2018 (5) TMI 56 - AT - Income Tax

Tribunal rejects Revenue's appeal, deems Section 153C proceedings void ab initio, stresses need for incriminating material

Dy. Commissioner of Income-tax Versus M/s Esteem Textiles P. Ltd.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s findings that the documents did not belong to the assessee and that the AO's ... Assessment u/s 153C - documents belonging to the assessee or the assumption of jurisdiction by the AO - Held that:- As rightly pointed out by the learned CIT(A) Exhibit A11 is the letter written by M/s Gee Ispat P. Ltd. and was returned by the assessee by putting their signature and seal in confirmation of the accounts, as such it belongs to Gee Ispat and not the assessee. So also the list of shareholders contained in Exhibit A1 and index sheet in Exhibit A8 cannot be said to belong to the assessee inasmuch as besides assessee there are so many names and it cannot be said that these documents belong to them. It would lead to some absurd conclusions or consequences to say that when a person maintains a list of their shareholders, such document belongs to or pertains to such shareholders also. We find no reason to disturb these findings of the learned CIT(A). We are of the considered opinion that the findings of the learned CIT(A) on the aspect of the documents belonging to the assessee or the assumption of jurisdiction by the AO cannot be said to be either perverse or require any interference at the end of this Tribunal. We accordingly while upholding the same, find the grounds of appeal as devoid of merits. - Decided against revenue. Issues Involved:1. Validity of proceedings initiated under Section 153C of the Income Tax Act.2. Whether the documents seized during the search action belonged to the assessee.3. Jurisdictional correctness of the Assessing Officer's (AO) actions under Section 153C.4. Requirement of incriminating material for reassessment under Section 153C.Detailed Analysis:1. Validity of proceedings initiated under Section 153C of the Income Tax Act:The Revenue initiated proceedings under Section 153C based on documents seized during a search of M/s Gee Ispat group of companies. The AO believed these documents pertained to the assessee, thus justifying the initiation of proceedings. However, the CIT(A) held that no document belonging to the assessee was seized, making the initiation of proceedings under Section 153C void ab initio due to incorrect jurisdiction assumption.2. Whether the documents seized during the search action belonged to the assessee:The Revenue argued that documents (Exhibit A1, A8, and A11) found during the search were incriminatory and pertained to the assessee. The CIT(A) and the Tribunal examined these documents and concluded that they did not belong to the assessee. Exhibit A11 was a confirmation letter from M/s Gee Ispat P. Ltd., returned by the assessee after signing, thus belonging to Gee Ispat. Exhibit A1 and A8 contained lists of shareholders, including the assessee, but could not be said to belong to the assessee as they included multiple names.3. Jurisdictional correctness of the Assessing Officer's (AO) actions under Section 153C:The Tribunal upheld the CIT(A)'s findings that the AO's assumption of jurisdiction under Section 153C was incorrect. The documents in question did not belong to the assessee, and the AO's actions were based on an incorrect understanding of the term 'belong to.' The Tribunal emphasized that documents seized must clearly belong to the assessee to justify jurisdiction under Section 153C.4. Requirement of incriminating material for reassessment under Section 153C:The Tribunal referenced several judicial precedents, including the Hon'ble jurisdictional High Court's decision in RRJ Securities Ltd. and the Hon'ble Apex Court's decision in Singhad Technical Education Society, to assert that incriminating material must pertain to the relevant assessment years. The seized documents did not establish any correlation with the assessee's undisclosed income for the years in question, thus invalidating the reassessment under Section 153C.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s findings that the documents did not belong to the assessee and that the AO's assumption of jurisdiction under Section 153C was incorrect. The proceedings under Section 153C were deemed void ab initio, and the reassessment lacked the necessary incriminating material. The Tribunal's decision emphasized the importance of clear jurisdictional grounds and relevant incriminating material for proceedings under Section 153C.