2015 (8) TMI 966 - HC - Income Tax

Validity of Income-tax Act notices upheld for documents crucial in land transfers

Kamleshbhai Dharamshibhai Patel Versus Commissioner of Income-tax

The court upheld the validity of the notices issued under Section 153C of the Income-tax Act, finding that the documents seized during the search ... Validity of assessment under Section 153C - set of documents relied upon by the Revenue pertain to sale deeds executed by the petitioners in favour of the purchases viz., M/s. Sanghvi Infracon Private Limited and agreements entered into between the erstwhile tenants of the said lands and the petitioners - Held that:- The portion of land in question were occupied by tenants. In order to not only give a clear marketable title to the purchaser but also give the vacant possession of the entire land, the petitioners before executing the Sale Deeds entered into agreements with the tenants under which, the tenants vacated the premises and handed over possession to the petitioners in consideration of seizable amount paid to them. This was done through several agreements executed between the tenants and the petitioners. Later on, the lands were sold to M/s. Sanghvi Infracon Private Limited by a registered sale deed dated 16th September 2010. The document executed between the erstwhile tenants of the petitioners regarding eviction of the tenants upon acceptance of sizeable payment by the petitioners definitely thus belong to the petitioners. It may be that as an evidence of passing on vacant and peaceful possession of the property, the petitioners handed over such documents to the purchasers to protect the interest of the purchasers against any action that may be initiated by the erstwhile tenants. The nature of the document or the fact that it belongs to the petitioners would not in any manner change. Likewise, the documents of sale also can be stated to belong to the petitioners. It is not in dispute that the petitioners were the sellers of the lands. The receipts of payments also are documents belonging to the petitioners. They are alleged to have received various payments in cash from the purchasers. If there are documents evidencing such particulars and if such documents are also signed by the petitioners, it can certainly be stated that such documents do belong to the petitioners. Thus the action initiated under Section 153C of the Act cannot be quashed on the ground on which writ petitions are presented before us - Decided in favour of revenue. Issues Involved:1. Validity of the order passed under Section 127(2) of the Income-tax Act, 1961.2. Validity of the notices issued under Section 153C of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of the order passed under Section 127(2) of the Income-tax Act, 1961:The petitioner initially challenged the order dated 2nd February 2012, passed by the Commissioner of Income-tax, Ahmedabad under Section 127(2) of the Income-tax Act, 1961. This order clubbed and consolidated the assessment proceedings of the petitioner and other family members with the Assistant Commissioner of Income Tax, Central Circle-2(1), Ahmedabad. However, during oral submissions, the petitioner's counsel gave up this challenge and focused solely on contesting the notices issued under Section 153C of the Act.2. Validity of the notices issued under Section 153C of the Income-tax Act, 1961:The petitioner challenged the notice dated 25th September 2012, issued under Section 153C of the Income-tax Act. The background of the case involves the sale of three parcels of land by the petitioner and other family members to Sanghvi Infracon Pvt. Ltd. Subsequently, a search and seizure operation was conducted on 9th March 2011 at the premises of Sanghvi Infracon Pvt. Ltd. During this operation, documents belonging to the petitioner were found, leading to the issuance of the notice under Section 153C.The petitioner argued that the documents found during the search did not belong to them as the lands had already been sold to Sanghvi Infracon Pvt. Ltd. on 18th September 2010. They contended that once the title in the land vested in the purchasers, the documents could not be considered as belonging to them. The petitioner heavily relied on the decision in Vijaybhai N. Chandrani v. Asstt. CIT, where the court interpreted the term 'belongs to' in Section 153C.On the other hand, the Revenue argued that the satisfaction note recorded by the authority clearly indicated that the documents belonged to the petitioner. They maintained that the nature of ownership of the documents did not change simply because the property was transferred later.The court examined the validity of the notices under Section 153C by analyzing the documents seized during the search. These documents included sale deeds and agreements between the tenants and the petitioners. The court found that the documents, such as agreements with tenants and sale deeds, indeed belonged to the petitioners. The court noted that these documents were essential for the petitioners to pass on the title and vacant possession of the land to the purchasers.The court referred to the statutory scheme of Section 153C, which requires that any money, bullion, jewelry, valuable article, books of account, or documents seized must belong to a person other than the one searched. The court concluded that the documents in question satisfied this requirement as they belonged to the petitioners, even though the title of the land had been transferred.The court also distinguished the facts of the present case from the Vijaybhai N. Chandrani case, noting that in the current case, the documents pertained directly to the petitioners' transactions and were not merely loose sheets of paper.Conclusion:The court dismissed the petitions, upholding the validity of the notices issued under Section 153C of the Income-tax Act. The court found that the documents seized during the search operation belonged to the petitioners, thereby justifying the action under Section 153C. The petitions were dismissed in favor of the Revenue.