Sundarasamy Vs ACIT (ITAT Chennai)
153C Invoked After 01.04.2021 Held Invalid: ITAT Chennai Quashes Bulk Assessments and Deletes Estimated Commission Additions
The Chennai Bench of the ITAT, in a batch of appeals led by Vadippan Senthilmurugan v. ACIT and connected cases including Eveready Spinning Mills Pvt. Ltd., Sundarasamy, Arunraj and Seethadevi (AYs 2018-19, 2019-20 & 2021-22), delivered an important ruling on the post-01.04.2021 applicability of section 153C and the sustainability of estimated commission additions based on third-party search material.
On the jurisdictional issue, the Tribunal held that in view of section 153C(3), no proceedings under section 153C can be initiated where the date of “initiation of search” (for the other person) falls on or after 01.04.2021. Relying heavily on the jurisdictional Madras High Court decision in Hari Govind v. ACIT, the Tribunal reiterated that for “other persons”, the date of handing over of seized material / satisfaction note is to be treated as the date of initiation of search. Since in all the cases the satisfaction notes were recorded after 01.04.2021 (August–September 2022), the notices issued under section 153C in February 2023 were held to be without jurisdiction and void ab initio. Consequently, all assessments framed under section 153C were quashed.
Independently, even on merits, the Tribunal held that estimated commission additions @ 5% on alleged bogus sales could not survive. The additions were found to be based solely on statements recorded during search of a third party, without any corroborative material against the assessees. The Tribunal noted that the books of account were not rejected, sales were accepted, and no direct evidence established that the assessees were beneficiaries of accommodation entries. Mere third-party statements, without linkage or confrontation, were held insufficient to justify additions.
Accordingly, the Tribunal quashed the 153C proceedings, and also directed deletion of all estimated commission additions, allowing all the appeals in full
FULL TEXT OF THE ORDER OF ITAT CHENNAI
