Case Law Details
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 There was no supporting evidence of returning cash withdrawn by the said Mr.T to the hospital, which was established and being administered by the assessee trust.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.
2. The above appeals were admitted on the following substantial questions of law:
“i. Whether, in the facts and circumstances of the case, the Tribunal is right in law in holding that the Assessing Officer ought not to have assumed the jurisdiction
under Section 153C of the Act ?
ii. Whether, in the facts and circumstances of the case, the Tribunal erred in not appreciating the fact that not bringing on record the incriminating material in the assessment order is only procedural lapse and on account of such procedural lapse, substantial justice out not to suffer ?
iii. Whether, in the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that the Assessing Officer is not justified in denying exemption under Section 11 of the Act ?
iv. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not considering the fact that Shri.T.John Rajasekhar had shown huge cash withdrawal from Monica Group and filed an application before the Income Tax Settlement Commission wherein he has disclosed additional income on account of inflation of salary expenses and disallowance on account of business promotion expenses ? And
v. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that the conclusion reached by the Assessing not in isolation of each and every single fact, as held by the Hon’ble Supreme Court in CIT Vs. Durga Prasad More [(1971) 82 ITR 540]?”
3. We have heard Mr.T.R.Senthilkumar, learned Senior Standing Counsel assisted by Ms.K.G.Usha Rani, learned Junior Standing Counsel appearing on behalf of the appellant – Revenue and Mr.R.Sivaraman, learned counsel appearing for the respondent – assessee.
4. The assessee is a charitable trust registered under Section 12AA of the Act. A search was conducted under Section 132 of the Act during November 2014 in the case of one Dr.S.Gurusankar, managing trustee of the assessee, which established and is administering a multi specialty hospital at Madurai. Simultaneously, the search action was conducted in the case of one Mr.T.John Rajasekhar, who is stated to be the supplier of medical and surgical equipment and other accessories to the hospital. The Department was of the prima facie view pursuant to the search that the funds were siphoned off through the said Mr.T. John Rajasekhar 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.
5. Based on the seized documents, a notice under Section 153 of the Act 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. Being aggrieved by the additions made by the Assessing Officer, the assessee preferred appeals before the Commissioner of Income Tax (Appeals), Chennai-34 [for short, the CIT(A)], who allowed the appeals filed by the assessee by a common order dated 02.4.2018. Challenging the said common order passed by the CIT(A), the Revenue filed appeals before the Tribunal and by the common impugned order, the appeals filed by the Revenue were dismissed. Thus, the Revenue is before us by way of these appeals.
6. From the record of the proceedings, we find that these appeals were elaborately heard by another Hon’ble Division Bench of this Court on the earlier occasion and by an order dated 16.3.2020, the Hon’ble Division Bench recorded that they were of the prima facie view that there were no merits in these appeals. This appears to be after considering the factual scenario involved in these appeals. Nevertheless, we have elaborately heard the learned counsel on either side.
7. The law on the subject with regard to an assessment under Section 153C of the Act qua the necessity to establish the correlation the document-wise with the assessment years in question was considered by the Hon’ble Supreme Court in the case of CIT-III, Pune Vs. Sinhgad Technical Education Society [reported in (2017) 84 Taxmann.com 290] wherein the Hon’ble Supreme Court held that where loose papers found and seized from the residence of the President of the assessee, an educational institution, indicating capitation fees received by various institutions run by the assessee did not establish correlation document-wise with the assessment years in question, the notice issued under Section 153C of the Act has to be quashed. The findings of the Hon’ble Supreme Court in this regard are as follows :
“18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four__ Assessment Years. Since this that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred.”
8. Bearing the above legal position in mind, if we examine the case on hand, we find that the entire case is completely factual. We also find that the CIT(A) has done the factual exercise elaborately and the substantial portion of the order passed by the CIT(A) has been referred to and quoted by the Tribunal in the impugned common order.
9. At this juncture, it has to be pointed out that on facts, the CIT(A) and the Tribunal 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.John Rajasekhar and the deposits made in the bank accounts of Dr.Gurusankar, managing trustee of the assessee trust. Further, the CIT(A) and the Tribunal noted that the said Mr.T.John Rajasekhar had not admitted that money was paid back to the managing trustee of the assessee trust. Furthermore, on facts, it was found that the materials seized did not indicate any inflation of purchase by the assessee trust and that the deposits in the bank account of the said Dr.Gurusankar stood explained.
10. The Tribunal further noted that the said Mr.T.John Rajasekhar approached the Income Tax Settlement Commission and submitted an application wherein the Commissioner of Income Tax stated that there was no supporting evidence of returning cash withdrawn by the said Mr.T.John Rajasekhar to the hospital, which was established and being administered by the assessee trust. The Tribunal rightly took note of the decision in the case of Sinhgad Technical Education Society that in proceedings under Section 153C of the Act, in the absence of any incriminating documents or evidence discovered during the course of search under Section 132 of the Act in the case of searched person against the assessee, the jurisdiction under the provisions of Section 153C of the Act cannot be assumed. Thus, we find that on a careful appreciation of the factual position and taking note of the said decision of the Hon’ble Supreme Court, the CIT(A) allowed the appeals filed by the assessee as confirmed by the Tribunal. We hold that no question of law much less substantial question of law arises for consideration in these appeals.
11. Accordingly, the above tax case appeals filed by the Revenue are dismissed and the impugned common order passed by the Tribunal stands confirmed. No costs.
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