ACIT Vs Ramasamy Rajasehar (ITAT Chennai)
153C assessment quashed for want of year-wise satisfaction; protective addition of ₹14.91 Cr u/s 69 deleted as no substantive addition existed in companies’ hands
In this appeal by the Revenue & the Cross-Objection filed by Assessee, the Tribunal examined the legality of a protective addition of ₹14.91 Crores made u/s 69 towards alleged unexplained investments in Vasan Construction Company Pvt Ltd & DS Builders Pvt Ltd based solely on loose sheets seized during search on the Dhanalakshmi Srinivasan Group. The Assessee, a former employee and CFO of the Group, consistently maintained that he had no independent resources to make such huge investments and that his name had been misused by the management, which was also admitted in the sworn statement of Shri S. Kathiravan u/s 132(4), who confirmed that investments were routed through bogus concerns to accommodate unaccounted income of the Group.
The AO treated the investments recorded in seized papers as unexplained investment and made a protective addition of ₹14.91 Crores in AY 2014-15, despite having made substantive additions in the hands of the two companies only for earlier years (AYs 2012-13 & 2013-14) and not for AY 2014-15. The CIT(A) deleted the addition holding that protective assessment without a corresponding substantive assessment for the same AY is invalid and that no corroborative evidence existed showing that Assessee actually invested any sum.
Before the Tribunal, Assessee raised a jurisdictional challenge to the consolidated satisfaction note recorded u/s 153C covering AYs 2012-13 to 2018-19, without year-specific correlation of seized material. The Tribunal applied binding precedents including Super Malls (SC), Pepsi Foods (Del HC), Calcutta Knitwears (SC) and the Karnataka HC judgment in Sunil Kumar Sharma (SLP dismissed), and held that year-wise, specific, and independent satisfaction is mandatory. Since the AO failed to record AY-specific satisfaction and relied on an omnibus note, the very assumption of jurisdiction u/s 153C was defective.
The Tribunal held that the consolidated satisfaction note vitiates the assessment and quashed the entire 153C assessment as void ab initio. Even on merits, the Tribunal confirmed that no substantive addition existed for AY 2014-15 in the hands of the companies and hence protective addition in Assessee’s hands could not survive. Loose sheets without signatures or corroboration cannot justify such a huge addition, particularly when AO himself accepted that the Assessee lacked financial capacity. The Tribunal approved the detailed findings of CIT(A) and found no perversity.
Accordingly, the Revenue’s appeal was dismissed and the Cross-Objection of the Assessee was partly allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
