Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2011 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (6) TMI 831 - AT - Income TaxAssessment u/s 153C - Satisfaction for issuing Notice by AO - AO issued a notice u/s 153C to verify certain transactions regarding lease agreement found during search and seizure operation u/s 132 - Assessee's stated that such order is unlawful and invalid - Issue is whether any satisfaction at all is required to be arrived at by the AO of the person who was searched u/s.132 regarding any undisclosed income of the person who was not subjected to a search HELD THAT:- The ITAT Delhi in the case of JINDAL STAINLESS LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. [2008 (4) TMI 357 - ITAT DELHI-G], had dealt with this issue, held that "the AO has to follow the condition precedent for proceeding u/s.153-C in the same manner as the AO would do for proceeding u/s.158BD. The Hon’ble Tribunal in this regard referred to the decision of the Hon’ble Supreme Court in the case of MANISH MAHESHWARI AND INDORE CONSTRUCTION P. LTD. VERSUS COMMISSIONER OF INCOME-TAX [2007 (2) TMI 148 - SUPREME COURT], and have held that satisfaction that undisclosed income belongs to the person other than the one who is searched u/s.132, has to be arrived at by the AO before proceeding to hand over seized document to the AO of the person who was not searched." We therefore hold, following the decision of the ITAT Delhi Bench referred to above, that the AO has to record satisfaction regarding existence of undisclosed income before proceeding u/s.153-C. Whether satisfaction about undisclosed income of the Assessee have been arrived at by the AO? - The assessee has been declaring income from letting out of the property regularly in its books of account. The factum of the assessee receiving income in the form of rent is very much in the knowledge of the department HELD THAT:- In our view, the satisfaction required for proceedings under section 153C cannot be reduced to a mere formality of forwarding the documents found in the course of search which did not belong to the person searched and which belonged to the person against whom proceedings under section 153C are sought to be initiated. In the present case we are of the view that that there was no satisfaction regarding existence of any undisclosed income which warrants proceedings under section 153 of the Act. We, therefore, hold that the necessary satisfaction does not exist for the proceedings under section 153C of the Act. On this ground the assessment is annulled - Decision in favour of Assessee. Income Received from letting out - Business Income or not? - Assessee, carries out business of property dealing where he earns income from selling and letting out of property - The properties let out did not get good price and therefore retained and let out temporarily. Since the letting was incidental to business - such income must be treated as business income. HELD THAT:- It can be said that the assessee did not cease to carry on the business of purchase and sale of properties. The expenses sought to be disallowed by the AO were required to be incurred by the assessee. Therefore, notwithstanding the fact that the rental income is to be assessed under the head income from House property, still the assessee would be entitled to the deduction of the aforesaid expenses. Therefore, the impugned additions deserve to be deleted even on merits. In our view, even on merits the assessee deserves to succeed. We, therefore, direct that the impugned addition be deleted. All the appeals of the assessee are accordingly allowed - Decision in favour of Assessee.
|