Guidelines regarding the provisions of section 153C of the Income tax Act, 1961 - Income Tax - F.No. 299/128/2013-DIR(lnv. III)/1547

F.No. 299/128/2013-DIR(lnv. III)/1547 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Room No. 27, E-2, ARA Centre, Ground Floor, Jhandewalan Extension, New Delhi; Dated: 31st March, 2014 To All Chief Commissioners of Income-tax(CCA) All Directors General of Income-tax(lnv.) The Director General of Income-tax (I CI) The Director General of Income-tax (Exemption) and The Director General of Income-tax(International taxation) Sub : Guidelines regarding the provisions of section 153C of the Income tax Act, 1961 Madam/Sir, Instances have come to notice wherein actions initiated under section 153C have been challenged before Courts on the ground of lack of jurisdiction or procedural infirmities. Common grounds of challenge include the following: (a) No satisfaction/improper satisfaction has been recorded by the Assessing Officer (AO/concerned to the effect that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned (hereinafter referred to as the seized material) belongs to a person other than referred to in section 153A (hereinafter referred to as the other person). (b) Satisfaction is not recorded by the AO having jurisdiction over the person covered under section 132 or 132A [hereinafter referred to as the searched person]. (c) The seized material in question does not belong to the other person. (d) Initiation of proceedings under section 153C is on the basis of a document impounded during the course of a survey under section 133A conducted document impounded under section 131 rather than the seized material. 2. With a view to ensure that proceedings for making assessment in the cases of the other person(s) are initiated appropriately as also to avoid procedural infirmities and to maintain consistency in approach, due care and caution needs to be exercised by the AO with regard to proceedings under section 153C. While dealing with proceedings under section 153C, inter alia, the following important issues should be given due consideration: 2.1 No proceeding under section 153C is to be initiated in the case of the other person of account or documents or other evidence belonging to such other person were merely impounded under section 133A/131 or where the subject asset/ document was not seized under section 132 or was not requisitioned under section 132A. 2.2 The evidence gathered during search under section 132 / requisition under section 132A can lead to consequential action (including action under section 147 or 153C) under the Income Tax Act, 1961 in the case of the other person(s). While deciding about the appropriate course of such consequential action under section 153C in the case of such other person(s), satisfaction of conditions mentioned therein must be ensured. 2.3 Under section 153C, the AO of the searched person is to be satisfied that any seized material belongs to the other person. On the basis of his satisfaction, he shall hand over the relevant seized material to the AO of such other person for taking action under section 153C. It has been held by various judicial authorities that the expression belong to connotes ownership: absolute or at least limited. Therefore, the AO of the searched person must arrive at his satisfaction on this vital issue after exercising due diligence, keeping in view, inter alia, the following: (a) Considering the views expressed in certain judicial pronouncements and to be on sound legal footing the although this requirement is not specifically mentioned in section 153C. (b) The satisfaction shall be. recorded in the case of each such other person separately, although this requirement is not specifically mentioned in section 153. Accordingly, the enclosed proforma shall be filled up in the case of each such other person separately. (c) While recording his satisfaction, the AO of the searched person may specifically refer to the seized material which, as per his satisfaction, belongs to the other person. Such specific reference may be given, inter alia w.r.t its place of seizure the searched person Panchanama Annexure, Sr. No., Page. No., nature of the seized material along with its details/ description, etc. (d) Clear and cogent reasons may be given in the satisfaction so recorded on the basis of which, the AO of the searched person is satisfied that the seized material belongs to the other person. (e) The AO of the searched person should record his satisfaction in writing even in the case of the other person(s) where the jurisdiction of such other person(s) is vested with him, even though the same is not specifically required in the statute. 2.4 Whenever jurisdiction over such other person lies with another AO, the AO of the searched person, after recording of the above satisfaction, shall hand over the relevant seized material to the Assessing Officer of the other person within 1 month of recording of such satisfaction or within 1 month from the date of completion of assessments u/s 153A, whichever is earlier. Consequently, the AO of the other person shall proceed against such other person in accordance with the provisions of section 153C. A copy of the satisfaction recorded by the AO of the searched person in this regard should also be handed over to the AO of the other person. While taking photocopies/ extracts of the seized material for handing over, due process should be followed as specified in the Search and Seizure Manual 2007 Volume I including Para 6.33(5) of Page 117. 2.5 The other person assumes jurisdiction under section 153C with the receipt of the relevant seized material from the AO of the searched person. Also, a copy of the satisfaction received from the AO of the searched person in this regard would enable him to proceed further in the case of the other person under section 153C. Though there is no statutory requirement for the AO of such other person to record any satisfaction/reason before issuing notice under section 153C and proceeding further, considering the above aspects, it is advisable for maintaining institutional memory that the AO records receipt of the seized material and the satisfaction from the AO of the searched person and such recording/ noting may be kept in the assessment folder of such other person. In case, the AO of the searched person exercises jurisdiction over the other reason also, appropriate referencing should be made in the relevant assessment records of such other person. 2.6 Where, based upon facts and circumstances of each case, the AO of the searched person is not satisfied that any seized material belongs to the other person; provisions of section 153C would not be applied in the case of such other person. However, where such seized material indicates any undisclosed income/likely escapement of income of such other person, the AO of the searched person shall hand over the relevant seized material to the AO of the other person who, in turn, may decide about appropriate course of consequential action under the Income Tax Act, 1961 particularly under section 147/ 143(3) of the Act. It shall be ensured by the transferor AO that such handing over is effected at the earliest so that appropriate consequential action can be initiated by the transferee AO within the time limits prescribed in the Act. The transferee AO shall ensure that consequential actions are initiated and completed well within the statutory limitations. 2.7 A suggested proforma for recording satisfaction under section 153C by the AO of the searched person is enclosed. 3. As per second proviso to Section 153A(1) r.w. Section 153((1) of the Act, proceeding pending in one relevant years specified, shall abate. Such abatement in the relevant cases of the other person [to be assessed u/s 153C] shall also be recorded by the AO concerned for the sake of institutional memory. Attention is also invited to first proviso to section 153C(1) for ascertaining the date in relation to pendency of the relevant proceedings in this context. 4. As per provisions of section 153C, the seizure of material belonging to the other person shall lead to proceedings under section 153C in the case of such other person. In this context also, it may be ensured that due application of mind and care is exercised before resorting to seizure under section 132 and indiscriminate seizure of money, bullion, jewellery or other valuable article or thing or books of account or documents is avoided. 5. Instances have also come to notice where the Appraisal Reports suggest names of specific cases for consideration under section 153C without giving specific reference to the seized material and reasons in this regard, which may not serve the desired purpose. With a view to ensure that such suggestion helps the AO of the searched person in arriving at proper satisfaction in respect of proceedings under section 153C, the following details need to be incorporated in the Appraisal Report in respect of cases suggested for action under section 153C: 1. Name and PAN No. of the searched person 2. Date of initiation of search in the case of the person referred in 1 above 3. Name, address and PAN No. of the person in whose case action under section 153C is suggested 4. Specific details of the seized material on the basis of which action under section 153C is suggested: (a) Nature of the seized material (money/ bullion /jewellery / other valuable article or thing / books of account/ documents) (b) Description of the seized material (c) Address of the premise/place from where such material was seized (d) Date of seizure of such material (e) Particulars of the relevant Panchanama (f) Annexure / S.No./Page number etc. (particulars to be specified) 5. Relationship of the person referred in S. No. 3 with the searched person 6. Specific reasons for suggesting that the seized material referred to in S. No. 4 belongs to the person referred to in S. No. 3 6. Where, based upon facts and circumstances of each case, any seized material indicates undisclosed income/likely escapement of income of any other person and it is opined that the seized material does not belong to the other person, it would be desirable for the ADIT/DDIT to gather relevant evidence enabling the AO of the other person to initiate appropriate course of consequential action under the Income Tax Act, 1961 particularly under section 147/143(3). Similarly, where the AO of the searched person is not satisfied that any seized material belongs to the other person, but, the same indicates undisclosed income/likely escapement of income of the other person; due efforts would be made by him to gather relevant evidence enabling the AO of the other person to initiate appropriate course of consequential action under the Income Tax Act, 1961 particularly under section 147/143(3). 7. Contents of the above guideline may be brought to the notice of all concerned. Yours faithfully, (S L Anuragi) Under Secretary (lnv. III), CBDT Proforma for recording Satisfaction under section 153C (To be filled by the Assessing Officer of the person referred to in section 153A) 1. Name of the Group searched 2. Name and PAN No. of the person referred to in section 153A 3. Date of initiation of search in the case of the person referred to in section 153A 4. Name, address and PAN No. of the person in whose case action under section 153C is proposed: 5. Specific details of the seized material on the basis of which action under section 153C is proposed (a) Nature of the seized material (money/bullion/ jewellery/ other valuable article or thing/ books of account/documents) (b) Description of the seized material (c) Address of premise/place from where such material was seized (d) Date of seizure of such material (e) Particulars of the relevant Panchnama (f) Annexure/S. No./Page number etc. (particulars to be specified) 6. Relationship of the person referred in S. No. 4 with the person referred to in S. No. 2 7. Satisfaction of the Assessing Officer of the person referred to in section 153A that the seized material referred to in S. No. 5 belongs to the person referred to in S. No. 4 8. Assessment Years involved Note : 1. Copy of relevant Panchnama may be sent at the time of handing over of the relevant seized material. 2. For the purposes of this proforma, seized material includes material requisitioned under section 132A. Name and Designation of the A.O. Date : Place :