2012 (4) TMI 335 - HC - Income Tax

Block assessment - Search and seizure - The main contention of the petitioner is that the Assessing Officer has illegally assumed jurisdiction under Section 153C read with Section 153A of the Act, that there was no undisclosed income to be assessed in the petitioner s hands and therefore a writ of certiorari should issue to quash the proceedings as null and void. - held that - Once Section 153A is found to be applicable, there will be only one assessment in respect of each of the six assessment years immediately preceding the assessment year - It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person - Even if they tend to act unreasonably or under misplaced enthusiasm, there are adequate safeguards which can be availed of by those persons - Writ petition dismissed

Summary

Issues Involved:
1. Validity of the assumption of jurisdiction under Section 153C read with Section 153A of the Income Tax Act.
2. Legality of the seizure of documents and the satisfaction recorded by the Assessing Officer.
3. Assessment of income for the assessment years 2003-04 to 2008-09.
4. Method of accounting for recognizing income from the sale of development rights.
5. Availability of alternative remedies and the appropriateness of invoking writ jurisdiction.

Issue-wise Detailed Analysis:

1. Validity of the Assumption of Jurisdiction under Section 153C read with Section 153A:

The petitioner, SSP Aviation Ltd., challenged the assumption of jurisdiction under Section 153C read with Section 153A of the Income Tax Act, arguing that there was no undisclosed income to be assessed. The court explained that Section 153A applies to a person in whose case a search is initiated under Section 132, and the Assessing Officer shall call upon the assessee to furnish returns of income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted. The court noted that the satisfaction required under Section 153C(1) is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement that the Assessing Officer should also be satisfied that such documents must conclusively reflect any undisclosed income.

2. Legality of the Seizure of Documents and the Satisfaction Recorded by the Assessing Officer:

The petitioner contended that the seizure of documents was illegal and invalid since the basic conditions required before issuing a warrant of authorization under Section 132 were not satisfied. The court held that the seizure of documents belonging to the petitioner during the search of Puri Group of Companies was valid. The court emphasized that the satisfaction required under Section 153C is only that the documents belong to a person other than the searched person, and it is not necessary for the Assessing Officer to reach a firm conclusion that the documents show undisclosed income. The court found that the procedure followed by the Assessing Officer was strictly in accordance with sub-section (1) of Section 153C.

3. Assessment of Income for the Assessment Years 2003-04 to 2008-09:

The petitioner argued that there was no undisclosed income to be assessed for the assessment years 2003-04 to 2008-09. The court noted that the Assessing Officer had not made any addition in the assessments for the years 2003-04 to 2006-07 and 2008-09, except for the assessment year 2007-08, where an addition of Rs.86 crores was made. The court explained that the addition for the assessment year 2007-08 was based on the agreements seized during the search, which showed that the petitioner had sold development rights in the land, and the profit from the transaction was taxable in that year.

4. Method of Accounting for Recognizing Income from the Sale of Development Rights:

The petitioner followed the percentage of completion method for recognizing income from the sale of development rights. The Assessing Officer did not accept this method, arguing that the petitioner is not a contractor or developer and had purchased and sold development rights. The court refrained from examining this issue in detail, noting that the assessment order for the assessment year 2007-08 is under appeal before the CIT (Appeals). The court emphasized that this question should be addressed in the appeal pending before the appellate authorities under the relevant provisions of the Act.

5. Availability of Alternative Remedies and the Appropriateness of Invoking Writ Jurisdiction:

The court highlighted that the petitioner has an efficacious alternative remedy by way of an appeal against the assessment made for the six preceding assessment years under Section 153A read with Section 153C. The court noted that the petitioner had already filed appeals before the CIT (Appeals). The court emphasized that the procedure envisaged by Section 153C does not infringe any rights of the petitioner or curtail his right to be heard by the Assessing Officer or to file appeals and question the assessments. The court found no merit in the writ petition and dismissed it, stating that the petitioner should pursue the appeals pending before the appellate authorities.

Conclusion:

The court dismissed the writ petition, finding no merit in the contentions raised by the petitioner. The court held that the assumption of jurisdiction under Section 153C read with Section 153A was valid, the seizure of documents was legal, and the petitioner had an alternative remedy by way of an appeal. The court refrained from examining the method of accounting for recognizing income from the sale of development rights, as the issue was pending in appeal. The court emphasized that the procedure followed by the Assessing Officer was in accordance with the statutory provisions, and there was no ground for apprehension that the petitioner would not be heard before the assessments or reassessments were completed.