By TIOL News Service

AHMEDABAD, MAR 06, 2017: THE issue is - Whether assessment orders passed u/s 153C without recording separate satisfaction in case of searched person, is invalid. YES is the verdict.

Facts of the case:

A search and seizure action was carried out u/s 132 during subject year, in the premises of one Vikas R. Patel and the assessee, wherein certain incriminating documents were seized. Thereafter notice was issued u/s 153C for the A.Ys 2007-08 and 2008-09. The AO completed the assessment u/s 153C determining the taxable income of assessee for the years under consideration. The same came to be confirmed by the CIT(A) and on further appeals, relying upon the decision of the Division Bench of this Court in the case of DCIT Central Circle 1 – Baroda Vs. Lalitkumar M. Patel and having found that there was no separate satisfaction in the case of the search person, Shri Vikas R. Patel before initiating 153 proceedings, the Tribunal allowed the Appeals preferred by the assessee and set aside the orders passed u/s 153C.

On appeal, the HC held that,

++ is not disputed that the search was carried out at the premises and in the case of one another person, Vikas R. Patel. There was no satisfaction recorded by the AO in the case of the searched person, Shri Vikas R. Patel before initiating Section 153 proceedings, and therefore, the mandatory requirement, before initiating the proceedings u/s 153C in the case of the assessee has not been followed. It was the case on behalf of the revenue that separate satisfaction note was recorded by the AO. However, as per catena of decisions of the Supreme Court as well as this Court, same is not sufficient to initiate the proceedings u/s 153C in the case of the assessee. As such, the issue involved in the present Appeals are squarely covered by the decision of the Supreme Court in the case of Manish Maheswari Vs. Asst. Commissioner of Income Tax & Another, in the case of Khandubhai Vasanji Desai & Others Vs. Deputy Commissioner of Income Tax & Another and in the case of Commissioner of Income Tax Vs. Champakbhai Mohanbhai Patel;

++ while passing the impugned common judgment and order, the tribunal has relied upon the decision of the Division Bench of this Court in the case of Lalitkumar M. Patel and relying upon the said decision the assessment orders u/s 153C in the case of the assessee are set aside. At this stage, it is required to be noted that even the CBDT has also issued Circular No.24/2015 dated 31/12/2015 in which it is observed that recording of satisfaction note is prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person. Despite the above, Department has preferred Appeals. Be that as it may, as observed hereinabove, no substantial question of law arise in the present Appeals.

(See 2017-TIOL-450-HC-AHM-IT)