2017 (12) TMI 1362 - HC - Income Tax

Validity of assessment u/s 153C - Held that - As decided in on similar issue in Amrapali Grand case 2016 (10) TMI 626 - DELHI HIGH COURT Two documents stated to have been recovered during the search which did not belong to the Assessee and, therefore, could not form the basis for initiating proceedings against the Assessee under Section 153 C of the Act. Even in the satisfaction note recorded by the AO, the said documents were stated to pertain to the Assessee and not belong to it. The amendment to Section 153C which replaced the words belong or belongs to with the words pertain or pertains to was made only with effect from 1st June, 2015 whereas the search in the present case took place on 9th September 2010 and the notice under Section 153C was issued on 12th April, 2012.Consequently, the ITAT cannot be said to have erred in holding the assessment to be unsustainable in law. - Decided in favour of assessee

Summary

Issues:
Validity of assessment under Section 153C of the Income Tax Act for assessment years 2008-09, 2010-11, and 2011-12.

Analysis:
The High Court addressed the issue of the validity of assessments under Section 153C of the Income Tax Act for the mentioned assessment years. The Court referred to a previous case concerning the same search block assessments and the question of whether the ITAT erred in holding the assessments invalid. In the previous case, a search was conducted in the 'Amprapali group' leading to assessments under Section 153C. The Assessing Officer made additions on account of bogus purchases and notional interest on interest-free loans. The Commissioner of Income Tax (Appeal) rejected the challenge to the assessment's validity but deleted the additions. The ITAT, however, held that certain documents recovered during the search did not belong to the Assessee and, therefore, the initiation of proceedings under Section 153C was invalid based on previous court decisions.

The Revenue argued that the recovered documents should be considered to belong to the Assessee as part of the 'Amrapali Group.' However, the Assessee pointed out that the documents were noted to "pertain" to the Assessee and not belong to it, highlighting a change in the law regarding the language used from "belong or belongs to" to "pertain or pertains to" effective from June 1, 2015, while the search and notice in this case occurred before that date. The Court agreed with the ITAT's decision, stating that the assessment was unsustainable in law due to the discrepancy in the language used in the relevant sections. As a result, no substantial question of law was found to arise, leading to the dismissal of the appeals for the mentioned assessment years.