· Pursuant to a search conducted on the premises of the partners of the firm, notice u/s 153C of the Act was issued to the assessee.
· The AO completed the assessment by treating the income earned from investment as business income, as against the short-term and long-term capital gain claimed by the assessee.
· The CIT(A) partly allowed the appeal of the assessee.
· Therefore, the assessee filed appeal before the Tribunal contending that the proceedings initiated u/s 153C of the Act were bad in law in the absence of any satisfaction note recorded by the AO of the searched person that incriminating material belonging to the assessee was found during the course of search.
· The Department relied upon the judgments of Delhi High Court in the case of Nau Nidhi Overseas Pvt. Ltd. and Super Malls Pvt. Ltd., whereby it was held that for the purpose of section 153C the satisfaction of the AO of the other person was sufficient.
· The Tribunal, however, observed that the facts of the above cases were different from assessee’s case as the person searched in both those cases happened to be one of the Directors of the companies, and that is the reason that the Court held that the satisfaction note of the other person was sufficient.
· The Tribunal, relying upon the recent decision of Hon’ble High Court in the case of ARN Infrastructures, wherein the decision of the Court in the case of RRJ Securities has been followed, concluded that for the proceedings u/s 153C to be valid, there had to be a satisfaction note recorded by the AO of the searched person.
· In the absence of the same, the proceedings u/s 153C of the Act were held to be bad under law.
For further reading, refer the attachment.
Further Reading