. The tribunal rejected the Revenue's objection, stating that the cross objections were filed within 30 days from the receipt of the notice of appeal by the assessee, thus, there was no merit in the Revenue's objection regarding the delay.3. Merits of Additions and Disallowances:Since the tribunal quashed the proceedings under section 153C on the grounds of improper satisfaction note, it did not adjudicate on the merits of the additions and disallowances made by the AO. The tribunal noted that once the proceedings under section 153C are quashed, there is no need to address the merits of the case.Conclusion:The tribunal allowed the cross objections of the assessee and dismissed the appeals of the Revenue. The tribunal emphasized the importance of adhering to procedural requirements, particularly the recording of satisfaction by the correct AO, as mandated by the statute and judicial precedents. The decision underscores that jurisdictional lapses cannot be overlooked under the guise of technicalities, and such lapses go to the root of the matter, rendering the entire proceedings invalid.