2013 (11) TMI 75 - AT - Income Tax

Jurisdiction of assessment u/s 153C of the Income Tax Act - Whether the assessing officer was within his sphere to call upon the appellant to furnish its returns of income on the solitary reasoning that the appellant s was also one of the members of UPDA who had made certain illegal payments to various public servants Held that - No books of account nor any incriminate documents pertaining to the appellant were seized when a search was conducted in the residential premises of Sri Miglani and that no books of account or documents or assets seized or requisitioned were handed over to the assessing officer having jurisdiction over the appellant Assessee was not within his realm for initiation of proceedings u/s 153A r.w.s 153C of the Act in the case of the present appellant. Reliance has been placed on the P Srinivas Naik v. ACIT reported in 2007 (11) TMI 443 - ITAT BANGALORE wherein it has been declared that - Documents or books of account found during the course of search and seized cannot be termed to be indicating any limited interest of the ownership of the assessee in such books of account or documents. The language used in section 153C is materially different from the language used under section 158BD. As per section 158BD if any undisclosed income relates to other person then action against such other person can be taken provided such undisclosed income is referable to the document seized during the course of search. However section 153C says that if valuable or books of account or documents belonging to other persons are seized then action under section 153C can be taken against that person. In the instant case books of account or documents do not belong to the assessee and therefore the AO was not justified in initiating action under section 153A read with section 153C of the Act In the instant case primary condition for issue of notices under section 153C of the Income-tax Act are not satisfied and hence the assessing officer was not justified in initiating proceedings under section 153C of the Incometax Act for all the assessment years under dispute Decided against the Revenue.

Summary

Issues Involved:
1. Overlooking of documents seized from Sri R.K. Miglani's premises indicating illegal payments.
2. Relevance of previous Bench's findings (117 ITD 201) relied upon by CIT (A).

Issue-wise Detailed Analysis:

1. Overlooking of Documents Seized from Sri R.K. Miglani's Premises:
The Revenue contended that the CIT (A) overlooked documents seized from Sri R.K. Miglani, which contained details of illegal payments by various distilleries, including the appellant. The documents were maintained by Sri Miglani on behalf of the Uttar Pradesh Distilleries Association (UPDA), of which the appellant was a member. The Revenue argued that these documents could be said to belong to the appellant, thus justifying the invocation of Section 153C of the Income-tax Act. However, the appellant argued that no books of accounts or documents belonging to them were seized during the search of Sri Miglani's premises, and only Xerox copies were made available to the Assessing Officer (AO) of the appellant, which does not satisfy the conditions for invoking Section 153C.

2. Relevance of Previous Bench's Findings (117 ITD 201):
The Revenue claimed that the CIT (A) incorrectly relied on the findings of the earlier Bench in the case of P Srinivasa Nayak (117 ITD 201), arguing that the facts of the current case were different. In the prior case, the seized materials did not contain recordings of transactions carried out by the assessee, whereas, in the present case, the seized materials did contain recordings of transactions carried out by the appellant. The appellant countered this by emphasizing that the documents seized did not belong to them and that the proceedings under Section 153C could not be initiated based on undisclosed income noticed from entries or transactions recorded in documents belonging to another person.

Judgment Analysis:
The Tribunal examined whether the AO was justified in invoking Section 153C based on the documents seized from Sri Miglani's premises. It was noted that Section 153C requires that the seized documents must belong to the person against whom the proceedings are initiated. The Tribunal found that no books of account or documents belonging to the appellant were seized during the search at Sri Miglani's premises, and only a satisfaction note was received from the DCIT, CC-19, New Delhi. Therefore, the AO was not justified in initiating proceedings under Section 153A read with Section 153C.

The Tribunal referred to judicial precedents, including the Hon'ble Gujarat High Court's ruling in Vijaybhai N. Chandrani v. ACIT (231 CTR 474) and the earlier Bench's decision in P Srinivasa Nayak (117 ITD 201), which supported the view that the primary condition for issuing notices under Section 153C was not satisfied. The Tribunal concluded that the CIT (A) was correct in holding that the AO was not justified in initiating proceedings under Section 153C for the assessment years in dispute.

Conclusion:
The Tribunal dismissed the Revenue's appeals for the assessment years 2002-03, 2003-04, 2004-05, and 2005-06, upholding the CIT (A)'s decision that the AO was not justified in initiating proceedings under Section 153C. The judgment emphasized the necessity of the seized documents belonging to the appellant for validly invoking Section 153C.