Block Assessments Invalid Due to Defective Satisfaction Note: ITAT Quashes S.153C Proceedings in Income Tax Case [Read Order]
The Tribunal found that the note did not contain any reference to specific seized documents or their relevance to individual assessment years
ITAT Delhi, ITAT Quashes, Income Tax Case
ITAT Delhi, ITAT Quashes, Income Tax Case
The bench of the Income Tax Appellate Tribunal (ITAT), Delhi examining the jurisdiction to frame search-based assessments under Section 153C of the IncomeTax Act, 1961, held that the initiation of proceedings lacked legal foundation and therefore quashed the assessments for all years under appeal as the satisfaction note did not establish a year-wise nexus between seized documents and the assessee.
Royal Multiplex (P) Ltd. was issued notices under Section 153C read with Section 153A following a search and seizure operation conducted under Section 132 in the case of the M3M group. The Assessing Officer (AO)recorded a satisfaction note stating that certain seized documents pertained to Royal Multiplex (P) Ltd., and required the company to file returns for Assessment Years (A.Y.) 2011-12 to 2013-14 and 2015-16 to 2017-18.
The AO assessed income by estimating alleged commission income at one percent of bank credits reflected in the company’s bank account. The Commissioner of Income Tax (Appeals) upheld both the validity of the proceedings and the additions made. Consequently, six appeals were filed by the assessee before the Tribunal.
The appellant, represented by S.S. Nagar and Gaurav Sachdeva argued that the satisfaction note was recorded on 25 September 2018, which would make A.Y 2019-20 the relevant search year for the purpose of Section 153C. Therefore, A.Y. 2011-12 and 2012-13 fell outside the permissible six-year block period and the assessments for those years were without jurisdiction.
It was further contended that the satisfaction note was prepared in a consolidated and general manner for multiple years without identifying which seized document pertained to which assessment year. It was submitted that no incriminating material belonging to or relating to Royal Multiplex (P) Ltd. was found in the course of search, and consequently, the jurisdiction assumed under Section 153C was legally unsustainable.
The revenue, represented by Javed Akhtar argued that the AO had duly examined seized material and recorded satisfaction that the documents had a bearing on the income of the assessee. It was contended that detailed quantification of undisclosed income at the satisfaction stage was not mandatory and that the Commissioner of Income Tax (Appeals) had correctly upheld the proceedings and the additions.
The Bench comprising Judicial Member, Anubhav Sharma and Accountant Member, S. Rifaur Rahman, held that since the satisfaction note was recorded on 25 September 2018, the relevant search year became A.Y. 2019-20. Therefore, A.Y. 2011-12 and 2012-13 lay outside the statutory scope of Section 153C and the assessments for those years were required to be quashed.
With respect to the remaining years, the Tribunal observed that the satisfaction note was vague and did not disclose any details of the seized material or demonstrate how such material had a bearing on the income of the assessee for specific assessment years.
Due to the absence of a year-wise nexus, the Tribunal held that the jurisdiction assumed under Section 153C was invalid for all the years under appeal. Consequently, the assessments were quashed in entirety.
Thus, all the appeals filed by the assessee were partly allowed.
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