Assessment u/s 153C cannot be made in absence of incriminating documents discovered during search

PCIT Vs S.R.Trust (Madras High Court)

Conclusion: In the absence of any incriminating documents or evidence discovered during the course of search under Section 132 in the case of searched person against the assessee, the jurisdiction under the provisions of Section 153C could not be assumed.

Held:  Assessee was a charitable trust registered under Section 12AA. A search was conducted under Section 132 in the case of one Dr. S. Gurusankar, managing trustee of the assessee, which established and was administering a multi specialty hospital at Madurai. Simultaneously, the search action was conducted in the case of one Mr.T, who was stated to be the supplier of medical and surgical equipment and other accessories to the hospital. Department was of the prima facie view pursuant to the search that the funds were siphoned off through the said Mr.T allegedly resorting to huge inflation of expenses through salaries paid to staff members by transfer of funds to the bank accounts of the employees as if salaries were paid to them. Based on the seized documents, a notice under Section 153 was issued for the assessment years under consideration in the case of the assessee’s trust. Ultimately, on 31.12.2016, the assessments were completed under Section 143(3) read with Section 153C of the Act for the years under consideration. It was held that there was no material brought on record to prove the nexus between withdrawal of the amount from the bank account of the said Mr. T  and the deposits made in the bank accounts of Dr.Gurusankar, managing trustee of the assessee trust.  There was no supporting evidence of returning cash withdrawn by the said Mr.T to the hospital, which was established and being administered by the assessee trust. Tribunal rightly took note of the decision in the case of Sinhgad Technical Education Society that in proceedings under Section 153C, in the absence of any incriminating documents or evidence discovered during the course of search under Section 132 in the case of searched person against the assessee, the jurisdiction under the provisions of Section 153C could not be assumed.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

These appeals has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (‘the Act’ for brevity) challenging the common order dated 27.6.2019 made in I.T.A.Nos.2144 to 2149 and 2153/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai, ‘C’ Bench (‘the Tribunal’ for brevity) respectively for the assessment years 2009-10 to 2015-16.

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