2020 (10) TMI 1020 - AT - Income Tax

Tribunal Upholds CIT(A) Decision on Jurisdiction under Income Tax Act

ACIT, Central Circle-14, New Delhi Versus Rangoli Buildtech (P) Ltd.

The Tribunal upheld the CIT(A)'s decision to quash the assessment order under section 153C of the Income Tax Act. It was found that the satisfaction note ... Assessment u/s 153A - satisfaction note that the seized documents mentioned there in belonged not to the searched person, but, to the assessee - HELD THAT:- No satisfaction has been recorded in the file of the searched person that the seized documents belonged to the other party and do not belong to the searched person, therefore, no infirmity in the order of the CIT(A) on this issue holding that the jurisdiction assumed under section 153C in the case of the assessee is not in accordance with law. We accordingly uphold the same and the grounds raised by the Revenue are dismissed. Issues Involved:1. Validity of jurisdiction assumed under section 153C of the Income Tax Act.2. Requirement and adequacy of satisfaction note for initiating action under section 153C.3. Whether the documents found during the search belonged to the assessee or the searched person.4. Whether the seized documents were incriminating in nature.5. Compliance with legal precedents and guidelines for assuming jurisdiction under section 153C.Issue-wise Detailed Analysis:1. Validity of Jurisdiction Assumed Under Section 153C:The primary issue in this case was whether the jurisdiction assumed under section 153C of the Income Tax Act was valid. The CIT(A) quashed the assessment order on the ground that the jurisdiction under section 153C was not properly assumed. The CIT(A) noted that the satisfaction note did not record that the seized documents belonged to the assessee and not to the searched person, which is a mandatory requirement for assuming jurisdiction under section 153C.2. Requirement and Adequacy of Satisfaction Note:The CIT(A) and Tribunal emphasized that for valid initiation of proceedings under section 153C, a satisfaction note must be recorded in the file of the searched person. The satisfaction note should clearly state that the documents do not belong to the searched person but to another person. The Tribunal referred to the decision in the case of DSL Properties (P) Ltd., which set guidelines for assuming jurisdiction under section 153C. The Tribunal found that the satisfaction note in this case did not meet these requirements, as it was recorded in the file of the assessee and not the searched person.3. Whether the Documents Found During the Search Belonged to the Assessee or the Searched Person:The Tribunal observed that the documents seized from the premises of M/s Excel Infotech Pvt. Ltd. were claimed to belong to the assessee, M/s Rangoli Buildtech Pvt. Ltd. However, the satisfaction note did not specify how these documents belonged to the assessee and not the searched person. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of Pepsi Foods (P) Ltd. vs ACIT, which held that the satisfaction note must display the reasons or basis for the conclusion that the documents belonged to a person other than the searched person.4. Whether the Seized Documents Were Incriminating in Nature:The Tribunal noted that the satisfaction note did not mention that the seized documents were incriminating in nature. The Hon'ble Delhi High Court in the case of ARN Infrastructure India Limited vs ACIT held that the documents should not only belong to the other person but also should be incriminating in nature. The absence of such a mention in the satisfaction note further weakened the Revenue's case.5. Compliance with Legal Precedents and Guidelines for Assuming Jurisdiction Under Section 153C:The Tribunal referred to several legal precedents, including the decisions of the Hon'ble Delhi High Court in the cases of Pepsi Foods (P) Ltd., NS Software, Pepsico India Holdings (P) Ltd., and Renu Constructions (P) Limited. These decisions consistently held that the satisfaction note must clearly state that the seized documents belong to the other person and not the searched person. The Tribunal found that the satisfaction note in this case did not comply with these legal precedents, leading to the conclusion that the jurisdiction assumed under section 153C was invalid.Conclusion:The Tribunal upheld the order of the CIT(A) quashing the assessment order passed under section 153C/143(3) of the Income Tax Act. The Tribunal found that the satisfaction note did not meet the mandatory requirements for assuming jurisdiction under section 153C, as it did not specify that the seized documents belonged to the assessee and not the searched person. The appeal filed by the Revenue was dismissed.