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2016 (3) TMI 1023 - AT - Income TaxValidity of assessment u/s 153C - real owner of the document seized - presumption - Held that - The satisfaction note recorded by the AO is identical for all the years except for difference in the assessment year. From the material seized, though there was a reference to the name of the assessee-firm, equally there are some documents which do not even contain name of the assessee-firm but there is nothing to indicate that these documents were disclaimed by Indian Builders Corporation in whose case search was conducted. The AO has not referred to any material to indicate that the assessee is the owner of those seized documents. Therefore, the presumption cast under provisions of section 132(4A) of the Act, comes into play. The said provision stipulates that where any document is found in the possession or control of any person in the course of search it may be presumed that such document belongs to such person. Further, even the provisions of section 292C(1) also provide the same. This presumption was not rebutted by the AO of the searched person. Therefore, it cannot be said that assessee-firm is the owner of the seized material based on which the impugned additions were made. Furthermore, even in terms of law laid down by the Hon ble Supreme Court in the cases of Bishwanath Chatterjee 1976 (4) TMI 1 - SUPREME Court and late Nawab Sir Mir Osman Ali Khan 1986 (10) TMI 2 - SUPREME Court , assessee-firm cannot be said to be the owner of the document seized. - Decided in favour of assessee
Issues Involved:
1. Validity of assessment under section 153C of the Income Tax Act. 2. Allowability of interest under section 36 of the Income Tax Act. 3. Non-following of binding decisions of the ITAT for earlier assessment years. 4. Alleged diversion of loan to sister concerns. 5. Ownership and relevance of seized documents. Issue-wise Detailed Analysis: 1. Validity of Assessment under Section 153C: The appeals challenge the validity of assessments made under section 153C of the Income Tax Act. The appellant contended that the assessments were invalid as the additions made were the same as those in earlier assessments under section 143(3), and no incriminating materials were seized from the searched persons. The CIT(A) upheld the validity of the assessments, stating that the AO had recorded the necessary satisfaction and that the seized documents belonged to the assessee-firm. However, the Tribunal found that the AO's satisfaction note did not indicate that the seized documents belonged to the assessee-firm, and there was no evidence that the searched persons disclaimed the documents. Citing various High Court decisions, the Tribunal held that the AO did not justify the assumption of jurisdiction under section 153C, leading to the cancellation of the assessments for the years 2003-04 to 2008-09. 2. Allowability of Interest under Section 36: The CIT(A) disallowed the interest claimed under section 36, stating that borrowed funds were not utilized for acquiring immovable property generating rental income. The Tribunal, however, noted that in earlier years, similar disallowances were deleted by the ITAT, which found the loans were used for business purposes. For the assessment year 2009-10, the Tribunal reiterated that the interest on loans used to repay earlier business loans should be allowed, following the precedent set by earlier ITAT decisions. 3. Non-following of Binding Decisions of ITAT: The appellant argued that the CIT(A) did not follow binding ITAT decisions for the assessment years 2001-02 and 2002-03, which allowed interest on loans used for business purposes. The Tribunal agreed with the appellant, emphasizing that the earlier ITAT decisions should have been followed, thereby allowing the interest deduction for the assessment year 2009-10. 4. Alleged Diversion of Loan to Sister Concerns: The CIT(A) found that loans were diverted to sister concerns, which the appellant contested as contrary to the materials on record. The Tribunal did not delve into this issue separately, as it focused on the broader validity of the assessments under section 153C and the allowability of interest based on earlier ITAT rulings. 5. Ownership and Relevance of Seized Documents: The appellant claimed that the seized documents belonged to Mr. Yunus Zia, not the assessee-firm. The CIT(A) held that the documents belonged to the assessee-firm, justifying the assessments under section 153C. The Tribunal, however, found that the AO did not establish that the documents belonged to the assessee-firm, as required by law. The Tribunal emphasized that mere references to the assessee in the documents were insufficient to assume ownership, leading to the conclusion that the assessments under section 153C were invalid. Conclusion: The Tribunal allowed the appeals, canceling the assessments for the years 2003-04 to 2008-09 due to invalid jurisdiction under section 153C. For the assessment year 2009-10, the Tribunal allowed the interest deduction, following earlier ITAT decisions. The Tribunal's decision was based on the lack of proper satisfaction by the AO regarding the ownership of seized documents and the consistent application of legal precedents.
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