2018 (8) TMI 341 - AT - Income Tax

Validation of notice issued u/s 153C - without having any incriminating material - Held that - As per the provisions of section 153C A.O. is required to initiate the proceedings and issue the notice only on the basis of money, bullion, jewellery, other article or thing seized or requisitioned belonged to or any books of accounts or documents seized or requisitioned pertains to or pertain to the assessee. It is settled law that in the case of completed assessments, no addition under section 153C is permitted to be made without having the seized material. This Tribunal in the case of Lalitha Devi vs. Assistant Commissioner of Income Tax, (2018 (4) TMI 337 - ITAT VISAKHAPATNAM) held that invoking provisions of section 153C of the Act without having incriminating material is bad in law. In the instant case the Ld DR did not place the satisfaction recorded by the AO for issuing the notice u/s 153C. From the Ld. CIT(A) order foundation for the issue of notice u/s 153C was the letter dated 08/10/2006 and the affidavit executed on 01/01/2008 which were scanned by us and found that there was no indication of any financial transaction leading to understatement of income except the mention of purchase of property on 05/02/2004 which is relevant to the Assessment Year 2004-05 and are not relevant to the assessment years under consideration. Therefore, the said documents cannot be held to be the incriminating material for the purpose of initiating the proceedings under section 153C of the Act. Earlier the assessments in this case are completed, since, the time limit for issue of notice u/s 143(2) got expired before the date of search, the AO did not make any addition in the assessment orders on the basis of the seized material. - Decided in favour of assessee

Issues Involved:
1. Validity of notice issued under section 153C of the Income Tax Act, 1961.
2. Requirement of incriminating material for issuing notice under section 153C.
3. Jurisdictional facts and the time limit for issuance of notice under section 143(2).

Issue-wise Analysis:

1. Validity of Notice Issued under Section 153C:
The assessee challenged the validity of the notice issued under section 153C of the Income Tax Act, 1961. The search was conducted on 03/02/2008, and notices were issued on 03/03/2010 for the Assessment Years 2005-06 to 2007-08. The Assessing Officer completed the assessments under section 143(3) r.w.s. 153C by orders dated 30/12/2010. The assessee contended that the assessments were completed, and no notice under section 153C could be issued without incriminating material. The Tribunal examined the documents relied upon by the CIT(A), which included a letter dated 18/10/2006 and an affidavit dated 01/01/2008. The Tribunal found that these documents did not pertain to any financial transactions leading to the understatement of income for the relevant assessment years, thus invalidating the notice under section 153C.

2. Requirement of Incriminating Material for Issuing Notice under Section 153C:
The Tribunal emphasized that for issuing a notice under section 153C, the Assessing Officer must have seized material indicating the understatement of income or unexplained investment. The documents in question were not related to the relevant assessment years and did not indicate any financial transactions leading to the understatement of income. The Tribunal cited the case of Lalitha Devi vs. Assistant Commissioner of Income Tax and the Supreme Court decision in CIT vs. Singhad Technical Education Society, which held that invoking section 153C without incriminating material is invalid.

3. Jurisdictional Facts and Time Limit for Issuance of Notice under Section 143(2):
The Tribunal noted that the time limit for issuing notice under section 143(2) had expired for the Assessment Years 2005-06 and 2006-07 by the time of the search. For the Assessment Year 2007-08, the notice was issued after the expiry of the time limit. The Tribunal highlighted that the Assessing Officer did not furnish the satisfaction recorded for issuing the notice nor the date of requisition made under section 132A. The Tribunal held that the absence of these details rendered the notice under section 153C invalid. The Tribunal reiterated that in the case of completed assessments, no addition under section 153C is permitted without seized material.

Conclusion:
The Tribunal concluded that the notice issued under section 153C was invalid due to the absence of incriminating material and the expiry of the time limit for issuing notice under section 143(2). The Tribunal set aside the orders of the lower authorities and allowed the appeals of the assessee. Since the primary issue was resolved in favor of the assessee, the Tribunal did not find it necessary to adjudicate the remaining grounds raised in the appeal.

Order:
All the appeals filed by the assessee were allowed, and the orders of the lower authorities were set aside. The judgment was pronounced in open court on 03rd August 2018.

← Previous Next →