TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1043
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....e AO is illegal and without jurisdiction. The AO has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly, the notice u/s. 153C alongwith the assessment order on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the satisfaction note(s) recorded u/s. 153C of the Act are bad in law and without jurisdiction and, accordingly, the assessment proceedings initiated on the foundation of such satisfaction note(s) and also the consequent assessment order passed are liable to be quashed." Assessment Year 2015-16 2. The brief facts of the case related to assessment year 2015-16 are that a search and seizure operation action u/s. 132 of the Act, was carried out on M/s SMC Global Securities Limited and its related entities (SMC Group) on 20.07.2018. During the assessment proceedings and on perusal of seized data / documents in the case of SMC Group, certain documents / information have been found which pertains to assessee. After analyzing the documents notice u/s. 153C was issued. In response to the notice u/s. 153C of the Act, ....
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....tation. The issue is no longer res integra, as it is covered by Apex Court decision in the case of CIT vs. Jasjit Singh (2023). Accordingly, applying the ratio of aforesaid judgment to the assessee's case the initiation of proceedings u/s. 153C for AY 2015-16 is without jurisdiction and barred by limitation. Thus, the proceedings initiated, and assessment order passed u/s. 153C for the year under consideration is also liable to be quashed as null and void. We hold and direct accordingly. Resultantly, the appeal of the assessee pertaining to assessment year 2015-16 stands allowed. Assessment Year 2016-17 6. The brief facts related to assessment year 2016-17 are that a search and seizure operation action u/s. 132 of the Act, was carried out on M/s SMC Global Securities Limited and its related entities (SMC Group) on 20.07.2018. During course the assessment proceedings and on perusal of seized data / documents in the case of SMC Group, certain documents / information have been found which pertains to assessee. After analyzing the documents notice u/s. 153C was issued. In response to the notice u/s. 153C of the Act, the assessee has filed the return of income on 18.11.2021 declaring ....
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.... assessee company. 8.1 Ld. DR did not controvert the aforesaid proposition made by the Assessee's AR on the aforesaid legal ground. 9. We have heard both the parties and perused the records. We find that the challenge to the assumption of jurisdiction under s. 153C of the Act hinges the legal infirmities in recording the 'satisfaction note' by the AO which is claimed to be foundation for assumption of jurisdiction under s. 153C of the Act. 9.1 The 'satisfaction note' recorded by the AO of the assessee being germane to the determination of challenge to the assumption of jurisdiction, is reproduced hereunder:- "10.06.2021 Reasons for satisfaction required for initiating the proceedings u/s 153C of the Income Tax Act, 1961 in the case of M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M), having registered address located at 1308-1311, 13th Floor, 28, Dr. Gopal Das Bhawan, Barakhamba Road, New Delhi - 110002 (for the A. Ys. 2013-14 to 2018-19 & 2019-20) A search & seizure operation action u/s 132 of the Income Tax Act, 1961 was carried out in the cases of M/s SMC Global Securities Ltd. and relates entities of group cases on 20.07.2018. During the course of assessment proce....
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....above seized incriminating material (in the form of digital data) are pertaining to the assessee i.c. M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M) and these seized documents have bearing on determination of total income of the assessee for the relevant assessment years referred to in sub section (1) of the section 153A of the Act and that it is a fit case for initiating proceedings u/s 153C of the Act, in the case of M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M) for the A.Y. 2013-14 to 2018-19 & A.Y. 2019-20. Sd/- (K.R. Sharma) Assistant Commissioner of Income Tax, Central Circle-4, New Delhi" 9.2 We note that as per the assessment order, Search & Seizure Operation u/s 132 was conducted on 10/07/2018 in SMC Global Securities Ltd. Satisfaction note u/s 153C is stated to be recorded in the case of the assessee on 10/06/2021. The proceedings initiated u/s 153C is bad in law and without jurisdiction due to the fact that the satisfaction note recorded is a consolidated satisfaction note for 7 years; there is no description/analysis of seized material based on which satisfaction has been recorded; there is no year wise analysis of seized material; there is no year w....
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....of proceedings u/s 153C - whether the assessee should be treated as a "Searched Person" or "Other Person"? - Whether 'Loose Sheets' and 'Diary' have any evidentiary value? - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court of Karnataka at Bengaluru in Writ Appeal [2024 (2) TMI 116 - KARNATAKA HIGH COURT] held notices issued u/s 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal. As satisfaction note is required to be recorded u/s 153C for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant / Revenue. As per the Panchanama provided herein, it is deemed appropriate to conclude that the notice provided u/s 153C is bad in law. Special Leave Petition is dismissed." 9.4 We further note that in the case of Rajendra Rameshlal Gugal....
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.... Delhi Hard Disk Named image [Inventorized as Annexure-A-65 (Hard Disk2 Nos.)] Various invoices, client statements raised by M/s. Super Bazaar Stoeres Private Limited. Stock details. The above said documents contain the information of income/investment/expenditure made by the assessee M/s. Super Bazar Stores Private Limited. After examining the documents, I am satisfied within the meaning of Section 153C r.w.s. 153A of the Act that these documents have bearing on the determination of the total income of M/s. Super Bazar Stores Pvt.Ltd. for the A.Ys 2010-11 to 2015-16." 10. Section 153C of the Act pertains to the assessment of income in the hands of person other than searched person, in cases where certain documents, assets or books of accounts etc. found to be pertained to or related to such third person (other than the person on whom search was conducted under s. 132 of the Act or requisitioned under s. 132A of the Act). This section allows the AO of other person to initiate proceedings against such other person/third person (not the searched person) if there are indications of undisclosed income. A key component of initiating search proceedings under s. 153C of the Act is....
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....sks have bearing on determination of total income of Super Bazar Stores Pvt. Ltd. for AYs 2010-11 to 2015-16, is without legal foundation and without application of mind, as the AO has even failed to name the alleged documents and further failed to mention as to how it is related/pertained to a given AY covered in the 'satisfaction note'; [iv] the AO on receipt of material/documents from the AO of the searched person must necessarily apply his mind on the material received and ascertain precisely the specific year to which incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by the AO in the light of judgement rendered in the case of Agni Vishnu Feature Pvt.Ltd. vs DCIT [2023] 157 taxmann.com 242 (Madras). In the instant case, nonapplication of mind on material supplied to AO is obvious as the company itself was not in existence for sizable period covered in proceedings under s. 153C of the Act; [v] the 'satisfaction note' is clearly very generic and ....
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....153C of the Act for years in addition to those to which material may be directly relatable. Thus, a nuanced application of mind and recording of reasons for drawing satisfaction as contemplated under section 153C of the Act qua different AYs is paramount. The Hon'ble Delhi High Court noticeably held that issuance of a notice under section 153C of the Act is clearly not intended to be an inevitable consequence to the receipt of material by the Jurisdictional AO and that the initiation of action under section 153C of the Act will have to be founded on a formation of opinion by the Jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the determination of total income and would be relevant for the purposes of assessment/re-assessment in terms of section 153C of the Act. 13. The observation of the Hon'ble Delhi High Court noted above, clearly provides vehement support to the plea taken by the assessee on aspects of jurisdiction flowing from 'satisfaction note'. The 'satisfaction note' under scrutiny defies most of the parameters expected of him while drawing satisfaction. While exercising the power under section 153C of the Act, neit....