2015 (4) TMI 190 - HC - Income Tax

Legality and validity of the notice under section 153C - revenue s assertion that the AO is empowered under the statute to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted and therefore the satisfaction which is recorded in the satisfaction note is enough, is erroneous as held by Tribunal - Held that - The satisfaction note was very closely examined and the reasons assigned by the Assessing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institutionwise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. Thus the tribunal s conclusion cannot be termed as perverse - Decided against revenue.

Summary

Issues:
1. Validity of notice under section 153C of the Income Tax Act, 1961.

Analysis:
The High Court of Bombay dealt with the appeals challenging the orders passed by the Income Tax Appellate Tribunal regarding Income Tax Appeal Nos.114 to 117 of 2010 for the assessment years 2000-01 to 2003-04. The primary concern was the legality and validity of the notice issued under section 153C of the Income Tax Act, 1961. The case involved an Educational Institution registered under various acts and its President. The search and seizure operation led to the issuance of a notice proposing cancellation of the institution's registration based on seized papers. The Commissioner canceled the registration under section 12AA, which was later set aside by the tribunal. The Assessing Officer treated the institution as an Association of Persons, disallowing exemption under section 11 and assessing income at a specified amount based on a special audit. The tribunal allowed an additional ground challenging the validity of the notice under section 153C, emphasizing the need for specific incriminating information for such notices.

The tribunal found that the seized material did not establish a document-wise correlation with the relevant assessment year, leading to the conclusion that the notice was not based on specific incriminating information. It was highlighted that the general satisfaction of the Assessing Officer was insufficient for upholding the notice, as it lacked details on the incriminating information for each assessment year. The tribunal emphasized the importance of specific incriminating details and criticized the vague approach taken by the revenue. The tribunal also noted discrepancies in the explanation provided by the assessee regarding cash and jewellery, pointing out the lack of detailed inquiries into the source of funds and admissions process.

The High Court dismissed the appeals, stating that the tribunal's conclusion was not perverse considering the factual background. It rejected the reliance on a judgment from the High Court of Delhi, emphasizing that the tribunal's understanding of the legal provisions was not erroneous. The court concluded that none of the appeals raised a substantial question of law and hence were dismissed without costs.