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TMI Blog2014 (10) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... terials - the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee - the pre-conditions for assuming jurisdiction u/s 153C are not satisfied - the proceeding initiated u/s 153C of the Act is invalid in law. As rightly been stated by the assessee that on the date notice was issued u/s 153C of the Act, there is no assessment proceeding pending before the AO for the AY - in absence of any incriminating material showing concealed/undisclosed income of the assessee, the AO could not have proceeded to assess income which has already been reflected in the books of accounts and disclosed in the return of income filed by the assessee - conclusion drawn by the AO that the agricultural income is unexplained also found to be not on cogent material, because of the fact that the CIT(A) has accepted 50% of the income shown as agricultural income against which the department is not in appeal - in the remand report, the AO himself has accepted that the assessee has earned income from coconut trees and casurina plantation which can be considered as agricultural income - the proceeding initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inayagar Group on 4.12.2007. As alleged by the assessing officer, during the course of search seizure operation, certain incriminating documents relating to the assessee were found and seized. On that basis notice u/s 153C of the Act was issued to the assessee on 15.12.2008 calling upon the assessee to submit his return of income. In response to the notice issued u/s 153C of the Act, assessee filed its return of income on 12.01.2009 declaring the same income as was returned in the original return of income. During the assessment proceeding, the assessing officer, as noted in the assessment order, on the basis of information available with him as a result of post search investigation as well as during the course of information obtained during the assessment proceeding and also on the basis of alleged incriminating materials found at the time of search, he noticed that the assessee has been claiming agricultural income from the land at Polipalli. He noted that the fund for the purchase of above stated land has been basically transferred from M/s. ATR Warehousing Pvt. Ltd. through its sister concerns. M/s. ATR Warehousing Pvt. Ltd. and its other sister concerns M/s. Vijaya Ice Cold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mango trees/coconut trees, betel leaf gardens/ orange groves or any such other gardens are existing on the land. It was noted by the assessing officer that it is the duty of the assessee to prove the genuineness of the amounts credited in the books of accounts. It was noted by the assessing officer that despite giving several opportunities, the assessee did not produce any evidence except the purchase deed and Pattadar pass book for the land. The assessee did not produce any evidence with regard to the agricultural activities undertaken or expenditure incurred towards such agricultural activities. Though the assessee submitted before the assessing officer that they have not carried out any agricultural activity directly but have leased out the lands to the farmers and also produced copies of the confirmation letters given by the farmers but the assessing officer was not convinced with the same by stating that original copies of the confirmation have not been submitted by the assessee. The assessing officer after examining the confirmation letters noted that all the confirmations were prepared by the assessee after the search seizure operation but has been ante dated. It was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his argument both on the validity of proceeding u/s 153C of the Act as well as the merits of the addition sustained by the Ld. CIT(A) submitted that so called seized material on the basis of which proceeding was initiated u/s 153C of the Act are material of general nature which are not incriminating. It was submitted that in that view of the matter the initiation of proceeding u/s 153C of the Act is invalid and consequently the assessments are liable to be quashed. In support of such contention, the Ld. A.R. relied upon the decision of the ITAT Vizag Bench in case of Sri Ram Educational Trust v. CIT IT Appeal Nos. 31 to 35/Vizag/2012, dated 13-12-2013 and in case of Smt. G. Bangaramma IT Appeal No.361/Vizag/2013, dated 5-3-2014. It was submitted that assessment for all the 4 years stood concluded on the date notice was issued u/s 153C of the Act on 15.12. 2008. It was submitted that on the date notice was issued u/s 153C assessments for all the aforesaid assessment years stood concluded in as much as the time available for issue of notice u/s 143(2) of the Act had already expired. Therefore, the addition made towards unexplained agricultural income without reference to seized mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash Estates Resorts Pvt. Ltd. S. No. Annexure No. Details Material found in annexure 1 ATR/B/2 Page Nos.12 to 15 Page Nos.76 to 78 Investment details in the project Oxygen Serviced Apartments by M/s. Avnash Estates Resorts Ltd. Provisional Profit Loss account and Balance Sheet of M/s. Avnash Estates Resorts Ltd. as on 31.03.2007 2 A/ATRR/1 Page Nos.57 to 73 Development Agreement cum General Power of Attorney executed by Shri I. Suryanarayana Rao and others in favour of M/s. Avnash Estates and Resorts Pvt. Ltd. on 15.12.2006 at Kakinada. 3 ATR/B/PO2/2 Page Nos.6 to 9 Unsigned cash payment vouchers. 8. A reference to the assessment order in the context of the aforesaid seized material would show that the addition made in the assessment order has no relevance or connection to the aforesaid seized materials on the basis of which proceeding has been initiated u/s 153C of the Act. Further, nowhere in the assessment order the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h credit u/s 68 of the Act. The assessing officer certainly is not empowered under the Act to consider the issues in a search assessment, which can be considered in regular assessment. The ITAT Vizag Bench in case of Sri Ram Educational Trust (supra) while considering the powers of the assessing officer in initiating proceedings u/s 153C of the Act has held as under: That besides, there are no incriminating materials indicating any undisclosed income of the assessee, which could have enabled the AO to invoke the provisions of section 153C of the Act. This becomes further clear from the fact that the income were determined for the assessment years 2001-02, 2002-03 2003-04 only on the ground that the assessee has not been approved under section 10(23C) of the Act. The determination of income has absolutely no relation or relevance to the seized materials. So far as the assessment years 2004-05 and 2005-06 are concerned, perusal of the assessment orders passed in those years would reveal the fact that the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee. In the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed copy dated 14.11.2007 and the computation of income in the hand writing of Sri Gadiraju Ramakrishnam Raju. So far as registered sale deed is concerned, it cannot be considered to be an incriminating material belonging to the assessee. Similarly, the computation of income in the hand writing of Sri Gadiraju Ramakrishnam Raju also cannot be considered incriminating material or a document belonging to the assessee. On the other hand, it shows a clear intention of the assessee to file his return of income for which time is available u/s 139(4) of the Act as on date of search. No other material whatsoever was recovered. In that view of the matter, the condition precedent for initiation of proceeding u/s 153C of the Act is not satisfied. For such conclusion, we draw support from the order passed by the coordinate bench in the case of CIT v. Sri Rama Educational Trust (supra), wherein the coordinate bench held as under: 9. We have heard the rival contentions and perused the records of the case as well as the orders of the authorities below. We have also examined the decisions relied upon by the parties. Admittedly, in the present case, the AO has initiated proceedings under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments, there is any reference to the assessee. Therefore, it cannot be said that these documents belong to the assessee. In the Remand Report, submitted before the CIT(A), in the course of appeal proceedings, the AO however has taken a different stand by stating that the initiation of proceedings under section 153C as per the noting in the appraisal report is on the basis of page 64 of the seized document which is a letter dated 10.12.2004. Perusal of the said letter, copy of which is placed in the PB, would reveal that it is nothing but a certificate issued by the Chairman of the Managing Trustee of the assessee trust certifying the works entrusted to H.N.R. Constructions. Therefore, on perusal of the aforesaid documents, it would clearly reveal that the documents considered by the AO for initiation of proceedings u/s.153C do not belong to the assessee. In the aforesaid circumstances, in our view proceedings under section 153C of the Act could not have been initiated by the AO only on the basis of so called seized documents as referred to by him which, in our view, do not belong to the assessee. At this stage, it would be worthwhile to look into the finding of facts recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are signed by the persons therein. This in my opinion would be ridiculous interpretation of the word any documents as found in sec. 153C. This definitely does not seem to be the intention of the law-makers in drafting the said section. 11. As can be seen from the aforesaid extracted portion of the order of the CIT(A), the CIT(A) after examining the seized material has given a categorical finding that the so called seized materials by no stretch of imagination could be said to be belonging to the assessee. This factual finding of the CIT(A) remains uncontroverted. In the aforesaid factual background, we will now examine the ratio laid down in various decisions of High Courts and different benches of the Tribunal. 12. In the case of Vijaybhai N Chandrani (supra), the Hon'ble Gujarat High Court held as under: 12. On a plain reading of the aforesaid provisions it is apparent that ss. 153A, 153B and 153C lay down a scheme for assessment in case of search and requisition. Sec. 153A deals with procedure for issuance of notice and assessment or reassessment in case of the person where a search is initiated under s. 132 or books of account, other documents or assets are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled any action taken under s. 153C of the Act stands vitiated. 13. The ITAT Hyderabad Benches in the case of M/s. Shouri Construction (supra), following the aforesaid decision of Hon'ble Gujarat High Court held that unless there is material belong to the assessee, initiation of proceedings under section 153C is invalid. 14. In the case of DCIT v. ASP Software Solutions (supra), the ITAT Hyderabad, where both the members are parties, in para 29 of the order expressed the view that if the seized documents do not establish any incriminating evidence of undisclosed income, provisions of section 153C cannot be invoked. 15. The other decisions relied upon by ld A.R. also support the above view. Therefore, considering the facts of the assessee's case in the light of ratio laid down in the aforesaid decisions, it becomes clear that the seized materials do not belong to the assessee. That besides, there are no incriminating materials indicating any undisclosed income of the assessee, which could have enabled the AO to invoke the provisions of section 153C of the Act. This becomes further clear from the fact that the income were determined for the assessment years 2001-02, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can also be looked into from another angle. As rightly been stated by the Ld. A.R., on the date notice was issued u/s 153C of the Act, there is no assessment proceeding pending before the assessing officer for the aforesaid assessment year. Therefore, in absence of any incriminating material showing concealed/undisclosed income of the assessee, the assessing officer could not have proceeded to assess income which has already been reflected in the books of accounts and disclosed in the return of income filed by the assessee. Even otherwise also, conclusion drawn by the assessing officer in the assessment order that the agricultural income is unexplained also found to be not on cogent material, because of the fact that the CIT(A) has accepted 50% of the income shown as agricultural income against which the department is not in appeal. Further, in the remand report, the assessing officer himself has accepted that the assessee has earned income from coconut trees and casurina plantation which can be considered as agricultural income. In aforesaid view of the matter, the proceeding initiated u/s 153C of the Act in absence of any incriminating material and only on the basis of the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Inspector of Income Tax, the land is found to be agricultural land and hence, the income derived from coconut and Casurina can be considered as agricultural income. With regard to the alternate claim proposed by the assessee, it is submitted that, the interest can be considered as expenditure for computing the agricultural income, since the interest is paid on agricultural loans obtained from banks. Therefore, the assessee's claim can be accepted. 14. It is also evident from the order of the CIT(A) that he has given no reason why he considered it reasonable to accept 50% of the income shown by the assessee as agricultural income. Therefore, considering the comments of the assessing officer in the remand report and possibility of inflation of agricultural income to certain extent as well as other facts and circumstances, we are of the view that disallowance of 25% out of the income shown by the assessee as agricultural income would serve the ends of justice. Accordingly, we direct the assessing officer to disallow 25% out of the agricultural income shown by the assessee in the impugned assessment year. 15. In the result, the ITA Nos.299 to 302/Vizag/2014 are allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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