TaxTMI 
TaxTMI 
2024 (4) TMI 1405
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....ving Authority level the order of assessment is liable to be annulled as being in violation of the principles of natural justice. 3. The CIT(A) erred in not deleting the addition of undisclosed income made to the extent of Rs. 53,20,320/- u/s 115BBE. 4. The CIT(A) erred in upholding the taxation of same income in the hands of the Appellant, which had already been offered by the partner in his return of income, resulting in double taxation. 5. The CIT(A) failed to appreciate the explanation provided by the Appellant in respect of the undisclosed income in a proper perspective. 3. The assessee has also raised the following additional grounds of appeal: 1. The order of the CIT(A) is erroneous as the same is opposed to the facts of the case and provisions of law. 2. Lack of Satisfaction: 2.1. The order of assessment passed by the AO is illegal and void as the same has been initiated without recording proper satisfaction as mandated by the Act. 2.2. The AO having failed to record satisfaction as per section 153C of the Act, the order of assessment is illegal, without jurisdiction and the CIT(A) erred in upholding the same....
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....The assessee filed reply on 12.12.2018. The AO also obtained a statement which has been recorded u/s.131(1A) of the Act, from Smt. J. Shanti, a partner of the assessee's firm. 5. After analyzing the facts and circumstances of the case along with material evidences on record, the AO completed the assessment by making an addition of Rs. 36,51,000/- by disallowing the sundry creditors for want of confirmations from the corresponding persons. 6. Further, based on register seized from the premise of M/s. K.P. Construction vide Annexure-Ann/RB/KPC/B&D/S/10 in which number of transaction entries made with one Shri D. Siva amounting to Rs. 53,20,320/- during the FY 2015-16, made an addition to the returned income as undisclosed income u/s.115BBE of the Act. The AO also stated that specific question was asked for notice u/s. 142(1) of the Act, dated 01.11.2018 to clarify the transactions and furnish the details of payment made along with TDS details thereon for an amount of Rs. 53,20,320/-. The AO stated that, in response to notice, the assessee has stated that the note book was maintained by Shri P. Narasimhan, partner of the firm, wherein, he has recorded the details of weekly labou....
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....counts, documents and other valuable assets found during search, who belong to a third party, which would lead to inference of undisclosed income of such third party, such inference should be recorded by the AO having jurisdiction over the searched persons. In the present case, if you go through the satisfaction note recorded by the AO of a searched person, there is no reference to materials, on which, the AO has based his findings to make additions towards unrecorded expenditure. Therefore, he submitted that notice issued u/s.153C of the Act and consequent assessment proceedings on the basis of invalid or incorrect satisfaction, is illegal ab initio and liable to be quashed. 9. The Ld. DR, Shri P. Sajit Kumar, JCIT, on the other hand, referring to the satisfaction note recorded by the AO of the searched person submitted that the law does not state that there should be a material for each addition in a particular assessment, but what is to be seen, is there any incriminating material found during the course of search pertains to a particular assessee and on the basis of said material, the AO has recorded satisfaction that the materials found during the course of search relates o....
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.... other person for the relevant assessment year. In other words, the satisfaction recorded by the AO of the searched person should specifically referred to the incriminating material found during the course of search of said satisfaction note and also explain how such material having a bearing on the total income of the other persons, unless the AO of searched persons brings out the reasons for his satisfaction with reference to seized materials, then, it can be said that the satisfaction note recorded by the AO of searched person not in accordance with law or incorrect satisfaction and thus, on the basis of said satisfaction, the proceedings u/s.153C of the Act, cannot be initiated. This legal position is supported by the decision of the Hon'ble Karnataka High Court in the case of CIT v. IBC Knowledge Part (P) Ltd., reported in [2016] 385 ITR 346 (Karnataka), wherein, the Hon'ble Karnataka High Court categorically held that where no material belonging to a third party is found during the course of search but only an inference of an undisclosed income is drawn during the course of search or based on such enquiry u/s.153C of the Act, would have no application. In the present case, on....