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2019 (8) TMI 852 - HC - Income TaxAssessment u/s 153C - scope of amendment with effect from 1st June, 2015 in Section 153C (1) - HELD THAT - It can straightaway be noticed that the crucial change is the substitution of the words books of account or documents, seized or requisitioned belongs to or belong to a person other than the person referred to in Section 153A by two clauses i.e. a and b, where clause b is in the alternative and provides that such books of account or documents, seized or requisitioned could pertain to or contain information that relates to a person other than a person referred to in Section 153A. The trigger for the above change was a series of decisions u/s 153C, as it stood prior to the amendment, which categorically held that unless the documents or material seized belonged to the Assessee, the assumption of jurisdiction u/s 153C qua such Assessee would be impermissible. The legal position in this regard was explained in Pepsi Foods Pvt. Ltd. v. ACIT 2014 (8) TMI 425 - DELHI HIGH COURT Notice to the Assessee was issued u/s 153C on 19th November 2010. This was long prior to 1st June, 2015 and, therefore, Section 153C as it stood at the relevant time applied. The change brought about prospectively with effect from 1st June, 2015 by the amended Section 153C (1) did not apply to the search in the instant case. Therefore, the onus was on the Revenue to show that the incriminating material/documents recovered at the time of search belongs to the Assessee. It is not enough for the Revenue to show that the documents either pertain to the Assessee or contains information that relates to the Assessee. Unexplained cash credit u/s 68 - relevance of document seized in search of other persons for the purposes of determining escapement of income - can statement given in search be documents belong to other assessee to confer jurisdiction u/s 153C? - HELD THAT - In the present case, the Revenue is seeking to rely on three documents to justify the assumption of jurisdiction u/s 153 C against the Assessee. Two of them, viz., the licence issued to the Assessee by the DTCP and the letter issued by the DTCP permitting it to transfer such licence, have no relevance for the purposes of determining escapement of income of the Assessee for the AYs in question. Consequently, even if those two documents can be said to belong to the Assessee they are not documents on the basis of which jurisdiction can be assumed by the AO u/s 153C. As far as the third document, being Annexure A to the statement of Mr. D. N. Taneja, is concerned that was not a document that belonged to the Assessee. Admittedly, this was a statement made by Mr. Taneja during the course of the search and survey proceedings. While it contained information that related to the Assessee, by no stretch of imagination could it be said to a document that belonged to the Assessee. Therefore, the jurisdictional requirement of Section 153C as it stood at the relevant time, was not met in the present case. This Court concludes that the ITAT committed no legal error in holding that the AO had wrongly assumed jurisdiction u/s 153C qua the Assessee.
Issues Involved:
1. Whether the ITAT erred in deleting the addition of ?2.12 crores made by the AO under Section 68 of the Income Tax Act, 1961. 2. Whether the AO’s assumption of jurisdiction under Section 153C of the Act was justified. Detailed Analysis: Issue 1: Deletion of Addition under Section 68 of the Act The Revenue challenged the ITAT's decision to delete the addition of ?2.12 crores made by the AO under Section 68 of the Income Tax Act, 1961, on account of unexplained cash credit. The AO had added the sum to the Assessee's income due to the Assessee's failure to establish the identity, creditworthiness, and genuineness of the entry from M/s. Shri Niwas Leasing & Finance Ltd. (SNLF). The CIT (A) had allowed the Assessee's appeal, noting that SNLF was an existing Assessee with a PAN, and the money was received by cheque and used for payments to MCD authorities, thus establishing the transaction's genuineness. Additionally, the Assessee provided a confirmatory letter and a copy of SNLF's bank account, and the jurisdictional AO of SNLF confirmed these facts. The CIT (A) concluded that the Assessee could not be burdened with proving the source of the source. The ITAT upheld the CIT (A)'s decision, dismissing the Revenue's appeal on the merits of the addition of ?2.12 crores. The ITAT found no legal error in the CIT (A)'s reasoning and deletion of the addition. Issue 2: Assumption of Jurisdiction under Section 153C The AO issued a notice under Section 153C of the Act to the Assessee following a search and seizure operation on 5th January 2009 at the premises of the Taneja Puri Group. The AO determined the Assessee's income at ?3.12 crores, including ?1.00 crore from entities controlled by Mr. S.K. Gupta, an accommodation entry provider. The ITAT allowed the Assessee's appeal against the assumption of jurisdiction under Section 153C, holding that the AO's satisfaction note did not justify such assumption. The ITAT noted that the documents referred to by the AO, including the licence issued by the Director, Town and Country Planning (DTCP), Haryana, and the permission to transfer the licence, did not constitute incriminating evidence revealing any income escapement. The ITAT relied on the decision in CIT v. RRJ Securities Ltd., which held that documents with no bearing on the Assessee's income could not trigger an enquiry under Section 153C. The ITAT also found that the statement of Mr. D.N. Taneja, which included a list of transactions with Mr. S.K. Gupta's concerns, did not pertain to the Assessee's undisclosed income. The ITAT concluded that the jurisdictional requirement of Section 153C was not met, as the documents did not "belong" to the Assessee but merely "related" to it. The High Court upheld the ITAT's decision, noting that the search occurred before the amendment to Section 153C on 1st June 2015, which required the documents to "belong" to the Assessee. The Court concluded that the AO wrongly assumed jurisdiction under Section 153C, as the documents did not meet the jurisdictional requirement. Conclusion: The High Court dismissed the Revenue's appeal, affirming the ITAT's decisions on both issues. The Court found no substantial question of law arising from the ITAT's order and concluded that the AO's assumption of jurisdiction under Section 153C was incorrect, and the deletion of the addition under Section 68 was justified.
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