2015 (1) TMI 1013 - AT - Income Tax

Invoking the jurisdiction under section 153C r.w.s. 153A of the Act - addition to capital gain - Held that - Assessing Officer was holding the jurisdiction of the person searched under section 132 of the Act from whose possession certain documents relating to the assessee were found. The said officer also held the jurisdiction of the present assessee before us and the satisfaction in such circumstances can be said to have been exercised by the Assessing Officer before initiating the proceedings under section 153C of the Act. No merit in the plea of the assessee that the document found in the present case being 7/12 extracts landholding of the assessee being a public document cannot be said to be a document on the basis of which the proceedings under section 153C of the Act could be initiated. - Decided against assessee. Addition of family income in the hands of assessee - Held that - Once the property is being held by the assessee and their family members from year to year jointly we find no merit in the order of the Assessing Officer in this regard. The assessee at best could be taxed for the income arising in his hands only of his share in the property and not on account of income arising on account of share of his family members in the property even though the 7/12 records the name of assessee. The assessee had already declared his share of income from capital gains in assessment year 2002-03. However the gain arising from the sale of the property is now being taxed in the hands of the assessee in assessment year 2001-02 holding the assessee to be the owner of the whole property. However we find no merit in the said stand taken by the authorities below especially in view of the facts and circumstances pointed here-in-above. Accordingly we direct the Assessing Officer to tax the share of the assessee in the said property in his hands and the balance share of the property is to be taxed in the hands of the other family members who are joint owners of the property. The CIT(A) has vide para 6 of the appellate order held the assessee to be entitled to the deduction under section 54F of the Act in respect of one flat owned by the assessee against which the Revenue is not in appeal. Accordingly we direct the Assessing Officer to re-compute the income of the assessee under the head capital gain in the hands of the assessee vis- -vis his share in the property after allowing the benefit of deduction under section 54F of the Act. - Decided in favour of assesse.

Issues Involved:
1. Validity of jurisdiction assumed under section 153C read with section 153A of the Income Tax Act.
2. Validity of jurisdiction for Assessment Year (A.Y.) 2001-02.
3. Validity of jurisdiction assumed under section 153C through assignment/transfer of a case under section 127 of the Income Tax Act.
4. Whether the 7/12 extract of land can be considered incriminating material.
5. Addition of Rs. 1,15,00,000 in the hands of the appellant.

Detailed Analysis:

Issue 1: Validity of Jurisdiction Assumed Under Section 153C Read with Section 153A
The assessee challenged the jurisdiction assumed by the ACIT, Central Circle 1(2), Pune, under section 153C read with section 153A, arguing that no satisfaction existed that incriminating material belonging to the appellant was found in the search of Mr. Manish Ladkat's premises. The Tribunal found that the search at Mr. Ladkat's premises resulted in the seizure of documents (7/12 extracts) related to the assessee. The jurisdictional CIT transferred the cases to the same Assessing Officer, who then issued a notice under section 153C. The Tribunal held that the Assessing Officer had correctly invoked jurisdiction, as the documents were found to belong to the assessee, and the necessary satisfaction was recorded.

Issue 2: Validity of Jurisdiction for A.Y. 2001-02
The assessee contended that the jurisdiction for A.Y. 2001-02 could not be assumed as it was beyond the six prior years for which jurisdiction under section 153A is available. The Tribunal noted that the notice under section 153C was issued on 17.09.2008, and the six years should be counted from the date of search. Since the search took place on 17.08.2006, the six-year period would end in A.Y. 2003-04. Therefore, the Tribunal agreed that the year under appeal, A.Y. 2001-02, was beyond the permissible period, rendering the initiation of proceedings for this year incorrect.

Issue 3: Validity of Jurisdiction Assumed Under Section 153C Through Assignment/Transfer Under Section 127
The assessee argued that jurisdiction under section 153C cannot be assumed through assignment or transfer of a case under section 127. The Tribunal found no merit in this argument, stating that the jurisdictional CIT is empowered to transfer cases for proper investigation. The transfer of jurisdiction to the ACIT, Central Circle 1(2), who also held jurisdiction over the searched person, was valid. The Tribunal concluded that the Assessing Officer had properly assumed jurisdiction under section 153C.

Issue 4: Whether the 7/12 Extract of Land Can Be Considered Incriminating Material
The assessee contended that the 7/12 extract of land, being a public document, cannot be considered incriminating material. The Tribunal referred to the Hon'ble Delhi High Court's decision in SSP Aviation Ltd. Vs. DCIT, which held that documents found during search need not be 'incriminating' to initiate proceedings under section 153C. The Tribunal found that the 7/12 extract, although a public document, was sufficient to initiate proceedings under section 153C as it related to the assessee.

Issue 5: Addition of Rs. 1,15,00,000 in the Hands of the Appellant
The Assessing Officer added Rs. 1,15,00,000 to the assessee's income, considering the assessee as the sole owner of the property mentioned in the 7/12 extract. The Tribunal found that the property was jointly owned by the assessee and his family members, who had declared their respective shares in their wealth tax returns. The Tribunal directed the Assessing Officer to tax only the assessee's share of the property and to allow the benefit of deduction under section 54F for the purchase of one flat. The remaining shares should be taxed in the hands of the other family members.

Conclusion:
The Tribunal partly allowed the appeal, holding that the jurisdiction for A.Y. 2001-02 was incorrectly assumed as it was beyond the permissible six-year period. The Tribunal also directed the Assessing Officer to re-compute the capital gains, taxing only the assessee's share and allowing the deduction under section 54F. The Tribunal found no merit in the other grounds raised by the assessee regarding the validity of jurisdiction under section 153C and the nature of the 7/12 extract as incriminating material.

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