Advocate Akhilesh Kumar Sah
Lord Krishna Dwellers case: Purchases of land reflected in the seized sale deeds duly recorded in the regular books of account, documents seized relating to same during the course of search cannot be considered as incriminating material, enabling AO to proceed under section 153A
In Lord Krishna Dwellers (P) Ltd. vs. DCIT [ITA No. 5294/DEL/2013 [AY: 2006-07] & ITA No. 2403/DEL/2014 [AY: 2007-08], decided on 17.12.2018], in ITA No. 5294/DEL/2013 [A Y: 2006-07], the assessee challenged the validity of the assumption of jurisdiction for framing assessment under section 153A of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’ for short]. The assessee contended that the Assessing Officer(AO) had framed the assessment under section 153A of the Act without bringing any incriminating material found during the course of search and seizure operation under section 132 of the Act.
Fact & Decision in brief:
Facts on record showed that a search operation was conducted at the premises of the assessee on 21.01.2011. Original return of income was filed on 21.11.2006 and the assessment was framed under section 143(3) of the Act vide order dated 13.05.2008. This meant that the assessment was completed on the date of search. This meant that a completed assessment can be reopened under section 153A of the Act and assessment can be framed if, and only if, some incriminating material is found during the course of search operation. The law is well-settled on this point by the decision of the Hon’ble Jurisdictional High Court in the case of Kabul Chawla 281 CTR 0045 [Del] which was followed in the case of Meeta Gutgutia 82 Taxmann.com 287.
During the course of search operations, several sale deeds were seized which related to the purchases of land aggregating to Rs. 4.01 crores for the year under consideration. From these sale deeds, the Revenue came to know that an amount of Rs. 1.05 crores has been paid to various persons in cash. Since the payments were made in cash, the AO was of the firm belief that the provisions of section 40A(3) of the Act squarely applied.
The learned Members of the ITAT considered whether the sale deeds in question constituted incriminating material to trigger the provisions of section 153A of the Act. It was observed that there was no dispute that the purchases of land reflected in the seized sale deeds were duly recorded in the regular books of account. There was no dispute in relation to the sources of payments made for purchases of land. The assessment was framed under section 143(3) of the Act.
The same sale deeds were found during the course of search operation and on the basis of the very same sale deeds, the AO came to the conclusion that an amount of Rs. 1.05 crores has been paid to various persons in cash. The learned Members of the ITAT opined that the sale deeds, transactions when duly recorded in the regular books of account, cannot be considered as incriminating material found during the course of search operation. It was not the case of the Revenue that if the search and seizure operation had not been conducted, the Revenue could never have come to know that the assessee has entered into various purchase transactions of land.
The DR vehemently stated that though the deeds were before the AO, but he examined the deeds only to ascertain the circle rate vis-a-vis the transaction rate and never went into the cash transactions reflected in the land deed. The learned Members of the ITAT found contention of the DR as not acceptable because once a document is filed before the AO during the course of search proceedings it is assumed that he has gone through the contents of those documents and has verified the same. It may be that the assessment framed under section 143(3) of the Act is silent on this aspect but as held by the Hon’ble Gujarat High Court in the case of Nirma Chemical Works 309 ITR 67 that if the assessment order were to incorporate reasons for upholding the claim made by an assessee, result would be an epitome and not an assessment order.
Considering the facts of the case in totality in the light of the judicial decisions discussed the learned Members of the ITAT held that the assessment framed under section 153A of the Act was bad in law and liable to be quashed.