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Commissioner vs Search

High Court Of Gujarat|27 April, 2011

JUDGMENT / ORDER

(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Tribunal dated 16.1.09 raising following questions for our consideration:
"A. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in holding that the assessment cannot be framed u/s.153C of the I.T.Act, 1961 and in turn canceling the assessment framed u/s.153C of the I.T.Act, 1961?
B. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in not appreciating the fact that the documents seized from Shri Kantilal M. Patel and Shri Lalit K. Patel belong to the assessee namely Meghmani Organics Limited ?
C. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in relying upon the ratio laid down in the case of CIT vs. Sun Engineering Works Pvt. Ltd., 198 ITR 297 (SC) as the aforesaid case is applicable to the provisions of Section 148 and not to the provisions of Section 153C of the I.T.Act?
D. Whether on the facts and in the circumstances of the case the Tribunal is justified in not appreciating the fact that the issues regarding claim of allowance u/s.80HHC and 80IA of the I.T.Act which had been pointed out by the Assessing Officer at the stage of original assessment and are pending at the appellate stage had not been considered again, even though certain issues like the income from DEPB and interest being treated as not derived from industrial undertaking, giving effect to amendments of Section 80HHC(3) of the I.T.Act with retrospective effect from 01.04.1998 and exclusion of gross interest income in place of new interest income while calculating deduction u/s.80HHC of the I.T.Act etc. were new issues ?"
Briefly stated, facts leading to the present appeals are as follows:
Search operations under section 132 of the Income Tax Act 1961 were undertaken in the premises of Lalit K. Patel and Kantibhai Patel. Certain documents were found during the search operations. Such documents allegedly reflect accounts and estimations of proposed land and building and miscellaneous work done for the respondent assessee. The Assessing Officer, therefore, invoked the provisions of section 153C of the Act and proceeded to assess/re-assessee the income of the assessee on the basis of the powers under section 153C.
Before the Assessing Officer and further appeals, the assessee had taken the following contentions in its defence.
That the papers found during search operations of said Shri Lalit Patel and Kanti K. Patel do not belong to the assessee and therefore, the Assessing Officer could not have invoked the provisions of section 153 of the Act.
In any case, there was no undisclosed income of the assessee.
The additions were not made in connection with material seized but were with respect to benefits under section 80HHC and 80IB of the Act which was not permissible; and That the claims under section 80HHC and 80IB were not pending for assessment when powers under section 153C were invoked and that therefore, there was no question of abatement of assessment proceedings.
By the impugned judgment, the Tribunal upheld all the four contentions and allowed the appeal of the assessee and dismissed the appeal of the Revenue.
The appeals were taken up for admission hearing today. We have concentrated our attention on the main question of applicability of section 153C of the Act since the same goes to the root of the matter and the question of very jurisdiction of the Assessing Officer to assess the income of the assessee under the said provision.
Counsel for the Revenue submitted that the loose documents found during search operations of said Shri Lalit Patel and Kantibhai Patel pertained to the undisclosed income of the assessee. There were clear references made in such documents with respect to estimation of miscellaneous work, etc. of land and building and other miscellaneous work done by them for the assessee as also the statements of steel, cement, etc. issued for purpose of such construction activities. He, therefore, submitted that the case would be governed by the provisions contained in sub-section (1) of section 153C of the Act. The Assessing Officer was, thus, justified in assessing the income of the assessee under such provisions.
Counsel drew our attention to a decision of the Delhi High Court in the case of S.R.Baltiboi & Co. v. Department of Income Tax, (2009) 315 ITR 137 (Delhi) wherein the Bench referring to the words "other person" employed in section 158BD observed that the same must only be construed as referring to the "other person" having dealings or transactions with the party who is being searched or whose material is being seized. Otherwise, the provisions may well be seen as violative of the fundamental rights enshrined in articles 14 and 19 of the Constitution.
On the other hand, counsel for the assessee opposed the admission of appeals and contended that the issue is no longer res integra. A Division Bench of this Court in the case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax, 2010(231) CTR 474 (Guj.) has ruled against the revenue under similar circumstances. Counsel further submitted that the documents seized did not pertain to any undisclosed income and even after framing the assessment, the Assessing Officer could not come to the conclusion that any undisclosed income of the assessee relatable to the loose documents was found. He further submitted that the benefits under section 80HHC and 80IB already granted could not be reopened.
As already noted, we have focused our attention to the question of applicability of section 156C of the Act in the present case. Sub-section (1) of section 153C, which is relevant for our purpose reads as under:
"(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151, and section 153, where the Assessing Officer is satisfied that any money, bullion, jewelery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of accounts 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 such other person notice and asses or reassess income of such other person in accordance with the provisions 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 subsection (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."
Central issue in the present case is, can it be stated that any documents seized or requestioned during search operations belonged to the assessee. In this regard, factual conclusion of the Tribunal which are not seriously in dispute need to be noted. In the impugned order, the Tribunal held and observed that "the Assessing Officer in the assessment order has categorically held that pages 87 to 91 of Annexure A4 seized from Lalit K Patel are his own hand written estimate for the proposed work of the assessee".
Additionally, we may refer to the decision of this Court the case of Vijaybhai Chandrani (supra). It was a case where search was conducted in the premises of Samukarsh Cooperative Housing Society and Savvy Infrastructure Ltd. During the course of search operations, certain documents were seized. In one of such documents, there were references to the petitioner in a loose paper indicating the plot numbers, names of members and other details. On the basis of such seized documents, Assessing Officer initiated proceedings against the assessee under section 153C of the Act by issuing notice. Such notice was challenged before the High Court on the ground that the documents seized and relied upon by the Assessing Officer for initiation of proceedings under section 153C of the Act did not belong to the assessee. High Court, in this background, held and observed as under:
"On a plain reading of the aforesaid provisions it is apparent that sections 153A, 153B and 153C lay down a scheme for assessment in case of search and requisition. Section 153A deals with procedure for issuance of notice and assessment or reassessment in case of the person where a search is initiated under section 132 or books of account, other documents or assets are requisitioned under section 132A after the 31st day of May, 2003. Section 153B lays down the time limit for completion of assessment under section 153A. Section 153C which is similarly worded to section 158 BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153-A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under Section 158BD if the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he shall proceed against such other person under section 158BC.
Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of section 153C of the Act.
Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner inasmuch as his name is reflected in the list under the heading "Samutkarsh Members Details" and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of Revenue that the said three documents are in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice is not fulfilled any action taken under section 153C of the Act stands vitiated."
We find that in the present case, very similar situation has arisen. The document on the basis of which the Assessing Officer initiated proceedings under section 153C of the Act was admittedly not written by the assessee. It, of course, had certain references to the estimations and expenditure, etc. of the properties belonging to the assessee. Nevertheless, we cannot hold that such document belonged to the assessee.
When we find that the very foundation for instituting the proceedings by the Assessing Officer was missing, the consequential actions and orders must fail. In the result, only on this ground we are inclined to dismiss the appeals. In view of our conclusion noted above, we do not find it necessary to examine other controversial issues. Tax Appeals are therefore dismissed.
(Akil Kureshi, J.) (Ms.Sonia Gokani, J.) (vjn) Top
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Title

Commissioner vs Search

Court

High Court Of Gujarat

JudgmentDate
27 April, 2011