2021 (10) TMI 1449 - AT - Income Tax

Documents seized from third party premises require assessment under section 153C, not sections 147/148

ITAT held that when documents are seized during search proceedings under section 132 at third party premises and allegedly belong to other assessees, ... Assessment u/s 153C or 147 - documents seized and impounded in search proceedings u/s 132 carried out at the premise of third party which allegedly belongs to the present assessees - assessments on the basis of loose documents - HELD THAT:- Provisions of section 153C of the Act supersede the applicability of provisions of sections 147 and 148 of the Act. We find that certain documents were seized during the search u/s 132 of the Act and the Revenue came to conclusion that such documents belongs to assessees. Thus, in our view, only the provisions in which any assessment could be made against the assessees in the Income tax Act were of section 153C read with section 153 of the Act. Hence, notices issued under section 148 of the Act and proceedings under section 147 of the Act by the Assessing Officer are illegal and void ab initio in view of the provisions of section 153C of the Act. Thus, the procedure of assessment in search cases clearly shows that these are separate provisions, independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. We are of the view that when a search is carried out u/s. 132 of the IT Act, various assets and documents may be found and seized or requisition is made u/s. 132A and many of these 'assets/documents' may not actually belong to the 'person searched' but may belong to such 'other person' and then Section 153C clearly provides that proceedings as prescribed u/s. 153A can be initiated against such 'other person' if conditions laid down in that section are satisfied. Thus the proceeding in such case where any document is seized “belong to” other person can only be initiated under Section 153C of the Act. Section 153C is a provision specifically provided “assessment of income any other person' Thus re-assessment pursuant to “material /document found” during search at third party where satisfaction recorded that material/document so found “belong to” to other person (other than the searched person) than assessments can only be done through recourse of Section 153C and not by invoking the Provision of Section 147/148 of the Act as the provisions of Section 153C are overriding in nature and contend non obstante Clause for Section 139, 147, 149,151 & 132 of the Act. Assessee appeal allowed. Issues Involved:1. Validity of reassessment proceedings under Section 147.2. Applicability of Section 153C over Section 147/148 in cases involving documents seized during search operations at third-party premises.Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147:The primary issue revolves around whether the reassessment proceedings initiated under Section 147 of the Income Tax Act were valid. The assessees contested the jurisdiction of the Assessing Officer in initiating these proceedings, arguing that the basis for reassessment was documents seized during a search at a third party's premises, which allegedly belonged to the assessees. The Tribunal found that the reassessment was based on documents (LPS 11 & 12) seized during a search operation at the premises of third parties, namely Shri Deepak Kalani and Shri Pankaj Kalani. The Assessing Officer had initially initiated proceedings under Section 153C but later dropped them and issued notices under Section 148. The Tribunal concluded that the reassessment proceedings under Section 147 were illegal and void ab initio because the documents in question were seized during a search operation, which should have been addressed under Section 153C.2. Applicability of Section 153C over Section 147/148:The Tribunal emphasized that Section 153C of the Income Tax Act supersedes Sections 147 and 148 when documents seized during a search operation belong to a person other than the one searched. The Tribunal noted that the provisions of Section 153C are specifically designed for assessing income related to documents or assets seized from a third party during a search. It was highlighted that Section 153C contains a non-obstante clause, indicating its overriding nature over other sections, including Sections 147 and 148. The Tribunal referred to various judicial pronouncements to support the view that once documents belonging to a person other than the one searched are seized, the only valid course of action is to initiate proceedings under Section 153C. Consequently, the Tribunal held that the initiation of proceedings under Section 147/148 in this case was improper, as the conditions for invoking Section 153C were met, and thus, the reassessment orders were quashed.In conclusion, the Tribunal allowed the cross-objections filed by the assessees, determining that the reassessment proceedings under Section 147 were invalid due to the overriding applicability of Section 153C in the context of documents seized during a search at third-party premises.