2020 (2) TMI 262 - AT - Income Tax

Tribunal upholds CIT(A)'s decision quashing assessment order under section 143(3) for 2010-2011

The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to quash the assessment order under section 143(3). The Tribunal ... Assessment u/s 153C - non recording satisfaction u/s 153C - HELD THAT:- A.O. was required to record satisfaction under section 153C because the A.Y. 2010-2011 is covered by Section 153C as satisfaction note was recorded on 23.07.2010. Therefore, there was no justification for the A.O. to pass Order under section 143(3) of the I.T. Act, 1961. Since mandatory conditions of Section 153C of the I.T. Act, 1961 are not satisfied in the present case, therefore, the Ld. CIT(A) was justified in quashing the assessment order under section 143(3) - Appeal of Revenue dismissed. Issues Involved:1. Validity of the assessment order under section 143(3) in light of section 153C.2. Determination of the relevant assessment years for proceedings under section 153C.3. Requirement and impact of recording a satisfaction note under section 153C.4. Applicability of incriminating material for reassessment under section 153C.Detailed Analysis:1. Validity of the Assessment Order under Section 143(3) in Light of Section 153C:The primary issue is whether the assessment order under section 143(3) was valid when the case should have been assessed under section 153C. The Ld. CIT(A) quashed the assessment order under section 143(3) on the grounds that the assessment year 2010-2011 is covered by section 153C, as the satisfaction note was recorded on 23.07.2010. The Ld. CIT(A) held that the assessment should have been made under section 153C read with section 153A, and since no satisfaction note was recorded for the assessment year 2010-2011, the assessment under section 143(3) was void ab initio.2. Determination of the Relevant Assessment Years for Proceedings under Section 153C:The Ld. CIT(A) and the Tribunal relied on the judgment of the Hon’ble Delhi High Court in the case of RRJ Securities Ltd., which established that the date of recording the satisfaction note is the base date for calculating the period to be covered under section 153C. The Tribunal confirmed that the relevant assessment years for section 153C proceedings would start from the assessment year corresponding to the year in which the satisfaction note was recorded. In this case, the satisfaction note was recorded on 23.07.2010, making the relevant assessment years 2010-2011 downwards.3. Requirement and Impact of Recording a Satisfaction Note under Section 153C:The Tribunal emphasized the necessity of recording a satisfaction note to initiate proceedings under section 153C. The satisfaction note must indicate that the seized documents or materials belong to a person other than the searched person. The Tribunal upheld the Ld. CIT(A)’s finding that since no satisfaction note was recorded for the assessment year 2010-2011, the assessment under section 143(3) was invalid. The Tribunal cited multiple precedents, including the Hon’ble Delhi High Court’s decision in the case of RRJ Securities Ltd., which reinforced the requirement of a satisfaction note.4. Applicability of Incriminating Material for Reassessment under Section 153C:The Tribunal agreed with the Ld. CIT(A) that no addition under section 153C could be made in the case of a completed assessment if no incriminating document was found during the search. The Tribunal reiterated that the assessment or reassessment under section 153C must be based on incriminating material found during the search. The Tribunal referenced the Hon’ble Delhi High Court’s decision in the case of Pepsico India Holdings Pvt. Ltd., which supports the principle that completed assessments can only be reopened if incriminating material is found.Conclusion:The Tribunal dismissed the Revenue’s appeal, upholding the Ld. CIT(A)’s decision to quash the assessment order under section 143(3). The Tribunal confirmed that the assessment year 2010-2011 should have been assessed under section 153C, and the failure to record a satisfaction note rendered the assessment under section 143(3) void. The Tribunal’s decision was based on established legal principles and precedents, ensuring that the assessment proceedings adhered to the mandatory requirements of section 153C.