INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153CRecording of satisfaction--Search and seizure action was taken in the premises of IMIPL and on the basis of seized record, a notice under section 153C was issued to IMEPL, Singapore. The assessee contended before assessing officer to allow inspection of records to reveal 'satisfaction' recorded by of searched party. However, no effort was made by revenue despite 4 years had elapsed and tax demand was stayed and stay was extended four times. Held: Since more than 20 months have passed from the time the first direction was given to the revenue and since three different Commissioners (Departmental Representatives) have followed up the matter with concerned assessing officers there was no satisfaction recorded while initiating the proceedings under section 153C either by assessing officer who assessed the searched party or even by the assessing officer who completed assessment in assessee's case.

The additional ground raised by assessee, being a legal ground, goes to the root of the matter. As briefly stated, it seems assessing officer did not allow the inspection of the record to assessee/Counsel and accordingly they have raised an additional ground about the validity of the proceedings under section 153C in the absence of any satisfaction being recorded by the Officer who was assessing the searched party. There is no dispute on the fact that assessee was not searched and the search has been conducted in the case of IMI (P) Ltd/TPI Ltd. at their business premises in Mumbai. Therefore, as per the provisions of sections 153A and 153C, proceedings can only be initiated only after assessing officer comes to a satisfaction that the seized material pertains to other persons other than the searched party and consequently assessing officer also comes to the conclusion that proceedings are required to be initiated in the other parties case. Nowhere in the assessment order there is any recording of the fact that there was satisfaction recorded by assessing officer assessing IMI (P) Ltd. In fact after assessee has raised an additional ground, the Department was specifically asked to produce the relevant correspondence between assessing officers and the satisfaction note recorded for initiating proceedings and in fact the entire record of the assessments have been to directed to be produced to examine the contentions raised by assessee that there is no satisfaction recorded. As stated earlier, this Bench has directed the Departmental Representative to furnish the necessary records as early as 28-4-2011 followed by repeated directions and as the last opportunity on 6-12-2012. The Departmental Representative was directed to produce the assessment record and the correspondence between assessing officers and it was further stated that since the stay was extended four times, no further extension will be granted. Inspite of the above and also on the basis of the correspondence placed by the Departmental Representatives on record, it seems that no serious efforts were made by the Revenue to furnish the relevant satisfaction note recorded by assessing officer nor the relevant records were submitted as directed by the Bench. Despite repeated efforts and requests for adjournment by the Departmental Representative for furnishing the record, the record has not been sent by the officers or any satisfaction has been placed on record. Since more than 20 months have passed from the time the first direction was given to the revenue and since three different Commissioner (Departmental Representatives) have followed up the matter with the concerned assessing officers, there is no satisfaction recorded while initiating the proceedings under section 153C either by assessing officer who assessed the searched party or even by assessing officer who completed the assessment in assessee's case. [Para 9] There is no satisfaction recorded by assessing officer before initiating proceedings under section 153C. Inspite of giving sufficiently adequate time to the Revenue for production of the necessary records and considering the fact that assessing officer refused to allow inspection to assessee as recorded by the bench on 20-4-2011, there is no option than to take an adverse view that no satisfaction was recorded by assessing officer before issuance of notice under section 153C. The Revenue has not been able to show any satisfaction recorded either in the case of searched person or in the case of assessee and consequently in view of the principles laid down by the Supreme Court in the case of Manish Maheshwari v. ACIT, a notice issued under section 153C read with section 153A is liable to be held as invalid. Thus, the consequential assessments passed under section 153C read with section 144C are annulled on account of the invalidity of the notices under section 153C. Assessee's additional grounds are accordingly allowed in all the impugned assessment years. Since assessee's additional ground is allowed on the preliminary issue of jurisdiction, there is no need for adjudicating the issues on merit in any of the assessment years. Accordingly, the other grounds raised are considered academic and hence, not adjudicated. [Para 15] All the impugned assessment orders passed in these respective assessment years by assessing officer are hereby annulled. [Para 16]