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2018 (12) TMI 1447 - AT - Income TaxValidity of proceedings initiated u/s 153C - basis of seized papers found - entries found in seized documents / note books found from the possession of person searched i.e. Shri Mohan Patel - plea assessee before us is that the said document does not belong to the assessee and if it does not belong to the assessee - whether under the pre-amended provisions of section 153C of the Act where the word was is belonging to and where the transaction recorded on the seized document related to person searched? - Held that - As relying on the decision of Pr. CIT & Ors. Vs. Nikki Drugs & Chemicals Pvt. Ltd. & Ors. 2015 (12) TMI 304 - DELHI HIGH COURT and M/S. ARPIT LAND PVT. LTD. M/S. AMBIT REALTY PVT. LTD. 2017 (2) TMI 553 - BOMBAY HIGH COURT wherein held that in the absence of incriminating material found during the course of search of the person who is covered under section 153A of the Act which in turn does not belong to other person than the searched person then proceedings under section 153C of the Act cannot be triggered. Following and applying the same ratio we hold that in the instant case where the documents found from the possession of Shri Mohan Patel does not belong to the assessee though it may relate to the assessee but in view of pre-amended provisions of section 153C we hold that there is no merit in initiating proceedings under section 153C of the Act. Appeal of assessee is allowed.
Issues Involved:
1. Validity of notice issued under section 153C. 2. Jurisdiction of the assessment completed under section 153C. 3. Addition of ?57,25,000 based on seized paper. 4. Nature and validity of the seized document as "dumb noting." 5. Alternative submission regarding the accounting of ?31,40,000 and the resultant addition. Issue-Wise Detailed Analysis: 1. Validity of Notice Issued Under Section 153C: The first issue raised by the assessee was the jurisdictional validity of the notice issued under section 153C of the Income-tax Act, 1961. The assessee argued that the notice was invalid as the seized documents did not belong to them but were related to another entity. The Tribunal referred to the pre-amended provisions of section 153C, which required the document to "belong to" the assessee for proceedings to be initiated. The Tribunal cited the case of Rajendra Motmal Shah Vs. ACIT, where it was held that the document must belong to the assessee, not just relate to them. The Tribunal concluded that the documents found during the search did not belong to the assessee, thus invalidating the notice issued under section 153C. 2. Jurisdiction of the Assessment Completed Under Section 153C: The assessee contended that the assessment was without jurisdiction since the documents seized during the search did not belong to them. The Tribunal examined the requirements under section 153C and noted that the seized documents must belong to the assessee for the proceedings to be valid. The Tribunal referred to the Hon'ble High Court of Delhi in Pr. CIT & Ors. Vs. Nikki Drugs & Chemicals Pvt. Ltd. & Ors., which emphasized that the Assessing Officer of the searched person must be satisfied that the documents do not belong to the searched person but to the assessee. The Tribunal found that this condition was not met, rendering the assessment without jurisdiction and null and void. 3. Addition of ?57,25,000 Based on Seized Paper: The CIT(A) had confirmed the addition of ?57,25,000 based on a seized paper found with Shri Mohan Patel, which allegedly indicated unaccounted cash transactions. The assessee argued that this addition was unwarranted as the document did not belong to them. The Tribunal noted that the document was found with Shri Mohan Patel and contained entries related to multiple entities, including the assessee. However, since the document did not belong to the assessee, the addition based on this document was not justified. 4. Nature and Validity of the Seized Document as "Dumb Noting": The assessee argued that the seized document was a "dumb noting" and did not indicate any receipt of extra consideration from the sale of fixed assets. The Tribunal considered this argument in the context of the jurisdictional issue and found that since the document did not belong to the assessee, the nature of the document as "dumb noting" further supported the assessee's case. The Tribunal held that the addition based on this document was not justified. 5. Alternative Submission Regarding the Accounting of ?31,40,000 and the Resultant Addition: The assessee made an alternative submission that if the addition of ?57,25,000 was to be considered, it should be restricted to the difference between ?57,25,000 and ?31,40,000 (i.e., ?25,85,000), as ?31,40,000 was already accounted for in their books. However, since the Tribunal quashed the entire proceedings under section 153C, this alternative submission became academic and was not addressed in detail. Conclusion: The Tribunal quashed the proceedings initiated under section 153C as the seized documents did not belong to the assessee, thus invalidating the notice and the subsequent assessment. Consequently, the addition of ?57,25,000 was also quashed, and the appeal of the assessee was allowed. The Tribunal emphasized the importance of fulfilling the jurisdictional conditions under section 153C, referring to relevant case law to support its decision. The order was pronounced on November 14, 2018.
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