Invalid Section 153C Notices Quashed; Assessments Under Section 143(3) Overturned

The Tribunal held that notices issued under Section 153C were invalid as the Assessing Officer (AO) of the searched person did not record satisfaction before transferring material to the AO of the assessee, and the AO of the assessee did not sign the satisfaction note. Consequently, the assessments under Section 153C with Section 143(3) were quashed, and the assessee's appeals were allowed. The Tribunal did not address the other grounds on merits.

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Issues Involved:
1. Validity of notice issued under Section 153C without recording satisfaction by the Assessing Officer (AO) of the searched person.
2. Validity of notice issued under Section 153C based on satisfaction recorded by the AO of the appellant without signing the order sheet.

Issue-Wise Detailed Analysis:

1. Validity of Notice Issued under Section 153C without Recording Satisfaction by the AO of the Searched Person:
The primary contention is that the AO of the searched person (Sai Teja Builders) did not record the required satisfaction before transferring the incriminating material to the AO of the assessee. As per the statutory requirement and the Supreme Court's decision in CIT vs. Calcutta Knitwears, the AO of the searched person must record satisfaction that the material belongs to the assessee before initiating proceedings under Section 153C. The assessee argued that the absence of such satisfaction renders the assessment invalid. The Tribunal noted that the department failed to provide evidence of recorded satisfaction by the AO of the searched person. The Tribunal cited various judicial precedents, including the Delhi High Court's decision in Pepsi Foods Ltd. and ITAT decisions in Shri Srinivas Babu vs. ACIT and Narsi Creations vs. DCIT, which emphasize the necessity of recording satisfaction. Consequently, the Tribunal held that the notice issued under Section 153C is unsustainable due to the lack of recorded satisfaction by the AO of the searched person.

2. Validity of Notice Issued under Section 153C Based on Unsigned Satisfaction Recorded by the AO of the Appellant:
The second issue pertains to the AO of the assessee not signing the satisfaction note before issuing the notice under Section 153C. The assessee provided evidence that the order sheet entries were unsigned and undated, arguing that unsigned entries cannot be considered valid proceedings. The Tribunal agreed, stating that an unsigned order loses its relevance and cannot be treated as a valid order for execution or implementation. The Tribunal referred to the statutory requirement under Section 153C, which mandates the AO to record satisfaction for issuing a notice. It also cited judicial precedents, including ITAT Mumbai's decision in Rajesh A. Yagnik vs. ACIT and ITAT Jaipur's decision in ITO vs. Super Tools India Ltd., which held that unsigned orders lack sanctity and are invalid. Consequently, the Tribunal quashed the notice issued under Section 153C due to the unsigned and undated satisfaction note, rendering the assessment invalid.

Conclusion:
The Tribunal concluded that the notices issued under Section 153C were invalid due to the lack of recorded satisfaction by the AO of the searched person and the unsigned satisfaction note by the AO of the assessee. As a result, the assessments made under Section 153C read with Section 143(3) were quashed. The appeals of the assessee were allowed, and the Tribunal did not find it necessary to adjudicate the remaining grounds on merits. The order was pronounced in the open court on January 11, 2019.

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