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2014 (9) TMI 212 - AT - Income TaxValidity of assessment proceedings initiated u/s 153C Proceedings initiated on seized material Seized documents belonging to assessee or not - Held that - The AO could not have initiated proceedings u/s 153C of the Act solely on the basis of the loose sheets - Reading of section 153C of the Act makes it clear that the primary condition for initiating proceedings u/s 153C, the AO must be satisfied that jewellery and other valuable articles or books of accounts or documents seized belongs to a person other than the person referred to in section 153A of the Act - the so called seized material on the basis of which the AO has initiated proceedings u/s 153C of the Act was admittedly not seized from the possession of the assessee but a third person Sri D. Nagarjuna Rao against whom the search and seizure operation was carried out u/s 132 of the Act - merely because D. Nagarjuna Rao has stated that he has received the amount from Tirumala Rao towards sale of the property it cannot be inferred on that basis alone, that the assessee has paid the amount towards purchase of the property - both the assessee and Tirumala Rao have denied of making the said payment to B. Nagarjuna Rao thus, the seized document on the basis of which proceeding u/s 153C was initiated cannot be said to be belonging to the assessee - the assumption of jurisdiction u/s 153C has to be held as invalid and the assessment order passed must be declared as without jurisdiction - since the seized material has no reference to the assessee, it cannot be considered to be belonging to the assessee for enabling the initiation of proceedings u/s 153C of the Act Decided in favour of assessee.
Issues Involved:
1. Delay in filing the appeal. 2. Validity of assessment proceedings initiated under section 153C of the Income Tax Act. 3. Addition of unexplained investment under section 69 of the Income Tax Act. Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was filed with a delay of seven days. The assessee submitted a petition seeking condonation of delay, accompanied by an affidavit explaining the cause of delay. Upon considering the averments made in the affidavit, the tribunal was satisfied that there was a reasonable cause for not filing the appeal in time. Consequently, the delay was condoned, and the appeal was admitted for hearing on merits. 2. Validity of Assessment Proceedings Initiated under Section 153C: The primary issue raised by the assessee was the validity of the assessment proceedings initiated under section 153C of the Income Tax Act. A search and seizure operation under section 132 was conducted in the case of third parties, and a notice under section 153C read with section 153A was issued to the assessee. The assessee argued that the proceedings under section 153C were invalid as the seized material did not belong to the assessee. The tribunal examined the seized material, which was page-38 of annexure A/DNR/18, and noted that it did not mention the name of the assessee or refer to the transaction of purchase of property by the assessee. The document had entries under the heading "Tirumala Rao account" but did not specify whether they were receipts or payments related to the assessee. The tribunal observed that the seized document neither mentioned the name of the assessee nor had any reference to the property purchased by the assessee. Additionally, the statement recorded from D. Nagarjuna Rao, who admitted that the entries were in his handwriting, did not suffice to establish that the document belonged to the assessee. The tribunal referred to previous judgments, including those of the ITAT Hyderabad Bench and the Hon'ble Gujarat High Court, which held that for proceedings under section 153C to be initiated, the seized material must belong to the person against whom the proceedings are initiated. Since the seized document did not belong to the assessee, the tribunal concluded that the initiation of proceedings under section 153C was invalid. Consequently, the assessment order passed was declared null and void. 3. Addition of Unexplained Investment under Section 69: The Assessing Officer had made an addition of Rs. 80,70,000 as unexplained investment under section 69, based on the seized document and the statement of D. Nagarjuna Rao. However, both the assessee and Tirumala Rao denied making any payment over and above the amount mentioned in the sale deed. Given that the tribunal had already declared the proceedings under section 153C invalid, it did not delve into the merits of the addition made by the Assessing Officer. Conclusion: The tribunal allowed the appeal filed by the assessee, holding that the assessment proceedings initiated under section 153C were invalid and the consequent assessment order was null and void. The appeal was allowed on the legal issue of the validity of the proceedings, and the tribunal did not address the merits of the addition made by the Assessing Officer. The order was pronounced in the court on 09-04-2014.
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