Section 153C Assessment invalid if satisfaction note was not recorded

Sanjay Thakur Vs DCIT (ITAT Delhi)

It is not in dispute that a search was conducted in the bank premises of HDFC Bank, Ambedkar Road, Ghaziabad, in the case of Bank A/c No.xxx2277 of M/s. A.K Traders. No incriminating material was found during the course of search against the assessee. The satisfaction note have been recorded in the case of assessee on 18.09.2012 under section 153C of the I.T. Act for A.Ys. 2005-2006 to 2010-2011. Assessment Year under appeal 2011-2012 was considered to be the year of the search. However, the 1st proviso to Section 153C of the I.T. Act provides that six assessment years for which assessments or re-assessments could be made under section 153C of the I.T. Act, would also have to be construed with reference to the date of handing-over of the assets or documents to the A.O. of the assessee. Since, satisfaction note have been recorded on 18.09.2012, therefore, the six assessment years under section 153C of I.T. Act in the case of assessee would be A.Ys. 2007-2008 to 2012­2013. The A.O, therefore, shall have to pass the assessment order under section 153C of the I.T. Act. However, A.O. has not issued any notice under section 153C of the I.T. Act before initiating the proceedings against the assessee which is also admitted by the authorities below in the impugned Orders. The Amendment in Section 153C of the I.T. Act by the Finance Act, 2017, w.e.f. 01.04.2017 to the effect that block period for the person in respect of whom the search was conducted as well as the “other person” would be the same six assessment years immediately preceding the year of search is prospective in nature. An identical issue have been considered by ITAT, Delhi, F-Bench, Delhi in the case of M/s. BNB Investment & Properties Ltd., Gurgaon, Haryana vs. The DCIT, Central Circle-1, Faridabad (supra) in the light of decision of Hon’ble Delhi High Court in in another decision of the Tribunal. The A.O, therefore, should have framed the assessment under section 153C of the I.T. Act in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice under section 153C of the I.T. Act which have not been done in this case. No satisfaction note have been recorded under section 153C of the I.T. Act for the assessment year under appeal. No assessment under section 153C have been framed.

Further, no notice under section 153C have been issued and no incriminating material was found against the assessee for the assessment year under appeal. The above conditions of Section 153C are mandatory for taking action against the assessee under section 153C of the I.T. Act.

The assessment order passed by the A.O. under section 143(3) of the I.T. Act, therefore, vitiated, void, illegal and bad in law and cannot be sustained. Considering the totality of the facts and circumstances of the case, we are of the opinion that the issue is covered by above Order of the ITAT, Delhi, F-Bench, Delhi in the case of M/s. BNB Investment & Properties Ltd., Gurgaon, Haryana vs. The DCIT, Central Circle-1, Faridabad (supra). We, accordingly, set aside the orders of the authorities below and quash the Orders of the authorities below and quash the Orders of the authorities below and allow the additional grounds of appeal. Resultantly, all additions stands deleted. Since the assessment order is set aside on legal grounds, therefore, there is no need to decide the addition on merit which has been left with academic discussion only.

FULL TEXT OF THE ITAT JUDGEMENT

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