2023 (4) TMI 183 - AT - Income Tax

Assessment u/s 153C - addition u/s 28(iv) - CIT(A) had deleted the addition on the pretext that the documents seized during the search and seizure operation carried out u/s 132 do not pertain to assessment year under consideration - HELD THAT - As from the perusal of Memorandum of Understanding dt.22.02.2007, it is abundantly clear that the MOU was spread over to various years including A.Y. 2010-11 before us. Therefore, the findings recorded by the ld.CIT(A) is non-est and against the record. The order of the Ld. CIT(A) is required to be set aside as being contrary to facts on record. CIT(A) had granted the relief to the assessee on the technical ground that the incriminating material does not pertain to the year under consideration and had refrained from deciding the grounds on merit. As we have decided the legal ground against the assessee and in favour of the revenue, therefore, we deem it appropriate to direct the Ld.CIT(A) to decide the remaining grounds of appeal on merits. Accordingly , the appeal of the Revenue is allowed for statistical purposes.

Issues Involved:
1. Validity of proceedings u/s.153C of the Income Tax Act.
2. Proper initiation and completion of assessment u/s. 153C.
3. Consideration of incriminating material in assessment proceedings.
4. Applicability of legal precedents in similar cases.
5. Authority of Assessing Officer to assess/reassess total income.

Issue 1: Validity of proceedings u/s.153C of the Income Tax Act:
The appeal was filed by the Revenue challenging the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The main contention was whether the assessing officer had the fundamental jurisdiction to invoke proceedings under section 153C of the Income Tax Act. The Commissioner of Income Tax (Appeals) had quashed the assessment based on the grounds that the assessing officer did not have valid jurisdiction to initiate the proceedings.

Issue 2: Proper initiation and completion of assessment u/s. 153C:
A search and seizure operation under section 132 was conducted in the case of a company, resulting in the finding and seizure of incriminating material related to another company. Subsequently, a notice under section 153C was issued to the latter company. However, the assessing officer made additions to the income of the company based on transactions and details unrelated to the seized material. The Commissioner of Income Tax (Appeals) held that the assessment was not validly initiated as there was no connection between the seized documents and the additions made.

Issue 3: Consideration of incriminating material in assessment proceedings:
The Commissioner of Income Tax (Appeals) examined the document forming the basis for initiating proceedings under section 153C. It was found that the document did not directly relate to the assessment year under consideration, leading to the conclusion that the assessment was not validly initiated. The assessing officer's reliance on the seized material was deemed improper, resulting in the quashing of the assessment.

Issue 4: Applicability of legal precedents in similar cases:
The Revenue contended that the Commissioner of Income Tax (Appeals) erred in deleting the additions made by the assessing officer based on the premise of a violation of section 153C. Reference was made to a decision of the Supreme Court in a similar case to support the argument that the assessing officer's actions were justified. However, the Commissioner of Income Tax (Appeals) based the decision on the lack of connection between the seized documents and the additions made.

Issue 5: Authority of Assessing Officer to assess/reassess total income:
The Tribunal set aside the decision of the Commissioner of Income Tax (Appeals) due to factual inaccuracies and incorrect findings. It was determined that the incriminating material seized during the search operation was indeed relevant to the assessment year under consideration. Therefore, the order of the Commissioner of Income Tax (Appeals) was overturned, and the Revenue's appeal was allowed for statistical purposes.

In conclusion, the judgment addressed various issues related to the validity of proceedings under section 153C of the Income Tax Act, the proper initiation and consideration of incriminating material in assessment proceedings, and the applicability of legal precedents. The Tribunal ultimately ruled in favor of the Revenue, emphasizing the importance of establishing a clear connection between seized documents and the additions made during assessment.

← Previous Next →