Ingram Micro (India) Exports Pvt. Ltd vs. DDIT (ITAT Mumbai)

S. 153C search assessment is void if AO’s satisfaction not recorded

A search & seizure action u/s 132(1) was carried out in the case of Ingram Micro India Pvt. Ltd. As certain documents were found which allegedly showed that the assessee (a Singapore compnay) was not paying tax in India though it had a PE, an assessment u/s 153C was made to bring such profits to tax. The assessee challenged the s. 153C assessment on the ground that the AO who had conducted the search had not recorded satisfaction that any income belonged to the assessee. HELD by the Tribunal:

U/s 153A & 153C, proceedings can be initiated only after the AO comes to the satisfaction that the seized material pertains to a person other than the searched party and comes to the conclusion that proceedings are required to be initiated in the other party’s case. In Manish Maheshwari 289 ITR 341 (SC), it was held in the context of s. 158 BD that the recording of satisfaction by the AO that any undisclosed income belongs to any person, other than the person searched, is a “condition precedent” and that a notice issued without recording satisfaction and application of mind was a nullity. This principle has been applied to s. 153C in SSP Aviation 207 Taxman 260 (Delhi) & P. Satyanarayana (ITAT Chennai). On facts, as the Department was not able to produce any material to show that the AO assessing the searched party had reached the satisfaction that any income belonged to the assessee, the assessment had to be annulled.