2022 (11) TMI 1392 - AT - Income Tax

Assessment u/s 153C - seized document as belongs to assessee or not? - Scope of amendment - HELD THAT - CIT(Appeals) has not erred in facts and in law in holding that for the year under consideration since the search was conducted prior to amendment in section 153C it was an essential pre-requisite that the incriminating documents on the basis of which the assessment was framed must belong to the assessee. From the contents of the assessment order and the observations made by CIT(Appeals) even the AO has not alleged that the documents belonged to the assessee and the AO has himself stated in the order that the documents pertain to the assessee. Therefore in the instant set of facts we find no infirmity in the order of the Ld. CIT(Appeals) wherein he has held that since the documents do not belong to the assessee then the additions are not liable to be sustained. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the action under section 153C of the Income Tax Act.
2. Deletion of addition of Rs. 5,17,00,000/- on account of undisclosed investment under section 69 of the Act.

Detailed Analysis:

Issue 1: Validity of the Action Under Section 153C of the Income Tax Act
The primary issue raised by the Department was whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in quashing the action of the Assessing Officer (AO) under section 153C of the Income Tax Act. The CIT(A) found that the documents on which the AO based his jurisdiction did not "belong" to the assessee. The documents were neither seized from the assessee nor written in their handwriting, nor signed by any partners of the assessee firm. The AO himself noted that the documents "pertained" to the assessee but did not "belong" to them.

The Tribunal upheld the CIT(A)'s decision, emphasizing that for the AO to assume jurisdiction under section 153C, the documents must "belong" to the assessee. This interpretation aligns with the judicial precedent set by the Gujarat High Court in the case of Anil Kumar Gopikishan Agrawal, which clarified that the amended provisions of section 153C (effective from 1-6-2015) do not apply to searches conducted before this date.

The Tribunal cited several cases, including:
- Index Securities (P.) Ltd: The Delhi High Court held that the seized documents must "belong" to the assessee, not merely "pertain" to them.
- Pepsico India Holdings (P.) Ltd: The Delhi High Court ruled that section 153C provisions do not apply unless it is established that the documents belong to the assessee.
- Meghmani Organics Ltd: The Gujarat High Court invalidated an assessment under section 153C where the documents did not belong to the assessee.

Issue 2: Deletion of Addition of Rs. 5,17,00,000/- on Account of Undisclosed Investment Under Section 69 of the Act
The second issue involved the deletion of an addition of Rs. 5,17,00,000/- made by the AO under section 69 of the Act for undisclosed investment. The AO had alleged that the assessee made unexplained investments in land purchases based on seized documents indicating unaccounted cash transactions. However, the assessee contended that the land was purchased for Rs. 1.80 crores, which was duly accounted for in their books, and they had no connection with the seized documents.

The CIT(A) found that the AO could not provide evidence that the assessee paid "on money" for the land. The documents did not bear the assessee's signature or handwriting and did not mention their name or address. The Tribunal agreed with the CIT(A), noting that the AO's failure to prove that the documents "belonged" to the assessee invalidated the addition under section 69.

The Tribunal concluded that the CIT(A) rightly quashed the action under section 153C and deleted the addition, as the jurisdictional requirements were not met. The Tribunal dismissed the Department's appeal, affirming the CIT(A)'s order.

Conclusion
The Tribunal upheld the CIT(A)'s decision to quash the action under section 153C and delete the addition of Rs. 5,17,00,000/-, as the documents on which the AO based his jurisdiction did not "belong" to the assessee. The Tribunal's decision was grounded in established judicial precedents, emphasizing the necessity of the documents "belonging" to the assessee for the AO to assume jurisdiction under section 153C.