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TMI Blog2014 (7) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... other 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. Also 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 material already disclosed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of the revenue authorities as well as other materials on record. We have dealt with identical issue in case of another group company viz. M/s. Avinash Estates Resorts Ltd. in ITA Nos. 299 to 302/Vizag/2014 dated 4.7.2014, where in the bench has held as under: 7. We have considered the submissions of the parties and perused the materials on record as well as the orders of the revenue authorities. Section 153C of the Act postulates that in course of search and seizure operation conducted in case of an assessee if money, bullion, jewellery, books of accounts and other documents pertaining to another person is found and seized, then proceeding u/s 153C of the Act can be initiated by the assessing officer after recording satisfaction. Therefore, the money, bullion, jewellery, valuable article, things, books of accounts other documents referred to in section 153C of the Act would mean that those articles or things are in nature of incriminating material and indicate concealed/suppressed income of the assessee. On a perusal of the assessment order, it is not forthcoming, what are the seized materials on the basis of which the assessing officer has initiated proceedings u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed u/s 143(3) of the Act read with section 153C of the Act has already been reflected in the books of accounts of the assessee maintained in regular course as well as disclosed in the return of income filed by the assessee prior to the search. Only on the basis of some enquiry conducted at the time of assessment proceedings, the assessing officer has formed an opinion that the agricultural income reflected in the books of accounts and disclosed in the return of income is unexplained. It is patent and obvious from the assessment order that AO has accepted the income declared by the assessee originally except tinkering with the agricultural income shown by treating it as unexplained credit u/s 68 of the Act. In fact no other addition has been made by the AO with relation to any material seized during search. In these circumstances, we fail to understand the purpose of initiating proceeding u/s 153C of the Act. Even in respect of addition made u/s 68 of the Act also the AO subsequently in his remand report has accepted that the income is in nature of agricultural income. When the income has already been reflected in the books of accounts of the assessee and disclosed in the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. We have heard the contentions of the parties and perused the orders of the revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions relied upon by the parties. It is apparent from the assessment order that the assessing officer has proceeded u/s 153C of the Act. However, we may observe that while dealing with assessee s ground on this issue in para-7 of his order extracted herein above, the CIT(A) has recorded a finding of fact that warrants were in the name of the assessee. Hence, if search and seizure operation was conducted in pursuance of such warrant, notices u/s 153A of the Act had to be mandatorily issued to the assessee. If that is the conclusion of the CIT(A), then the very edifice of the assessment order u/s 153C of the Act would collapse, because once the warrant is in the name of the assessee, then it is to be presumed that search and seizure operation u/s 132 of the Act was initiated in case of the assessee and as a natural corollary, assessing officer should have proceeded u/s 153A of the Act and not 153C of the Act as has been done in the present case. Hence, in this premises alone, the assessment order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing proceedings under section 153C of the Act. Firstly, the AO must be satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Secondly, after being satisfied that it belongs to a person other than the persons to whom seized, he shall handover the seized material to the AO having jurisdiction over such other person and that AO shall proceed against such other person by issuing notice for assessing or reassessing for such material. Thus, the primary condition for assumption of jurisdiction under section 153C of the Act is the seized materials must belong to the person against whom proceedings under section 153C is sought to be initiated. As would be evident from the assessment order, the AO has referred to pages 31, 32 61 of the seized document with identification mark TH/HNR/2. On going through the said seized materials, copies of which are placed before us, it is to be noted that the seized materials at page 31 is a receipt of M/s. HNR Constructions acknowledging the receipt of Rs. 1,50,000/- from one Shri K. Bangarraju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sri Rama Educational Trust. The letter is a certificate issued to whom-so-ever it may concern, certifying that certain works of construction are entrusted to M/s. HNR construction, a proprietorship concern of Sri Tangi Hari Narayana. This though is on assessee's letter head is a general certificate which is issued to HNR Construction and there is nothing either incriminating in this document suggesting any unaccounted transactions. This certificate only says what is already declared in the books of accounts of assessee. In my opinion if 153C proceedings can be initiated based on such general letters that would be stretching the law a bit too far. If that is the intention of the law-makers then 153C proceedings can be initiated against all assesses whose letter heads/visiting cards are found during the search. To illustrate the matter, if some person is searched and during the search proceedings, if bank statements, LIC policy certificates or share certificates etc are found, it does not mean that 153C proceedings can be initiated 'against those banks/LIC/ companies to which the shares belong. Similarly from any person searched many purchase bills would be found. All tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or assets were requisitioned under s. 132A, he shall proceed against such other person under s. 158BC. 13. Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of s. 153C of the Act. 14. Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading 'Samutkarsh members details' and certain details are given under different columns against the name of the petitioner along with other members, however, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t find any infirmity in the order of the CIT(A) in holding the initiation of proceedings under section 153C to be ab initio void and consequently annulling the assessments for all the aforesaid assessment years. Accordingly, we uphold the same by dismissing the grounds taken by the department. 10. The ITAT Delhi Bench in case of V.K. Fiscal Services Pvt. Ltd. Vs. DCIT in ITA Nos. 5460 to 5465/Del/2012 on a conspectus of decisions of different high courts as well as different benches of ITAT also expressed the view that in absence of incriminating material belonging to assessee, proceeding u/s 153C cannot be initiated. Hon ble A.P. High Court in a judgement dated 12.7.2003 in ITA No. 266 of 2013 in case of M/s. Hyderabad House Pvt. Ltd. Upheld the decision of the ITAT Hyderabad bench, wherein it is held that computation of undisclosed income u/s 153A/153C of the Act must be in reference to the incriminating material found as a result of search. 9. The same view was again reiterated in case of Sri Lalitha Constructions (supra). Therefore, considering the fact that the assessment made by the assessing officer is on the basis of the entries made in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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