2019 (3) TMI 628 - AT - Income Tax

Initiation of proceedings u/s 153C - proof of incriminating document found in search to substantiate the additions - HELD THAT - The only material on the basis of which proceedings u/s 153C were initiated was the audited balance sheet and financial statements of the assessee for the year ended on 31st March, 2009. Document must be incriminating and it must relate to the assessment year whose assessments are sought to be reopened. In this case, admittedly, the document was relating to assessment year 2009-10 while the assessment reopened is for 2010-11. Therefore, the requirement that the document should relate to the assessment year sought to be reopened is not fulfilled. Moreover, how the audited balance sheet and financial statements of the assessee are incriminating material has also not been proved. In view of the above, we are of the opinion that on the facts of the assessee s case, the case of INDEX SECURITIES PRIVATE LIMITED, VIDYA SHANKAR INVESTMENT PRIVATE LIMITED 2017 (9) TMI 585 - DELHI HIGH COURT would be squarely applicable. Respectfully following the same, we quash the initiation of proceedings u/s 153C - Decided in favour of assessee.

Issues:
Validity of proceedings under Section 153C - Initiation of proceedings and addition made by Assessing Officer challenged - Decision of Hon'ble Jurisdictional High Court in Principal CIT Vs. Index Securities Private Limited cited - Material found during search of group companies - Document pertains to different assessment year - Incriminating nature of seized material questioned.

Analysis:
The appeal and cross-objection before the Appellate Tribunal ITAT Delhi concerned the validity of proceedings under Section 153C for the assessment year 2010-11. The case originated from proceedings initiated by the Assessing Officer based on a search at M/s Jagat Agro Commodities Pvt.Ltd. and M/s Jagat Projects Ltd. The assessment was completed at `5,98,52,000/-, contested by the assessee before the CIT(A). The CIT(A) upheld the initiation of proceedings under Section 153C but deleted the addition made by the Assessing Officer. The Revenue appealed against the deletion of the addition, while the assessee filed a cross-objection challenging the validity of the proceedings under Section 153C.

During the hearing, the assessee's counsel referenced the decision of the Hon'ble Jurisdictional High Court in the case of Principal CIT Vs. Index Securities Private Limited, emphasizing that the seized material did not pertain to the assessment year under consideration. The material found during the search of group companies was considered incriminating by the Hon'ble High Court, leading to the initiation of proceedings under Section 153C. The counsel argued that the material found was not relevant to the assessment year in question, as it related to a different period.

The Revenue, represented by the CIT-DR, supported the initiation of proceedings under Section 153C, contending that once a document is found for any assessment year, proceedings need to be initiated for a period of six years. The CIT(A)'s decision was cited in favor of the validity of the initiation of proceedings.

Upon careful consideration, the Tribunal noted that the only material triggering the proceedings under Section 153C was the audited balance sheet and financial statements of the assessee for the year ended on 31st March, 2009. Citing the decision of the Hon'ble Jurisdictional High Court in a similar case, it was highlighted that the seized documents must be incriminating and relate to the assessment year sought to be reopened. In this instance, the document pertained to a different assessment year, and the incriminating nature of the material was not proven.

Consequently, the Tribunal quashed the initiation of proceedings under Section 153C and annulled the assessment order. As a result, the Revenue's appeal was dismissed, and the cross-objection of the assessee was allowed. The decision was pronounced in open court on 14.01.2019.

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