2015 (10) TMI 2167 - AT - Income Tax

Validity of assessment made u/s 153C - CIT(A) annulled assessment as the seized documents do not belong to the assessee?- Held that - In the present case, documents at pages 148-149 are the ledger accounts in the books of AR Airways (P) Ltd. Therefore, proceedings u/s 153C could be initiated as the documents belonged to assessee. Therefore, ld. CIT(A) was not justified in annulling the assessment. However, if the documents did not pertain to the year under consideration, then no 153C assessment could be made. The matter is restored back to the file of AO to find out as to which year the documents belong. - Decided in favour of revenue for statistical purposes

Summary

Issues Involved:
1. Validity of the assessment made under Section 153C.
2. Whether the seized documents, on the basis of which proceedings under Section 153C were initiated, belonged to the assessee.
3. Interpretation of Section 153A and 153C of the Income-tax Act.
4. Taxability of income from commission and brokerage services under Chapter IV-D versus Chapter IV-F of the Income-tax Act.

Detailed Analysis:

1. Validity of the Assessment Made Under Section 153C:
The revenue appealed against the order annulling the assessment made under Section 153C, arguing that the seized documents belonged to the assessee. The assessee, in its cross-objections, contended that the assessment order passed under Section 153C read with Section 143(3) was without jurisdiction, as no search was initiated against the assessee under Section 132(1), nor were any books of accounts requisitioned under Section 132A. The tribunal noted that the AO issued notice under Section 153C based on seized documents, which were ledger accounts of the assessee in the books of AR Airways (P) Ltd., but these accounts were for FY 2004-05, not for the relevant assessment year 2000-01. The tribunal restored the matter to the AO to verify the years to which the documents belonged, emphasizing that no Section 153C assessment could be made if the documents did not pertain to the year under consideration.

2. Whether the Seized Documents Belonged to the Assessee:
The CIT(A) had annulled the assessment on the ground that the documents did not belong to the assessee, as the AO did not discuss the contents of the documents in the assessment order. The tribunal referred to various judicial precedents, including the Gujarat High Court's decision in Vijay Bhai N Chandrani vs. ACIT, which emphasized that the documents seized should belong to the assessee for initiating proceedings under Section 153C. The tribunal found that the documents in question were ledger accounts of the assessee in the books of AR Airways (P) Ltd., thus belonging to the assessee. However, the tribunal noted that if the documents did not pertain to the relevant assessment year, no assessment under Section 153C could be made.

3. Interpretation of Section 153A and 153C of the Income-tax Act:
The tribunal analyzed the interpretation of Sections 153A and 153C, referring to judicial precedents that emphasized the need for the seized documents to belong to the assessee and to pertain to the relevant assessment year for valid initiation of proceedings. The tribunal highlighted that the AO must be satisfied that the documents belong to the assessee and contain undisclosed income, which was not disclosed to the department. The tribunal restored the matter to the AO to verify the relevance of the documents to the assessment year in question.

4. Taxability of Income from Commission and Brokerage Services:
The assessee contended that the sum received on account of commission and brokerage services should be taxable under Chapter IV-D (income from business or profession) rather than Chapter IV-F (income from other sources). The AO had treated these amounts as "income from other sources," but the CIT(A) and the tribunal did not explicitly address this issue in their final decision, as the primary focus was on the validity of the proceedings under Section 153C.

Conclusion:
The tribunal allowed the revenue's appeal for statistical purposes, restoring the matter to the AO to verify the years to which the seized documents belonged. The cross-objections filed by the assessee were dismissed as infructuous. The tribunal emphasized the importance of verifying the relevance of the seized documents to the assessment year in question for valid initiation of proceedings under Section 153C. The order was pronounced in open court on 24/09/2015.