2021 (7) TMI 983 - AT - Income Tax

Validity of Income Tax Act proceedings upheld, Rs. 2.44 Crores deemed assessable income.

The Assistant Commissioner of Income Tax, Central Circle - 2 (3), Bengaluru. Versus M/s. Everglades

The Assistant Commissioner of Income Tax, Central Circle - 2 (3), Bengaluru. Versus M/s. Everglades - TMI Issues Involved:1. Validity of proceedings initiated under section 153C of the Income Tax Act.2. Whether the sum of Rs. 2.44 Crores is assessable as income in the hands of the assessee.Issue-wise Detailed Analysis:1. Validity of proceedings initiated under section 153C of the Income Tax Act:The primary issue under consideration is the validity of the proceedings initiated under section 153C of the Income Tax Act. The Tribunal examined whether the necessary satisfaction was recorded by the Assessing Officer (AO) before initiating such proceedings. The Tribunal referred to the Hon'ble High Court's order and the decision in the case of M/s. Arihant Aluminum Corporation Ltd. vs. ACIT, which emphasized the requirement for the AO to record satisfaction that the seized documents belong to a person other than the one searched.The Department produced the satisfaction note, and the Tribunal noted that the AO of the searched person and the AO of the assessee were the same. Citing the Supreme Court's decision in Super Malls Pvt. Ltd. vs. CIT, the Tribunal concluded that the satisfaction note recorded by the AO was sufficient for initiating proceedings under section 153C. The Tribunal clarified that the satisfaction note must indicate that the seized documents belong to the assessee, which was adequately done in this case.The Tribunal also addressed the assessee's argument that the satisfaction note did not disclose how the material found during the search belonged to the assessee. The Tribunal found this argument beyond the scope of the present proceedings, as the High Court had remanded the case solely to examine the existence of satisfaction for initiating proceedings under section 153C.The Tribunal further referred to the decision in IBC Knowledge Park Pvt. Ltd., which required incriminating material for initiating proceedings under section 153C. However, the Tribunal differentiated between the initiation of proceedings and making additions based on seized documents. It concluded that while incriminating material is necessary for making additions, it is not required for initiating proceedings under section 153C.2. Whether the sum of Rs. 2.44 Crores is assessable as income in the hands of the assessee:The second issue was whether the sum of Rs. 2.44 Crores received by the assessee from Shri. D. K. Sharma was assessable as income. The Revenue contended that this amount was part of the sale consideration for the land sold to M/s. Sobha Developers Ltd. The assessee argued that the amount was for settling disputes and litigation related to the property and not income.Initially, the AO assessed the sum of Rs. 2.44 Crores as income, but the CIT(A) deleted the addition. The Tribunal, in its earlier order, reversed the CIT(A)'s decision and restored the AO's assessment. The High Court remanded the case to the Tribunal to reconsider the existence of satisfaction for initiating proceedings under section 153C.Upon review, the Tribunal upheld the AO's satisfaction note and concluded that the proceedings under section 153C were valid. Consequently, the Tribunal maintained that the sum of Rs. 2.44 Crores was assessable as income in the hands of the assessee.Conclusion:The Tribunal decided in favor of the Revenue, holding that the proceedings under section 153C were validly initiated based on the satisfaction note recorded by the AO. The Tribunal also upheld the assessment of Rs. 2.44 Crores as income in the hands of the assessee. The appeal by the assessee was dismissed.