2024 (1) TMI 909 - AT - Income Tax

AO cannot invoke section 153C without proving seized documents belong to different person than searched party

M/s Decent Realtech Pvt Ltd Versus The Dy. C.I.T Central Circle, Karnal

The ITAT Delhi quashed an assessment order under section 153A where the AO invoked section 153C provisions without proper justification. Following the ... Assessment u/s 153A - Incriminating material found from assessee premises at the time of search or not? - HELD THAT:- The Hon'ble Delhi High Court in the case of Pepsico India Pvt Ltd [2014 (8) TMI 898 - DELHI HIGH COURT] has concluded that since it was not even alleged that the searched person had disclaimed the said documents as belonging to them and thus it cannot be held that the documents do not belong to the searched person and once it could not be held so, then the provisions of section 153C of the Act cannot be invoked as the Assessing Officer of the searched person must be satisfied that the seized material does not belong to the person referred to in section 153A of the Act i.e. searched person. AO has not referred to any material much less, cogent material, to assume and conclude that the documents seized from the premises of the searched person belonged to the appellant company and do not belong to the searched person. In the absence of such a burden having been discharged by the searched person invocation of provisions contained in section 153C of the Act is not in accordance with law. Assessment order is accordingly quashed. Decided in favour of assessee. Issues Involved:1. Validity of assessment orders based on incriminating material.2. Application of the legal precedent set by the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt Ltd.3. Whether the documents found during the search belonged to the appellants.4. Compliance with Section 153C of the Income-tax Act, 1961.Summary:Validity of Assessment Orders Based on Incriminating Material:The case involved search and seizure operations at the premises of certain individuals and companies. Notices under Section 153A of the Income-tax Act, 1961 were issued, and subsequent assessments led to significant additions on account of share transfers and sales. The core issue was whether the assessments were based on incriminating material found during the search. The Tribunal found that the incriminating material was not found from the premises of Reliable Realtech Pvt Ltd, Shiv Kumar Garg, and Jai Bhagwan Garg, thus making the assessments devoid of any incriminating material.Application of Legal Precedent:The Tribunal referred to the Hon'ble Supreme Court's decision in the case of Abhisar Buildwell Pvt Ltd, which concluded that in the absence of incriminating material found during the search, the Assessing Officer cannot make additions in respect of completed/unabated assessments. This precedent was pivotal in quashing the assessment orders for Reliable Realtech Pvt Ltd, Shiv Kumar Garg, and Jai Bhagwan Garg.Ownership of Documents Found During Search:The Tribunal scrutinized the documents found from the premises of Shri Rajbir Singh Goyat, which included MOUs and details of cash payments. It was determined that these documents were not found at the premises of the appellants, thus they could not be considered as incriminating material against them. The Tribunal emphasized that the documents must belong to the person being assessed, as per the legal requirements.Compliance with Section 153C:The Tribunal evaluated the Satisfaction Note and found that the Assessing Officer did not provide sufficient evidence to conclude that the documents belonged to the appellant company. The Tribunal cited various High Court decisions, including Pepsico India Pvt Ltd and N.S. Software, which reinforced that the Assessing Officer must record specific reasons why the seized material belongs to the assessee. The Tribunal concluded that the invocation of Section 153C was not in accordance with the law, leading to the quashing of the assessment order for Decent Realtech Pvt Ltd.Conclusion:The appeals of the Revenue were dismissed, and those of the assessee were allowed. The Tribunal quashed the assessment orders, holding that the additions were made without any incriminating material found during the search, and the provisions of Section 153C were not properly invoked.