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2015 (9) TMI 127 - ITAT HYDERABAD

2015 (9) TMI 127 - ITAT HYDERABAD - Assessment U/s. 153C - Addition towards low withdrawals - Held that:- Even though, the AO did mention that there was some incriminating material, there is no satisfaction recorded about the explanation of the income from the person who was searched and how the document is relevant in assessee’s case. The order sheet entry only indicate that ‘during the course of search incriminating material regarding undisclosed income of the assessee was found’. This stateme .....

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ant for making assessments in this case. Therefore, the initiation of proceedings U/s. 153C itself is bad in law. Therefore, consequential proceedings are bad in law and orders are to be cancelled.

Even on merits, there is no justification for estimating the low withdrawals on assumptions and presumptions, without there being any basis. In view of that also, the addition made in all the years about the low withdrawals cannot be sustained.

Addition on amount received from fr .....

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criminating material and as assessee has shown the amount as a receipt in 2002-03 itself in the capital account, we are of the opinion that addition cannot be made in the proceedings U/s. 153C, without any evidence to contrary to disbelieve assessee’s contentions. Be that as it may, as we have already held that initiation of proceedings U/s. 153C are itself bad in law, these issues become academic in nature. - Decided in favour of assessee. - 1755, 1756 , 1757, 1758, 1759, 1760, 1762, 1763 /Hyd/ .....

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he hands of Shri Satyanarayan Agarwal, proceedings U/s. 153C of the Income Tax Act [Act] were initiated in the above two assessee s cases. In all the impugned assessment years, Assessing Officer (AO) made addition towards low withdrawals as under: S.No. Name Asst. Year Amount (Rs.) 1. Anil Kumar Agarwal 2002-03 25,000 2. Anil Kumar Agarwal 2003-04 25,000 3. Anil Kumar Agarwal 2004-05 30,000 4. Anil Kumar Agarwal 2005-06 30,000 5. Anil Kumar Agarwal 2006-07 30,000 6. Anil Kumar Agarwal 2007-08 30 .....

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eals in all the impugned years. 3. Assessee apart from raising various grounds contesting the additions made, also raised additional grounds commonly in all the cases as under: 9. We would like to submit that as per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd., V. CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine the question of law which though not arose before the AO but arose before the ITAT for the first time. 10. .....

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isdiction over the searched party becomes invalid as held by the Hon'ble AP High Court in the case of CIT Vs. M/s. Shettys Pharmaceuticals & Biologicals Ltd. In ITTA No. 662 of 2014 dated 26-11-2014. 12. The Ld. CIT(A) ought to have appreciated the fact that no addition can be made to the income of the assessee U/s. 143(3) rws 153C of the Act without therebeing any incriminating material found during the course of search. 13. Without prejudice to the above ground, Ld. CIT(A) ought to hav .....

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o. 662 of 2014 dated 26-11-2014. It was further contended that AO has not only failed in recording the satisfaction but also had not used any incriminating material in estimating the low withdrawals. On both the counts, the orders passed by the authorities are not valid. 5. Ld. DR while placing copies of the order sheets. submitted that the satisfaction note recorded do indicate that there was incriminating material pertaining to assessees. Therefore, initiation of proceedings are valid. 6. We h .....

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s. This bland statement can not be considered as satisfaction for initiation of proceedings u/s 153C as it does not indicate the nature of seized material and how income is assessable in assessee hands. As seen from the orders also, there is no discussion about any incriminating material or incomes to be assessed under the provisions of Section 153C. Provisions of Section 153C are as under: 153C. (1) [Notwithstanding anything contained in section 139, section 147, section 148, section 149, secti .....

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having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section ( .....

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it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized o .....

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been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue .....

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erred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person" by the Finance Act, 2015, w.e.f. 1-6-2015. 20. Substituted for "and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A" by the Finance (No. 2) .....

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er referred to as the Act). This action has to be taken against a third party in respect of the incriminating material brought out in connection with search and seizure conducted on another party. Section 153C of the Act specifically says that the Assessing Officer must be satisfied that such action is required to be initiated. Sri Narasimha Sarma, learned counsel for the appellant, submits that the word recording satisfaction is not a pre-condition for the object of the aforesaid Section. In an .....

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139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessi .....

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that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own sati .....

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ging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding u/s. 153C of the I. T. Act. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A .....

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ctional High Court in the above case, we notice that there is neither any satisfaction recorded by the AO nor there is any incriminating material relevant for making assessments in this case. Therefore, the initiation of proceedings U/s. 153C itself is bad in law. Therefore, consequential proceedings are bad in law and orders are to be cancelled. 9. Even on merits, there is no justification for estimating the low withdrawals on assumptions and presumptions, without there being any basis. In view .....

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