2019 (8) TMI 364 - HC - Income Tax

Assessment u/s 153C - cogent materials between the documents seized and the assessee - satisfaction - Tribunal interpreting the term 'belongs to' as 'ownership' in Section 153C - whether intention of the legislature is always that section 153C is applicable when documents seized in a searched premise belongs to or its content thereof pertains to some other person in view of amendment by Finance Act, 2015 - HELD THAT - Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the AO to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . Having regard to the materials on record, if the CIT, Ahmedabad and the Appellate Tribunal relied upon the decision of the Delhi High Court in the case of Pepsi Foods Private Limited 2014 (8) TMI 425 - DELHI HIGH COURT then, in our opinion, no error much less an error of law could be said to have been committed in taking the view that there is no cogent material for arriving at the substantive satisfaction. In the documents, which were seized during the course of search, there may be some reference of the assessee, but that itself would not be sufficient. It is necessary to show some nexus on the basis of some cogent materials between the documents seized and the assessee. - appeal fails and is hereby dismissed

Summary

Issues Involved:
1. Interpretation of the term 'belongs to' in Section 153C of the Income Tax Act, 1961.
2. Validity of the satisfaction recorded by the Assessing Officer for initiating proceedings under Section 153C.
3. Sufficiency of the material evidence to establish ownership of the seized documents.

Issue-wise Detailed Analysis:

1. Interpretation of the term 'belongs to' in Section 153C of the Income Tax Act, 1961:
The core issue revolves around the interpretation of the term 'belongs to' as used in Section 153C of the Income Tax Act, 1961. The revenue contended that the Appellate Tribunal erred in interpreting 'belongs to' as 'ownership'. The Tribunal and CIT, Ahmedabad, relied on the Delhi High Court's decision in the case of Pepsi Foods Private Limited, which established that the term 'belongs to' requires a clear satisfaction that the seized documents belong to a person other than the one searched. This interpretation was deemed necessary to prevent the misuse of Section 153C and ensure that proceedings are initiated based on substantial evidence rather than mere possession of documents.

2. Validity of the satisfaction recorded by the Assessing Officer for initiating proceedings under Section 153C:
The satisfaction recorded by the Assessing Officer was scrutinized to determine if it met the legal requirements for initiating proceedings under Section 153C. The CIT, Ahmedabad, and the Appellate Tribunal found that the satisfaction recorded was insufficient and lacked cogent and tangible material. They emphasized that the presumption under Section 292C(1)(i) of the Act, which states that documents found in possession during a search belong to the searched person, was not adequately rebutted by the Assessing Officer. The Tribunal highlighted that the satisfaction note must contain reasons and a basis for concluding that the documents belong to another person, which was not evident in this case.

3. Sufficiency of the material evidence to establish ownership of the seized documents:
The evidence presented by the Assessing Officer included various documents and receipts related to the transfer of shares, which were found during the search operation. However, the CIT, Ahmedabad, and the Appellate Tribunal concluded that these documents, although found in possession of the searched person, did not conclusively establish ownership by the assessee. The Tribunal noted that the documents might reference the assessee, but this alone was insufficient to meet the jurisdictional requirement under Section 153C. The Tribunal emphasized the need for a clear nexus between the seized documents and the assessee, supported by substantial evidence.

Conclusion:
The High Court upheld the concurrent findings of the CIT, Ahmedabad, and the Appellate Tribunal, dismissing the revenue's appeal. The Court agreed that the satisfaction recorded by the Assessing Officer lacked the necessary cogent and tangible material to justify proceedings under Section 153C. The Court reiterated the importance of clear and substantial evidence to establish ownership of seized documents and prevent arbitrary use of Section 153C. The appeal was dismissed, affirming the decisions of the lower authorities.