2017 (7) TMI 1324 - AT - Income Tax

Assumption of jurisdiction u/s.153C - Assessment of income of any other person - documents seized in search - HELD THAT - In the present case, the income stands already returned with reference to the profit (loss) disclosed in the assessee s operating statement (profit and loss account), found and seized in search. Also, the balance-sheet also agrees with that furnished as a part of the return of income. The opportunity provided by us to the Revenue to exhibit the AO s satisfaction was guided primarily by the intent to find the basis thereof in-as-much as it could well be that there has been some omission in writing the satisfaction note, even as the satisfaction is otherwise discernible from the seized material itself. It is in doubt surprising, even as observed during hearing, that the assessee s audited accounts were found at the place of another, but that, a valid ground for making further investigation, is by itself not sufficient for invoking s. 153C, or regarding the ingredients of the said provision, as satisfied. There has been thus no valid assumption of jurisdiction for the issue of notice there-under and, accordingly, the impugned assessment, framed u/s. 143(3) r/w s. 153A, is bad in law. It is not any seized material belonging to, but only that which has a bearing on the determination of total income of, such other person, that shall give rise to the special jurisdiction envisaged by the provision. The same only seeks to take the circumstance of the seized material found in search in respect of the assessee to its logical conclusion, without which the provision becomes open ended and, accordingly, liable to be regarded as arbitrary. Legislative intent is to be the foundation of any interpretative exercise. Again, it cannot be lost sight of that the earlier assessment may be, as in the instant case, under verification procedure, i.e., u/s. 143(3) or u/s. 144. And, therefore, in the absence of any such caveat or condition in the provision, the ensuing assessment would only be a review, impermissible under the scheme of the Act - See M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT and KALYANJI MAVJI AND CO. 1975 (12) TMI 2 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
Validity of assumption of jurisdiction under section 153C of the Income Tax Act, 1961.

Analysis:

Issue: Validity of assumption of jurisdiction under section 153C

The appeal contested the assessment under section 143(3) r/w section 153A of the Income Tax Act, 1961 for the assessment year 2008-09. The primary issue raised was the validity of the assumption of jurisdiction under section 153C of the Act. Section 153C empowers the Assessing Officer to assess the income of any other person if money, assets, or valuable articles seized or requisitioned belong to a person other than the one referred to in section 153A. The appellant argued that no seized material was found during the search that had a bearing on their total income. The notice issued under section 153C was deemed bad in law as there was no reference to any seized material in the assessment order. The appellant contended that the seized final accounts were in agreement with the accounts filed along with the return of income, and there was no basis for the Assessing Officer's satisfaction regarding the seized material's impact on the total income. The satisfaction note lacked clarity on the basis for the assessment under section 153C, and the appellant argued that the invocation of section 153C was unjustified.

During the hearing, the Bench examined the seized material provided by the Departmental Representative and noted that the seized documents pertained to a different entity, not directly linked to the appellant. The satisfaction note by the Assessing Officer referred to documents belonging to another entity, indicating a lack of connection with the appellant's total income determination. The Tribunal emphasized the importance of clear satisfaction by the Assessing Officer regarding the seized material's relevance to the total income assessment. The Tribunal found no valid basis for the satisfaction noted by the Assessing Officer, leading to the conclusion that the assumption of jurisdiction under section 153C was unfounded. The Tribunal highlighted that the legislative intent behind the provision was to ensure that only seized material directly impacting the total income of the concerned person should trigger special jurisdiction under section 153C. The Tribunal ruled in favor of the appellant, holding that there was an absence of jurisdiction to assess under section 153C, rendering the impugned assessment invalid in law. The other grounds not pressed during the hearing were not adjudicated due to the decision upholding the appellant's objections regarding jurisdiction under section 153C.

In conclusion, the Tribunal allowed the appellant's appeal, pronouncing the order on July 27, 2017, at Chennai.