2024 (12) TMI 260 - HC - Income Tax

Validity of Assessment u/s 153C - whether no incriminating material has been found either belonging to the petitioner or pertaining to the petitioner in any search conducted u/s 132? - HELD THAT - Neither any books of account nor documents, either belonging to the petitioner or containing information pertaining to the petitioner, were found. The fact that an Agreement to Sell between two separate parties has been retrieved from the mobile phone of the husband of the petitioner, does not establish that the information pertains to the petitioner. As noted above, the information is that there was an Agreement to Sell between two separate parties. Therefore, the assumption that the said information pertained to the petitioner is clearly erroneous. It appears that the AO has, based on the image of the Agreement to Sell sent on Whatsapp, assumed the value of one floor of the property and based on this assumption, the AO is seeking to impute that said value in a separate transaction involving the petitioner. The only question to be addressed is, whether any asset, bullion, jewellery, books of account, documents were found during search, which either belonged to the petitioner or contained information pertaining to the petitioner. The fact that the image suggested a value of a particular property, in respect of a transaction between two other parties, cannot be stated to be pertaining to the petitioner. Assessee appeal allowed.

Summary

Issues: Jurisdiction of notices under Section 153C of the Income Tax Act, 1961

Analysis:
The petitioner challenged the notices dated 18.10.2023 issued under Section 153C of the Income Tax Act, 1961, for the assessment years 2015-16 to 2021-22, alleging lack of jurisdiction due to the absence of incriminating material related to the petitioner in any search conducted under Section 132 of the Act or any requisition made under Section 132A of the Act. The court directed the Revenue to produce material found during search proceedings, which led to the discovery of an Agreement to Sell involving cash transactions. The Revenue claimed the information was related to the petitioner based on the Agreement to Sell retrieved from the husband's mobile phone, indicating a property transaction. However, the court found that the information did not pertain to the petitioner, as it involved a transaction between other parties. The court emphasized that the absence of incriminating material directly linked to the petitioner rendered the notices without jurisdiction.

Conclusion:
The court allowed the petition, setting aside the impugned notices under Section 153C of the Income Tax Act, 1961, as the information found during the search did not establish any connection to the petitioner. The court clarified that the mere presence of an Agreement to Sell between third parties on the husband's phone did not imply relevance to the petitioner. The judgment focused on the requirement of incriminating material directly linked to the assessee for the validity of notices under Section 153C, emphasizing the jurisdictional aspect in such cases.