2021 (10) TMI 603 - AT - Income Tax

Assessment u/s 153C - jurisdictional conditions precedent to the issue of a notice u/s.153C - CIT(A) recorded that undisputedly certain documents were seized, but the contents thereof are reflected in the books of account and financial statements maintained and submitted by the assessee to the authorities and therefore, they cannot be dubbed as incriminating material? - HELD THAT - In CIT vs. Sinhgadh Education Society 2017 (8) TMI 1298 - SUPREME COURT held that one of the jurisdictional conditions precedent to the issue of a notice u/s.153C of the Act is that money, bullion, jewellery or other valuable article or thing or any books of account or document must be seized or requisitioned for the relevant assessment year for issue of notice u/s. 153C - CIT(A), therefore, observed that in order to reopen the assessment of other person u/s. 153C of the Act for any assessment year earlier to the year of search, not only a direct corelation with the document is required, but also that such documents must be incriminating in nature, namely, such documents found as a result of search and belongs to or pertains to or relates to the assessee qua the assessment year. CIT(A) properly appreciated the effect of the documents and rightly applied the binding precedent rendered by Hon ble Apex Curt in the case of CIT vs. Sinhgadh Education Society(supra). We, therefore, do not find anything illegality or irregularity in the findings of the ld. CIT(A) and as a result, decline to interfere with the same. We, accordingly, find the grounds of appeal as devoid of merit and dismiss the same.

Summary

Issues:
Appeal against order of CIT(A) regarding additions made to income based on unsecured creditors and non-refundable security deposit. Determination of incriminating material seized during search and seizure operation under section 153C of the Income-tax Act, 1961.

Analysis:
1. Additions to Income: The Revenue appealed against the CIT(A)'s order deleting the additions made to the assessee's income for the assessment years 2010-11, 2011-12, and 2014-15. The Assessing Officer added unsecured creditors, non-refundable security deposit amounts to the income, which the CIT(A) found lacking incriminating material seized during the search and seizure operation. The Revenue contended that the entities mentioned in the seized documents were involved in routing unaccounted funds. However, the absence of incriminating material led the CIT(A) to delete the additions.

2. Determination of Incriminating Material: The Revenue argued that the seized documents indicated accommodation entries by various entities, including the assessee, which should be considered incriminating under section 153C of the Act. The Revenue emphasized the need to consider the totality of facts and circumstances to determine incriminating material. On the other hand, the assessee contended that the seized documents were part of regular books of accounts and did not qualify as incriminating material. The satisfaction note by the Assessing Officer highlighted the interconnected cases of the group, requiring deep investigation.

3. Judicial Analysis: The CIT(A) analyzed the seized documents in detail, finding that the contents were properly reflected in the regular books of accounts and financial statements submitted by the assessee. The CIT(A) referred to the Supreme Court's decision in CIT vs. Sinhgadh Education Society, emphasizing the need for a direct correlation and incriminating nature of seized documents for reopening assessments under section 153C. The CIT(A) concluded that the seized documents lacked incriminating content and upheld the deletion of additions to the income. The Tribunal concurred with the CIT(A)'s findings, dismissing the Revenue's appeals for lack of merit.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of incriminating material and a direct correlation with seized documents for reopening assessments under section 153C. The detailed analysis of the seized documents and their reflection in the regular books of accounts played a crucial role in determining the lack of incriminating content, leading to the dismissal of the Revenue's appeals.