2019 (7) TMI 1030 - AT - Income Tax

Assessment u/s 153C or 153A - assessee submitted that a search u/s 132 was conducted on 12.09.2013 in the case of the assessee as evidenced from panchnama dated 12.09.2013 and argued the AO ought to have initiated the proceedings u/s 153A, but not u/s 153C - HELD THAT - As per the provisions of section 153C of the Act, assessments required to be completed u/s 153A in the case of the person where the search is initiated. In the instant case, search was initiated in the case of G.S.L.Educational Society and the assessee s premises were also searched for incriminating material of G.S.L.Educational Society. Apart from the above, during the search in the premises of Shri Adapa Rambabu, Accountant of the firm, incriminating material belonging to the assessee was found. Therefore, in the assessee s case, correct action for search assessment is initiation of proceedings u/s 153C. Accordingly, we uphold the action of the AO in issuing the notice u/s 153C of the Act and dismiss the assessee s appeal on this ground. Time limit for issue of notice u/s 143(2) was expired for all the impugned assessment years and no addition is permissible without the incriminating material - HELD THAT - It is settled issue that for initiating the proceedings u/s 153C of the Act, it is incumbent upon the A.O. to have the incriminating material evidencing the undisclosed income. In the assessee s case no such evidence was found during the course of search in the case of G.S.L.Educational Society. As per the provisions of section 153C of the Act, it is mandatory to have the satisfaction of the A.O. that money, bullion, jewellery or other valuable article or thing or any books of accounts, documents seized or requisitioned pertains to or relates to the assessee, which means that unless there is an incriminating material belonging to the assessee is found, the action u/s 153C of the Act is not permissible. In the assessee s case there was no incriminating material found and seized from the premises of the searched person. As discussed earlier the material found during the course of search was related to the A.Y.2014-15. Therefore, we hold that the notices issued u/s 153C for the impugned assessment years are unsustainable. See SINHGAD TECHNICAL EDUCATION SOCIETY 2017 (8) TMI 1298 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice issued under section 153C of the Income Tax Act, 1961.
2. Time limit for issuing notice under section 143(2) and the necessity of incriminating material for assessments under section 153C.

Issue 1: Validity of notice under section 153C:
The case involved appeals by the assessee against the Commissioner of Income Tax (Appeals) orders for the Assessment Years 2009-10, 2012-13, and 2013-14 regarding the notice issued under section 153C. The search and seizure operation was conducted in the case of G.S.L.Educational Society, leading to the discovery of incriminating material at the residence of the assessee's accountant. Subsequently, a search was conducted at the assessee's residence, resulting in the finding of incriminating material related to the assessee's income. The notice under section 153C was challenged by the assessee, arguing that the search was conducted at the assessee's residence, thus jurisdiction under section 153C was not justified. However, the CIT(A) upheld the AO's action, stating that the notice under section 153C was rightly issued due to the incriminating material found during the search at the accountant's premises. The Tribunal, after considering the arguments, upheld the action of the AO in issuing the notice under section 153C, dismissing the assessee's appeal on this ground.

Issue 2: Time limit for issuing notice under section 143(2) and necessity of incriminating material:
The assessee contended that the time limit for issuing notice under section 143(2) had expired for all the assessment years in question, and no addition was permissible without incriminating material. The Tribunal observed that for proceedings under section 153C, incriminating material evidencing undisclosed income is essential. As no such evidence was found during the search at G.S.L.Educational Society, and the material discovered was related to a different assessment year, the Tribunal held that the notices issued under section 153C for the impugned assessment years were unsustainable. Citing the decision of the Hon'ble Supreme Court and a previous tribunal case, the Tribunal quashed the notices issued under section 153C without any incriminating material, ruling in favor of the assessee.

In conclusion, the Tribunal allowed the appeals of the assessee, emphasizing the necessity of incriminating material for proceedings under section 153C and the importance of adhering to the statutory time limits for issuing notices under section 143(2).