TMI Blog2014 (7) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... 09. ITA Nos.344 to 347/Vizag/2014: 2. Facts being identical and grounds being common in all these appeals except amounts, for sake of convenience we will deal with the facts relating to ITA No. 344/Vizag/2014. The first issue is regarding validity of proceeding u/s 153C of the Act. 3. Briefly the facts are the assessee the assessee is engaged in real estate business. It has filed its return in regular course on 28/10/2004 declaring NIL income and agricultural income of Rs. 2,34,000/-. As a result of search and seizure operation conducted in case of Sri A.T. Rayudu on 4.12.2007, the assessing officer initiated proceeding u/s 153C of the Incometax Act on 15.12.2008 calling upon the assessee to submit his return of income. The assessing officer completed the assessment u/s 153C of the Act by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit. The assessee challenged the addition made in appeal preferred before the CIT(A). Before the CIT(A), the assessee challenged the validity of the proceeding initiated u/s 153C of the Act as well as the merits of the additions made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer of Attorney executed by Shri I. Suryanarayana Rao and others in favour of M/s. Avnash Estates and Resorts Pvt. Ltd. on 15.12.2006 at Kakinada. 3. ATR/B/PO2/2 Page Nos.6 to 9 Unsigned cash payment vouchers. 8. A reference to the assessment order in the context of the aforesaid seized material would show that the addition made in the assessment order has no relevance or connection to the aforesaid seized materials on the basis of which proceeding has been initiated u/s 153C of the Act. Further, nowhere in the assessment order the assessing officer has referred to these seized materials to say that as a result of such seized materials, undisclosed income of the assessee has been unearthed. In the aforesaid facts, the so called seized materials cannot be considered to be incriminating materials so as to empower the assessing officer to initiate proceedings u/s 153C of the Act. Section 153C of the Act cannot be interpreted in a manner to contemplate that any material which has a reference to the assessee, whether it is incriminating or not can be used as a tool to launch a proceeding u/s 153C of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This becomes further clear from the fact that the income were determined for the assessment years 2001-02, 2002-03 2003-04 only on the ground that the assessee has not been approved under section 10(23C) of the Act. The determination of income has absolutely no relation or relevance to the seized materials. So far as the assessment years 2004-05 and 2005-06 are concerned, perusal of the assessment orders passed in those years would reveal the fact that the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee. In the aforesaid circumstances, the pre conditions for assuming jurisdiction under section 153C are not satisfied. So far as the decisions relied upon by Ld. D.R. in support of his contention, after carefully applying our mind to the ratio laid down therein, we observe that the decisions are distinguishable on facts and do not apply to the facts of the assessee s case. In that view of the matter, we do not find any infirmity in the order of the CIT(A) in holding the initiation of proceedings under section 153C to be ab initio void and consequently annulling the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on date of search. No other material whatsoever was recovered. In that view of the matter, the condition precedent for initiation of proceeding u/s 153C of the Act is not satisfied. For such conclusion, we draw support from the order passed by the coordinate bench in the case of CIT Vs. Sri Rama Educational Trust (supra), wherein the coordinate bench held as under: 9. We have heard the rival contentions and perused the records of the case as well as the orders of the authorities below. We have also examined the decisions relied upon by the parties. Admittedly, in the present case, the AO has initiated proceedings under section 153C of the Act. Therefore, it is clear that there is no search action in the case of the assessee. Section 153 C of the Act reads as under: 153C(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151, and section 153, where the AO 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 referred to in section 153A, then the books of account or documents or assets seized or requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate issued by the Chairman of the Managing Trustee of the assessee trust certifying the works entrusted to H.N.R. Constructions. Therefore, on perusal of the aforesaid documents, it would clearly reveal that the documents considered by the AO for initiation of proceedings u/s. 153C do not belong to the assessee. In the aforesaid circumstances, in our view proceedings under section 153C of the Act could not have been initiated by the AO only on the basis of so called seized documents as referred to by him which, in our view, do not belong to the assessee. At this stage, it would be worthwhile to look into the finding of facts recorded by the CIT(A) in this regard, which is extracted hereunder: 6. I have considered these arguments and also perused the documents on the basis of which satisfaction is said to be arrived at by AO. Page No. 31 of TH/HNR/2 is a receipt of HNR Constructions which reflects receipt of Rs. 1,50,000/- from Sri K. Bangraju vide a cheque towards plot advance. Page No. 32 also belongs to HNR Constructions which shows the disbursement schedule given by licensed engineer Sri K. Krishna Prasad. This pertains to HNR Constructions and it also has nothing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) remains uncontroverted. In the aforesaid factual background, we will now examine the ratio laid down in various decisions of High Courts and different benches of the Tribunal. 12. In the case of Vijaybhai N Chandrani (supra), the Hon ble Gujarat High Court held as under: 12. On a plain reading of the aforesaid provisions it is apparent that ss. 153A, 153B and 153C lay down a scheme for assessment in case of search and requisition. Sec. 153A deals with procedure for issuance of notice and assessment or reassessment in case of the person where a search is initiated under s. 132 or books of account, other documents or assets are requisitioned under s. 132A after the 31st day of May, 2003. Sec. 153B lays down the time-limit for completion of assessment under s. 153A. Sec. 153C which is similarly worded to s. 158BD of the Act, provides that where the AO 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 s. 153A he shall proceed against each such other person and issue such other person notice and assess or reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish any incriminating evidence of undisclosed income, provisions of section 153C cannot be invoked. 15. The other decisions relied upon by ld A.R. also support the above view. Therefore, considering the facts of the assessee s case in the light of ratio laid down in the aforesaid decisions, it becomes clear that the seized materials do not belong to the assessee. That besides, there are no incriminating materials indicating any undisclosed income of the assessee, which could have enabled the AO to invoke the provisions of section 153C of the Act. This becomes further clear from the fact that the income were determined for the assessment years 2001-02, 2002-03 2003-04 only on the ground that the assessee has not been approved under section 10(23C) of the Act. The determination of income has absolutely no relation or relevance to the seized materials. So far as the assessment years 2004-05 and 2005-06 are concerned, perusal of the assessment orders passed in those years would reveal the fact that the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee. In the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Even otherwise also, conclusion drawn by the assessing officer in the assessment order that the agricultural income is unexplained also found to be not on cogent material, because of the fact that the CIT(A) has accepted 50% of the income shown as agricultural income against which the department is not in appeal. Further, in the remand report, the assessing officer himself has accepted that the assessee has earned income from coconut trees and casurina plantation which can be considered as agricultural income. In aforesaid view of the matter, the proceeding initiated u/s 153C of the Act in absence of any incriminating material and only on the basis of the material already disclosed by the assessee is invalid and consequently the assessment orders passed are also unsustainable in law. Accordingly, we quash assessment orders passed in all these assessment years. 5. The facts and issues in the present appeal are identical to the facts dealt by the coordinate bench in the decision referred to herein above. In this case also assessment made by the AO is not with reference to any incriminating material found as a result of search. Therefore, respectfully following the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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