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2021 (11) TMI 1007 - ITAT PANJIValidity of Assessment u/s 153A /153C - Mandation of recording satisfaction note for the purposes of initiating the proceedings u/s.153C - as contended by the ld. DR that the satisfaction was not only recorded in the file of the searched person but also in the file of the other person, namely, assessee before us - Deemed dividend addition u/s 2(22) - HELD THAT:- The procedure to be adopted for initiating proceedings under section 153A against a person who has not been searched, has been prescribed in the provisions of section 153C wherein a situation, the Assessing Officer having the jurisdiction over the other person is different from the Assessing Officer having jurisdiction over the person in respect of whom the search has been conducted. Before notice can be issued under section 153C, the Assessing Officer has to be satisfied that undisclosed income found during search operations belongs to the third person. A clear and plain reading of section 153C leaves no doubt that recording of satisfaction by the Assessing Officer of the person searched is mandatory and it has to precede the initiation of proceedings against the other person (not searched). If we look into the satisfaction note in the file of the searched person namely, Model Construction Pvt. Ltd. It is abundantly clear that there is no recording of satisfaction by the Assessing Officer that the document seized during the search at the premises of Model Construction Pvt. Ltd. Belongs to the assessee and were incriminating in nature. In our view, unless there is a recovery of the document belonging to the other person, section 153C of the Act cannot trigger. In the present case there is neither the recording of satisfaction by the AO of the searched person that the documents belong to the other person nor there is any finding that the documents so found were incriminating in nature. In our view a detailed scheme has been provided for initiation of Section 153C i.e. first there would be a satisfaction in the file of the AO of the searched person and thereafter transmission of the file along with the incriminating document to the AO of the other person and thereafter recording of satisfaction by the AO of the other person and issuance of notice u/s.153C of the Act and completion of proceedings. In the absence of the fundamental and foundational fact of recording satisfaction by the AO of the searched person no proceeding u/s.153C of the Act can be initiated by the other person. In the present case, there is no satisfaction in the file of AO of the searched person and accordingly, the issuance of proceedings u/s.153C of the Act were without of any basis. Assuming the proceeding can be initiated without there being any satisfaction in the file of the AO whether the satisfaction on record in the file of the assessee reproduced hereinabove can be said to be satisfaction in the eyes of law. It is fundamental that in the satisfaction note, it is not only essential to mention the PAN No. of the assessee, his address and other details by the Assessing Officer and invariably the satisfaction note should not be forming part of the order sheet and it should be separately recorded as is satisfaction note showing the application of mind by the Assessing Officer of the assessee before us. Admittedly, the application of mind is conspicuously missing in the order sheet (satisfaction) as neither the description of the document were mentioned nor how those document leads to evasion or concealment of non-disclosure of income by the assessee in all these years. None of the document belongs to the assessee before us, and, therefore, it cannot be said to be relevant or incriminating in nature. We may also like to point out that as confirmed by the ld. CIT-DR that none of the additions were made by the AO on the basis of the seized document and were only made u/s.2(22)(e) of the Act as is clear, from the grounds of appeal raised by the revenue before the ITAT, which were not pertaining to the seized document. In terms of the directions of the Hon’ble High Court in SAVESH KUMAR AGARWAL [2013 (7) TMI 805 - ALLAHABAD HIGH COURT] we hereby decide the verification of the jurisdictional parameter for initiation of proceedings u/s.153C of the Act in favour of the assessee and against the revenue.
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