CA Vinamar Gupta
Delhi High Court in Judgment delivered in the case of CIT Vs. RRJ Securities Ltd. ITA 164/2015 dated 30-10-2015, has dealt comprehensively the principles and procedure of framing assessment u/s 153C.
Relevant provisions of Section 153C are as under:
Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,
a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person ] and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A :]
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to 12[sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :
Principles and Procedure emerging from above provisions
- The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. [Para 13]
- All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person[Para 13]
- Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong.[Para 13]
- The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act.[Para 13]
- Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person – that is, the Assessee other than the person searched – in accordance with provisions of Section 153A of the Act.
- The AO of the person other than the one searched also, is not, at the stage of issuing notice under Section 153C/153A of the Act, required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the Assessee under his jurisdiction.[Para35]
- As explained in SSP Aviation  346 ITR 17(Del), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years.[Para 35]
- If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with [Para 35]
- Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 35]
- The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years.[Para 36]
- Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years.[Para 36]
- The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.[Para 37]
- Where AO having jurisdiction over searched person and other than searched person is same
In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched.[Para 18 2nd line]
Allahabad High Court in the case of Commissioner of income Tax v. Gopi Apartments:  360 ITR 411
“26. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of ‘satisfaction’ is a must, as, that is the foundation, upon which the subsequent proceedings against the ‘other person’ are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory.”
Madhya Pradesh High Court in Commissioner of Income Tax v. Mechmen:  60 taxmann.com 484 (Madhya Pradesh) also suggested the same.
Treatment of Concluded Assessments
Delhi High Court in Commissioner of Income Tax (Central)-IIIv. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. [Para 21,22]
Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 36]
The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.[Para 37]
Working papers of the client stored in the hard disk of the CA
Working papers of the client stored in the hard disk of the CA can not be said to be belonging to the his assessee. They are property of Chartered Accountant and hence do not “belong to” his client, hence no proceedings against the client of the CA u/s 153C can be undertaken on the basis of such evidence. However this finding of the Court may not sustain post 01-06-2015, scenario , where the words “belong to” have been replaced by “pertain to” and “relates to” by Finance Act 2015.
The amendmend of section 153C was brought in wake of Judgement of Delhi High Court in the case of Pepsico India Holdings (P.) Ltd.50 taxmann.com 299, where in it was held that photocopies of documents can not be said to be belonging to person who holds the originals. A registered sale deed, for example, ‘belongs to’ the purchaser of the property although it obviously ‘relates to’ or ‘refers to’ the vendor. In this example if the purchaser’s, premises are searched and the registered sale deed is seized, it cannot be said that it ‘belongs to’ the vendor just because his name is mentioned in the document. In the converse case if the vendor’s premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy ‘belongs to’ the purchaser just because it refers to him and he (the purchaser) holds the original sale deed.
Conclusion: Delhi High Court has touched almost all the aspects of section 153C and principles laid down there in might guide the legal purists in the times to come. However the post Finance Act 2015 amendment of section 153C has again enlivened the tilt of legal mind between “belong to” and “relate to” and the words of wisdom from judiciary might help in clarifying the law further on this thin line difference.