The Income Tax Appellate Tribunal (ITAT) Jaipur bench dismissed the assessment order passed under Section 153 of the Income Tax Act , 1961 without recording proper satisfaction. As per Section 153C of the Income Tax Act, it would also be appropriate to understand that before issuing notice, the TO (Tax Officer) of the searched person must be ‘’satisfied’’ that inter alia, any document seized or requisitioned ‘’belongs to‘’ a person other than the searched person.
Against the Assessee Macro Properties Pvt, a search and seizure action and survey action was carried out by the Income Tax Department on the members of Krian Fine Jewellers Group on which the Assessee is one of the members.
During the proceedings certain documents were seized belonging to a person other than the person in the case of whom the search under Section 132 of the Income Tax Act was carried out.
Thereafter, a notice under Section 153C of Income Tax Act was issued and served upon the assessee requiring the assessee to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 within 15 days of the service of the said notice.
Subsequently, the AO passed an assessment order under Section 153C of the Income Tax Act however, no such satisfaction is manifest in the assessment order. The AO also made various additions in the income of assessee.
Aggrieved by the order, the assessee filed objections before the Commissioner of Income Tax (Appeals){ CIT(A)}, who upheld the decision of the AO. Thereafter the assesee filed another appeal before tribunal.
C.M. Agarwal, Counsel for the assessee submitted that Asseesee filed four appeals in each appeal the AO has not recorded satisfaction in respect of each of the assessment years before issuing notice under Section 153C of the Income Tax Act relating to seized books of accounts or documents to each assessment year separately.
Thus, from the plain reading of the facts noted by the Assessing Officer, it is crystal clear that the assumption of jurisdiction by the Assessing Officer in issuing Notice under Section 153C of the Income Tax Act was totally illegal and bad in law and thereby renders the assessments made pursuant thereto illegal and void ab initio.
Jamesh Kurian, Counsel for Revenue, supported the order of assessing officers.
It was determined by the tribunal that the provision of Section 153C of the Income Tax Act, it would also be appropriate to understand that before issuing notice under Section 153C of the Income Tax Act , the TO (Tax Officer) of the searched person must be ‘’satisfied’’ that inter alia, any document seized or requisitioned ‘’belongs to ‘’ a person other than the searched person.
Further, the tribunal observed that recording of the satisfaction note did not speak to any incriminating material related to the assessee company. The transactions mentioned in the said satisfaction note are duly recorded in the books of the assessee company.
Moreover, once the requirement of satisfaction wherein the Assessing Officer of the searched person records that documents belonging to the other person is met, the assessment or re-assessment of the income of the other person shall take place in accordance with Section 153A of the Income Tax Act
The present case, AO did not bring anything on record stating the fact that there exists any document found in the search and seizure operation conducted so as to prove that the transaction recorded in the seized material with that of the transactions already recorded are incriminating in nature.
After reviewing the facts and submissions of the both parties, the two member bench of Rathod Kamlesh Jayantbhai, (Accountant Member ) and S. Seethalakshmi ( Judicial Member) held notice issued under Section 153C of the Income Tax Act as bad in law and consequently whole proceedings including the assessment order passed under Section 143(3) r.w.s. 153C of the Income Tax Act void ab initio.
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