INCOME TAX ACT, 1961

Section 153C

Search and seizure - Assessment under section 153C - Non-recording of separate satisfaction - AO of searched party and other person, i.e., assessee being one and the same

AO having jurisdiction over searched party and the assessee both, initiated section 153C proceedings in assessee's case on the basis of documents found during search in case of searched party, however, without recording separate satisfaction in case of 'other person', i.e., assessee. Assessee challenged this. As per AO, although Supreme Court in CIT-III v. Calcutta Knitwears, Ludhiana (2014) 362 ITR 673 (SC) : 2014 TaxPub(DT) 1547 (SC) held that even if the AO of searched person and other person is one and the same, then also separate satisfaction as required under section 153C is required to be recorded, but the fact remains that the judgment of Supreme Court was rendered in 2014 and has been issued circular in 2015, therefore, AO could not have foreseen or anticipate the procedure required to be followed for issuance of notice under section 153C during the year under consideration.Held: Supreme Court in case of CIT v. M/s. Calcutta Knitwears merely, clarified the position of law that recording of separate satisfaction is pre-requisite to issue notice under section 153C and this legal position has been accepted by the department and accordingly CBDT issued a Circular No. 24/2015. Therefore, even if AO of searched person and the other person, i.e., assessee was one and the same, then also he was required to record separate satisfaction as required under section 153C and since no separate satisfaction was recorded. Notice issued under section 153C and consequently, whole proceedings including assessment order passed under section 143(3) read with section 153C was void ab initio.

Followed:CIT-III v. Calcutta Knitwears, Ludhiana (2014) 362 ITR 673 (SC) : 2014 TaxPub(DT) 1547 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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