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ASSESSMENT OF THIRD PERSON UNDER INCOME TAX ACT, 1961

Income Tax - By: - Mr. M. GOVINDARAJAN - Dated:- 8-3-2017 - Section 153C provides for the procedure for assessment of income of any other person. Section 153C (1) provides that notwithstanding anything contained in section 139 (return of income), section 147 (income escaping assessment), section 148 (issue of notice where income has escaped assessment), section 149(time limit for notice), section 151(sanction for issue of notice) and section 153(Time limit for computation of assessment, reassess .....

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e handed over to the Assessing Officer having jurisdiction over such other personand that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or .....

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The second proviso to this section provides that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any asse .....

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- no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitio .....

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documents seized in a branch under Section 132 of requisitioned under Section 132A, 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 the jurisdictional Assessing Officer shall proceed against such other person and issue such person notice and assess or reassess the income of such other person in acco .....

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ets which belonged to a person other than the person referred to in Section 153A. Otherwise the Assessing Officer has no jurisdiction under Section 153C. In Commissioner of Income Tax V. Promy Kuriakose - 2016 (8) TMI 327 - KERALA HIGH COURT the High Court held that incriminating material must be found during search showing undisclosed income of third person. The Assessing Officer is to record his satisfaction for having jurisdiction over the third person in respect of search conducted that such .....

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under Section 68 of the Act. The Commissioner (Appeals) held that the assessee was carrying on business only on paper and its sole purpose was to benefit others and hence the addition must be made in the hands of the beneficiaries and not in the hands of the assessee. The Tribunal held that the documents found during the search and seizure operation conducted with reference to the SVP Group did not belong to the assessee and therefore the assumption of jurisdiction under Section 153C of the Act .....

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note was not disclosed despite its request. Moreover the documents seized could not be considered to be belonging to the assessee. The High Court held that the initiation of the proceedings under Section 153 is without jurisdiction. Invalid proceeding In Commissioner of Income Tax V. Refam Management Services Private Limited - 2015 (11) TMI 410 - DELHI HIGH COURT the High Court held that the only document seized during the search was a cheque book pertaining the assessee which reflected the issu .....

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COURT the High Court held that one of the conditions precedent for invoking a block assessment pursuant to a search in respect of a third party under Section 158 BD of the Act, i.e., recording satisfaction, which was detected pursuant to a search had not been complied with. Though the documents belonging to the assessee were seized at the time of operation, there was no incriminating material found leading undisclosed income. Therefore the assessment of income of the assessee was unwarranted. I .....

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e books maintained by the firm where the search was conducted which even the petitioner admits in his writ petition, the satisfaction of the Assessing Officer and the issuance or to notice seems to be perfectly correct which requires no interference. In Commissioner of Income Tax V. Manoj Bansal and others - 2015 (1) TMI 617 - DELHI HIGH COURT the High Court held that assessment of third person requires the satisfaction of the Assessing Officer of person searched that undisclosed income discover .....

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the Assessing Officer of the person in respect of whom search was conducted needs to record his satisfaction that undisclosed income belongs to the person other than the person with respect to whom search was carried out. In this case the High Court held that since the recording of reasons in the assessee s case was absent, the notice under Section 158 BD was invalid. In Pepsico India Holdings Private Limited V. Assistant Commissioner of Income tax and another - 2014 (8) TMI 898 - DELHI HIGH CO .....

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rded by the Assessing Officer shall not be in general nature. In Commissioner of Income Tax V. Sinhgad Technical Education Society - 2015 (4) TMI 190 - BOMBAY HIGH COURT the High Court held that the reasons assigned by the Assessing Officer in the satisfaction note were silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue from the assessee. The general satisfaction as recorded in the .....

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note that apart from saying that the documents belonged to the assessee and that the Assessing Officer was satisfied that it was a fit case for issuance of a notice under Section 153C, there was nothing which would indicate how the presumptions which were to be normally raised had been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the requirement of the concept of the satisfaction under Section .....

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dent had not been met the notices under Section 153C were liable to be quashed. Onus on the part of Department If the third person, on whom the proceedings are initiated, submits necessary evidence to establish his bona fide transactions, then the onus is shifted to the Department to prove that the claim of the assessee is incorrect. In Assistant Commissioner of Income Tax V. Goodview Trading P. Limited - 2016 (2) TMI 624 - ITAT DELHI the assessee is engaged in the business of investments in cap .....

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assessee had submitted necessary evidence to establish the bona fides of the transactions. Thereafter, the onus was shifted on the Revenue to prove that the claim of the assessee was factually incorrect. Though it was part of their duty to ensure that no tax which was legitimately due from the assessee remained unrecovered, at the same time they would not act in a manner as might indicate that scales were weighed against the assessee. On appeal the Tribunal upheld the order of Commissioner (Appe .....

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essment) in respect of third parties would certainly be included with in the two year period given to the Assessing Officer for completion of the block assessment under Section 158BE (1). The High Court dismissed the appeal holding that the statute for completion of block assessment in respect of persons other than the person on whom search was made and therefore the notices issued under Section 158BD by Assessing Officer was not valid. In Commissioner of Income Tax V. Calcutta Knit wares - (201 .....

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n for preparation of the satisfaction note under Section 158BD and consequent issues of notice to the other person. In Commissioner of Income Tax V. Sudhir Dhingra and others - 2015 (5) TMI 319 - CALCUTTA HIGH COURT the High Court held that the delay of 5 months in issuing of notice by the Assessing Officer was not unreasonable. The Notices issued under Section 158 BC read with Section 158BD were not barred by limitations. It is quite possible that if a search, conducted against one assessee, re .....

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casion to proceed against him does not arise at all. In Commissioner of Income Tax V. Bharat Bhushan Jain - 2015 (1) TMI 705 - DELHI HIGH COURT the High Court held that the Revenue has to be vigilant in issuing notice to third party under Section 158BD immediately after the completion of the assessment or the person in respect of whom search was conducted. The assessees were third parties who were issued with notices under Section 158 BD pursuant to search proceedings in respect of Manoj Agarwal .....

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ities conducted the search on 23.10.1998. But intimation to the assessee as third person under Section 158BD was given on 04.10.2005. The High Court held that the proceedings were initiated by enormous and unexplained delay. Suppression In Commissioner of Income Tax V. Sunny Liquors Private Limited - 2015 (1) TMI 103 - ANDHRA PRADESH HIGH COURT the High Court held that in this case no search was conducted against the respondent. The proceedings under Chapter XIV -B of the Act were initiated agai .....

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ture. Secondly the respondent has shown the purchase of the gift articles not only in their books of account but also in the returns. The Assessing Officer has also accepted the same. Hence there did not exist any occasion or basis for the department to initiate block assessment proceedings against the respondent. The Tribunal has taken the correct view of the matter and there is no basis to interfere with the same. When notice cannot be issued? In Commissioner of Income Tax and another V. Anil .....

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