Block Assessment is Invalid in the absence of Satisfaction recorded by AO of Searched Party: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai, while quashing a block assessment, held that the same with not sustainable in law as the satisfaction note of the Assessing Officer of the searched party was absent.

Before the Tribunal, the assessee challenged the order of CIT(A) upholding the validity of assessment under Section 153C of the Income Tax Act in the absence of any incriminating material found during the course of search under section 132 of the Act. The assessee contended that no proper satisfaction has been recorded by the AO of the searched person of Shri Gangadhar Shetty or its group cases.

On first appeal, the CIT(A) noted that since the AO of the searched person and the person assessed under section 153C of the Act is the same, it does not require to record a separate satisfaction in this regard.

The Tribunal observed that the assessee had requested for copy of satisfaction note before the AO during the course of assessment proceedings vide letter dated 20.04.2012. But the assessee was not granted the copy of any satisfaction note recorded by the AO of the search person or any other satisfaction note.

“Only when such ‘satisfaction’ is recorded by the AO of the person searched and such documents or assets seized, etc., are handed over to the AO of the ‘other person’, that the later AO acquires jurisdiction to make assessment or reassessment of the ‘other person.’ It is, therefore, amply vivid that the AO of the ‘other person’ can acquire jurisdiction to assess or reassess income of the ‘other person’ only when the AO of the person searched records satisfaction in his case before handing over money, bullion, jewellery, etc. to him,” the Tribunal observed.

Based on several judicial decisions and CBDT Circular, the Tribunal held that the satisfaction in the case is not recorded by the AO of the searched party, which is a pre-condition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed u/s 153C read with Section u/s 143(3) of the Act is bad in law and hence, quashed.