ACIT Vs Maulik Jayantilal Patel (Supreme Court of India)
A search under Section 132 of the Income-tax Act, 1961 was conducted on 15.10.2019 in the case of the Land Broker & Financer Group, Ahmedabad, during which digital images of a memorandum of understanding (MoU) were recovered from the mobile phone of Shri Dhaval Teli. Based on the search, the Assessing Officer (AO) issued notices dated 13.10.2021 under Section 153C to the respondents for Assessment Years 2014-15 to 2020-21. The respondents filed returns, sought the recorded satisfaction notes, raised objections to the assumption of jurisdiction, and subsequently challenged the notices before the Gujarat High Court. They contended that the recovered MoU neither related nor pertained to them, that their names did not appear in it, and that no incriminating material having a nexus with them was found during the search. The Revenue argued that the AO had validly invoked Section 153C after noting that the land covered by the MoU was later purchased by the respondents through a registered sale deed for Rs. 12 crore, whereas the MoU reflected a proposed consideration of Rs. 39.32 crore, giving rise to an inference of undisclosed investment.
The High Court found that the MoU recovered during the search was between different parties and did not mention the respondents. It observed that the AO linked the respondents to the transaction only after obtaining information from the public domain regarding the subsequent registered sale deed and presumed undisclosed investment on the basis of the difference between the MoU value and the registered consideration. The Court noted that the searched person had stated that he had not brokered the land transaction and had only supplied land records after the search. It held that no incriminating material found during the search had any direct nexus with the respondents and that the information collected subsequently from the broker, seller or public domain did not create the live link required under Section 153C. The High Court further held that the Revenue’s reliance on Income Tax Officer v. Vikram Sujitkumar Bhatia was misplaced, as that decision dealt with the applicability of the 2015 amendment to Section 153C for searches conducted before 01.06.2015. Accordingly, it quashed the notices issued under Section 153C and allowed the writ petitions.
