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2021 (7) TMI 945 - AT - Income TaxValidity of proceedings u/s 153C - related party transaction with subsidiary companies - satisfaction note for invoking the provisions of section 153C - assessee is a foreign company, thus in the first instance, the AO should have issued a draft assessment which is not done in the instant cases - non - adherence of the provisions of section 144C - HELD THAT:- The unchallenged observations of the Ld. CIT(A) clearly establishes that the learned Assessing Officer did not make any enquiry pertaining to the documents seized, no deadly conduct any verification as to the transactions recorded on them with related parties, but on the other hand, as observed by the Ld. CIT(A) he simply placed reliance on certain photostate copies and recorded his satisfaction note in a wholesale consolidated manner pertaining to all the Indian company’s and overseas companies Thus so-called satisfaction recorded by the AO to invoke the jurisdiction is not a specific satisfaction with reference to any particular document belonging to the assessee and, therefore, it goes to the root of the matter and vitiates the assumption of jurisdiction by the learned Assessing Officer to reopen the assessment proceedings by issuance of notice under section 153C of the Act. Non-adherence of the provisions of section 144C - The assessee company incorporated in Cyprus as per laws of Cyprus and have been resident of Cyprus. The assessee has been filing the Incometax Return with Cyprus Revenue Authorities. Since the transaction between Focus Energy Ltd. with the assessee was accepted as an international transaction continuously over a period of time, it goes without saying that other party, i.e., the assessee is a foreign company. Any transaction between Indian Company and Indian company cannot be an international transaction and therefore, the international transaction of Focus Energy Ltd. which is an Indian Company, will necessarily be with the foreign company. CIT(A) concluded that it an unmistakable pointer that the assessee is a foreign company and such a fact is admitted by the Assessing Officer while dealing with the transactions of Focus Energy Ltd. with its foreign AEs continuously over a period of time. Basing on these facts, learned CIT(A) concluded that the material on record is more than enough to conclude that the assessee is a foreign company and therefore, under the provisions of section 144C, the Assessing Officer shall, in the first instance, forward a draft order of the proposed assessment to the assessee if he proposes to make any variation which is prejudicial to the interest of assessee. Evidently, no draft order was passed in this case. See CBDT Circular No. 09/2013 dated 19.11.2013 wherein the Assessing Officer is required to forward a draft assessment order to the eligible assessee, if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee It is, therefore, clear that the assessment order is bad for invoking the jurisdiction u/s. 153C without proper satisfaction and also for not passing the draft assessment order as required u/s. 144C. Documents found in search as not incriminating in nature - Also as per decision of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] there is a finding of fact returned by ld. CIT(A) that documents found in search were not incriminating in nature; that the contents of the same were fully explained by the assessee and accepted by the Assessing Officer; and that the seized documents were only referred for ascertaining the residence status of the assessee company in accordance with the provisions of section of the Act and not for detecting any undisclosed income of the assessee as per the provisions of section 153C of the Act, but served the purpose as a foot board to reopen the case of the assessee company for a block period of six years. - Decided against revenue.
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