Since assessment under section 153C was made only on the basis of incriminating documents such as balance sheet and profit and loss account which were not related to assessment years under appeals, therefore, assessment was invalid as no incriminating material was found during the course of search to proceed against the assessee.
AO initiated search proceedings under section 153C against the assessee by recording satisfaction that the incriminating documents belonged to assessee-company. It was held only incriminating documents related to assessee, were balance sheet and profit and loss account, which were not related to assessment years under appeals. Thus, no incriminating material was found during the course of search so as to proceed against the assessee under section 153C. It was a general satisfaction recorded, therefore, AO was not justified in assuming jurisdiction under section 153C so as to proceed against assessee.
FULL TEXT OF THE ITAT JUDGEMENT
All the appeals by the assessee are directed against the common Order of the Learned CIT(A)-XXVI, New Delhi, Dated 19.03.2015, for the A.Ys. 2006-2007, 2007-2008 and 2008-2009.
2. Briefly, the facts of the case of that a search action under section 132 of the Income Tax Act was carried-out at the business premises of ABW Group of Cases and at the residential premises of their Directors and various documents/books of accounts etc., were found and seized during the course of search. While examining the seized material of this group of cases, documents belonging to assessee-company were also found and therefore, satisfaction note was prepared indicating that the said documents belongs to assessee-company and that action under section 153C of the Income Tax Act is required to be taken. Thereafter, being the A.O. of the person other than the searched person, the said documents were again examined and a fresh satisfaction note was prepared on 22nd January 2014 indicating the satisfaction that the said documents belongs to the assessee-company and therefore, provisions of Section 153C of the Income Tax Act are attracted in the case of the assessee-company. It is noted in the assessment orders that assessee-company is engaged in the business of builders and developers. The matters relating to property at the Rajokari, New Delhi was referred to the Valuation Officer. The A.O. reproduced the details in the assessment orders with regard to assessment year under appeals as well as others whereby cost of construction reported by assessee-company and estimated by the DVO are mentioned. In assessment year under appeals, the difference in the valuation was found in a sum of Rs.65,66,274/- Rs.63,09,391/- and Rs.37,36,240/-respectively. The A.O. after considering the explanation of assessee-company made these additions in the assessment orders passed under section 153C of the Income Tax Act, 1961.
3. The assessee-company challenged the assessment orders before Learned CIT(A). The assessee-company challenged the assumption of jurisdiction by the A.O. under section 153C of the Income Tax Act as well as additions on merit. However, the appeals of the assessee were dismissed. The assessee in the present appeals challenged the assumption of jurisdiction by the A.O. under section 153C of the Income Tax Act as well as additions on merits.
4. We have heard the Learned Representatives of both the parties and perused the material on record.
5. Learned Counsel for the Assessee referred to PB-1, which is satisfaction note recorded under section 153C of the I.T. Act dated 22.01.2014 for A.Ys. 2006-2007 to 2011-2012. The same reads as under :
Satisfaction note for initiating proceedings u/s. 153C read with section 153A of Income Tax Act, 1961 in the case of M/s Wisdom Realtors Pvt. Ltd. – PAN: AAACW5637Q
22.01.2014 : Action u/s 132 of the Income Tax Act,.1961 was carried out in the case of M/s. ABW Infrastructure Pvt. Ltd. on 09.11.2011. This action was carried out at the business premises of M/s. ABW Infrastructure Pvt. Ltd. and at the residential premises of Directors of this company. During the course of search action various books of-account and documents etc. were found and seized.
While examining the seized material of ABW Infrastructure Pvt. Ltd., where action u/s 132 of the Income Tax Act, 1961 was taken on 09.11.2011, it was found that following documents belonging to M/s Wisdom Realtors Pvt. Ltd. – PAN: AAACW5637Q were found.
1. Page No.1-16, Document Annexure A-10, Party-4 are copy of Balance Sheet, P & L a/c as on 31.3.2010 along with Schedule and Audit Report.
A satisfaction to this effect was recorded by the A.O. assessing the person(s) searched and kept in the file to the said person searched viz., ABW Infrastructure Pvt. Ltd.,
I have also examined the above noted seized documents and I find that these documents belong to M/s Wisdom Realtors Pvt. Ltd., PAN: AAACW5637Q. After examining the contents of these documents I am satisfied that proceedings u/s 153C read with Section 153A of the Act are required to be initiated in this case. Accordingly, notices u/s. 153C read with section 153A of the Act are being issued for the assessments years 2006-2007 to 2011-12.
Asstt. Commissioner of Income Tax,
Central Circle-21, E-2, ARA Centre,
Jhandewalan Extn., New Delhi – 55.
6. Learned Counsel for the Assessee referring to the said satisfaction note submitted that incriminating material found was, balance sheet and profit and loss account as on 31st March 2010 along with schedule and audit report which do not related to the assessment years under appeals. Therefore, assumption of jurisdiction under section 153C of the Income-Tax Act, 1961, is bad in law and illegal. He has submit that the issue is covered by the judgment of the Hon’ble Supreme Court in the case of CIT vs. Singhad Technical Education Society (2017) 397 ITR 344 (SC).
7. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and relied upon the Judgment of the Hon’ble Supreme Court in the case of CIT vs. Mukundray K. Shah (2007) 290 ITR 433 (SC) .
8. We have considered the rival submissions and perused the material available on record.
8.1. The Hon’ble Bombay High Court in the case of CIT vs. Singhad Technical Education Society (2015) 378 ITR 84 (Bom.) held as under :
“In terms of section 153C of the Income-tax Act, 1961, the Assessing Officer should be satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A of the Act and he can hand over the seized documents to the Assessing Officer having jurisdiction over that person.
The assessee was an educational institution since the assessment year 1994-95. A search and seizure operation was carried out and certain loose papers were seized from the president of the assessee. Simultaneously a survey action was conducted on the assessee. On the basis of loose papers found with and seized from the president the Assessing Officer issued a notice under section 153C on the assessee and assessed the income. The Tribunal set aside the assessments. On appeals to the High Court:
Held, dismissing the appeals, that the reasons assigned by the Assessing Officer in the satisfaction note were silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note was not enough. There was absolutely nothing to indicate as to in which educational courses, the education was imparted and institution wise, whether the admissions were granted to the technical courses merit-wise or on the basis of marks obtained in XII standard HSC exam. Whether any fee structure was approved and cash component was, therefore, collected over and above the sanctioned fees were matters which ought to have been gone into and there could, not be a general or vague satisfaction. The Tribunal was justified in setting aside the assessments.”
8.2. The Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) held as under :
“Held, dismissing the appeals, (i) that the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the groundon the merits as well. The High Court was right in affirming this view of the Tribunal.
Decision of the Bombay High Court in CIT v.Sinhgad Technical Education Society  378 ITR 84 (Bom) affirmed.
(ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment years the assessment was under section 153C of the Act. The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The objection pertaining to the four assessment years in question did not relate to the other tax assessment years, namely, 2004-05 and 2005-06. Nor did this decision have a bearing in respect of assessment for assessment year 1999-2000 or assessment year 2006-07. The necessary consequence would be that the conclusions of the Assessing Officer in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of sections 11 and 12 would not be affected by this judgment.”
8.3. The Hon’ble Madras High Court in the case of CIT Vs Late J. Chandrasekhar (HUF) (2011) 338 ITR 61 (Mad.) held as under :
“On the search conducted in the case of A and group on November 25, 2003,materialpertaining to “on-money” payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that, theAssessingOfficer issued notice under section 153C of the Income-tax Act, 1961,and reworked the capital gains. The Commissioner (Appeals) and the Tribunal held that the notice under section 153C was not valid. On appeal to the High Court:
Held, dismissing the appeals, that the Assessing Officer did not have the benefit of the seized material while issuing the notice under section 153C. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing Officer at the time of issuing notice, the Tribunal rightly came to the conclusion that he assumption of jurisdiction under section 153C was not valid.”
8.4. Considering the facts of the case in the light of satisfaction note dated 22nd January 2014 reproduced above, it is clear that the only incriminating documents relates to the assessee was balance sheet and profit and loss account as on 31st March 2010 which would not relate to assessment years under appeals i.e., A.Ys. 2006-2007 to 2008-2009. Thus, no incriminating material was found during the course of search so as to proceed against the assessee under section 153C of the Income Tax Act. It is a general satisfaction recorded, therefore, A.O. was not justified in proceeding against the assessee under section 153C of the I.T. Act, 1961. The issue is covered by the aforesaid Judgments. In view of the above, we are of the view that A.O. was not justified in assuming jurisdiction under section 153C of the Income Tax Act, 1961 so as to proceed against him. We, accordingly, set aside the Orders of the authorities below and quash the proceedings under section 153C of the Income Tax Act. Resultantly, all additions stands deleted. Appeals of the assessee are allowed.
9. In the result of appeals of assessee are allowed
Order pronounced in the open Court.