2024 (10) TMI 763 - HC - Income Tax

Validity of assessment u/s 153C - Interpretation of the terms belongs to and pertains to in Section 153C - ITAT justification in holding that the Land Aggregation Agreement entered into between the Ramprastha Group of companies (searched person) and the respondent-assessee and which was discovered during the course of search did not belong to the respondent-assessee, especially in light of the 2015 amendments made by the Legislature HELD THAT - Undisputedly, the said questions are covered by the decision of Vikram Sujitkumar Bhatia 2023 (4) TMI 296 - SUPREME COURT . The Supreme Court had, in its decision, noted that this Court had in the case of Pepsico India Holdings (P.) Ltd. 2014 (8) TMI 898 - DELHI HIGH COURT taken a restrictive view of the words belong to as used in Section 153C of the Act. Thus, even though incriminating material pertaining to the third parties was found during a search conducted u/s 132 Revenue could not proceed against such other persons if the document did not belong to the said person. The Parliament had substituted the words belongs or belongs to with the words pertains or pertains to by the Finance Act, 2015. In the present case, the Tribunal has proceeded on the restrictive interpretation of the words belongs to as interpreted by this Court in Pepsico India Holdings (P.) Ltd. v. ACIT and Anr. (supra). The said decision in this regard does not hold good, in view of the legislative amendment to Section 153C of the Act brought by the Finance Act, 2015. Further, in the case of Income-tax Officer v. Vikram Sujitkumar Bhatia (supra), the Supreme Court has also authoritatively held that the same would be applicable to the searches conducted prior to the enactment of the Finance Act, 2015. Assessee does not dispute that the questions now stand fully covered by the said decision in favour of the Revenue. He submits that the other questions that were not decided by the Tribunal in view of its decision that the material found during the search did not belong to the assessee. And, the same require to be considered. Revenue also submits that in view of the above, it is necessary that the matter be remanded to the Tribunal to decide the remaining grounds as raised in the given appeals.

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961.
2. Interpretation of the terms "belongs to" and "pertains to" in Section 153C of the Act.
3. Applicability of the Finance Act, 2015 amendment to searches conducted before 1-6-2015.
4. Request for remand of the matter to the Tribunal for consideration of remaining grounds raised by the assessee.

Analysis:
1. The Revenue filed appeals under Section 260A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal for assessment years 2007-08 and 2008-09. The questions framed for consideration pertained to the interpretation of the Land Aggregation Agreement in relation to the respondent-assessee and the Ramprastha Group of companies.

2. The Supreme Court's decision in Income-tax Officer v. Vikram Sujitkumar Bhatia highlighted the restrictive view taken by the Court in Pepsico India Holdings (P.) Ltd. v. ACIT and Anr regarding the terms "belongs to." The Finance Act, 2015 amended the Act, substituting "belongs or belongs to" with "pertains or pertains to." The Tribunal's restrictive interpretation of "belongs to" was deemed invalid post the legislative amendment.

3. The Tribunal's decision was overturned based on the legislative amendment and the Supreme Court's ruling, which held that the amendment applies to searches conducted even before its enactment. The judgment emphasized the applicability of the Finance Act, 2015 to searches conducted under section 132 of the Act before 1-6-2015. Consequently, the impugned order was set aside, and the appeals were restored before the Tribunal for consideration of remaining grounds raised by the assessee.

4. Both parties agreed that the questions raised were resolved in favor of the Revenue. The remaining grounds raised by the assessee were to be reconsidered by the Tribunal. Hence, the matter was remanded to the Tribunal for further consideration. The judgment disposed of the present appeal in these terms, allowing the appeals but with no order as to costs.