2013 (3) TMI 685 - AT - Income Tax

Tribunal rules in favor of assessee, invalidating assessments under Section 153C and deleting additions under Section 69C

Avkash Land Realty Pvt. Ltd., Alibaug and others Versus DCIT, C.C. 39, Mumbai

The Tribunal ruled in favor of the assessee, finding that the assessments under Section 153C were invalid as the seized documents did not belong to them. ... Legality of of proceedings u/s.153C - whether money, bullion, jewellery or other valuable articles or things or books of account or documents seized belongs to assessee which disclosed that there is unaccounted expenditure - Cash payments made for purchase of land - Held that:- document seized from the possession of Shri Dilip Dherai does not belong to the assessee as none of these documents have been found from the possession of the assessee - these seized documents do not even mention the name of the assessee - in the absence of corroborative evidences, additions on the basis of slips, loose sheets cannot be upheld - until there are independent evidences exist, the addition on the basis of notings, jottings cannot be upheld - there is nothing on record to prove the source of the alleged cash expenditure The ‘satisfaction note’ as recorded by AO is of no legal consequence - u/s. 153C, the primary condition has to be fulfilled is that the money, bullion, documents etc., seized should belong to such other person - If this condition is not satisfied, no proceedings could be taken u/s. 153C of the Act - Here the seized documents do not belong to the assessee but were seized from the residential premises of Shri Dilip Dherai - Decided in favor of assessee Issues Involved:1. Legality of proceedings under Section 153C of the Income Tax Act.2. Validity of additions made under Section 69C of the Income Tax Act for alleged unexplained expenditure.Issue-wise Detailed Analysis:1. Legality of proceedings under Section 153C:The assessee challenged the legality of the assessment order framed under Section 143(3) read with Section 153C of the Income Tax Act. The main contention was that the documents seized during the search did not belong to the assessee. The search and seizure action was carried out on the Jai Corp group, and the documents were found at the residence of Shri Dilip Dherai. The Assessing Officer (AO) issued a notice under Section 153C based on these documents, but the assessee argued that these documents neither belonged to them nor mentioned their name.The Tribunal observed that the provisions of Section 153C require that the documents seized must belong to a person other than the one searched. In this case, the documents did not mention any company names and were found at Shri Dilip Dherai's residence. The Tribunal noted that the AO's satisfaction note lacked a prima facie basis to link the documents to the assessee. The Tribunal also referred to Section 292C, which presumes that seized documents belong to the person from whose possession they were found. Thus, the Tribunal concluded that the action under Section 153C was bad in law as the primary condition that the documents should belong to the assessee was not satisfied.2. Validity of additions under Section 69C:The AO made additions under Section 69C for alleged unexplained expenditure based on seized documents indicating cash payments for land acquisitions. The assessee contended that these documents were merely projections or budgeted figures and not actual expenditures. The AO relied on the statement of Shri Dilip Dherai, who initially admitted to cash payments but later retracted his statement.The Tribunal emphasized that for Section 69C to apply, it must be established that the assessee incurred the expenditure. The Tribunal found that the AO's conclusions were based on loose sheets and not corroborated by any independent evidence, such as statements from land sellers confirming receipt of cash payments. The Tribunal also noted that the assessee had a small corpus and no business activity, making it improbable that they incurred such huge expenditures. The Tribunal concluded that there was no evidence to support the AO's claim that cash changed hands, and thus, the additions under Section 69C could not be sustained.Conclusion:The Tribunal quashed the assessments under Section 153C due to the lack of evidence that the seized documents belonged to the assessee. On merits, the Tribunal also deleted the additions under Section 69C, as there was no corroborative evidence to prove that the assessee incurred the alleged unexplained expenditure. Consequently, the appeals filed by the assessees were allowed.